While Amtrak is in the business of providing on-time railway services to millions of passengers each year, the corporation’s two-year-plus delay in tendering defense to its insurer following a South Florida railway accident put it off track in a summary judgment order in the Middle District of Florida. On March 26, 2022, the federal court held that Amtrak’s notice to the insurer was not timely and that the carrier was prejudiced by the late notice.
West Palm Beach Train Accident
On July 6, 2016, an individual was performing relay testing on a railway located in West Palm Beach, Florida. As part of the maintenance, the employee deactivated the crossing signals and gate arms at one of the railway’s road crossings and allegedly failed to notify train operators on the railway that the signals and gate arms were deactivated (a subsequent criminal investigation also alleged the employee removed and disposed of a recording device that keeps track of the times at which passing trains activate warning signals and crossing gates).
Because of the lack of signals or other warnings to vehicles at the railway crossing, a vehicle driven by a South Florida woman entered the crossing where her vehicle was struck by an Amtrak train traveling from Miami to New York. As a result of the collision, the driver was ejected from her vehicle, thrown into a chain-link fence, and pinned against the fence by the wreckage of her vehicle. Miraculously, she survived, but she suffered severe injuries requiring both immediate and likely lifelong care. The driver subsequently brought a personal injury action against Amtrak, among several other defendants, in September 2016. The action ultimately resulted in a settlement of $7 million and was dismissed in November 2019.
Insurance Claim
One of the defendants in the underlying suit had contracted with Steadfast Insurance Co., which issued a policy providing coverage stating: “Any railroad operating over your tracks is an insured.” On October 31, 2018, or nearly two and a half years after the date of loss, a commercial general liability insurer of one of the defendants tendered the defendant’s defense and indemnity of the personal injury action to Steadfast. Steadfast denied coverage in part because notice of the personal injury action was not timely.
After that denial, Amtrak separately tendered defense and indemnity of the personal injury action to Steadfast on January 25, 2019. Steadfast disclaimed coverage, citing again untimely notice. Amtrak subsequently filed a coverage action against Steadfast, alleging Steadfast was obligated to defend and indemnify Amtrak for the personal injury action, as well as seeking compensatory damages of nearly $850,000.
Untimely Notice of Loss
Applying Florida state law to the dispute, and acknowledging the parties’ agreement that the policy was in effect on the date of the accident, the district court first noted that “the question of whether an insured’s untimely reporting of loss is sufficient to result in the denial of recovery under the policy implicates a two-step analysis.” The first step of the analysis is ascertaining whether the notice of loss was timely — if an insured can prove the notice was timely, it will prevail. On the other hand, if the notice of loss was untimely, “a presumption of prejudice in favor of [the insurer] arises and it is [the insured’s] burden to rebut the presumption by showing that the insurer has not been prejudiced.”
Noting that while it was clear Amtrak did not immediately send any correspondence or notice to Steadfast, the court acknowledged “there is no bright-line rule under Florida law setting forth a particular period of time beyond which notice cannot be considered prompt.” Instead, the court noted “the reasonableness and promptness of the notice necessarily relies on the facts and circumstances in any given case.” Complicating matters in this case was the fact that Amtrak had no knowledge of the policy until late 2018 — indeed, Amtrak argued that it provided notice within several weeks after learning of its existence and that, at a minimum, this created a question of fact for the jury to decide whether notice was promptly given.
Rejecting this argument, the court held that due diligence of the insured is applicable when ascertaining whether the insured should have known about the existence of a policy providing coverage. Specifically, the court indicated it was at a loss to explain why, given Amtrak’s knowledge of the accident on the date it occurred, coupled with its knowledge of various other insurance policies and agreements relevant to the claim, it failed to “take any steps at all to attempt to identify” the policy. Finding that Amtrak provided no reasonable explanation for not discovering the policy sooner, the court then cited a string of Florida cases finding that a two-year delay before providing notice of loss is untimely as a matter of law. Based on these factors, the court found as a matter of law “that notice to Steadfast was untimely under the policy, and no reasonable trier of fact could conclude otherwise.”
Prejudicial Notice
Moving on to the second step of the two-step analysis, the court then looked at whether Steadfast was prejudiced by the notice and cited Florida Supreme Court holdings placing the burden “on the insured to show lack of prejudice where the insurer has been deprived of the opportunity to investigate the facts.” In attempting to rebut this presumption, Amtrak first argued Steadfast knew of the accident, at the latest, on October 31, 2018, when one of the other defendants tendered its defense to Steadfast, and that Steadfast could have known about the accident after a formal report showed Steadfast’s insured knew of the accident almost immediately after it occurred. In response to the former claim, the court reiterated its previous analysis, specifically that October 31, 2018, was more than two years after the accident occurred. As to the latter, the court noted that knowledge of the insured is not imputed to its insurance carrier, and indeed, if it were it would result in the illogical elimination of notice requirements in insurance policies.
Amtrak then argued that even if Steadfast did not know about the accident until October 31, 2018, nothing disclosed in an immediate investigation of the accident would have been materially different from that disclosed by a delayed investigation. In response, the court rejected this conclusory argument and held that “[s]imply stating that Steadfast was not prejudiced is insufficient for Amtrak to carry its burden and overcome the presumption.”
The court further noted that even a complete investigation after the accident does not show an insurer is not prejudiced by a lack of notice, stating that even if the report “following the accident provided a complete investigation of the accident, the purpose of a provision for notice and proof of loss goes beyond mere causation and is to enable the insurer to evaluate its rights and liabilities, to afford it an opportunity to make a timely investigation, and to prevent fraud and imposition upon it.” Finding Amtrak’s notice to be untimely and that Amtrak “failed to come forward with evidence to show that Steadfast was not prejudiced” by the late notice, the court granted Steadfast’s motion for summary judgment and held that Steadfast has no duty under the policy to defend or indemnify Amtrak in the personal injury action.
