WBI Energy Transmission, Inc. v. Colony InsuranceWBI Energy Transmission, Inc. v. Colony Insurance
ORDER
Introduction
Plaintiff WBI Energy Transmission, Inc. (“WBI”) initiated this declaratory judgment action against Defendants Colony Insurance Company (“Colony”) and National Union Fire Insurance Company of Pittsburgh, PA (“National Union”) seeking a declaration that WBI is covered by insurance policies issued by Colony and National Union and that Colony and National Union have a duty to defend and indemnify WBI in a lawsuit filed against WBI in the Montana Seventh Judicial District Court. (Amended Complaint, Doc. 41.) Now before the Court are the parties’ respective motions for summary judgment. (Docs. 60, 69, 77, 88.) The Court has jurisdiction under 28 U.S.C. § 1332(a)(1). WBI’s motions for partial summary judgment are granted, and Cоlony’s and National Union’s motions for summary judgment are denied.
Background
Sometime near August 19, 2008, WBI entered into a Construction Agreement with Pro Pipe Services, Inc. (“Pro Pipe”) to replace a high-pressure, natural gas pipeline in Richland County, Montana (“the Project”). (WBI SUF, Doc. 71 at 2; Construction Agreement, Doc. 71-1.) To complete the Project, Pro Pipe subcontracted with Underground Boring Specialties, Inc. (“Underground Boring”). (Doc. 71 at 5; Colony SUF, Doc. 63 at 3.)
Under the Construction Agreement, Pro Pipe was required to maintain insurance coverage to protect WBI against liability for damages arising out of the work provided for under the Construction Agreement. (Doc. 71 at 3; Doc. 71-1 at 16.) To satisfy this requirement, Pro Pipe procured a commercial general Lability insurance policy through Colony with Policy
Around November 10, 2008, an employee of Pro Pipe, Dave Shanks (“Shanks”), was operating a backhoe on the Project site when the backhoe bucket accidentally struck an active, natural gas pipeline, which caused the pipeline to rupture. (Doc. 71 at 5.) The rupture allegedly caused a blast wave that resulted in injuries to Shanks. (Id.) Shanks filed a personal injury lawsuit against WBI and Underground Boring in state court (“the underlying lawsuit”). (Id.; Underlying Complaint, Doc. 71-3.) Shanks alleged that a cause of his injuries was the acts and omissions of both WBI, as the pipeline owner and operator, and Underground Boring, as the excavator responsible for the location of the pipeline entrance and exit pit and drilling the underground borehole for the Project. (Doc. 71-3.)
In a letter dated April 13, 2012, WBI tendered Shanks’s claim to Pro Pipe and its insurers, Colony and National Union, for defense and indemnity of WBI, insisting that WBI is an “additional insured” under both Policies and that Shanks’s claim is covered by certain provisions of the Construction Agreement and the Policies. (Doc. 71 at 7; WBI Tender, Doc. 63-6.) In a letter dated, April 20, 2012, Colony denied any obligation to defend or indemnify WBI in the underlying lawsuit. (Doc. 71 at 7; Colony Denial, Doc. 63-6.) National Union did not respond to WBI’s tender of defense and indemnity. (Doc. 41 at 6.) "WBI began defending the underlying lawsuit and on June 26, 2012, filed the instant lawsuit against Colony and National Union seeking, inter alia, a declaration of coverage under the Policies. (Doc. 41.)
Standard
A party is entitled to summary judgment if it can demonstrate thаt “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). Summary judgment is warranted where the documentary evidence produced by the parties permits only one conclusion. Anderson v. Liberty Lobby, Inc.,
Analysis
Usually, a duty-to-defend case focuses solely on whether the complaint in the underlying litigation sets forth sufficient facts to invoke coverage under an insurance policy. See United Natl. Ins. Co. v. St. Paul Fire & Marine Ins. Co.,
I. Additional Insured Status
This threshold issue depends on the terms of the Colony and National Union Policies and the Construction Agreement. “The construction and interpretation of a contract is a question of law for [a
A. Colony Policy
WBI argues it is insurеd by Colony because it is an “additional insured” as defined by the Colony Policy. (Doc. 70 at 8-22.) The Policy provides in its Commercial General Liability Coverage Form under Section I — Coverages:
[Colony] will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies. [Colony] will have the right and duty to defend the insured against any “suit” seeking those damages. However, [Colony] will have no duty to defend the insured against any “suit” seeking damages for “bodily injury” or “property damage” to which this insurance does not apply.
