Waste management company Recology Inc. is a landfill operator founded in 1920, with its headquarters in San Francisco, California. The company has approx 3,700 employees, and in 2018 it generated 1 billion USD in revenue.

This is the case of Recology Inc. v. Berkley Regional Insurance Co., in the U.S. District Court for the Northern District of California.

On Thursday, Recology told a federal court in California that a competent jury should hear the company’s claims against its insurer, Berkley Regional Insurance Co. (“BRIC”) regarding coverage for two employees who were engaged in kickback schemes, accusing BRIC of changing its justifications for denying coverage, which Recology argues constitutes bad faith.

Recology seeks coverage for loss purportedly suffered as a result of its former employees' engaging in the illicit kickback schemes with customers.

In response, BRIC filed a motion for summary judgment hoping to dispose of the case without the need of a trial or further proceedings, but on Thursday, Recology Inc opposed the Defendant’s motion saying the insurer has relied on inadmissible evidence to support its own arguments. Recology also argued that the insurer’s investigation into their claim was biased toward denying coverage.

In the opposition brief filed by Recology on Thursday, the company said "That BRIC has disavowed the reason it initially denied coverage speaks volumes and goes a long way toward establishing bad faith." It said "A reasonable jury could determine BRIC's changing coverage positions, coupled with the other reversals (as to whether it disputes Recology's quantum of loss and whether it would honor its promise not to seek another continuance after obtaining the extensions it desired) and other conduct, is bad faith."

This case originates from a coverage dispute dating back to 2015, when Recology said it learned that some of its employees were engaging in two separate schemes by which they would take kickbacks from waste haulers allowing them to dump waste at one of Recology's facilities at a lower rate or in some cases for free. Recology submitted a claim to BRIC that exceeded $2.5 million, which represented lost revenue.

BRIC initially agreed to compensate Recology for the amount of employee kickbacks Recology was able to prove, including the costs of their investigation. However, BRIC refused to cover the Recology for what it refers to as “anticipated revenue.”

Records from previous court filings show that in October, BRIC argued that a person or institution with a claim to money does not actually own it, concluding that “anticipated revenue” falls outside the scope of the Recology policy's employee theft provisions.

Recology, who is represented by attorney Craig A. Pinedo of Pinedo Law, said in his opposition brief, that BRIC's current coverage position "bear[s] little resemblance" to its initial position, which it claims was based on the fact that the former employees did not personally benefit from uncollected landfill fees.

Recology claims that when BRIC was presented with case law that rejected its argument and coverage position, it says BRIC "cobbled together an incoherent and unduly restrictive interpretation of 'theft' that violates multiple rules of policy construction under California law."

Testimony from multiple individuals that BRIC cited in its own summary judgment filings did not contain written declarations from these purported individuals stating they could or would testify under oath as to the statements alleged.

Recology’s opposition to BRIC’s motion for summary judgment noted on Thursday, that such testimony is inadmissible. It also accused BRIC's bad faith, "oppressive litigation tactics" include duplicative requests for troves of documents that had been previously produced.

This matter is currently under the court’s review.

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