FEBRUARY 2013 BAD FAITH CASES: COURT DENIES BAD FAITH CLAIM BECAUSE INSUREDS WERE NOT ENTITLED TO COVERAGE FOR BODILY INJURY UNDER APPLICABLE POLICY (Philadelphia Federal)

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In ArcelorMittal Plate, LLC v. Joule Tech. Servs., a steel manufacturer sued a temporary staffing agency and the agency’s general liability insurance carrier for indemnity after a temporary employee provided by the staffing agency was injured at the steel facility and was awarded $1,000,000 in damages against the plaintiff-manufacturer.

The manufacturer and the insured temporary staffing agency had a “Contractor Agreement” in place, providing that the staffing agency would purchase insurance and that the manufacturer would be listed as an additional insured. After the injured employee received a judgment, the manufacturer filed suit for indemnity against the insured-staffing agency and its liability carrier, under the applicable general liability policy.

The court rejected the manufacturer’s breach of contract for failure to indemnify claim against the staffing agency because the injuries sustained by the temporary employee were the fault of the manufacturer, not the staffing agency.

The court also denied the manufacturer’s claim against the staffing agency’s carrier because the policy explicitly excluded coverage for bodily injury to any employee arising out of employment with either the manufacturer or the insured-staffing agency. Although the manufacturer was an additional insured under the policy, the language of the contract unambiguously excluded coverage for the underlying injury.

In the absence of coverage, the court also denied the manufacturer’s bad faith claim because the carrier rightfully refused to tender indemnity. The court also held that the applicable purchase order, signed when the staffing agency provided the manufacturer with the later-injured temporary employee, did not require the carrier to indemnify the manufacturer.

Date of Decision: December 20, 2012

ArcelorMittal Plate, LLC v. Joule Tech. Servs., No. 11-6873, 2012 U.S. Dist. LEXIS 180512, U.S. District Court for the Eastern District of Pennsylvania (E.D. Pa. Dec. 20, 2012) (Schiller, J.)

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