Digital Extra: The Station Fire

The Virginia-based insurance firm says it is not responsible to pay for the brothers' criminal defense, and it asks for a jury trial to decide the matter.

01:00 AM EDT on Tuesday, September 14, 2004

BY TRACY BRETON
Journal Staff Writer

PROVIDENCE -- Jeffrey and Michael Derderian, the owners of The Station nightclub who are under indictment for the blaze that killed 100 people, have filed a lawsuit to try to force the company that insured the club to pay for their criminal defense.

The Derderian brothers each face 200 counts of involuntary manslaughter in connection with the Feb. 20, 2003 fire at their West Warwick nightclub and have pleaded not guilty. They are being represented by a high-profile legal team that includes former Attorney General Jeffrey B. Pine and Boston lawyer Richard M. Egbert, who has represented a host of prominent Rhode Island defendants in recent years, including former Gov. Edward D. DiPrete and former Providence Mayor Vincent A. Cianci Jr.

In a suit filed in Superior Court, the Derderian brothers claim that Essex Insurance Co., which provided them with liability insurance for The Station, has a obligation to pay their criminal defense lawyers' fees because if they are found guilty, a civil judgment will automatically be entered against them.

Thomas M. Dickinson, a lawyer for the Derderians, said that Essex is responsible for paying for the criminal defense because the insurance policy it issued to the brothers requires it to provide them "with a defense in connection with any suit seeking damages for bodily injury or property damage to which the insurance applies."

Under Rhode Island law, once a defendant is convicted of a felony after trial by a jury, "a civil judgment shall automatically be entered by the trial court against the defendant conclusively establishing his or her liability to the victim" for personal injuries or loss of property sustained as a result of the defendant's felonious conduct, Dickinson said.

"Because a verdict against each defendant in the indictments would result in the imposition of civil judgment for liability and damages. . . each indictment constitutes a 'suit' under the terms of the Essex policy," the lawsuit states.

But Essex, a Virginia-based company, said it is not responsible for paying for the Derderians' criminal defense, because "such coverage is not authorized under the relevant insurance policy contracts and is contrary to the settled law and public policy of Rhode Island."

Essex seeks a jury trial on the matter. In answering the Derderians' lawsuit, it lists 26 reasons why it said it is not obliged to pay for the criminal defense. Among them: that "the Derderians failed to exercise ordinary care for the security of their own position and their own well-being."

At the time of the fire, The Station had $2 million in liability coverage with Essex -- with a per-occurrence limit of $1 million. The policy also has a medical expense limit of $1,000 for each person injured.

The fire at The Station killed 100 people and injured more than 200 others. It started when fireworks for a rock show by the band Great White ignited highly flammable polyurethane packing foam installed by the Derderians as soundproofing on the walls of the wood-frame nightclub. At least 440 people were inside.

The pyrotechnics were set off by the former tour manager for Great White, Daniel Biechele, who is under indictment on the same charges as the Derderians.

No trial date has been set in the criminal case. Superior Court Judge Francis Darigan has scheduled a conference for Sept. 24. Defense lawyers want Darigan to approve their request to subpoena attendance records for the grand jurors who heard the case that resulted in the Derderians' indictment.

The Derderians, who also face a raft of federal civil suits from the fire victims, are asking the U.S. District Court to stay the civil proceedings against them until their criminal case is resolved. If they were required to answer the civil suits at this point, they would have to assert their Fifth Amendment right against self-incrimination, their civil lawyer, Anthony F. DeMarco, said in court papers, and this could hurt their civil defense.

All together, there are about 50 named defendants in the civil cases, including the Derderians, foam manufacturers, a Channel 12 cameraman who shot footage of the fire, and officials for the Town of West Warwick and the State of Rhode Island who, the plaintiffs say, should have uncovered fire-code violations at The Station before the date of the fire.

By now, almost all of those sued have filed answers denying liability. Some have filed motions to dismiss the complaints against them before trial -- including lawyers representing the state, the Town of West Warwick, state Fire Marshal Irving J. Owens, and two West Warwick public safety officers -- Fire Inspector Denis P. Larocque and police officer Anthony Bettencourt, who was employed as a special detail officer to provide security services at The Station the night of the fire.

Victims who are suing fault Bettencourt for failing to prevent overcrowding at The Station the night of the fire, and the fire inspectors to note the flammable foam in their inspection reports.

But lawyers for the state, the town, the fire inspectors and Bettencourt assert that in Rhode Island, a plaintiff cannot recover damages against a defendant for negligently enforcing fire safety laws, and that their clients are immune under the law from being held liable.

James R. Lee, an assistant attorney general representing the state in the civil lawsuits, said in court papers that neither Owens nor anyone else from the state ever inspected The Station or approved the use of illegal fireworks there.

"Even assuming the truth of the allegations" in the civil suits, "the illegal and unanticipated use of pyrotechnics" at The Station "was an intervening, superceding cause breaking any alleged causal chain to the town defendants," defense lawyers assert.

Under Rhode Island's public-duty doctrine, state and municipal workers are immune from damages caused by alleged negligence. But there are exceptions to the immunity doctrine. The state or municipality's immunity can disappear if there is "egregious conduct." Three elements must be established to show such conduct: the government created circumstances that forced a reasonably prudent person into a position of extreme peril; officials had actual or constructive knowledge of the dangerous circumstances. and they had a reasonable amount of time to eliminate a dangerous situation but failed to do so.

One allegation made by the fire victims in U.S. District Court is that Jeffrey Derderian, as a reporter for Channel 12 as well as a co-owner of The Station, had a duty to expose the unsafe conditions inside his nightclub before the fire occurred and that his employer, WPRI, had a similar duty. But WPRI lawyers assert in court papers that "there is no duty for a television station to immediately broadcast hazardous conditions which one of its reporters has allegedly learned in the course of his newsgathering activities," and ask that the case against WPRI be dismissed.

In addition, some foam manufacturers are also asking for dismissal of the cases against them because, they assert, they include safety warnings on all flammable foam they sell and had no control over the use of their foam once it was sold to the Derderians. Also, one of the manufacturers, General Foam, asserts that plaintiffs will be unable to prove that it manufactured the foam that the Derderians installed at The Station after buying it from the Johnston-based American Foam.

In another development in connection with the fire, the U.S. Attorney's Office said that that it has passed along to the FBI a citizen's complaint made by the father of a fire victim that corruption and politics are the reason fire inspectors were not indicted in The Station fire.

In a letter to David Kane, Assistant U.S. Attorney Gerard B. Sullivan said that Kane's complaint has been referred to Special Agent Dennis Aiken for review but that there is no evidence to merit a formal investigation at this point.

Kane, the father of 18-year-old fire victim Nicholas O'Neill, has announced that he plans to run against Attorney General Patrick Lynch in 2006. He has asserted -- although he has no evidence to back up his suspicions -- that corruption must have played a role in the fire inspectors' failure to properly inspect the nightclub and the attorney general's failure to secure an indictment against the inspectors.

"You are aware that under state law, no crime exists, by statute or common law, for negligent homicide," Sullivan said in his letter to Kane. "Should you learn of the existence of any evidence or any witnesses to the crimes you suspect occurred, please bring that to the attention of Special Agent Aiken."