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Mid-Continent Casualty Co. v. True Oil Co.

United States Court of Appeals, Tenth Circuit

September 18, 2014

TRUE OIL COMPANY, a Wyoming partnership, Defendant - Appellee

Page 1001

Appeal from the United States District Court for the District of Wyoming. (D.C. No. 1:05-CV-00258-ABJ).

Christopher W. Martin of Martin, Disiere, Jefferson & Wisdom, L.L.P., Houston, Texas (Patrick T. Holscher of Schwartz, Bon, Walker & Studer, LLC, Casper, Wyoming, on the briefs), for Plaintiff-Appellant.

Scott P. Klosterman (Patrick J. Murphy with him on the brief) of Williams, Porter, Day & Neville, P.C., Casper, Wyoming, for Defendant-Appellee.

Before TYMKOVICH, SEYMOUR, and GORSUCH, Circuit Judges.


Page 1002

SEYMOUR, Circuit Judge.

Mid-Continent Casualty Company (Mid-Continent) brought this declaratory judgment action to ascertain the applicability to True Oil Company (True Oil) of Mid-Continent's commercial general liability (CGL) policy issued to Pennant Service Company (Pennant). The district court granted summary judgment to True Oil, determining Mid-Continent breached its duty to defend and indemnify True Oil in the underlying action against it by Pennant's employee. As damages, the court awarded True Oil the amount it paid to settle the underlying suit and the attorney fees and costs incurred in defending itself. Mid-Continent appeals from the district court's judgment. We affirm.


In 2001, True Oil, an owner and operator of oil and gas wells, entered into a master service contract (MSC) with Pennant for work on a well in Wyoming. The MSC included a provision whereby Pennant agreed to indemnify True Oil " from and against all claims, damages, losses, . . . causes of action, suits, judgments, penalties, fines and expenses, including attorney fees, of any nature, kind or description whatsoever" resulting from either Pennant or True Oil's negligence. Aplt. App., vol. 1 at 43-44.

Pennant has a CGL policy with Mid-Continent. Under the policy, Mid-Continent agreed to insure Pennant against damages because of bodily injury " [a]ssumed in a contract or agreement that is an 'insured contract,'" including " reasonable attorney fees and necessary litigation expenses incurred by or for a party other than an insured" as long as " (a) [l]iability to such party for, or for the cost of, that party's defense has also been assumed in the same 'insured contract'; and (b) [s]uch attorney fees and litigation expenses are for defense of that party against a civil . . . proceeding in which damages to which this insurance applies are alleged." Id. at 24-25 (noting exception to coverage exclusion).

In July 2001, Christopher Van Norman, an employee of Pennant, was injured in an accident at True Oil's well. On October 26, 2001, Mr. Van Norman filed a negligence suit against True Oil in Wyoming state court.[1] In accordance with the MSC's indemnity provision, counsel for True Oil wrote to Pennant on November 20, requesting indemnification for its defense costs, attorney fees, and any award that Van Norman might recover against it. Id. at 83-84. Mid-Continent refused to defend or indemnify True Oil based on

Page 1003

Wyoming's Anti-Indemnity Statute, Wyo. Stat. Ann. § 30-1-131, which invalidates agreements related to oil or gas wells that " indemnify the indemnitee against loss or liability for damages for . . . bodily injury to persons." Id.

In May 2002, True Oil brought a federal action against Mid-Continent for declaratory relief, breach of contract (CGL policy), and other related claims. In February 2005, the district court granted Mid-Continent summary judgment, determining that the MSC's indemnity provision, when invoked with respect to claims of the indemnitee's own negligence, violated § 30-1-131 and was thus unenforceable as a matter of public policy. The court held that Mid-Continent was not required to defend or indemnify True Oil in the underlying suit as it then existed because " where an indemnification provision in a MSC is void and unenforceable, the insurer never actually assumed any of the indemnitee's liabilities under the policy." [2] Aplt. App., vol. 2 at 513.

Subsequently, on March 16, 2005, Mr. Van Norman amended his original state court complaint to include an allegation of vicarious liability against True Oil for negligence of Pennant that had caused injury to Mr. Van Norman. True Oil then filed a third-party complaint against Pennant for indemnification.

In September 2005, Mid-Continent agreed to provide True Oil a conditional defense to the vicarious liability claim in the state court action, under a reservation of rights. In November, unable to agree upon the terms of the defense, True Oil refused Mid-Continent's offer to defend. The following month, just prior to the December scheduled trial date, True Oil settled with Mr. Van Norman for $500,000 for the claims alleged in the amended complaint. While Pennant did not participate in the negotiations, it did stipulate to the reasonableness of the settlement.

On September 28, 2005, Mid-Continent returned to federal district court, seeking a declaratory judgment regarding its rights and obligations in light of the amended complaint. In March 2006, while those proceedings were pending, we affirmed the district court's entry of summary judgment in favor of Mid-Continent in the first federal court action with no knowledge of the amended complaint in the underlying state court lawsuit. True Oil Co. v. Mid-Continent Cas. Co., 173 F.App'x 645, 646-51 (10th Cir. 2006).

In August 2006, the district court granted True Oil summary judgment, concluding Mid-Continent was obligated to provide True Oil a defense and indemnification in the underlying litigation on the vicarious liability claims. In doing so, the court rejected Mid-Continent's contention that the Tenth Circuit decision in the first case was dispositive, distinguishing between True Oil's efforts to obtain indemnification for its own negligence in the first case and its efforts to obtain indemnification for vicarious liability from Pennant's negligence. The court held that where a claim of vicarious liability exists, the Wyoming Anti-Indemnity Statute, ยง 30-1-131, does not render the agreement void or ...

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