BNSF Railway Company v. Gilster-Mary Lee Corporation

Filing 136

MEMORANDUM AND ORDER, The Court DENIES BNSF's motion for partial summary judgment on Count II (Doc. 85 ); GRANTS in part and DENIES in part GML's motion for summary judgment (Doc. 87 ). The motion is GRANTED to the extent it seeks summa ry judgment on Count II and is DENIED to the extent it seeks summary judgment on Counts I and III; DENIES as moot GML's motion to bifurcate the trial of Count I from the trial of Count II (Doc. 128 ); ORDERS that the parties shall have up to a nd including April 21, 2017, to respond to the pending motions in limine to which responses have not already been filed; and DIRECTS the Clerk of Court to enter judgment accordingly at the close of the case. Signed by Judge J. Phil Gilbert on 3/29/2017. (jdh)

UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
BNSF RAILWAY COMPANY,
Plaintiff,
v.

Case No. 15-cv-250-JPG-SCW

GILSTER-MARY LEE CORPORATION,
ACE AMERICAN INSURANCE
COMPANY and ACE PROPERTY AND
CASUALTY INSURANCE COMPANY,
Defendants.
MEMORANDUM AND ORDER
This matter comes before the Court on two motions for summary judgment, one filed by
plaintiff BNSF Railway Company (“BNSF”) (Doc. 85) and the other filed by defendant
Gilster-Mary Lee Corporation (“GML”) (Doc. 87). BNSF’s motion seeks summary judgment
only on Count II. GML has responded to that motion (Doc. 90), and BNSF has replied to that
response (Doc. 92). GML seeks summary judgment on Counts I, II and III. BNSF has
responded to that motion (Doc. 89), and GML has replied to that response (Doc. 91).
I.

Background
This case arose after a BNSF employee, Cecil A. Parrish, was injured while working for

BNSF at GML’s rail yard. He was injured using a pry bar to align two railcars on a curved track
in the rail yard. Parrish filed a lawsuit against BNSF under the Federal Employers’ Liability Act
(“FELA”), 45 U.S.C. § 51 et seq.: Parrish v. The Burlington Northern and Santa Fe Railway
Company, No. 13-cv-1054-JPG-SCW. BNSF and Parrish settled that lawsuit.
In the case at bar, BNSF seeks to hold GML and its insurers, defendants ACE American
Insurance Company and ACE Property and Casualty Insurance Company (collectively, the “ACE

defendants”), liable for the costs of the defense in Parrish and the settlement amount. It believes
a written Industry Track Agreement (the “Sidetrack Agreement”) between BNSF and GML
(Count I) as well as a common law duty of implied indemnity (Count III) obligate GML to
indemnify it for those amounts. BNSF also believes GML breached the Sidetrack Agreement by
failing to name BNSF as an additional insured on an insurance policy that covered BNSF’s
liability and defense in Parrish (Count II). BNSF tendered the defense of the case to GML and
asked GML to initiate an insurance claim on its behalf, but GML refused.
Following a previous round of summary judgment motions, the Court found as a matter of
law that GML did not agree in the Sidetrack Agreement to indemnify BNSF for BNSF’s own
negligence and that neither of the insurance policies issued by the ACE defendants provided
coverage for BNSF for losses from the Parrish lawsuit (Doc. 84).
In the current round of summary judgment motions, both parties seek summary judgment
on Count II, the claim for breach of the promise to obtain insurance in the Sidetrack Agreement.
BNSF relies on the Court’s finding in its prior summary judgment order to argue GML breached
the Sidetrack Agreement by failing to provide liability insurance that would cover liability for
Parrish’s injury. On the other side, GML argues the Sidetrack Agreement only obligated it to
name BNSF as an additional insured on an automobile insurance policy, not a general liability
policy. In any case, it contends, even if it were required to obtain general liability insurance
naming BNSF as an additional insured, it complied with the Sidetrack Agreement with the ACE
policy it purchased. Additionally, GML argues that BNSF waived the insurance requirement.
GML also seeks summary judgment on Count I for contractual indemnity and Count III for
implied indemnity. With respect to Count I, GML argues that it was not negligent in any way