(Doc. 63-3 at 13.)
The Policy provides under Section II-Who Is An Insured, that the entity “designated in the Declarations” is an insured, (id. at 20), and in the Declarations, the Policy designates Pro Pipe as the “Named Insured,” (id. at 1). As for any additional insureds, the Policy includes a blanket additional insured endorsement, which provides that “Additional Insured Organization^)” are “all persons or organizations as required by written contract with the named insured.” (Id. at 30.)
Pro Pipe furnished WBI with a Certificate of Liability Insurance (“the Certificate”), which identified Pro Pipe as the “Insured,” Colony and National Union as the “Insurers Affording Coverage,” and WBI as the “Certificate Holder.” (Dоcs. 71-2 at 64; 63-4 at 1.) The Certificate shows the details of coverage for each policy provided by Colony and National Union, A box labeled “ADD’L INSRD” is marked with an “X” next to the Colony Policy. (Doc. 63-4 at 1.) A box labeled “Description of ... Exclusions Added by Endorsement/Special Provisions” provides, “Certificate holder is additional insured with respect to contracts with them.” (Id.)
WBI insists it is an “additional insured” on the Colony Policy because it is an organization required to be an additional insured by written contract with Pro Pipe. WBI is correct because the Construction Agreement required that WBI be named as an additional insured on Pro Pipe’s insurance policies. Section XXI on Insurance in the Construction Agreement provides:
[Pro Pipe] ... shall maintain with reliable insurance companies ... minimum insurance coverage[ ] in accordance with requirements set forth in Insurance Form 21160, attached hereto as Exhibit “B” and made a part hereof, to protect [WBI] against liability for damage, loss, or expense arising from damage to property or injury or death of any person or persons arising in any way out of, in connection with, or resulting from the*? work or construction provided for [under the Construction Agreеment].
(Doc. 71-1 at 16.) Pro Pipe’s Project Manager declared that he “understood that ... the Construction Agreement required [Pro Pipe] to name [WBI] as an additional insured on [Pro Pipe’s] liability insurance policies. To comply with the Construction Agreement, [Pro Pipe] asked its insurance agent ... to procure appropriate Certificates of Liability Insurance.... and [he] sent those Certificates to [WBI].” (Marsh Deck, Doc. 90-1 at 2.) WBI received the Certificate from Pro Pipe and incorporated it into the Construction Agreement. (Docs. 71-1 at 21; Seifert Aff., Doc. 71-2 at 3, 29, 64.)
Colony argues that the insurancе provision of the Construction Agreement is ambiguous, and therefore unenforceable, because it does not specify the minimum insurance coverage Pro Pipe was to obtain and references Insurance Form 21160, which WBI failed to attach to the Construction Agreement. (Doc. 61 at 19-21.) Colony’s argument is without merit. No ambiguity exists because the provision, “as a whole, is [not] reasonably subject to different interpretations.” Burrell,
Colony disputes that the Construction Agreement required Pro Pipe to name WBI as an additional insured. (Docs. 76 at 4; 80 аt 4.) Colony insists that the Agreement required Pro Pipe to procure insurance coverage for WBI with respect to liability for Pro Pipe’s negligence — not WBI’s own negligence. Regardless, the Construction Agreement obligates Pro Pipe to procure insurance coverage to protect WBI against liability for damages for the injury of any person “arising in any way out of, in connection with, or resulting from the work or construction provided [by Pro Pipe].” (Doc. 71-1 at 16.) Colony asks the Court to create a limitation on the provision, but the language is “clear and unambiguous.” Burrell,
B. National Union Policy
WBI argues it is insured by National Union because it is also an “additional insured” under the National Union Policy. (Doc. 89 at 5-7, 17-20.) The Policy is a commercial umbrella liability policy. (National Union Policy, Doc. 78-4.) It contains a commercial general liability limitation endorsement, which excludes commercial general liability coverage unless “Commercial General Liability is provided by a policy listed in Scheduled Underlying Insurance.” (Id. at 33.) The exclusion further states:
Coverage under this policy will follow the terms, definitions, conditions and еxclusions of Scheduled Underlying Insurance, subject to the Policy Period, Limits of Insurance, premium and all other terms, definitions, conditions and exclusions of this policy. Provided, however, that coverage provided by this policy will be no broader than the coverageprovided by Scheduled Underlying Insurance.
