Appeals court reinstates coal mining company’s coverage dispute

The Kentucky Court of Appeals on Friday overturned a win for certain underwriters at Lloyd’s of London, finding an abandonment exclusion does not relieve it from covering a highwall coal mining company’s loss of equipment following a tunnel collapse.

The three-judge panel in Mega Highwall Mining Inc. v. Certain Underwriters at Lloyd’s of London said the exclusion was inapplicable because Ashland, Kentucky-based Mega’s loss occurred when a mining tunnel caved in, trapping 16 add cars as well as a piece of equipment called a continuous miner that is used to extract coal from a mountain.

The appellate court said the exclusion would apply if the loss resulted from Mega’s abandonment of the equipment.

Mega was able to recover one add car after the April 2021 tunnel implosion but was unable to successfully extract the remaining equipment after concluding that additional recovery efforts were not viable.  Mega sought coverage for the loss of the equipment under its “all-risks” policy but was denied coverage based on the abandonment exclusion.

Mega sued the insurer in October 2021 in Kentucky’s Boyd County Circuit Court for breach of contract. The trial judge awarded summary judgment to the insurer in September 2023, saying the exclusion applied because of Mega’s failure to retrieve the equipment constituted abandonment. Mega appealed.

Representatives for the parties did not respond to requests for comment.