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with respect to Parrish’s injury because it owned him no duty. As a consequence, it argues, the
Sidetrack Agreement does not obligate it to indemnify BNSF for any of the costs stemming from
Parrish’s injury. In response, BNSF argues GML was negligent in a number of ways and that its
liability stems from its contractual obligation to provide a safe workplace.
With respect to Count III, GML argues that BNSF does not satisfy the requirements for
implied indemnity, which include being completely blameless. BNSF maintains that the relative
fault of the parties – and whether BNSF is blameless – is a question for the jury to decide.
II.

Summary Judgment Standard
Summary judgment must be granted “if the movant shows that there is no genuine dispute

as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Spath v. Hayes Wheels Int’l-Ind.,
Inc., 211 F.3d 392, 396 (7th Cir. 2000). The reviewing court must construe the evidence in the
light most favorable to the nonmoving party and draw all reasonable inferences in favor of that
party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986); Chelios v. Heavener, 520
F.3d 678, 685 (7th Cir. 2008); Spath, 211 F.3d at 396.
The initial summary judgment burden of production is on the moving party to show the
Court that there is no reason to have a trial. Celotex, 477 U.S. at 323; Modrowski v. Pigatto, 712
F.3d 1166, 1168 (7th Cir. 2013). Where the non-moving party carries the burden of proof at trial,
the moving party may satisfy its burden of production in one of two ways. It may present
evidence that affirmatively negates an essential element of the non-moving party’s case, see Fed.
R. Civ. P. 56(c)(1)(A), or it may point to an absence of evidence to support an essential element of
the non-moving party’s case without actually submitting any evidence, see Fed. R. Civ. P.

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56(c)(1)(B). Celotex, 477 U.S. at 322-25; Modrowski, 712 F.3d at 1169. Where the moving
party fails to meet its strict burden, a court cannot enter summary judgment for the moving party
even if the opposing party fails to present relevant evidence in response to the motion. Cooper v.
Lane, 969 F.2d 368, 371 (7th Cir. 1992).
In responding to a summary judgment motion, the nonmoving party may not simply rest
upon the allegations contained in the pleadings but must present specific facts to show that a
genuine issue of material fact exists. Celotex, 477 U.S. at 322-26; Anderson, 477 U.S. at 256-57;
Modrowski, 712 F.3d at 1168. A genuine issue of material fact is not demonstrated by the mere
existence of “some alleged factual dispute between the parties,” Anderson, 477 U.S. at 247, or by
“some metaphysical doubt as to the material facts,” Matsushita Elec. Indus. Co. v. Zenith Radio
Corp., 475 U.S. 574, 586 (1986). Rather, a genuine issue of material fact exists only if “a
fair-minded jury could return a verdict for the [nonmoving party] on the evidence presented.”
Anderson, 477 U.S. at 252.
III.

Discussion
Because the two general issues in the pending motions – indemnity and insurance coverage

– turn on facts about different aspects of this case, the Court sets forth the facts separately,
followed by analysis of each issue.
A.

Counts I and III: Indemnity Issues
1.

Facts

Viewed in the light most favorable to BNSF, the evidence establishes the following
relevant facts.
Cecil Parrish was an employee of BNSF. When he first began working for BNSF, BNSF

