In a significant legal confrontation unfolding within Nevada’s judicial system, Scottsdale Insurance Company has initiated a compelling challenge to avoid covering a severe workplace injury at a Cheesecake Factory location, raising critical questions about insurance policy exclusions. This lawsuit, filed on August 6 in the US District Court for the District of Nevada under the title Scottsdale Insurance Company v. All Type, LLC, et al. (Case No. 2:25-cv-01452), seeks a declaratory judgment to define the insurer’s responsibilities. The dispute centers on an electric shock injury sustained by Amy Reyes, an employee at the restaurant, spotlighting critical issues surrounding the boundaries of coverage. As this case progresses, it promises to illuminate the often complex and contentious realm of commercial general liability (CGL) policies, potentially reshaping how such disputes are navigated in the state.
Background of the Dispute
Incident and Legal Actions
The genesis of this legal battle traces back to June 24, 2023, when Amy Reyes, a bartender at the Cheesecake Factory in Henderson, Nevada, located at 160 South Green Valley Parkway, suffered a devastating electric shock while cleaning a refrigerator cooler. According to court documents, the incident resulted in severe injuries to her head, neck, and upper extremities, accompanied by lasting neurological pain and a permanent partial disability rating. Reyes subsequently filed a lawsuit in Clark County District Court (Case No. A-24-895563-C), targeting All Type, LLC, the maintenance contractor for the restaurant. Her claims include negligence, negligent hiring and supervision, products liability, breach of warranty, and failure to warn, painting a broad picture of alleged misconduct that led to her suffering.
Parallel to Reyes’ action, a separate lawsuit emerged, filed by Corvel Corporation and The Cheesecake Factory (Case No. A-25-918394-C), seeking over $100,000 in workers’ compensation benefits, ongoing medical expenses, and lost income. These two cases were consolidated in Clark County District Court around June 2, highlighting the significant financial stakes involved. The combined legal actions underscore the potential liability facing All Type, LLC, and set the stage for Scottsdale Insurance’s federal challenge to determine whether it must bear the burden of defense or indemnity costs. This situation not only affects the immediate parties but also raises broader questions about accountability and coverage in workplace injury scenarios.
Context of Contractual Obligations
Delving deeper into the background, the relationship between All Type, LLC and The Cheesecake Factory was formalized through a Master Services Agreement dated November 9, 2022, effective until December 31, 2023. This agreement mandated that All Type provide maintenance services, including refrigeration work, at various Nevada locations, while also requiring the contractor to secure CGL insurance and name The Cheesecake Factory as an additional insured. Scottsdale Insurance issued such a policy to All Type, covering the period from October 5, 2022, to October 5, 2023 (Policy Number CPS7665624). This contractual framework forms the bedrock of the current dispute, as it dictates the expectations and obligations that Scottsdale now seeks to clarify through judicial intervention.
The complexity of this case is further compounded by the nature of the incident occurring within the scope of Reyes’ employment at an insured location. While All Type fulfilled its contractual duty to obtain insurance, the specific terms and exclusions within Scottsdale’s policy are now under scrutiny. The outcome of this legal challenge could influence how similar agreements are drafted and interpreted in the future, particularly regarding the protection offered to additional insureds. As such, the dispute transcends a single injury, touching on systemic issues within commercial contracts and insurance coverage that could reverberate across the industry.
Scottsdale Insurance’s Legal Position
Policy Exclusions and Coverage Limits
At the core of Scottsdale Insurance’s argument lies the “Injury To Employee And Worker Exclusion” endorsement within its CGL policy issued to All Type, LLC. This specific clause explicitly bars coverage for bodily injuries sustained by employees or workers of any insured party, including contractors or subcontractors, if the injury occurs during their employment. Given that Amy Reyes was an employee of The Cheesecake Factory at the time of her electric shock injury, Scottsdale contends that this exclusion applies directly, absolving the insurer of any obligation to defend or indemnify All Type in the underlying state court lawsuits. This stance is pivotal to the insurer’s request for a declaratory judgment in federal court, aiming to establish a clear boundary on its liability.
