951 F.3d 1185
10th Cir.2020Background
- Ultra leased a Wyoming well; Ultra hired Upstream under a Master Service Agreement requiring Upstream to carry insurance naming Ultra and certain others as additional insureds. Upstream bought a General Liability policy and a Commercial Umbrella policy from Lexington (issued in Texas).
- Upstream employed Darrell Jent as a company man; Ultra/Upstream reassigned Jent to supervise Precision Drilling’s rig operations; Jent exercised safety oversight and supervised a rig-down; Jent was seriously injured when a derrick collapsed.
- Jent sued Precision (the rig operator). Precision sought defense/indemnity up the contract chain; Lexington initially defended under reservation, later denied coverage; Precision (with Lloyd’s) settled Jent’s claim for $3 million.
- Lexington sued for declaratory judgment arguing Wyoming’s anti-indemnity statute voided coverage. District court agreed pre-remand; this court reversed on that statutory point in Lexington Ins. Co. v. Precision Drilling Co., 830 F.3d 1219 (10th Cir. 2016), and remanded.
- On remand the district court held Precision was an additional insured under Endorsement 17 (Upstream’s work ‘‘for’’ Precision), awarded $3 million (combined General + Umbrella), and denied Precision’s requests for prejudgment interest and attorneys’ fees. The Tenth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Precision is covered as an additional insured under Endorsement 17 | Endorsement 17 covers any party Upstream was required to add; Precision’s liability arose from work performed by Upstream (Jent) "for" Precision | "For" requires Precision’s right to control the work; because Upstream controlled Jent, work was not "for" Precision | Precision is an additional insured; "for" means "on behalf of" or for the benefit of Precision; any ambiguity construed against insurer |
| Whether Lexington forfeited right to contest additional-insured coverage on remand | Lexington failed to address Endorsement 17 earlier and thus forfeited | Remand and prior proceedings left open coverage issues; Lexington preserved response | Court held Lexington did not forfeit the ability to contest coverage; district court’s factual finding that work was "for" Precision affirmed (factual findings reviewed for clear error) |
| Proper policy limits — whether Umbrella Endorsement 3 caps Lexington’s exposure at $2M | Precision sought full $3M reimbursement (General $1M + Umbrella excess) | Lexington argued Endorsement 3 subsection D reduces Umbrella limit (to yield only $2M total) because an "insured contract" required lesser limits | Court ruled Endorsement 3 subsection D did not apply: "Insured Contract" defined to mean indemnity (tort-liability assumption) and did not cover separate Insurance clause; result: $1M primary + $5M umbrella available; $3M judgment affirmed |
| Prejudgment interest and attorneys’ fees under Wyoming law; common-law interest | Precision sought statutory prejudgment interest and fees under Wyo. Stat. §26-15-124(c) (and argued common-law interest on appeal) | Lexington argued statute applies only to policies issued/delivered in Wyoming (these were issued in Texas) and that its denial was a reasonable/debatable position | Court affirmed denial: statutory remedy unavailable because policies issued in Texas; insurer’s litigable position on anti-indemnity statute meant withholding was not per se unreasonable; common-law interest waived by not timely raising it |
Key Cases Cited
- Lexington Ins. Co. v. Precision Drilling Co., 830 F.3d 1219 (10th Cir. 2016) (prior appellate decision reversing district court on anti-indemnity statutory issue and remanding)
- Marathon Ashland Pipe Line LLC v. Maryland Cas. Co., 243 F.3d 1232 (10th Cir. 2001) (insurance-policy interpretation reviewed de novo)
- Sonnett v. First Am. Title Ins. Co., 309 P.3d 799 (Wyo. 2013) (Wyoming courts give insurance policy language its plain meaning; interpret de novo)
- Century Sur. Co. v. Jim Hipner, LLC, 377 P.3d 784 (Wyo. 2016) (ambiguities in insurance policies construed against insurer)
- Hursch Agency, Inc. v. Wigwam Homes, Inc., 664 P.2d 27 (Wyo. 1983) (insured bears initial burden to prove coverage)
- Coleman Co. v. Cal. Union Ins. Co., 960 F.2d 1529 (10th Cir. 1992) (umbrella insurance provides excess coverage after exhaustion of primary)
- Paulino v. Chartis Claims, Inc., 774 F.3d 1161 (8th Cir. 2014) (insurer’s losing position does not alone show bad faith where a debatable issue existed)