(Id.) The Policy covers entities qualifying as an “insured,” which includes “[a]ny person or organization, other than [Pro Pipe], included as an additional insured in the policies listed in Scheduled Underlying Insurance, however ... coverage will not be broader than is available to such person or organization under such Scheduled Underlying Insurance.” (Id. at 37.) Because the National Union Policy is an umbrella policy, the underlying insurance must respond first, and the National Union Policy responds upon exhaustion of the underlying policy. (Id. at 7-11.)
Based on these provisions of the National Union Policy, WBI is insured by National Union. The Colony Policy is listed in the Schedule of Underlying Insurance in the National Union Policy. (Id. at 3.) The National Union Policy follows the terms of the underlying Colony Policy. Because WBI is an additional insured under the Colony Policy, it is also an additional insured under the National Union Policy.
National Union insists WBI cannot quality as an additional insured under the Colony Policy because Pro Pipe was not required to name WBI as an additional insured, (Doc. 78 at 18), where the Construction Agreement required only that Pro Pipe “maintain ... minimum insurance coverage! ] ... to protect [WBI] against liability in connection with Pro Pipe’s work,” (Doc. 71-1 at 16). National Union avers that “[a]n agreement to maintain insurance that will protect an entity is not an agreement to name that entity as an additional insured under an insurance policy.” (Doc. 78 at 18.) National Union relies on RCS Group, Inc. v. Lamonica Constr. Co.,
That case is distinguishable because Pro Pipe did add WBI as an additional insured on the Policies, and Pro Pipe does not contest it wаs required to do so. Indeed, the Construction Agreement does not explicitly state that Pro Pipe must name WBI as an additional insured on its general liability policies, (Doc. 63-2 at 16), which creates some ambiguity. . However, even construing the ambiguity against WBI instead of Pro Pipe, the Certificate and the affidavit testimony of both Pro Pipe’s Project Manager and WBI’s Pipeline Engineering and Integrity Manager are sufficient to show the intent of the parties to have WBI added as an additional insured, (Docs. 63-4, 90-1, 71-2). See Scentry Biologicals, Inc. v. Mid-Continent Cas. Co.,
II. Duty to Defend
The central issue here is whether Colony and National Union had a duty to defend WBI in the underlying litigation. “Montana law is well-settled that an insurer’s duty to defend its insured arises when an insured sets forth facts that represent a risk covered by the terms of an insurance policy. And the duty to defend is independent from and broader than the duty to indemnify created by the same insurance contract.” United Natl. Ins. Co.,
A. Colony
Colony insists it does not have a duty to defend WBI in the underlying litigation because Shanks’s claim against WBI unequivocally does not fall within the Policy coverage. The cornerstone of Colony’s argument is its assertion that Shanks’s complaint does not allege that WBI is vicariously liable for any actions of Pro Pipe or those acting on Pro Pipe’s behalf — the complaint only alleges that WBI is liable for its own acts or omissions. Therefore, it is Colony’s position that because its Policy only covers liability for injuries caused, in whole or in part, by Pro Pipe or those acting- on Pro Pipe’s behalf, Shanks’s claim falls outside the scope of covеrage.