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trained him to do his job. It provided him a training booklet, the train yard and engine safety rules
(“Safety Rules”), which included instructions about how to couple and uncouple railcars and
locomotives. Coupling involves aligning a drawbar on the railcar coupler and a drawbar on the
locomotive coupler so that when they impact each other, the knuckles of the couplers
automatically attach to allow the locomotive to pull the railcar. When couplers are not aligned –
or mismatched, in the language of the Safety Rules – they must be adjusted into alignment either
by hand or using a device such as, for example, various types of bars listed in the Safety Rules.
The Safety Rules describe the adjustment procedure, but no BNSF employee ever actually
demonstrated to Parrish use of the specific devices mentioned in the Safety Rules.
On April 12, 2013, Parrish was working for BNSF at GML’s Centralia, Illinois, rail yard
within fifty feet of track owned and maintained by GML. BNSF would run railcars full of sugar
into GML’s Centralia plant, which GML would use to manufacture cake mixes, and would remove
empty railcars from the yard. GML employees would instruct BNSF employees which railcars to
move where and would observe the railcar movement, but they would not participate in the actual
movement. The Sidetrack Agreement, a standard agreement BNSF drafted and executed with the
owners of industrial facilities on which BNSF provided rail service by a track other than the main
track, governed the arrangement between BNSF and GML regarding BNSF’s rail service to the
GML plant. In the Sidetrack Agreement, GML agreed, among other things, “to provide a safe
workplace for [BNSF] employees.” Sidetrack Agmt. § 2(a) (Doc. 1-1 at 1). Further, as
explained in the Court’s June 30, 2016, order, in § 8(a) of the Sidetrack Agreement, GML agreed
to indemnify BNSF for losses BNSF incurs as a result of GML’s fault or negligence in proportion
to GML’s comparative degree of fault or negligence.1
1

The indemnity clause in the Sidetrack Agreement states:
5

On that day, Paul Spieth, a GML yard operator, instructed Parrish where to put the loaded
railcars being delivered and which empty railcars to pull out of the yard, and then GML’s yard
manager Elmer Patten observed the operation. Spieth’s instruction did not include any direction
about how to accomplish the mechanics of the movement such as, for example, how to couple or
uncouple railcars. When Parrish tried to couple an empty railcar with a locomotive in preparation
for moving the railcar out, he was faced with mismatched couplers that he was unable to move by
hand.
As he had once or twice a week on numerous other occasions when adjusting couplers in
the GML yard, Parrish retrieved a pry bar that was kept near where he was working. The pry bar
had been kept there for about three years. Parrish thought the bar was of a type mentioned in the
Safety Rules as appropriate for adjusting couplers, and he had been taught to use the pry bar for
that purpose by other BNSF employees. It was actually a pry bar GML provided for its
employees to use to open outlet valves of full railcars. BNSF had not provided Parrish with any
other device to assist in adjusting mismatched couplers, had not observed Parrish using the pry

[GML] shall indemnify and save harmless [BNSF] from any and all claims,
demands, suits, losses, judgments, costs, damages, or expenses on account of
injuries to or death of any and all persons whomsoever, and any and all loss or
destruction of or damage to property to whomsoever belonging, including property
owned by, leased or rented to, or in the care, custody or control of the parties hereto,
arising or growing out of or in any manner connected with the maintenance,
operation, and use of the Track and crossings covered by this Agreement, or caused
or occasioned, in whole or in part, by reason of or arising during the presence of the
person of [GML], its subcontractors, the employees or agents of either, or third
parties upon or in proximity to the Track covered by this Agreement. If any claim
or liability shall arise from the joint or concurring negligence of the parties hereto,
it shall be borne by them in proportion to the degree of fault or negligence of both
of them as provided by law.
Sidetrack Agmt. § 8(a) (Doc. 1-1 at 4).
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bar2, but had also not instructed Parrish not to use GML’s pry bar. At least two GML employees,
Spieth and Patten, had seen Parrish and other BNSF employees using its pry bar for years to adjust
couplers on numerous prior occasions and had never told them not to use the bar.
Unlike every other time Parrish had used the pry bar to adjust a coupler, when he used it on
April 12, 2013, it slipped. Parrish fell, snapping his ankle sideways at a ninety degree angle to his
leg.
3.

