Insurers interpleaded $146 million for the settlement of the claims. The claims were called the Chatsworth claims because the accident occurred in the Chatsworth district of Los Angeles. The insurers and insureds entered into a “Policy Release and Agreement” (Agreement) in exchange for contributing their aggregate policy limits. The Agreement included a provision allowing the insurers to retain the right “if any, to seek contribution and/or subrogation, or to assert policy defenses” with respect to the insureds, Connex and its parent corporation Veolia. The insureds retained a right to assert a setoff in the event that the insurers did sue, the insureds released and discharged the insurers for all liability arising out of the collision.

 Soon after, the insurers initiated an action against the insureds based on the exclusion for “Bodily Injury, Personal Injury, Property Damage and/or Advertising Injury which the insured intended or expected or reasonably could have expected”. The insureds filed a cross-complaint.

 The insureds maintained that the exclusion did not defeat coverage for the Chatsworth accident.

 Although the trial court found evidence that Metrolink engineers often used handheld electronic devices while on duty and in violation of Connex's policies, and that Connex executives were aware that corporate rules were being violated and accidents could be a result of distracted engineers, they still granted summary judgment in favor of the insureds, Connex and Veolia.

 The appellate court agreed with the district court discussing how the expected or intended exclusion has been interpreted to not apply when accidental results flow from intentional causes, where some accidental damage results from an original intentional act. The court went on to say that the result had to be “inherent in the nature of the acts alleged to be committed by the insured” in order for the claim to be denied based on the mentioned exclusion. The insurer failed to persuade the court that by turning a blind eye to the misconduct, that Connex and Veolia reasonably should have expected the damages that resulted from the Chatsworth collision, because the court stated that the “reasonable person” standard was not appropriate in this scenario. The court said that in order to defeat summary judgment the insurers had to show that there was a triable issue of material fact that the collision “flowed directly and immediately from an insured's alleged intentional act.” And because they had not met that burden, summary judgment was appropriately awarded, and the exclusion did not apply.

 Editor's Note:

The expected or intended injury exclusion is included in many insurance policies, and prohibits coverage for injuries that are expected or intended from the standpoint of the insured. The courts have typically interpreted this pretty strictly, so coverage is typically only excluded when the type of injury that actually occurred was the type that could have been expected or intended from the standpoint of the insured. For an article discussing the expected or intended injury exclusion, please see our article Expected or Intended.

Also relevant in this case is summary judgment. Sometimes, in a lawsuit one party will make a motion for summary judgment, meaning that from their standpoint the facts of the case seem so one-sided that they believe the matter does not need to be tried. In this case both courts agreed with the insureds, that the facts of the case were so one-sided in favor of the insureds that the case should not be tried.