1. Additional Insured Endorsement
According to Colony, the Shanks complaint does not contain allegations that fall within the limitation of coverage contained in the additional insured endorsement, but WBI maintains that the endorsement covers the very set of facts set forth in the underlying litigation. The additional insured endorsement in the Colony Policy limits coverage for an additional insured “to liability for ‘bodily injury’ ... caused, in whole or in part, by: 1. [Pro Pipe’s] acts or omissions; or 2. [t]he acts or omissions of those acting on [Pro Pipe’s] behalf; in the performance of [Pro Pipe’s] ongoing operations for the, additional insured.” (Dоc. 63-3 at 30.)
Shanks’s complaint alleges liability for injuries caused, in whole or in part, by the acts or omissions of those acting on Pro Pipe’s behalf, specifically Underground Boring.
To support its position that the endorsement precludes coverage for the defense of WBI because the underlying lawsuit involves WBI’s own alleged negligence, Colony relies on Plum Creek Marketing, Inc. v. American Economy Insurance Co.,
Colony’s position that its endorsement does not cover the factual scenario here that multiple parties, including the additional insured, may have contributed to Shanks’s injuries creates an ambiguity in its own Policy. There is a legal notion that any ambiguity be construed against Colony, Steadele,
Because Shanks alleged that the acts or omissions of Underground Boring, an entity acting on behalf of Pro Pipe, was at least a partial cause of his injuries and that WBI was a contributing cause — but not the sole cause — of his injuries, the additional insured endorsement in the Colony Policy does not preclude coverage.
2. Insured Contract
Alternatively, Colony insists coverage of WBI for Shanks’s claim is precluded under the contractual liability exclusion of its Policy. (Doc. 61 at 10-14.) That exclusion states, “This insurance does not apply to ... ‘[b]odily injury’ or ‘property damage’ for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement.” (Doc. 63-3 at 14.) The exclusion goes on to state, however, “[t]his exclusion does not apply to liability for damages ... [a]ssumed in a contract or agreement that is an ‘insured contract.’” (Id.) The parties have briefed at length whether or not the Construction Agreement’s indemnification provision renders it аn “insured contract” as defined by the Policy. Yet, as WBI correctly highlights, (Doc. 84 at 12-13), the contractual liability exclusion pertains to claims for contractual indemnity and is independent of Colony’s duty to- defend WBI as an additional insured. See United Natl. Ins. Co.,
Nevertheless, the Construction Agreement is an insured contract. The Colony Policy defines “insured contract” as:
That part of any other contract or agreement pertaining to [Pro Pipe’s] businеss ... under which [Pro Pipe] assume[s] the tort liability of another party to pay for ‘bodily injury’ or ‘property damage’ to a third person or organization, provided the ‘bodily injury’ or ‘property damage’ is caused, in whole or in part, by [Pro Pipe] or by those acting on [Pro Pipe’s] behalf.
(Doc. 63-3 at 32.) The Construction Agreement’s indemnification provision provides:
[Pro Pipe] ... shall and agrees to indemnify, protect and hold [WBI] harmless from and against any and all loss, damage and expense, including judgments, costs and attorney’s fees by reason of any and all accidents, injuries ... and/or damages whatsoevеr, to the person or property of any and all persons ... or by reason of claims of any and every character, in any manner connected with said work or undertaking or acts or omissions of [Pro Pipe], or any subcontractor hereunder.
(Doc. 63-2 at 12.) The common sense meaning of these provisions is clear. The Construction Agreement is an “insured contract” because the Construction Agreement pertains to Pro Pipe’s business, Pro Pipe assumed the tort liability of WBI to
Relying on United National Insurance Co. and Slater v. Central Plumbing & Heating Co.,
In sum, the additional insured endorsement covers Shanks’s claim against WBI, and the contractual liability exclusion does not preclude coverage. Colony has a duty to defend WBI where Shanks’s claim was potentially within the Colony Policy coverage.