Analysis

In its motion, GML asks the Court to grant summary judgment on Count I on the grounds
that the evidence conclusively establishes that GML bore no fault whatsoever in Parrish’s accident
because BNSF was exclusively responsible for training its employees to adjust mismatched railcar
couplers and for supervising its employees in that operation. BNSF maintains that GML owed it
a contractual duty to provide a safe workplace for BNSF employees, and that it is a question of fact
for a jury whether GML breached that duty and, consequently, bears some responsibility for
Parrish’s accident. It points to three ways GML was potentially negligent: (1) making the bar
available to Parrish to use in coupling railcars, (2) having a curved track that required couplers to
be adjusted and (3) directing BNSF to place certain cars on the curved track. In reply, GML
argues that BNSF has not provided any evidence that GML was negligent because of its curved
track design or its direction to Parrish to put cars on the curved track. GML notes that it did not
design the track, which was installed prior to its acquisition of the facility, and that BNSF has
pointed to no evidence from which a reasonable jury could find coupling railcars on a curved track
In his first deposition, taken April 14, 2014, Parrish testified that his supervisors had tested him
using the pry bar, Parrish dep. I 96:22-25 (Doc. 88-9), but in his second deposition, taken July 8,
2016, he testified that he could not say for sure that they had, Parrish dep. II 13:20-14:1 (Doc.
88-10). Because the Court resolves conflicting evidence in favor of BNSF for GML’s motion for
summary judgment, the Court must assume BNSF did not know Parrish was using the pry bar.
2

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is an unreasonably dangerous activity. It also argues that it did not “provide” the pry bar to
Parrish such that it could be negligent.
Here, whether GML owes contractual indemnity in any amount to BNSF depends on
whether GML was negligent or at fault in Parrish’s injury. The Sidetrack Agreement requires
indemnity only in proportion to GML’s negligence or fault as compared with BNSF’s: “If any
claim or liability shall arise from the joint or concurring negligence of the parties hereto, it shall be
borne by them in proportion to the degree of fault or negligence of both of them as provided by
law.” Sidetrack Agmt. § 8(a) (Doc. 1-1 at 4). Thus, although the contractual duty to indemnify
is a matter of contract law, see Burlington N., Inc. v. Hughes Bros., Inc., 671 F.2d 279, 284 (8th
Cir. 1982), the parties have chosen to measure their contractual liability using a fault or negligence
standard, that is, “the degree of fault or negligence of both of them as provided by law.” Sidetrack
Agmt. § 8(a) (Doc. 1-1 at 4). The Court therefore finds it appropriate to apply Illinois negligence
law to determine the apportionment of fault and, therefore, the magnitude of the indemnity GML
owes, if any.
To be negligent under Illinois law, the defendant must have owed a duty, breached the
duty, and caused injury because of that breach. Bell v. Hutsell, 955 N.E.2d 1099, 1104 (Ill. 2011).
GML claims, however, that it owed no duty. However, the Sidetrack Agreement clearly creates a
duty for GML “to provide a safe workplace for [BNSF] employees.” Sidetrack Agmt. § 2(a)
(Doc. 1-1 at 1).
Even absent such a duty assumed by contract, under the common law understanding of
duty, a duty would exist.
The touchstone of the duty analysis is to ask whether the plaintiff and defendant
stood in such a relationship to one another that the law imposes on the defendant an
obligation of reasonable conduct for the benefit of the plaintiff. The inquiry
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involves four factors: (1) the reasonable foreseeability of the injury; (2) the
likelihood of the injury; (3) the magnitude of the burden of guarding against the
injury; and (4) the consequences of placing the burden on the defendant.
Krywin v. Chicago Transit Auth., 938 N.E.2d 440, 447 (Ill. 2010). In this case, the relationship
between GML and BNSF, as reflected in the Sidetrack Agreement, imposed a duty of reasonable
conduct on GML toward BNSF’s employees working on GML’s tracks It was reasonably
foreseeable that a BNSF employee using a GML pry bar – which GML knew was readily
accessible yet clearly not intended for railroad use – could get hurt as a result of misusing that pry
bar for railroad purposes. Additionally, it was a small burden either to remove the misused pry
bar from a place where BNSF employees could access it or to instruct BNSF employees not to use
the pry bar for railroad purposes. Finally, there would be no serious consequences from tasking
GML with controlling the use of its own pry bar. Therefore, even if the common law provided the
rule for determining the existence GML’s duty, it would establish one in this case.
The Court further finds that a reasonable jury could find that GML breached this duty and
that the breach caused Parrish’s injuries. GML employees knew for years that BNSF employees
were using a pry bar designed for use by GML employees for a completely different purpose.
Arguably, the ease with which Parrish could access and use the pry bar, which he believed to be an
appropriate tool, rendered the workplace unsafe. GML easily could have asserted control over its
own pry bar to prohibit or prevent its use for an inappropriate purpose. A reasonable jury could
find that by failing to do this, GML was negligent and consequently bore some responsibility for
Parrish’s accident. Therefore, GML has not carried its burden of showing it is entitled to
judgment as a matter of law on BNSF’s contractual indemnity claim in Count I.3
Because the Court finds sufficient evidence from which a reasonable jury could find GML at
fault in connection with the availability of the pry bar, it need not consider whether there is
sufficient evidence from which a jury could find GML at fault in connection with the track design
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3

