Arch Ins. Co. v. Berkley Nat'l Ins. Co.
| Docket Number | Civil Action 2:15-cv-09203 |
| Decision Date | 13 June 2022 |
| Parties | ARCH INSURANCE COMPANY, Plaintiff, v. BERKLEY NATIONAL INSURANCE COMPANY, et al., Defendants. |
| Court | U.S. District Court — Southern District of West Virginia |
Pending before the court is Plaintiff Arch Insurance Company's Second Motion for Summary Judgment. [ECF No. 235]. This suit began as a declaratory action to determine the rights of the parties under competing insurance obligations after Defendants disclaimed coverage for an underlying lawsuit. I have already concluded that under the controlling insurance contract, Defendant Berkley National Insurance Company owed its insured, co-Defendant HG Energy, a duty to defend and indemnify it from the underlying lawsuit. Thus, this motion for summary judgment requests relief on the only issues remaining: Plaintiff's damages and attorneys' fees including the entire amount paid to settle the underlying lawsuit, attorneys' fees and costs for defending HG from the underlying lawsuit, and attorneys' fees and costs in litigating this declaratory judgment action. [ECF Nos. 142 at 21-22, 235 at 3-4]. For the reasons below, Plaintiff's Motion is GRANTED.
HG Energy, LLC, (“HG”) owns and operates oil and gas wells in West Virginia. Stric-Lan Companies, LLC (“Stric-Lan”) is a service company that contracted with HG in 2012 to provide certain services equipment, and personnel for HG's well operations. The contract that memorializes this relationship and lays out each party's obligations is the Master Service and Supply Agreement (“MSSA”). [ECF No. 235-1]. All parties agree that the MSSA is an “insured contract.” Steadfast Ins. Co. v. Berkley Nat'l Ins. Co., 217 F.Supp.3d 904, 914 (S.D. W.Va. 2016). In a published opinion in 2016, I determined that the obligations laid out in the MSSA control this dispute. Id. at 915.
In the MSSA, Stric-Lan is referred to as “Contractor” and HG is referred to as “Company.” [ECF No. 235-1, at 1]. “Contractor” and “Company” are both defined to encompass each respective entity, as well as their respective parent companies, successors, assigns, subsidiaries, affiliates, “agents, directors, officers, and employees.” Id. at 6. The MSSA required Stric-Lan to obtain insurance and name HG as an additional insured under the policy. Id. at 7. The parties also acknowledged the risk of loss or injury in connection with the services to be performed and allocated those risks in the MSSA “so as to minimize the possibility of disputes and to engage in effective risk management.” Id. at 8. To that end, Stric-Lan and HG agreed to several defense and indemnity obligations in the MSSA.
Stric-Lan agreed to the following indemnity obligations:
Id. at 9-10 (emphasis added). HG agreed to an almost identical indemnity provision. Id. at 11.[1]
Stric-Lan agreed to a defense obligation in the MSSA that provided that “the Contractor shall owe Company a separate duty to investigate, handle, respond to and provide defense for any claim, demand or suit for which Contractor extends indemnity in this Agreement, and shall satisfy any and all judgments or decrees which may be entered.” Id. at 12. Stric-Lan agreed that “[t]he duty of defense shall require Contractor to retain counsel of Contractor choice and sole cost and expense to represent the Company.” Id. Finally, Stric-Lan agreed in paragraph V.D.5 of the MSSA that:
[i]f a demand of defense and indemnity is made by the Company but rejected by Contractor, then upon a determination that Contractor owed a duty of defense under this Agreement, Contractor shall be held liable for any amount paid by the settling party without a need for a judicial determination as to whether the Company had potential liability to the claimant or whether the settlement amount was reasonable.
Per the MSSA, Stric-Lan obtained insurance coverage from Defendant Berkley National Insurance Company (“Berkley”) and named HG as an additional insured. Steadfast, 217 F.Supp.3d at 908-09. I found that between the Berkley insurance policy and the MSSA, the provisions of the MSSA controlled “because the Berkley policy expressly limits its coverage to the lesser terms of the MSSA.” Id. at 915.
