Jeffrey and Michael Derderian, the owners of The Station nightclub, are suing their insurance company, claiming it should pay to defend them from felony charges they face in connection with the deaths of 100 people in the Feb. 20, 2003, fire at the club.
The Station was covered by a $2 million liability policy from the Essex Insurance Co., which included the right to legal defense against suits seeking damages for bodily injury or property damage, with some limits and only up to the coverage cap.
Along with the 100 deaths, the fire left over 200 people injured and destroyed the club building, which the Derderians rented. The Virginia-based insurer is already involved in the slew of civil lawsuits filed against the club in U.S. District Court. Now, in a new twist, the Derderians want the company’s help with criminal proceedings.
The Derderians’ claim, filed June 28 in Superior Court, Providence, points out that Rhode Island’s victims-right statute provides for an automatic civil judgment against a felony defendant upon his conviction, finding him liable for damages to the victim.
“Because a verdict against each defendant in the indictments would result in the imposition of civil judgment for liability and damages as provided in § 12-28-5, each indictment constitutes a ‘suit’ under the terms of the Essex policy,” they argued.
The brothers tried that argument with Essex, but the company rejected their claim, leading them to seek a judge’s order to compel the payment.
Essex’s response to the suit, filed Aug. 17, vigorously denies any obligations to the Derderians in the criminal case, saying the coverage they seek “runs contrary to objectively reasonable expectations” of parties under the policy. It’s also “contrary to the law and the public policy of the State of Rhode Island.” And in any case, Essex argued, the brothers weren’t personally covered by the policy.
Many of the insurer’s arguments in the case go well beyond the legal point in question, and suggest that the Derderians could face strong resistance from Essex in general when it comes to covering claims related to the fire.
The insurer argued, for example, that the brothers aren’t entitled to compensation because they “failed to exercise ordinary care for the security of their own position and their own well-being,” and because they failed to mitigate damages.
The Derderians also “failed to perform all of their obligations” under the terms of the policy, Essex argued, and they “failed to cooperate with Essex.” The insurer also noted that the Dec. 9 indictments against the brothers alleged that the 100 deaths “were the result of criminal negligence and unlawful acts by the Derderians.”
The Station policy, which was to expire just over a month after the fire, provided up to $2 million total coverage, or $1 million per occurrence, with a $100,000 limit for fire damage and $1,000 per person for medical expenses.
Based on $250,000 in sales, including over 75 percent in liquor sales, the club’s premium for the year was $6,063. The policy did not include liquor liability – meaning damages resulting from someone being intoxicated, among other things. It also specifically excluded assaults and related injuries, as well as injuries or property damage affecting any entertainer, stage hand, crew, independent contractor, or spectator participating in a show.
The fire at the Station started when fireworks set off by the band Great White ignited the polyurethane foam that the Derderians had installed as soundproofing on the walls and ceiling of the stage area. The wood-frame building was quickly consumed in flames, and scores of patrons were trapped inside.
Along with the Derderians, the former tour manager for Great White, Daniel Bichele, has been indicted for manslaughter in the 100 deaths. No trial date has been set. Defendants in the civil cases also include the band, the Town of West Warwick, a police officer who was on detail at the club during the concert, and foam manufacturers.
