951 F.3d 1199
10th Cir.2020Background
- On March 23, 2014, RW Trucking driver Jason Metz flicked a cigarette lighter at a New Mexico well site while (allegedly) pumping fracking water; fumes ignited and David Garza and others were injured. Garza sued Devon (well operator), Metz, RW Trucking, and others in New Mexico state court.
- At the time of the accident RW Trucking had dual insurance: a Carolina commercial-automobile policy and a Burlington commercial general liability (CGL) policy; Burlington initially defended under a reservation of rights.
- At a January 2017 mediation Burlington paid $415,000, Carolina paid $375,000, and Devon paid $60,000; Burlington and Carolina both reserved rights to pursue indemnity/reimbursement against each other.
- Carolina filed a declaratory-judgment suit against Burlington seeking a ruling that Burlington (not Carolina) had the duty to defend and indemnify, and seeking reimbursement of Carolina’s $375,000 payment. Burlington counterclaimed.
- The district court (applying Wyoming choice-of-law rules) issued mixed rulings: it ultimately held Carolina had breached a duty to defend (then later vacated some rulings), held Burlington had a duty to indemnify, and ruled Carolina paid as a volunteer (denying reimbursement). The Tenth Circuit reviewed and reached different conclusions on several issues.
Issues
| Issue | Plaintiff's Argument (Carolina) | Defendant's Argument (Burlington) | Held |
|---|---|---|---|
| Choice of law for duty-to-defend | Wyoming law should govern (forum choice rules) | New Mexico law should apply (location of accident and underlying suit) | Wyoming law applies; but outcome same under either state's approach here |
| Duty to defend (Carolina) | No duty — underlying complaints do not connect injury to use of a covered auto; exclusion for pump operations bars coverage | Duty exists because extrinsic evidence shows Metz was pumping from his truck trailer when fumes released, potentially tying injury to auto use | Reversed district court: Carolina did not owe a duty to defend (four-corners controls under Wyoming; even extrinsic facts would be excluded by Carolina’s operations/pump exclusion) |
| Duty to indemnify (Carolina and Burlington) | Carolina: no duty to indemnify because no duty to defend; Burlington: should indemnify | Burlington: its auto exclusion applies so no indemnity; alternatively exclusion exceptions may not apply | Affirmed in part: Carolina owes no indemnity; Burlington does owe indemnity (Burlington’s auto exclusion does not bar coverage here, and its exception for pump/mobile equipment covers this risk) |
| Voluntary-payment / subrogation (Carolina’s right to reimbursement) | Carolina is entitled to reimbursement; it paid under mutual reservation of rights, not as a volunteer | Carolina paid as a volunteer and cannot recover its contribution | Reversed district court: Carolina is not a volunteer under these facts and may seek reimbursement from Burlington (mutual reservation of rights and public policy favoring settlement) |
Key Cases Cited
- Worthington v. State, 598 P.2d 796 (Wyo. 1979) (interpreting "arising out of ownership, maintenance or use" and articulating the natural-and-reasonable-consequence test)
- Ulrich v. United Servs. Auto. Ass'n, 839 P.2d 942 (Wyo. 1992) (reaffirming Worthington as Wyoming law over broader causation tests)
- First Wyo. Bank, N.A. v. Continental Ins., 860 P.2d 1094 (Wyo. 1993) (duty-to-defend analyzed from complaint allegations)
- Matlack v. Mountain W. Farm Bureau Mut. Ins., 44 P.3d 73 (Wyo. 2002) (insurer’s duty to defend triggered by any potentially covered claim in the complaint)
- Am. Gen. Fire & Cas. Co. v. Progressive Cas. Co., 799 P.2d 1113 (N.M. 1990) (New Mexico rule permitting consideration of extrinsic, known-but-unpleaded facts for duty-to-defend analysis)
- Commercial Union Ins. v. Postin, 610 P.2d 984 (Wyo. 1980) (discussing voluntary-payment doctrine and insurer subrogation)
- Fed. Ins. Co. v. Tri-State Ins., 157 F.3d 800 (10th Cir. 1998) (interpreting similar operations exclusion and excluding coverage for injuries arising out of listed equipment such as pumps)
- Genesis Ins. Co. v. Wausau Ins. Co., 343 F.3d 733 (5th Cir. 2003) (holding mutual reservation of rights between insurers precludes voluntary-payment bar to subrogation)
- Marathon Ashland Pipe Line LLC v. Md. Cas. Co., 243 F.3d 1232 (10th Cir. 2001) (doubts about duty to defend are resolved in favor of the insured)