In 2013, a Stric-Lan employee, Tyler Kunz, was severely injured by an explosion at an HG wellsite in West Virginia. [ECF No. 142, at 3]. Mr. Kunz sued both HG and Stric-Lan in the Circuit Court of Wood County, West Virginia, alleging that HG was negligent for not providing him with a safe workplace and that Stric-Lan was liable under West Virginia's deliberate-intent statute. Id. at 2, 3. At that time, the Kunz complaint alleged that Stric-Lan “created a specific unsafe working condition” to which it intentionally exposed Mr. Kunz, causing his severe injuries. [ECF No. 235-4, at 3-6]. Following the terms of the MSSA and its associated insurance policy, HG tendered the claim to Stric-Lan for defense and indemnification. [ECF No. 235-5]. Stric-Lan refused to indemnify HG because Mr. Kunz had “not brought a claim against Stric-Lan for ‘negligence (of any degree), strict liability, or willful misconduct[, ]'” which it called “the three triggers for indemnification under the MSSA.” [ECF No. 235-6, at 2 (quoting [ECF No. 235-1, at 9])]. Because Stric-Lan's reading of the MSSA did not require it to extend indemnity for the Kunz lawsuit, it similarly reasoned that it did “not owe HG a defense obligation.” Id.
The Circuit Court found Stric-Lan to be statutorily immune from the Kunz lawsuit pursuant to applicable state workers' compensation laws and dismissed Stric-Lan as a defendant, which left only HG to defend the suit. Steadfast, 217 F.Supp.3d at 916 n.9; [ECF No. 239-2, at 7, 15]. HG was also insured by Plaintiff Arch Insurance Company (“Arch”) and Steadfast Insurance Company (“Steadfast”). Because Stric-Lan and Berkley refused to defend HG, Arch and Steadfast paid for the defense and settlement of the Kunz lawsuit. In 2015, Arch paid $5, 000, 000 and Steadfast paid $1, 000, 000 to Mr. Kunz to settle the lawsuit. The cost paid to defend HG in the Kunz lawsuit was $152, 816.41. [ECF No. 235, at 3].
Arch and Steadfast brought a declaratory judgment action against Berkley, Stric-Lan, and HG seeking a determination that the Berkley insurance policy provided “additional insured” coverage for HG in the Kunz action and that Berkley had to provide primary, non-contributory coverage for the defense and settlement of the Kunz action. See Steadfast, 217 F.Supp.3d at 909. The parties moved for summary judgment, and I found that (1) Pennsylvania law controls this dispute; (2) under the MSSA, Stric-Lan and subsequently Berkley had a duty to provide primary, non-contributory insurance coverage to HG; (3) under the terms of that coverage, Berkley had a duty to defend and a duty to indemnify HG; and (4) the Kunz complaint alleged facts sufficient to trigger these duties. Id. at 913, 917. As my order did not “address the insurance companies' rights, subrogation, amount in question and good faith settlements, and reimbursement[, ]” I granted Steadfast and Arch leave to file an amended complaint seeking civil damages. Id. at 917; [ECF No. 141].
In the amended complaint, Steadfast and Arch sought their expenses in defending and resolving the Kunz litigation. [ECF No. 142, at 21-22]. Arch alleged the following claims against Stric-Lan and Berkley (“Defendants”): Declaratory Relief (Count I); Equitable and Legal Subrogation (Count II); and Breach of Contract (Count III). Id. at 15-21. After filing the amended complaint, Steadfast settled its claims with Stric-Lan and Berkley and was dismissed from this case. [ECF No. 167]. Arch moved for summary judgment, seeking to recover the $5, 000, 000 it advanced to settle the Kunz lawsuit with interest, as well as attorneys' fees and costs. [ECF No. 190]. Berkley and Stric-Lan then filed cross motions for summary judgment, arguing that HG settled the Kunz lawsuit purely for its own negligence and not Stric-Lan's and that because the MSSA did not require Stric-Lan to indemnify HG for HG's own negligence, Berkley and Stric-Lan were entitled to judgment as a matter of law. [ECF No. 192].
In 2019, I entered an order granting summary judgment to Berkley and Stric-Lan that the Fourth Circuit later vacated because it relied on incorrect law. Arch Ins. Co. v. Berkley Nat'l Ins. Co., 399 F.Supp.3d 571 (S.D. W.Va. 2019) ...
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