Arch Ins. Co. v. Berkley Nat'l Ins. Co.

• Citation: 399 F.Supp.3d 571
• Decision Date: 24 June 2019
• Docket Number: CIVIL ACTION NO. 2:15-cv-09203
• Parties: ARCH INSURANCE COMPANY, et al., Plaintiffs, v. BERKLEY NATIONAL INSURANCE COMPANY, et al., Defendants.
• Court: United States District Courts. 4th Circuit. Southern District of West Virginia

399 F.Supp.3d 571

ARCH INSURANCE COMPANY, et al., Plaintiffs,

v.BERKLEY NATIONAL INSURANCE COMPANY, et al., Defendants.

CIVIL ACTION NO. 2:15-cv-09203

United States District Court, S.D. West Virginia, Charleston Division.

Signed June 24, 2019

Andrew S. Dornbos, Don C. A. Parker, Laura Elizabeth Hayes, Spilman Thomas & Battle, Charleston, WV, for Plaintiffs.

Jason L. Holliday, John Andrew Smith, Flaherty Sensabaugh & Bonasso, Charleston, WV, Dennis A. Watson, Grogan Graffam, Pittsburgh, PA, for Defendants.

MEMORANDUM OPINION AND ORDER

JOSEPH R. GOODWIN, UNITED STATES DISTRICT JUDGE

This suit began as a declaratory action to declare the rights of the parties under competing insurance obligations: the terms in the Master Supply Service Agreement ("MSSA") [ECF No. 92-3] and the Berkley Policies [ECF Nos. 92-5 and 92-6]. Not. Removal [ECF No. 1]. In a published opinion, I found that "[t]he Berkley policy ... limits its coverage to "the lesser of: (a) the coverage and/or limits of this policy; or (b) the coverage and/or limits required by [the MSSA]." 217 F. Supp. 3d 904, 914 (S.D. W. Va. 2016). Consequently, I found that the policy's coverage is limited to the lesser terms provided by the MSSA. Id. at 915.

Pending before the court are cross-motions for summary judgment [ECF Nos. 190 and 192]. The remaining issue before the court involves the interpretation of the indemnity provision in the MSSA. For the reasons that follow, the defendants' Motion [ECF No. 192] is GRANTED and the plaintiff's Motion [ECF No. 190] is DENIED .

I. Background

HG Energy LLC ("HG") operates oil and gas wells in West Virginia, and Stric-Lan Companies LLC ("Stric-Lan") provides certain well-site services for HG. HG and Stric-Lan laid out this agreement for services in their Master Service and Supply Agreement. See MSSA [ECF No. 92-3]. In addition to the well-site services, the MSSA requires Stric-Lan to procure insurance and name HG as an "additional insured" under that insurance policy. Id. at 8. The MSSA also establishes defense and indemnity obligations under certain circumstances for both HG and Stric-Lan. Id. at 10–11. Pursuant to its obligations under the MSSA, Stric-Lan contracted with Berkley National Insurance Company ("Berkley") to provide coverage and named HG as an additional insured.

a. The Kunz Incident

This coverage dispute arises out of a personal injury lawsuit involving Stric-Lan employee Tyler Kunz ("Kunz Litigation"). While working for Stric-Lan at the HG site, Mr. Kunz lit a cigarette near a natural-gas hazard, resulting in an explosion and significant injury to himself. Following his injury, Mr. Kunz sued HG and Stric-Lan, alleging that HG was negligent in maintaining its workplace and that Stric-Lan was liable under West Virginia's deliberate intent statute. Pursuant to the terms of the MSSA and insurance policy, HG sought defense in the Kunz Litigation from Stric-Lan and Berkley. Both refused to defend or indemnify HG. As a result, Arch Insurance Company ("Arch") and Steadfast Insurance Company ("Steadfast"), companies providing separate insurance policies for HG, paid for the defense and settlement of the Kunz Litigation.

After Stric-Lan and Berkley refused to defend HG, Arch and Steadfast brought this suit to determine (1) whether the Berkley insurance policy provided "additional insured" coverage for HG in the Kunz Litigation and (2) whether the Berkley policy provided primary, non-contributory coverage for the defense and settlement of the Kunz Litigation.

b. November 11, 2016 Memorandum Opinion & Order

On May 31, 2016, and June 6, 2016, the parties cross-moved for summary judgment, and on November 11, 2016, I ruled on those motions in a published opinion. See Steadfast Ins. Co. v. Berkley Nat'l Ins. Co. , 217 F. Supp. 3d 904 (S.D. W. Va. 2016). In that Memorandum Opinion and Order, I found that Berkley had an obligation to cover claims "to the extent that such claims, losses, damages, injuries, illnesses, or death are caused by the negligence (of any degree), strict liability, or willful misconduct of the Contractor [Stric-Lan]." I also found that Stric-Lan and Berkley were obligated to provide primary, non-contributory coverage for the Kunz Litigation, that Stric-Lan and Berkley had a duty to defend HG in the Kunz Litigation, and that Stric-Lan and Berkley's duty to indemnify was triggered. Steadfast , 217 F. Supp. 3d at 917.

