Berkley Nat'l Ins. Co. v. XTO Energy, Inc.

Decision Date25 August 2021
Docket NumberCase No. 1:18-cv-195
Citation556 F.Supp.3d 981
Parties BERKLEY NATIONAL INSURANCE COMPANY, Plaintiff, v. XTO ENERGY, INC., Defendant, and Third-Party Plaintiff, v. Commerce and Industry Insurance Company, Torus National Insurance Company n/k/a StarStone National Insurance Company, and Seneca Specialty Insurance Company, Third-Party Defendants.
CourtU.S. District Court — District of North Dakota

Thomas C. Wright, Natasha Taylor, Wright Close & Barger, LLP, Houston, TX, Corey J. Quinton, Fisher Bren & Sheridan, LLP, Fargo, ND, Susan A. Daigle, Daigle Rayburn, LLC, Lafayette, LA, for Plaintiff.

Carla Green, Pro Hac Vice, Ernest Martin, Jr., Pro Hac Vice, Haynes and Boone, LLP, Dallas, TX, Leslie C. Thorne, Haynes and Boone, LLP, Austin, TX, Carla Green, Pro Hac Vice, Ernest Martin, Jr., Pro Hac Vice, Haynes and Boone, LLP, Dallas, TX, Leslie C. Thorne, Haynes and Boone, LLP, Austin, TX, for Defendant, and Third-Party Plaintiff.

Jessica M. Rydell, Joel A. Flom, Flom Law Office, P.A., Fargo, ND, Laura Eve Besvinick, Pro Hac Vice, Stroock & Stroock & Lavan LLP, Miami, FL, for Third-Party Defendants Commerce and Industry Insurance Company.

Mark A. Solheim, Richard William Bale, Pro Hac Vice, Larson King, LLP, St. Paul, MN, for Third-Party Defendants Torus National Insurance Company.

AMENDED ORDER ON MOTIONS FOR SUMMARY JUDGMENT AND CROSS-MOTIONS FOR PARTIAL SUMMARY JUDGMENT

Daniel L. Hovland, District Judge

Before the Court are three motions for summary judgment (Doc. Nos. 72, 81, and 84) and three motions for partial summary judgment (Doc Nos. 101, 110, and 115) filed by the parties in this declaratory judgment action. The motions have been fully briefed and are ripe for consideration.

The first set of motions is between Berkley National Insurance Company ("Berkley"), and XTO Energy, Inc. ("XTO"). Berkley filed a motion for summary judgment against XTO on February 5, 2020. See Doc. No. 72. XTO filed a response in opposition to Berkley's motion on April 24, 2020. See Doc. No. 109. Berkley filed a reply brief June 5, 2020. See Doc. No. 133. XTO filed a motion for partial summary judgment against Berkley on April 24, 2020. See Doc. No. 110. Berkley filed a response in opposition on July 10, 2020. See Doc. No. 143. XTO filed a reply brief on August 14, 2020. See Doc. No. 159.

The second set of motions is between XTO, as third-party plaintiff, and Commerce and Industry Insurance Company ("Commerce"), third-party defendant. Commerce filed a motion for summary judgment against XTO on March 4, 2020. See Doc. No. 84. XTO filed a response in opposition to the motion on April 24, 2020. See Doc. No. 114. Commerce filed a reply brief on June 29, 2020. See Doc. No. 140. XTO filed a motion for partial summary judgment on April 24, 2020. See Doc. No. 115. Commerce filed a response in opposition to the motion on July 27, 2020. See Doc. No. 151. XTO filed a reply brief on August 31, 2020. See Doc. No. 162.

The final set of motions are between XTO, as third-party plaintiff, and third-party defendant Torus National Insurance Company n/k/a StarStone National Insurance Company ("StarStone"). StarStone filed a motion for summary judgment against XTO on March 2, 2020. See Doc. No. 81. XTO filed a response in opposition on April 22, 2020. See Doc. No. 97. StarStone filed a reply brief on May 20, 2020. See Doc. No. 130. XTO filed a motion for partial summary judgment against StarStone on April 22, 2020. See Doc. No. 101. StarStone filed a response in opposition to the motion on May 20, 2020. See Doc. No. 128. XTO filed a reply brief on June 10, 2020. See Doc. No. 134.

I. BACKGROUND

This declaratory judgment action involves contract and insurance claims stemming from an explosion and fire that occurred on June 18, 2016, at an oil and gas well located in western North Dakota. The action is brought pursuant to the Federal Declaratory Judgment Act, 28 U.S.C. § 2201 et seq. The amount in controversy far exceeds $75,000. Jurisdiction is based upon diversity of citizenship. 28 U.S.C. § 1332.

A. THE PARTIES

Plaintiff Berkley National Insurance Company is an Iowa corporation. Its principal place of business is Urbandale, Iowa. Berkley issued primary and umbrella policies to Missouri Basin Well Services Inc. ("Missouri Basin").

Defendant and third-party plaintiff XTO Energy Inc. is a Delaware corporation with its principal place of business in Fort Worth, Texas. XTO owned and operated the oil and gas well where the explosion and fire occurred.

