Affiliated FM Ins. Co. v. LTK Consulting Servs., Inc.

In May 2004, the monorail blue train of the Seattle Monorail System caught fire after leaving the Seattle Center Station. The train had a full load of passengers. The fire began under the floor of the passenger compartment of the front two cars of the train but soon came through the flooring and engulfed both front passenger cars. Smoke traveled to all four of the blue train’s cars. The red train on the other track stopped to help passengers escape. The red train was damaged by smoke. The cause of the fire was electrical in nature and involved a shaft in the blue train’s motor that had disintegrated causing it to collide with an electrically charged collector shoe.

10 Years prior to the fire, the City of Seattle (“City”) entered into an agreement with Seattle Monorail Services (“SMS) which granted rights to SMS related to the operation of the monorail. The rights granted to SMS included the right to maintain and exclusively operate the monorail system  as well as permitted SMS to run concession stands. SMS was also required by the agreement to to collect fares according to an agreed schedule and in return for the rights granted, SMS would pay the City concession fees and charges.

The agreement allocated responsibility for maintaining the monorail among SMS and the City. It required SMS to provide the city with access to the monorail system at all reasonable times in order to inspect, repair, improve, alter, or add to any of the property owned by or under control of the City. Additionally, SMS was required to carry an insurance policy for fire, extended coverage, collision and overturn vandalism, malicious mischief, and other perils and the City was designated as the loss payee.

In 1999, the City contracted with the Defendant, LTK Consulting Servs., Inc., to examine the monorail system and recommend repairs. By 2002, the Defendant had completed its contractual obligations. SMS was not a party to the contract.

SMS and the City amended their agreement following the fire to allocate the costs and responsibility for repairing the damage to the monorail from the fire and smoke. The Plaintiff, Affiliated FM Ins. Co., was SMS’s insurer. The Plaintiff paid $3,267,861 to SMS and was surrogated to SMS’s rights against the Defendant. The Plaintiff then sought to recover damages from the Defendant for SMS’s losses.