For similar reasons, the GML is not entitled to summary judgment on BNSF’s implied
indemnity claim in Count III. “The right to common law implied indemnity is available to ‘a
tortfeasor whose liability is vicariously imposed by policy of law rather than culpability of
conduct.’” Travelers Cas. & Sur. Co. v. Bowman, 893 N.E.2d 583, 590 (Ill. 2008) (quoting
Allison v. Shell Oil Co., 495 N.E.2d 496, 501 (Ill. 1986)). In Count III, BNSF claims it is
blameless in Parrish’s injury, although liable under FELA simply because of its employer status,
and that GML actually and solely caused Parrish’s injury. While it appears to the Court that it is
likely BNSF may bear at least some culpability for Parrish’s accident – after all, it settled Parrish’s
lawsuit for a substantial sum – the allocation of fault is a job for the jury, as explained above in
connection with Count I. The Court will not foreclose an implied indemnity claim until the jury
has made its decision, and if BNSF bears any fault, its implied indemnity claim will fail. Because
this is a question for the jury, the Court will not grant summary judgment on Count III.
B.

Count II: Insurance
1.

Facts

The facts with respect to Count II are essentially undisputed. The Sidetrack Agreement
was executed in 1998. It states, in pertinent part:
Section 7.(a) [GML] shall, at its expense, procure and maintain throughout the
term of this Agreement, and thereafter until any [GML]-owned
improvements are removed from the Property, a comprehensive
general form of insurance covering liability, including, but not
limited to, Public Liability, Personal Injury and Property Damage,
as well as Contractual Liability in the amount of $1,000,000 per
occurrence and $2,000,000 in the aggregate. Such insurance shall
contain no exclusion with respect to property of [BNSF] in the care,
custody or control of [GML]. [GML] also shall, at its expense,
procure and maintain throughout the term of this Agreement, an
automobile liability policy with limits of $1,000,000 covering “any
auto”. [BNSF] SHALL BE NAMED AS AN ADDITIONAL
or GML’s instruction to Parrish to move railcars sitting on the curved portion of the track.
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INSURED PARTY COVERED BY THE POLICY.
(b)

All risk insurance on the property of [GML], or in [GML]’s care,
custody and control, shall contain a waiver of subrogation of claims
against [BNSF]. [GML] shall maintain Workers Compensation
insurance which shall contain a waiver of subrogation against
[BNSF].

(c)

All insurance shall be placed with insurance companies licensed to
do business in the state in which the Property is located, with a
current Best’s Insurance Guide Rating of A- and Class X, or better.
[GML] shall provide, and thereafter maintain in effect, a current
Certificate of Insurance evidencing such insurance and said
Certificate shall reference this contract number. Insurance must
provide for coverage of incidents occurring within fifty (50) feet of
a railroad track, and any provision in the insurance policy to the
contrary must be specifically deleted. Each policy shall provide
that it shall not be canceled or materially changed unless at least
thirty (30) days’ prior written notice of cancellation or change shall
have been mailed by the insurance company to [BNSF] at the
address designated herein.

(d)

The furnishing of insurance required by this section shall in no way
limit or diminish the liability or responsibility of [GML] as provided
under any section of this Agreement.