Additionally, Scottsdale points to the “Additional Insured” endorsement in the policy, which limits coverage to what is explicitly required by the contract with The Cheesecake Factory. This endorsement further excludes liability for professional services or injuries occurring after the completion of contracted work, reinforcing the insurer’s position that the circumstances of Reyes’ injury fall outside the policy’s protective scope. By providing a defense to All Type under a reservation of rights, Scottsdale has signaled its intent to contest coverage while seeking judicial confirmation that it owes no duty in this matter. This legal maneuver highlights the intricate balance between policy language and real-world application in determining insurer responsibilities.
Financial and Legal Strategy
Scottsdale’s approach in this case also reflects a calculated financial and legal strategy to mitigate exposure. By agreeing to defend All Type under a reservation of rights, the insurer preserves its ability to challenge coverage while temporarily shielding the contractor from immediate legal costs. However, the federal lawsuit goes a step further, requesting not only a ruling that Scottsdale owes no duty to defend or indemnify but also reimbursement for defense costs already incurred. Citing Nevada legal precedents, such as Nautilus Insurance Company v. Access Medical, LLC (2021), the insurer seeks to align its actions with established state law that permits recovery of costs related to uncovered claims.
This strategic filing underscores a broader intent to limit financial burdens before they escalate further in the state court actions. The consolidated lawsuits involving Reyes and Corvel Corporation present substantial claims, with potential liabilities that could strain All Type’s resources without insurer support. Scottsdale’s proactive move to seek a declaratory judgment illustrates a cautious approach to managing risk, potentially setting a benchmark for how insurers handle similar disputes. The resolution of this aspect could influence future litigation strategies, particularly in cases involving complex policy exclusions and high-stakes claims.
Broader Implications and Trends
Impact on Insurance and Liability
The ramifications of Scottsdale Insurance’s challenge extend far beyond the immediate parties involved in this Nevada case. Should the federal court side with the insurer’s interpretation of the “Injury To Employee And Worker Exclusion” endorsement, it could establish a significant precedent for how such clauses are applied in workplace injury cases across the state. This outcome might limit insurers’ liability exposure when dealing with contractors and additional insureds, potentially reshaping the landscape of commercial insurance coverage. Businesses relying on CGL policies could face heightened scrutiny over policy terms, necessitating more robust risk management strategies to protect against uncovered claims.
Moreover, the financial and legal burdens on contractors like All Type, LLC, could intensify if coverage is denied. Without insurer backing, contractors may struggle to absorb the costs of litigation and settlements, which in turn affects their ability to operate effectively. For The Cheesecake Factory, as an additional insured, the case’s resolution could impact its capacity to recover losses tied to Reyes’ injury. Similarly, Reyes herself faces uncertainty regarding the resources available for compensation. This dispute thus serves as a critical reminder of the interconnected vulnerabilities within commercial relationships when insurance coverage is contested.
Trends in Insurance Litigation
A notable trend illuminated by this case is the increasing reliance on declaratory judgments by insurers to clarify their obligations early in the litigation process. Scottsdale Insurance’s decision to file for such a judgment before incurring substantial defense or indemnity costs reflects a growing practice among insurers to minimize financial exposure. This approach allows companies to seek judicial clarity on policy interpretations, potentially avoiding prolonged and costly disputes. In Nevada, where legal precedents support reimbursement for defense costs under a reservation of rights, insurers are incentivized to take preemptive action, as Scottsdale has done by referencing relevant case law.
This litigation pattern also highlights the evolving dynamics of insurance disputes, where the balance between contractual obligations and policy exclusions is frequently tested in court. The emphasis on early intervention through federal filings suggests a shift toward more proactive legal strategies within the industry. As businesses and contractors navigate these complexities, the need for precise policy language and clear contractual agreements becomes paramount. The outcome of Scottsdale’s challenge may encourage insurers to refine their policies and litigation approaches, while prompting insured parties to scrutinize coverage details more closely to avoid future gaps in protection.
