Navigators Can’t Parse ‘Additional Insured’ Policy Wording in Georgia Explosion Case

Navigators Insurance Co., a Hartford excess insurer, cannot escape a Georgia utility company’s argument that the utility is an additional insured on a policy, after a 2018 gas explosion in Georgia that left three women severely injured.

The decision by the U.S. 7^th Circuit Court of Appeals in Chicago upheld a federal district court ruling in Indiana, which had found against Navigators in 2024 on the “additional insured” question but in favor of the insurer on bad faith and breach of fiduciary duty claims.

The crux of Navigators’ argument was that Atlanta Gas Light Co. can be an additional insured only as long as a gas-line marking company faces liability for its actions in Georgia lawsuits brought by the injured women.

“But the policy is devoid of such language, and we will not ‘supply omitted terms while professing to construe the contract,'” the appellate panel of judges wrote in the Jan. 22 opinion.

Besides adding new light to the definition of additional insured, the decision also lays out how clear Indiana’s insurance statutes and case law are on bad-faith allegations—a clarity that not all states’ laws provide.

People in rural southeast Georgia may remember the incident that destroyed a coffee shop and led to the insurance claims and protracted litigation. Atlanta Gas Light Co., part of the Southern Company utility giant, had hired Indianapolis-based United States Infrastructure Corp. (USIC) to locate and mark gas lines that Atlanta Gas owned across Georgia.

The utility required USIC to obtain primary and excess liability insurance and to include Atlanta Gas as an additional insured.

The trouble came after USIC failed to mark a gas line in Homerville, a town of about 2,500 people, 40 miles from the border with Florida. A boring company digging in 2018 struck the line, causing the release of natural gas into a sewer line, the court explained. Soon after, the nearby Coffee Corner café exploded, severely injuring three women and heavily damaging the shop. The incident made national news reports. A video clip from NBC’s Today show can be seen here. An Insurance Journal report about the incident is here.

After mediation, the injured women settled with the line-marking company. Atlanta Gas was not able to come to an agreement with them, and the women sued Atlanta Gas in Georgia state court.

The utility asked Navigators to defend and indemnify but the insurer denied the claim. Its stated reason was that the USIC umbrella policy covered Atlanta Gas as an additional insured only for injuries caused by the line-marking company. The injury suit against the utility named only Atlanta Gas, not USIC. Also, the primary Zurich insurance policy had not yet been exhausted at the time of settlement talks, although the utility had argued that it was pretty obvious that the primary policy’s $2 million limits would soon be surpassed.

In 2020, Atlanta Gas sued Navigators in federal court in Indiana, alleging breach of contract, bad faith and violation of fiduciary duty. The district court judge ruled in favor of Navigators on bad faith and fiduciary duty but found that Atlanta Gas was indeed an additional insured under the umbrella policy. The court awarded the utility $13.8 million.

On appeal, the 7^th Circuit judges agreed that the policy wording is clear and the lower court ruling was correct.

“Thus, for AGL to qualify as an ‘additional insured,’ the liability the underlying suits seek to impose upon it must stem from injuries proximately caused ‘in whole or in part’ by USIC’s conduct. That is precisely what we have here,” 7^th Circuit Judge John Lee wrote in the opinion.

Yes, Navigators’ attorneys were correct in arguing that the underlying injury suits do not mention USIC by name, Lee wrote. But “when assessing its duty to defend, the ‘insurer must look to the allegations in the complaint coupled with the facts known to the insurer after reasonable investigation,‘” the opinion noted, quoting from a 2020 Indiana Court of Appeals decision.

The Navigators full opinion can be seen here. Attorneys for Atlanta Gas could not be reached for comment.

Photo: The destroyed coffee shop in 2018, a day after the explosion. (Georgia Insurance and Safety Fire Commissioner’s Office via AP)

Topics Georgia