Sidetrack Agmt. § 7 (Doc. 1-1 at 3-4).
GML purchased a comprehensive general liability (“CGL”) insurance policy from one of
the ACE defendants and named BNSF as an additional insured. However, the Court has already
determined as a matter of law that the ACE CGL policy did not cover BNSF for losses from the
Parrish lawsuit because of the circumstances of the accident; the policy did not cover an employer
for its own employee’s injuries (Doc. 84). GML never provided BNSF with a copy of the ACE
CGL policy and may have sent BNSF a copy of the certificate of insurance mentioned in § 7(c) in
1998 and in 2002, both prior to issuance of the ACE CGL policy. BNSF never objected to the
insurance coverage provided by GML pursuant to the Sidetrack Agreement until Parrish’s injury

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became an issue. Shortly after Parrish’s accident, BNSF made numerous efforts to obtain copies
of the CGL insurance policy GML was obligated to obtain under the Sidetrack Agreement. The
Court has already found that, after this litigation began, BNSF diligently attempted to secure the
ACE CGL policy (Doc. 32). GML provided a copy of the ACE CGL policy in July 2015.
2.

Analysis

Both parties have moved for summary judgment on Count II. BNSF maintains that the
failure to provide CGL insurance covering BNSF for the Parrish accident breached § 7 of the
Sidetrack Agreement, so it is entitled to summary judgment. Specifically, BNSF argues, the
policy did not cover all “incidents occurring within fifty (50) feet of a railroad track,” and GML
did not require that “any provision in the insurance policy to the contrary . . . be specifically
deleted,” as required by § 7(c) of the Sidetrack Agreement.
On the other side, GML argues that § 7(a) of the Sidetrack Agreement unambiguously
required it only to name BNSF as an additional insured on the automobile insurance policy, noting
that the final sentence of § 7(a) refers to “the policy” in the singular, clearly referring only to the
automobile policy mentioned in the immediately preceding sentence. Alternatively, GML argues
that if the Sidetrack Agreement required it to purchase CGL insurance naming BNSF as an
additional insured, it did so by naming GML as an additional insured on the ACE CGL policy.
GML maintains that whether the CGL policy actually covered liability from Parrish’s accident is
immaterial to whether it complied with any obligation § 7(a) to purchase CGL coverage for BNSF.
GML further notes that its failure to provide a certificate of insurance as required by the Sidetrack
Agreement caused BNSF no damage. Finally, GML argues that BNSF waived the right to contest
compliance with § 7(a) because it failed to raise the issue of insufficient coverage or to request a

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certificate of insurance to check compliance with the Sidetrack Agreement from 1998 to 2013.
In response to GML’s arguments, BNSF maintains that the automobile coverage portion of
§ 7(a) simply means that the single insurance policy required must also cover automobile liability,
so the final clause referring to “the policy” applies to all types of coverage listed earlier in the
paragraph. Alternatively, it argues that the use of the singular “the policy” creates an ambiguity
because it is at the conclusion of a paragraph mentioning two policies. The ambiguity, BNSF
argues, must be construed in light of the other evidence in the case showing that both parties
assumed and acted as if the requirement to name BNSF as an additional insured applied to the
CGL coverage and, indeed, GML added BNSF as an additional insured on the ACE CGL policy.
Finally, BNSF argues it did not waive the insurance requirements in § 7 of the Sidetrack
Agreement because it did not even know the CGL insurance provided by GML was insufficient.
a.

CGL v. Automobile Policy

The Court first addresses GML’s contention that the Sidetrack Agreement only obligates it
to name BNSF as an additional insured on an automobile policy. This requires interpretation of
the Sidetrack Agreement under principles of Illinois law, which provide that when construing a
contract, the Court must give effect to the intent of the parties. Gallagher v. Lenart, 874 N.E.2d
43, 58 (Ill. 2007); Virginia Sur. Co. v. Northern Ins. Co. of New York, 866 N.E.2d 149, 153 (Ill.
2007). The Court must first attempt to determine this intent solely from the plain and ordinary
meaning of the contract language, which is usually the best indication of the parties’ intent.
Gallagher, 874 N.E.2d at 58; Virginia Sur., 866 N.E.2d at 153. The Court should also consider
the contract as a whole because words often derive their meaning from their context. Gallagher,
874 N.E.2d at 58. It may also consider the custom and usage of terms within a certain industry to

