Arch Ins. Co. v. Berkley Nat'l Ins. Co.
| Decision Date | 13 April 2021 |
| Docket Number | No. 19-1773,19-1773 |
| Parties | ARCH INSURANCE COMPANY, Plaintiff - Appellant, and STEADFAST INSURANCE COMPANY, Plaintiff, v. BERKLEY NATIONAL INSURANCE COMPANY; STRIC-LAN COMPANIES, LLC, a Louisiana Limited Liability Company, Defendants - Appellees, and HG ENERGY, LLC, a West Virginia Limited Liability Company, Defendant. |
| Court | U.S. Court of Appeals — Fourth Circuit |
UNPUBLISHED
Appeal from the United States District Court for the Southern District of West Virginia at Charleston. Joseph R. Goodwin, District Judge. (2:15-cv-09203)
Before WILKINSON, HARRIS, and RICHARDSON, Circuit Judges.
Vacated and remanded by unpublished opinion. Judge Richardson wrote the opinion, in which Judge Wilkinson and Judge Harris joined.
Robert L. Massie, Thomas M. Hancock, Megan Basham Davis, NELSON MULLINS RILEY & SCARBOROUGH, LLP, Huntington, West Virginia; Laura E. Hayes, Don C.A. Parker, SPILMAN, THOMAS & BATTLE, PLLC, Charleston, West Virginia, for Appellant. John Andrew "Jack" Smith, Jason L. Holliday, FLAHERTY SENSABAUGH BONASSO PLLC, Charleston, West Virginia, for Appellees.
The district court granted summary judgment to Berkley National Insurance Company ("Berkley") and its insured, Stric-Lan Companies, LLC, finding that Arch Insurance Company had no right to indemnity for a settlement Arch made on behalf of its insured, HG Energy, LLC. Arch makes two arguments on appeal, either of which, if successful, would require us to vacate the district court's order. First, Arch argues that the district court should have ruled on the scope of an indemnification provision in an agreement between HG Energy and Stric-Lan. Second, Arch argues that the district court relied on the improper fault-apportionment statute in holding that Berkley did not have to indemnify HG Energy. Finding the district court applied the incorrect fault-apportionment statute and this error was not harmless, we vacate and remand.
HG Energy operates oil and gas wells in West Virginia. Stric-Lan provides certain well-site services related to the exploration, development, and production of oil and natural gas. In 2012, HG Energy and Stric-Lan entered into a Master Service and Supply Agreement for Stric-Lan to provide those well-site services to HG Energy. This Master Agreement required Stric-Lan to procure insurance and name HG Energy as an "additional insured" under that insurance policy. The Master Agreement also contained defense and indemnity obligations for both HG Energy and Stric-Lan. To comply with the Master Agreement, Stric-Lan obtained insurance coverage from Berkley, naming HG Energy as an additional insured. HG Energy retained its own insurance through Steadfast Insurance Company and Arch.
This indemnification dispute stems from payments Arch made to settle a personal-injury lawsuit brought against HG Energy and Stric-Lan. Tyler Kunz, an employee of Stric-Lan, was severely injured by an explosion on an HG Energy work site. The explosion occurred when Kunz lit a cigarette next to an active natural gas well. Kunz sued both HG Energy and Stric-Lan, alleging that HG Energy was negligent for failing to provide him with a safe workplace and that Stric-Lan was liable under West Virginia's deliberate-intent statute. Under the Master Agreement and its associated insurance policy, HG Energy tendered the claim to Stric-Lan for defense and indemnification. Stric-Lan, in turn, passed the tender on to its insurer, Berkley. Both Stric-Lan and its insurer Berkley refused. As a result, Arch and Steadfast, HG Energy's primary insurance carriers, paid for the defense and settlement of the Kunz litigation. The defense cost Steadfast and Arch around $150,000 and the settlement required Arch to pay Kunz $5,000,000 and Steadfast to pay $1,000,000.
So Arch and Steadfast brought a declaratory judgment action against Berkley and Stric-Lan seeking a determination that (1) the Berkley insurance policy provided "additional insured" coverage for HG Energy in the Kunz action and (2) Berkley had to provide primary, non-contributory coverage for the defense and settlement of the Kunz action. See Steadfast Ins. Co. v. Berkley Nat'l Ins. Co., 217 F. Supp. 3d 904, 909 (S.D. W. Va. 2016). The parties moved for summary judgment, and the district court granted in part and denied in part Arch and Steadfast's motion. Id. at 907. The court found that Stric-Lan and Berkley had to provide primary coverage, had a duty to defend, and had a duty to indemnify HG Energy, all of which were triggered by the Kunz litigation. Id. at 917. Thedistrict court, however, noted that the parameters of coverage under the Berkley policy were "limited to those contained within the [Master Agreement]." Id. at 915. And under the Master Agreement, Berkley, as Stric-Lan's insurer, had to cover only "such claims, losses, damages, injuries, illnesses, or death [ ] caused by the negligence (of any degree), strict liability, or willful misconduct of [Stric-Lan]." Id. at 917 (quoting the Master Agreement).
