AIG Unit Must Defend Davey Tree in Murder Suit, but Subsidiary Loses Coverage

Davey Tree’s Partial Win on Defense Costs

A subsidiary of American International Group must defend the parent company of a tree care business against wrongful-death lawsuits tied to the 2017 murder of an employee, a federal judge in Ohio ruled last week. At the same time, the judge found the insurer has no duty to defend or indemnify the subsidiary that directly employed the victim.

The decision by Chief Judge Sara Lioi of the U.S. District Court for the Northern District of Ohio splits the coverage obligations under umbrella and excess policies issued by National Union Fire Insurance Company and third-party defendant XL Insurance America. The ruling requires National Union to defend Davey Tree Expert Company in litigation stemming from the killing of Eliud Montoya, but holds that the same policies provide no coverage for Davey Tree’s subsidiary, Wolf Tree, because the death arose from “employment-related practices” covered by an exclusion.

The underlying civil suits followed a Georgia jury’s award of $3.1 million in compensatory damages plus more than $2.3 million in attorney’s fees to Montoya’s widow. The suits alleged that Montoya, a Wolf Tree employee, was murdered after he reported a supervisor’s illegal conduct — including supplying undocumented workers with falsified documents — to Davey Tree’s general counsel. That report was allegedly forwarded to the supervisor, who then fabricated safety violations to have Montoya fired and hired his brother to shoot Montoya outside his home. The supervisor, Pablo Rangel-Rubio, is now serving nearly 49 years in federal prison; his brother, who fired the fatal shots, received a mandatory life sentence.

While insurers had argued that an employment-practices exclusion in the umbrella and excess policies blocked coverage for both entities, Judge Lioi concluded that the exclusion only applied when an employment relationship existed between the claimant and the insured. Because neither underlying lawsuit adequately pleaded that Montoya was Davey Tree’s employee, rather than Wolf Tree’s, the exclusion did not bar coverage for the parent. For Wolf Tree, however, the judge found that the murder was a “direct consequence or responsible condition” of the employment relationship and the alleged retaliation, cutting off all defense and indemnity rights under both insurers’ policies.

Why the Exclusion Shielded Davey Tree but Left Wolf Tree Exposed

The Corporate Structure That Created a Coverage Gap

At the heart of the split ruling is a simple corporate fact: Davey Tree and Wolf Tree were separate legal entities, only one of which directly employed the victim. The insurers’ employment-practices exclusion barred coverage for liability arising from employment-related acts of the insured. By treating the two firms as distinct insureds, the court gave the exclusion its literal reading — Montoya was not Davey Tree’s employee, so the exclusion could not apply to Davey Tree. For Wolf Tree, however, the retaliation, firing, and eventual murder were intertwined enough with the employment relationship that they fell within the exclusion’s scope.

This outcome exposes a gap that parent-subsidiary coverage placements often overlook. If the parent and subsidiary are separately named insureds, an exclusion may operate differently for each. An employment practices liability insurance policy written for the subsidiary would have responded more directly, but standard umbrella and excess policies frequently exclude such exposures unless specifically endorsed.

Implications for the $5.3 Million Verdict

Wolf Tree now faces the full force of the jury award without insurance coverage. While Davey Tree receives a defense from National Union, the parent may ultimately bear the financial burden if it indemnifies its subsidiary directly. That intra-group exposure can be substantial, and the lack of insurance reimbursement shifts the burden onto the corporate balance sheet. There is also the possibility of an appeal or further litigation over allocation of defense costs between the parent’s covered claims and the subsidiary’s uncovered ones.

Where Does the Litigation Go Next?

Both insurers had sought declaratory judgments that they owed no duty to defend or indemnify. The court’s partial grant of summary judgment in their favor regarding Wolf Tree may still be appealed, while Davey Tree’s defense obligation stands. The practical effect is that Davey Tree’s general liability program will, for now, fund the parent’s defense costs — but all eyes remain on whether Wolf Tree attempts to challenge the denial of coverage or negotiate a settlement without insurer participation.

What Corporate Insurance Buyers Should Take from the Ruling

• Review named insured status across all entities: The ruling underscores that separate legal entities can have different coverage outcomes under the same policy. Risk managers should confirm that every subsidiary intended to be covered is explicitly listed as a named insured and that the scope of coverage for each is clear.
• Consider standalone employment practices liability insurance (EPLI) for subsidiaries: Umbrella and excess policies frequently contain broad employment-practices exclusions. A dedicated EPLI policy for each operating subsidiary would have addressed retaliation and wrongful-death claims arising from the employment relationship here.
• Examine “insured vs. insured” and related exclusions in parent‑subsidiary structures: The decision turned on whether Montoya was the insured’s employee. Multi‑entity programmes should be stress‑tested for scenarios where one entity’s act triggers an exclusion but another entity’s coverage survives.
• Prepare for coverage disputes when serious misconduct is alleged: Allegations of retaliation, immigration violations and murder push insurers to test every exclusion. Corporate counsel should assemble the factual record early to support coverage claims, particularly when the relationship between parent and subsidiary is at issue.