A California judge has ruled that Lloyd’s of London and other insurers can’t apply an intentional acts of employees exclusion to recoup $132.5 million paid toward a train crash settlement. Los Angeles Superior Court Judge Elihu M. Berle said Lloyd’s “can’t show a reasonable party would have known the accident would have occurred as a result of an intentional act. On Sept. 18, Judge Berle granted summary judgment in favor of Veolia Transportation Inc. subsidiary Connex Railroad LLC, saying that under New York law – which the judge said last October applies to the case per a choice of law provision in Connex’s policy – the insurers don’t have evidence that a reasonable party would have known that the accident would have happened as a result of a train conductor being distracted by his phone.
Lloyd’s and the other insurers collectively paid $132.5 million out of policies with Connex toward $200 million that covered claims stemming from the 2008 commuter train crash that left 24 people dead and dozens injured. The judge rejected the insurers’ argument that Connex knew its drivers were texting and ignored it, saying that the allegation “assumes a negligence-based standard for invoking the exclusion and fundamentally fails to meet the more stringent New York standard.”
Judge Berle also noted that no Connex engineer, including the one involved in the accident, Robert Sanchez, had ever caused an accident because of a cell phone violation before the 2008 crash, and that a witness for Lloyd’s had acknowledge there is no way it could have known the accident was going to occur on Sept. 12, 2008, at 4:22 p.m. It was noted by Judge Berle that the railroad didn’t see Sanchez’s cell phone records until they were subpoenaed by the National Transportation Safety Bureau (NTSB) during its investigation. Judge Berle also granted the insurers’ motion for summary judgment on the railroad’s cross-claims that they brought the suit in bad faith.
A conference date was set by Judge Berle to discuss if there will be future proceedings or if the court should enter judgment. Indian Harbor Insurance Co., Steadfast Insurance Co., Aspen Insurance UK Ltd. and Lloyd’s filed suit in October 2012, seeking reimbursement of the $132.5 million they paid out after the crash. They contended that Connex should have expected the incident. The insurers claimed that Connex was aware that employees like Sanchez violated company policy by using cellphones on duty, but failed to report the incidents to Los Angeles public transit operator Metrolink or deal with the dangerous behavior.
Connex’s general code of operating rules at the time of the crash stated that engineers are not allowed to use any personal electronic devices, including cellphones, while on duty. Also, the train operator’s contract with Metrolink required it to report any allegations of a rules violation regarding the safe movement of trains. The suit alleged that Connex ignored several of these rules and requests. By failing to report the incidents to Metrolink, the suit said Connex avoided penalties of up to $25,000 per occurrence.
Less than 20 seconds after Sanchez sent a text message on his cellphone, the Metrolink passenger train he was driving passed through a red signal and collided with a Union Pacific freight train near Chatsworth, Calif This happened in September 2008, causing 24 deaths and more than 100 injuries. Sanchez, who died in the collision, received 57 text messages on his phone while on duty for Connex the day of the crash.
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