On Friday, when the Supreme Court decided to hear Hugh Caperton and Harman Mining’s appeal from the reversal of their $50 million verdict against A. T. Massey Coal Co., Don Blankenship, Massey Energy’s chairman, was embroiled in another lawsuit. 

The families of two coal miners killed in an accident in January 2006 sued their employer, Aracoma Coal Company, Inc., Massey Energy, A. T. Massey, and Blankenship individually.   The plaintiffs contend that Blankenship is at fault because he emphasized increased coal production over proper safety procedures, according to Ken Ward, Jr.’s article in Tuesday’s Charleston Gazette.  Aracoma is a subsidiary of Elk Run Coal Company, Inc., which is a subsidiary of A. T. Massey Coal Company, Inc.

Blankenship was present at the trial on Friday, but his testimony was presented via videotape — although his lawyers attempted to convince Logan County Circuit Court Judge Roger L. Perry to allow him to testify in person, which Judge Perry did not allow.  Blankenship’s lawyers may present his testimony live during his case-in-chief.

According to Ward’s article in yesterday’s Saturday Gazette-Mail, Blankenship involved himself in seemingly small details of Massey’s operations, such as whether to waive its usual policy and hire three workers who did not have high school diplomas.  What may be more helpful to the plaintiffs, though, is Blankenship’s testimony that he receives faxed production reports from Massey mines every two hours and monitors profit and loss statements from each mine on a daily basis.

The wrongful-death case has created an insurance coverage dispute between Aracoma and its insurer, American International Specialty Lines Insurance Co.  In this complaint, Aracoma seeks a declaration that its policy with AISLIC covers the January 2006 fire in which the two miners died.  Aracoma Coal Company, Inc. v. American International Specialty Lines Insurance Co., Civil Action No. 08-C-322-O (Circuit Court of Logan County, West Virginia, October 29, 2008).

AISLIC’s policy provides Massey with general liability coverage of $15 million per occurrence limit of liability with a $10 million per occurrence retention, and  employer’s liability/stop gap coverage of $20 million per occurrence with a $5 million per occurrence retention.  Aracoma, as a Massey subsidiary, is an insured under the policy.

Aracoma claims that in the course of settlement negotiations, the plaintiffs offered to settle within the applicable limits of coverage under the West Virginia stop gap portion of the policy, which would result in a full and complete release of Aracoma, as well as the other defendants.  Aracoma agreed to pay the $5 million retention toward the claim.

But AISLIC refused to agree to such a settlement, and instead insisted that the other Massey defendants pay all or a portion of the $10 million retention applicable under the general liability portion of the policy before it would proceed on Aracoma’s behalf.

Aracoma alleges that AISLIC’s conduct has exposed it to a verdict in excess of its policy limits so that AISLIC can obtain a settlement more favorable to itself.  The complaint seeks a declaratory judgment that AISLIC cannot refuse to settle the claims against Aracoma by first requiring payment under the general liability portion of the policy, and alleges common law and statutory bad faith causes of action.

Ward wrote about the insurance dispute in Wednesday’s Charleston Gazette.  But according to a story he wrote for Thursday’s edition, Massey took issue with the the suggestion that Aracoma had agreed to settle with the plaintiffs for $20 million.  Massey’s general counsel, Shane Harvey, would not reveal the amount the parties had agreed to, but put the settlement range at somewhere between $1 and $20 million.  Harvey  expressed concern that the article could "influence jurors and prevent fair trials."

There are a couple of things I don’t understand about the lawsuit and Massey’s reaction to Ward’s article.  Aracoma is the party that made the allegations about AISLIC’s actions, particularly that the plaintiffs had offered to settle within the limits of liability.  Ward’s article doesn’t state that the parties had agreed to settle for $20 million, simply that they had agreed to settle within the policy limits.

But if Massey is so worried about the article’s possible effect on the jurors, then why did Aracoma file its declaratory judgment action in the same state court where the wrongful death cases were pending, a few days before those cases went to trial?  The wrongful death and insurance coverage cases would understandably attract media attention, and the surest way to avoid any such attention would be to have waited until the underlying trial was concluded.