GOSHEN — A Goshen-based bus maker is suing its former insurance carrier in an effort to recoup at least $5 million it paid out in a lawsuit alleging its buses were defective.
King County, Wash., in 2012 sued the Star Trans Bus Division of Supreme Corp., alleging 35 buses the company supplied its Seattle area transit system were poorly designed and manufactured, and had numerous defects that didn’t conform to contract specifications, making the buses unsafe for drivers and passengers. Because of the alleged defects, the buses were out of service for about 70 percent of the 20 months the transit system tried to use them, the county argued in court documents. The county claimed damages of nearly $10.6 million.
In June 2013, the company and county reached an out-of-court settlement in which Supreme agreed to take back the buses and pay the county about $4.7 million, about $500,000 of which it recovered from subcontractors.
Supreme had to borrow against its $35 million credit line to pay the settlement because its insurance carrier, Overland Park, Kan.-based First Specialty Insurance Corp., refused coverage. First Specialty asserted the policy Supreme had taken out only covered bodily injury or property damage the buses might have caused, or personal and advertising injury, none of which pertained to the King County case.
First Specialty in April 2012 filed a complaint in the South Bend federal court, asking U.S. Senior Judge James T. Moody to issue an order declaring the carrier was not obligated to cover Supreme’s costs and damages. Since March 2013, both sides have been waiting for a ruling from Moody, who carries a partial docket as a semi-retired judge.
Supreme’s South Bend attorney, Michael Hays, said he filed the recent complaint to preserve the company’s rights as the parties await Moody’s ruling. Language in the insurance policy sets time limits on when the insured can legally object to the carrier’s decisions on coverage. The case has been consolidated with First Specialty’s complaint for declaratory relief.
"We wanted to make sure we got into court to preserve the right to seek recovery of the costs Supreme incurred in settling the lawsuit,” Hays said. "We continue to believe and hope the judge will rule in our favor.”