The district court then granted Steadfast and Arch leave to file an amended complaint seeking civil damages. The amended complaint sought Steadfast and Arch's expenses in defending and resolving the Kunz litigation, including the settlement amounts. After the amended complaint was filed, Steadfast settled its claims with Stric-Lan and Berkley and was dismissed from the case. Arch, Berkley, and Stric-Lan then filed cross motions for summary judgment. Arch argued that Stric-Lan and Berkley were barred by the Master Agreement from challenging the reasonableness of the settlement and that, even if they were not barred, the settlement was reasonable. In response, Berkley and Stric-Lan argued that, under the Master Agreement, Stric-Lan was only liable for its own negligence and Berkley's obligations were limited to the liability of Stric-Lan. They also argued that, in the Kunz litigation, only Kunz and HG Energy's negligence were at issue when Arch settled the Kunz matter and the Master Agreement did not require Stric-Lan to indemnify HG Energy for HG Energy's own negligence.
The district court granted Stric-Lan and Berkley's motion and denied Arch's, noting that the indemnity clause in the Master Agreement "provides indemnity only for the amount of damage caused by the indemnitor's [Stric-Lan's] negligence, and not fordamages attributable to the indemnitee's [HG Energy's] negligence." Arch Ins. Co. v. Berkley Nat'l Ins. Co., 399 F. Supp. 3d 571, 577 (S.D. W. Va. 2019) (quoting Greer v. City of Phila., 795 A.2d 376, 381 (Pa. 2002)). Finding the settlement rested on HG Energy's negligence, not Stric-Lan's, the district court found that Arch had no right to indemnity from either Stric-Lan or Berkley. Arch timely noticed its appeal.
We review the district court's grant of summary judgment de novo. Lee v. Town of Seaboard, 863 F.3d 323, 327 (4th Cir. 2017). "The narrow questions before us on summary judgment are whether any genuine issues of material fact exist for the jury and, if not, whether the district court erred in applying the substantive law." Id. (quoting Higgins, 863 F.2d at 1166-67).
Arch argues on appeal that the district court erred in failing to address its argument that ¶ V.D.51 of the Master Agreement entitles it to damages in the amount paid to settle the Kunz action. But Arch failed to raise this argument before the district court. So Arch waived this argument, and we will not address its merits.
"Absent exceptional circumstances, . . . we do not consider issues raised for the first time on appeal." Robinson v. Equifax Info. Servs., LLC, 560 F.3d 235, 242 (4th Cir. 2009) (quoting Volvo Constr. Equip. N. Am., Inc. v. CLM Equip. Co., 386 F.3d 581, 603 (4th Cir. 2004)); see also Agra, Gill & Duffus, Inc. v. Benson, 920 F.2d 1173, 1176 (4th Cir. 1990) (). Appellate courts are Tele-Commc'ns, Inc. v. Comm'r of Internal Revenue, 104 F.3d 1229, 1233 (10th Cir. 1997) (citations omitted). "[I]f a party wishes to preserve an argument for appeal, the party must press and not merely intimate the argument during the proceedings before the district court." In re Under Seal, 749 F.3d 276, 287 (4th Cir. 2014) (alteration in original) (quoting Dallas Gas Partners, L.P. v. Prospect Energy Corp., 733 F.3d 148, 157 (5th Cir. 2013)).
Arch has not argued that exceptional circumstances justify our departure from the general rule. Instead, Arch insists that the argument was raised before the district court. Arch calls this Court's attention to a handful of documents where the text of ¶ V.D.5 appears. But each time ¶ V.D.5 is cited for the assertion that Stric-Lan and Berkley cannot challenge the reasonableness of the settlement.2 In those documents, Arch argues that ithas a right to recover the entire settlement amount from Berkley because Stric-Lan was at fault for Kunz's injuries. See J.A. 442 (); ECF Dkt. No. 139 at 15 (). But notably absent is the argument it tries to raise here: that because Stric-Lan rejected HG Energy's demand of defense and indemnity, Arch is entitled to indemnification. References in the record to ¶ V.D.5 in the context of a different argument will not remedy that absence. So Arch has waived this argument for vacating the grant of summary judgment.
The district court based its finding that HG Energy had no right to...
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