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understand the parties’ intent. Intersport, Inc. v. National Collegiate Athletic Ass’n, 885 N.E.2d
532, 539 (Ill. App. Ct. 2008). If the language so viewed is susceptible to more than one meaning,
it is ambiguous, and the Court may consult extrinsic evidence to determine the parties’ intent.
Gallagher, 874 N.E.2d at 58. One type of extrinsic evidence of the parties’ intent is their conduct
subsequent to formation of the contract. Szafranski v. Dunston, 34 N.E.3d 1132, 1157 (Ill. App.
Ct.), app. denied, 39 N.E.3d 1012 (Ill. 2015), cert. denied, 136 S. Ct. 1230 (2016).
The plain language of § 7(a) is ambiguous. The reference to “the policy” following a
requirement that GML “shall, at its expense, procure and maintain . . . a comprehensive general
form of insurance [and] an automobile liability policy” could be interpreted to refer to either policy
individually, or it could be construed as grammatically incorrect reference to both policies.
Considering the purpose of the Sidetrack Agreement to govern the relationship between GML and
BNSF in connection with the GML rail yard, it would be absurd to find it required GML to name
BNSF as an additional insured only on an automobile insurance policy, a minute aspect of the
relationship between the two parties. In fact, one of the primary purposes of a sidetrack
agreement is to allocate liability for a wide range of losses arising out of the use of the sidetrack,
not just liability connected to an automobile. See International Risk Management Institute, Inc.,
Railroad Sidetrack Agreement, https://www.irmi.com/online/insurance-glossary/terms/r/
railroad-sidetrack-agreement.aspx (visited Mar. 23, 2017) (defining railroad sidetrack agreement
as “[a]n agreement between a railroad and a business in which the railroad agrees to build a siding
on the property of the business, and the business will hold the railroad harmless for certain liability
arising out of the use of the sidetrack”).
Additionally, the parties’ post-formation conduct reflects their intent that the Sidetrack

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Agreement require GML to name BNSF as an additional insured on its CGL policy. The parties
admit numerous times in discovery that they believed § 7 required GML to name BNSF as an
additional insured on GML’s CGL policy and, indeed, named BNSF as an additional insured on
the ACE CGL policy in order to comply with § 7(a) of the Sidetrack Agreement.
In sum, the language and context of the Sidetrack Agreement and the parties’
post-agreement conduct reveal that they intended the Sidetrack Agreement to obligate GML to
name BNSF as an additional insured on its CGL policy. The Court rejects GML’s cramped
reading otherwise.
b.

Naming of Additional Insured

GML argues it has satisfied any obligation under § 7(a) of the Sidetrack Agreement by
naming BNSF as an additional insured on the ACE CGL policy. BNSF disputes this, pointing out
that the ACE CGL policy did not cover Parrish’s accident, which occurred within fifty feet of a
railroad track. It notes that § 7(c) obligated GML to “provide for coverage of incidents occurring
within fifty (50) feet of a railroad track.”
To understand whether GML satisfied its insurance obligations under the Sidetrack
Agreement, the Court again must determine what the parties intended when they bargained for
CGL coverage. The Sidetrack Agreement, executed in 1998, essentially requires GML to name
BNSF on a CGL insurance policy (1) for certain kinds of liability (including personal injury), (2)
with certain dollar amounts of coverage ($1,000,000 per occurrence/$2,000,000 in the aggregate),
(3) not to exclude BNSF’s property in GML’s care, custody and control, (4) with waivers of
subrogation claims against BNSF, (5) from certain licensed insurance companies, (6) that covers
incidents occurring within fifty feet of the track, and (7) that cannot be canceled or changed

