Connex Railroad Wins Appellate Victory in ‘Clawback’ Insurance Coverage Suit

Munger, Tolles & Olson represented Veolia Transportation Inc. and its subsidiary Connex Railroad LLC in winning an appellate victory affirming a lower court ruling preventing insurers from “clawing back” more than $132 million they paid out to settle claims resulting from a deadly train accident in 2008.

The case stemmed from the aftermath of a tragic railroad accident in Chatsworth, California, during which a freight train and a commuter train collided, resulting in the death of 25 people and numerous injuries. The commuter train was owned by Metrolink but was operated by Connex, which  employed the conductor driving the train. In the investigation that followed, it was discovered the conductor had been texting prior to the time of the accident, and the insurers for Connex claimed that the texting was the cause of the accident, a conclusion disputed by Connex and Veolia..

Connex and Metrolink settled all of the personal injury lawsuits for $200 million, the maximum allowed under federal law for a single train accident. After Connex’s insurers paid $146 million of the $200 million settlement, most of the insurers sued Connex and Veolia for reimbursement of $132 million of the payments, claiming that Connex should have known that the conductor was texting and therefore should have reasonably expected the accident to occur.

Along with attorneys from Kiesel Law; Farella Braun & Martel LLP; and Weinberg Wheeler Hudgins Gunn & Dial LLC, a Munger, Tolles & Olson team represented Connex and Veolia in trial court, obtaining summary judgment rejecting the insurers’ reimbursement claims. On April 19, 2018, a three-judge panel in the California Court of Appeal, Second Appellate District affirmed the lower court’s ruling, finding that “the Chatsworth collision was unquestionably an ‘accident’ within the meaning of the policies pursuant to New York law,” and the amount paid in settlement was not barred by an exclusion for injuries that were expected or intended or reasonably could have been expected or intended.

The Munger, Tolles & Olson appellate team included Cary B. Lerman, Daniel P. Collins and Jeremy A. Lawrence.