On January 17, 2018, Steadfast and Arch were granted leave to file Plaintiffs' First Supplemental and Amended Complaint for Declaratory Relief and Civil Damages [ECF No. 142]. Among other things, the Amended Complaint seeks the damages that Steadfast and Arch incurred in defending and resolving the Kunz Litigation. See Am. Compl [ECF No. 142]. On August 13, 2018, Steadfast settled its claims with the defendants for the amount it paid to defend the Kunz Litigation, and the court dismissed it from this case. On February 14, 2019, Arch, the only remaining plaintiff, moved for summary judgment [ECF No. 190], seeking to recover the $5,000,000 it advanced to settle the Kunz Litigation with interest as well as attorney's fees and costs. On February 14, 2019, Defendants Berkley and Stric-Lan also filed a cross-motion for summary judgment [ECF No. 192]. The defendants argue that the Kunz Litigation was settled purely for the negligence of HG and not Stric-Lan. Moreover, they argue that because Stric-Lan did not contract to cover HG for HG's own negligence, the defendants are entitled to judgment as a matter of law. Argument was heard on the Motions during the pretrial conference and additional briefing was ordered. Both parties filed supplemental briefs, which the court has considered. The parties' second set of cross-motions for summary judgment are now ripe for review.

II. Legal Standard

To obtain summary judgment, the moving party must show that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). "Facts are ‘material’ when they might affect the outcome of the case." Lester v. Gilbert , 85 F. Supp. 3d 851, 857 (S.D. W. Va. 2015) (quoting The News & Observer Publ'g Co. v. Raleigh-Durham Airport Auth. , 597 F.3d 570, 576 (4th Cir. 2010) ). "A genuine issue of material fact exists if ... a reasonable fact-finder could return a verdict for the non-movant." Runyon v. Hannah , No. 2:12-1394, 2013 WL 2151235, at *2 (S.D. W. Va. May 16, 2013) (citations omitted); see Williams v. Griffin , 952 F.2d 820, 824 (4th Cir. 1991) ("Disposition by summary judgment is appropriate ... where the record as a whole could not lead a rational trier of fact to find for the non-movant."). The moving party bears the burden of showing that "there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett , 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

In considering a motion for summary judgment, the court will not "weigh the evidence and determine the truth of the matter." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Instead, the court will draw any permissible inference from the underlying facts in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587–88, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Summary judgment is appropriate when the nonmoving party has the burden of proof on an essential element of his or her case and does not make, after adequate time for discovery, a showing sufficient to establish that element. Celotex Corp. , 477 U.S. at 322–23, 106 S.Ct. 2548. The nonmoving party must satisfy this burden of proof by offering more than a mere "scintilla of evidence" in support of his or her position. Anderson , 477 U.S. at 252, 106 S.Ct. 2505. Conclusory allegations or unsupported speculation, without more, are insufficient to preclude the granting of summary judgment. See Dash v. Mayweather , 731 F.3d 303, 311 (4th Cir. 2013).

"When faced with cross-motions for summary judgment, the court must review each motion separately on its own merits ‘to determine whether either of the parties deserves judgment as a matter of law.’ " Rossignol v. Voorhaar , 316 F.3d 516, 523 (4th Cir. 2003) (quoting Philip Morris Inc. v. Harshbarger , 122 F.3d 58, 62 n.4 (1st Cir. 1997) ). "When considering each individual motion, the court must take care to ‘resolve all factual disputes and any competing, rational inferences in the light most favorable’ to the party opposing that motion." Id. (quoting Wightman v. Springfield Terminal Ry. Co. , 100 F.3d 228, 230 (1st Cir. 1996) ).

III. Discussion

a. Scope of Indemnity

In my November 11, 2016 Memorandum Opinion and Order, I found that Stric-Lan had a duty to indemnify HG under the MSSA, which was triggered by Stric-Lan's negligence through its employee, Mr. Kunz. See Steadfast , 217 F. Supp. 3d at 916–17. Importantly, however, that holding did not resolve the scope of Stric-Lan's indemnity obligation. That is, the November 21, 2016 Order left open whether Stric-Lan's indemnity obligation is limited only to the negligence of Stric-Lan, giving it a comparative negligence construction, or whether complete indemnity, including HG's negligence, is required if Stric-Lan is negligent to any degree. I will begin with the language of the indemnity provision in the MSSA:

Contractor [Stric-Lan] shall defend, indemnify, hold harmless, and release Company [HG] from and against any and all claims, losses, damages, demands, causes of action, suits, judgments and liabilities of every kind ... brought or asserted against Company by any party whomsoever ... to the extent that such claims, losses, damages, injuries, illnesses, or death are caused by the negligence (of any degree); strict liability, or willful misconduct of the Contractor [Stric-Lan], regardless of whether the Company [HG] is negligent in part.

MSSA 10 (emphasis added). Thus, the first question that must be answered is...