NIPSCO just won a major court battle after contractors and their insurer ditched its defense in a multimillion-dollar workplace injury lawsuit.
Northern Indiana Public Service Company (NIPSCO) secured the victory on September 12, 2025, when the Indiana Court of Appeals ruled that Safway Services, LLC, and ACE American Insurance Company were liable for abandoning their contractual duty to defend NIPSCO in a costly workplace injury suit.
The dispute began after Safway employee Adam Nagel was seriously injured in 2008 while working on scaffolding at NIPSCO’s Bailly Generating Station. Nagel and his wife sued NIPSCO, alleging unsafe conditions. NIPSCO’s contract with Safway required the contractor to defend and indemnify NIPSCO for claims tied to Safway’s work, and Safway had secured liability insurance from ACE, naming NIPSCO as an additional insured.
For years, Safway covered NIPSCO’s legal defense. But in March 2016, just before mediation, both Safway and ACE withdrew their defense, leaving NIPSCO to pay its own legal bills and ultimately settle the lawsuit for $3.5 million. ACE later contributed $500,000 to the settlement under its insurance policy with Headwaters Resources, Inc., but reserved its rights to pursue recovery of that amount.
NIPSCO then sued Safway and ACE for breach of contract and declaratory relief, seeking reimbursement for defense costs, the settlement payment, and attorney fees. The trial court found Safway breached its contractual duty to defend NIPSCO, awarding NIPSCO its defense costs and attorney fees, but denied recovery of the $3.5 million settlement payment. The court also held ACE was liable under its policy for damages assessed against Safway, subject to the policy’s $2 million deductible.
On appeal, the Indiana Court of Appeals affirmed in part, reversed in part, and remanded for clarification on damages. The appellate court found the Safway contract language - requiring Safway to “indemnify, defend and hold harmless” NIPSCO from claims “related in any way” to Safway’s work or breach—was broad and unambiguous. The court held that Safway’s duty to defend was triggered by the facts of the injury lawsuit, even though Safway was not named as a defendant and even after the appellate opinion narrowed the claims to premises liability.
The court also examined the ACE-Safway insurance policy, which stated ACE would “pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ . . . to which this insurance applies,” but that ACE had no duty to defend any suit, as defense was to be provided by Safway’s claim service organization. The appellate court agreed ACE was liable for defense costs, subject to the deductible, but not for attorney fees NIPSCO incurred in bringing the indemnification action.
The appellate court denied NIPSCO’s request to recover the $3.5 million settlement as consequential damages or under collateral estoppel, as there was no determination of negligence or liability in the underlying suit. The court remanded for clarification on the exact sum of damages awarded.
For insurers and contractors, this ruling is a reminder: clear contract language and honoring defense obligations are critical. The decision highlights the risks of abandoning defense and indemnity commitments in complex workplace incidents.
The September 12, 2025, decision is not yet final, with further proceedings on damages still to come.