15

without prior written notice to BNSF. Sidetrack Agmt. § 7 (Doc. 1-1 at 3-4). There are no more
material details than that. In this lawsuit, the only requirement BNSF claims GML breached was
(6), the geographic coverage requirement because the ACE CGL policy did not cover Parrish’s
accident that occurred within fifty feet of the track.
The relevant question is whether the parties intended to require the CGL policy to provide
unlimited coverage for any damage, injury or liability whatsoever within fifty feet of the track, as
BNSF contends. The Court finds they did not intend such sweeping coverage. It is a
fundamental principle of insurance coverage that insurers limit the scope of their policies’
coverage by carefully describing what is covered, exclude certain liabilities that otherwise fall
within that coverage, and except some circumstances from those exclusions. This is just as true
for CGL policies as any other insurance policies. Thus, when the parties entered into the
Sidetrack Agreement in 1998 to provide CGL coverage, they undoubtedly expected some limits on
the coverage, whether they were because of the terms of the coverage or from exclusions.
The parties did not intend the geographical coverage requirement to supersede or negate
the limitations on the type of liability covered. Instead, the parties intended it to describe the
minimum area for which the limited CGL coverage would apply – within fifty feet of the track,
where most incidents implicating BNSF’s potential liability were likely to occur. So, for
example, the GML CGL policy would not need to cover BNSF as an additional insured for an
accident that occurred in a parking lot of the GML facility far from the track; it is unlikely BNSF
would have liability in an area so remote from its operations in the GML rail yard. This was the
parties’ intent when they included the fifty-foot requirement, not an expansion of the type of
liability covered by the CGL policy. Indeed, if Parrish’s injury had been of the type of liability for

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which BNSF was covered by the ACE CGL policy and had occurred thirty feet from the track, but
the ACE CGL policy had only covered accidents within ten feet of the track, the policy would not
have satisfied GML’s obligations under § 7 of the Sidetrack Agreement. However, that is not the
case.
Here, GML obtained a CGL policy and named BNSF as an additional insured. The failure
of the policy to cover BNSF for liability from the Parrish lawsuit was not attributable to any
failure on GML’s part to obtain the required insurance containing the terms set forth in the
Sidetrack Agreement. Therefore, GML is entitled to summary judgment on Count II.
c.

Waiver

Because GML has prevailed on Count II, the Court need not consider whether BNSF
waived its objection to the insurance provided by GML. The Court notes, however, that BNSF’s
apparent failure to diligently check whether GML actually procured the insurance coverage BNSF
thought it had is a major factor in why this lawsuit arose. The evidence shows that, until this
lawsuit, BNSF did not ever examine GML’s CGL policies to ensure it was receiving what it
believed it had bargained for and, if it was not getting the supposed benefit of its bargain, to
renegotiate the bargain. This would have been a wise course of action, especially in light of the
insurance industry’s progressive narrowing of additional insured coverage in its standard forms.
See Scott P. Pence & William Cary Wright, Not All Additional Insured Endorsements Are Created
Equal: Brief History of ISO’s Additional Insured Endorsements and 2013 Changes, Under
Construction (ABA/Forum on Construction Law, Chicago, Ill.), Vol. 15, No. 3, Aug. 2013,
http://www.americanbar.org/publications/under_construction/2013/august_2013/iso_additional_i
nsured_endorsements.html (visited Mar. 23, 2017). However, the Court does not – and need not

17

– find BNSF has waived its breach of contract argument but simply notes a practical course that
could have avoided this litigation.
IV.

Conclusion
For the foregoing reasons, the Court:


DENIES BNSF’s motion for partial summary judgment on Count II (Doc. 85);



GRANTS in part and DENIES in part GML’s motion for summary judgment (Doc. 87).
The motion is GRANTED to the extent it seeks summary judgment on Count II and is
DENIED to the extent it seeks summary judgment on Counts I and III;



DENIES as moot GML’s motion to bifurcate the trial of Count I from the trial of Count II
(Doc. 128);



ORDERS that the parties shall have up to and including April 21, 2017, to respond to the
pending motions in limine to which responses have not already been filed; and



DIRECTS the Clerk of Court to enter judgment accordingly at the close of the case.

IT IS SO ORDERED.
DATED: March 29, 2017
s/ J. Phil Gilbert
J. PHIL GILBERT
DISTRICT JUDGE

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