An Arch Capital Group Ltd. unit need not provide a defense for employees of coal companies in Kentucky who provided fraudulent carbon samples to federal regulators, during an exclusion of contaminants in its directors 'and officers' insurance policies, a federal appeals court ruled Wednesday that confirm a lower court decision.
To prevent miners from getting black lungs, the Department of Labor & # 39 ;s Mine Safety and Health Administration limits the concentration of carbon dust that can be in the air in a mine and requires coal companies to monitor and report their dust levels, according to the decision of 6 American Circuit Court of Appeals in Cincinnati Charley Barber et. al. v. Arch Insurance Co.
The Agency may suspend production and impose a fine if a mine is too dusty or if a coal company does not comply with MSHA regulations.
Employees sought defense against their allegations from the Arch Capital unit Arch Insurance under its D&O policy, which generally provides that Arch shall pay the defense costs of Armstrong employees in connection with criminal proceedings. which stemmed from the employee's wrongful act, the decision said.
Arch denied the employees' allegations, based on an exclusion of contaminants in its coverage, which stated that the insurer is not responsible for any claim involving a contamination or any direction to test for
"Arch determined that coal dust was a" pollution "and that the criminal proceedings arose from a direction to monitor and test for coal dust," the decision said.
The employees sued the insurer, raising breaches of contract and bad faith. The U.S. District Court in Owensboro, Kentucky, ruled in favor of the insurer and was upheld by a three-judge appeals panel.
"Because coal dust pollutes and irritates, and because it is regulated by Armstrong, it fits comfortably into the intended scope of the exclusion (pollution) exclusion," the decision states.
The panel also concluded that "the criminal proceedings arose from a direction to test or monitor a contaminant, and the exclusion of contaminants impedes coverage of criminal proceedings. " Lawyers in the case did not respond to a request for comment.