B. National Union
Like Colony, National Union insists that although “[vicarious liability imputed to the putative additional insured for the conduct of the named insured falls within the scope of additional insured coverage ... liability caused by the putative insured’s own negligent conduct is not covered.” (Doc. 78 at 20.) National Union relies on three cases to support its position that the additional insured. endorsement does not provide coverage to WBI, but all three cases are either distinguishable or inapposite. Lincoln Gen. Ins. Co. v. Fed. Constr., Inc.,
National Union also relies on Dale Corp. v. Cumberland Mut. Fire Ins. Co.,
Again, both requirements of the endorsement are met here where Shanks alleges the acts and omissions of Underground Boring caused, at leаst in part, his injuries, and Shanks does not allege the acts and omissions of WBI were the sole cause. Like Colony, National Union would have the Court read into the Policy a vicarious liability limitation, which is not justified. United Natl. Ins. Co.,
Ultimately, National Union concedes that where Colony owes a duty to defend, it too owеs a duty to defend. But National Union argues “it does not owe "WBI a current duty to defend in the underlying lawsuit, unless and until the Colony Pokey’s limits are fully exhausted.” (Doc. 78 at 25.) The National Union Policy provides: ‘We will have the right and duty to defend any Suit against the Insured that seeks damages ... covered by this policy ... when ... the total applicable limits of Scheduled Underlying Insurance have been exhausted_” (Doc. 78-4 at 8.) Such a position is not without risk. A determination on the allocation of defense costs .between Colony and National Union is reserved until further briefing on this issue and further notification of the status of the underlying lawsuit. See Guaranty Natl. Ins. Co. v. Am. Motorists Ins. Co.,
III. Duty to Indemnify
Because the Court is unaware of any determination of WBI’s liability in the underlying lawsuit, resolution of the indemnity obligation of Colony and National Union is premature.
Conclusion
WBI is an additional insured under both the Colony and National Union Pokcies, and both Colony and National Union have a duty to defend WBI in the underlying lawsuit.
Accordingly, IT IS ORDERED that WBI’s Motions for Partial Summary Judgment (Docs. 69, 88) are GRANTED.
IT IS FURTHER ORDERED that Colony’s Motion for Summary Judgment (Doc. 60) and National Union’s Motion for
IT IS FURTHER ORDERED that pursuant to the Court’s Order of September 17, 2013 (Doc. 102; see also Doc. 101), the Court will set a scheduling conference to address any unresolved issues.
Notes
. Because WBI is an additional insured under the National Union Policy by way of the Colony Policy, the Court need not address WBI's argument that it is an additional insured separately under the Contractors’ Limitation Endorsement in the National Union Policy. (Docs. 89 at 17-20; 96 at 3-10.) Additionally, National Union's averment that WBI does not qualify as an additional insured pursuant to Montana’s comparative fault statute is without merit. (Doc. 78 at 22-24.) The comparative fаult statutes that National Union relies on are "effective upon occurrence of [a] contingency” that has not occurred. See Mont.Code Ann. §§ 27-1-702, 703. And National Union fails to cite any authority establishing that comparative fault and joint and several liability statutes may prevent status as an additional insured.
. Because the Court finds that Shanks’s allegations against Underground Boring are sufficient to bring the claim within the scope of the endorsement, it is unnecessary to address WBI’s argument that the acts and omissions of Shanks himself, while acting on behalf of Pro Pipe, bring the claim within the scope of the endorsеment. (Docs. 70 at 12-15; 76 at 8-9.)
. Shanks’s theories of liability against WBI were developed through discovery in the underlying lawsuit, and Colony cannot ignore this information when assessing whether it has a duty to defend. See Revelation Indus., Inc. v. St. Paul Fire & Marine Ins. Co.,
. The Court rejects Colony’s additional argument that coverage is precluded by "the exclusivity provisions of Montana’s Workers' Compensation Act, § 39-71-411,” (Doc. 61 at 15), because "nothing in [Montana Code Annotated] § 39-71-411 precludes [a party] from being covered, as an additional insured, under [an employer’s] policy.” Liberty Mut. Ins. Co. v. Contl. Resources, Inc.,