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Kern v. BLM

Citation: 32 ELR 20571
No. No. 99-35254, 284 F.3d 1062/(9th Cir., 03/06/2002)

The court holds that under the law of the U.S. Virgin Islands, an insurer must provide coverage to an oil company for injuries company workers suffered in an explosion at the company's St. Croix oil refinery. After settling the claims that the injured employees had filed against it, the oil company sued the insurer in an attempt to recover under its insurance policy. The district court found that both parties presented compelling interpretations of the policy, but nevertheless concluded that the oil company's claim was unambiguously excluded from coverage under the policy. The court first holds, however, that the very fact that both parties were able to offer conflicting, yet compelling, interpretations establishes the essential ambiguity in the policy. The court next holds that under the law of the U.S. Virgin Islands, any ambiguity in an insurance policy is to be construed against the insurer and in a manner that is more favorable to coverage. Here, there are no disputed material facts outside the interpretation offered by the oil company. The district court, therefore, erred and the oil company is entitled to judgment as a matter of law. The court further holds that the district court contravened Virgin Islands law in limiting the insurance company's exposure to the amount defined in the first-tier of the oil company's two-tiered settlement agreement with its employees. Where an insured has recovered a judgment against an insurer after settling underlying claims, the insured is legally obligated to pay the injured parties pursuant to the terms of any settlement agreement, and the insurer remains liable to the insured up to the policy limits where it has undertaken to pay amounts the insured is obligated to pay by adjudication or compromise.

The full text of this decision is available from ELR (7 pp., ELR Order No. L-488).

Counsel for Appellee
John B. Wyss
Wiley, Rein & Fielding
1776 K St. NW, Washington DC 20006
(202) 719-7000

Counsel for Appellants
Robert H. Shulman
Howery, Simon, Arnold & White
1299 Pennsylvania Ave. NW, Washington DC 20004
(202) 783-0800