Third-party defendant Commerce and Industry Insurance Company is a New York corporation with its principal place of business in New York. Commerce issued a second layer umbrella policy to Missouri Basin.

Third-party defendant Torus National Insurance Group, n/k/a StarStone National Insurance Company, is a Delaware corporation with its principal place of business in New Jersey. StarStone issued an umbrella policy to Badlands Consulting, LLC ("Badlands").

Third-party defendant Seneca Specialty Insurance Group is a Delaware corporation with its principal place of business in New York. Seneca issued a primary policy to Badlands. The claims between Seneca and XTO have been settled.

B. THE INCIDENT

On June 18, 2016, an explosion and fire occurred at the Ryan 14X-09E oil and gas well ("Ryan Well") near Watford City, North Dakota. XTO was the owner and lease operator of the Ryan Well. XTO retained Sherwood Enterprises, LLC, and Most Wanted Well Service, LLC, to provide snubbing services at the Ryan Well. XTO retained Missouri Basin and Badlands to provide "company man" services at the Ryan Well.

Prior to the explosion and fire, XTO contractors at the Ryan Well encountered a down-hole problem whereby the drill was not making progress in milling out a frac plug. Rather than kill the well, a decision was made to snub out the hole. Snubbing is a process whereby a machine grabs the tubing and pulls it out a little at a time while maintaining pressure in the wellhole. Snubbing is a specialized operation used when the pipe string is pressurized and the weight of the pipe alone is insufficient to keep the pipe in the wellhole. A snubbing unit is employed to prevent the pressurized pipe string from being shot out of the wellhole.

On the morning of June 18, 2016, the crews were snubbing out the last length of pipe when a hole in the side of the pipe string was exposed, resulting in the release of gas and other wellbore fluid into the atmosphere. Workers observed a hole in the pipe and gas coming out of the hole. The snubber, John Stassinos, then shoved the portion of the pipe with a hole in it back beneath the annular bag to seal off the wellbore from the atmosphere. However, within a few seconds the final section of pipe rocketed out of the well and into the air along with oil, gas, and wellbore fluid resulting in an explosion and fire.

The explosion and fire resulted in the death of John Stassinos and severe burn injuries to Justin Pyle and Chad Maheu, all employees of Most Wanted Well Service. Daniel Pavon, who was employed by Sherwood Enterprises, also suffered severe burns. Joe Guillen, another Sherwood Enterprises employee, suffered severe emotional distress and post-traumatic stress disorder

. No employees of Missouri Basin or Badlands were injured.

C. THE UNDERLYING LAWSUITS

Two lawsuits, both of which were filed in the District of North Dakota, resulted from the incident: Mary Stassinos et al. v. XTO Energy Inc. et al.; case no. 1:17-cv-138, filed on July 6, 2017, and Richard Maheu et al. v. XTO Energy Inc. et al.; case no. 1:17-cv-102, filed on May 22, 2017, ("Underlying Lawsuits"). The Underlying Lawsuits named XTO, Missouri Basin, Badlands and others as defendants.

On October 12, 2018, all defendants in the Underlying Lawsuits and their insurance carriers participated in a mediation with the plaintiffs. At that mediation or shortly thereafter, XTO was able to secure settlements with all of the plaintiffs. The total amount of the settlements exceeds the total limits of the Berkley, Commerce, Seneca and StarStone policies. Berkley, Commerce, Seneca, and StarStone are aware of the amounts paid in settlement of the Underlying Lawsuits. The defense costs of XTO and others have been paid by two carriers, Arch Insurance Company and St. Paul Fire & Marine Insurance, which are not involved in this lawsuit.

Several carriers for other defendants in the Underlying Lawsuits, or for contractors who were otherwise involved, tendered their full limits of coverage toward the settlements. Berkley and Commerce did not participate in the mediation or contribute to the settlement. Seneca and StarStone participated in the mediation and each agreed to tender their limits of coverage ($1 million from Seneca and $5 million from StarStone), on the condition the parties could litigate or arbitrate the coverage issues later and that Seneca and StarStone could recoup their limits if a court or arbitrator determined their policies do not afford coverage.

D. THE MASTER SERVICE AGREEMENTS

XTO retained contractors Missouri Basin and Badlands to perform certain services at the Ryan Well. Missouri Basin and Badlands entered separate master service agreements ("MSAs") with XTO to govern their contractual rights, responsibilities, and obligations for the work they performed. See Doc. Nos. 86-3 and 83-1. XTO entered into similar or identical MSAs with its other contractors: Sherwood Enterprises; Most Wanted Well Service (Doc. No. 74-3); Petroleum Experience, Inc.; Weatherford International, LLC; and KLX Energy Services, LLC/KLX Energy Holdings, LLC.

The MSAs contain "knock-for-knock" indemnity obligations which both parties agreed to support with insurance. See Doc. No. 86-3, pp. 5-7 and 83-1, pp. 5-7. In the "knock-for-knock" indemnity provisions, Missouri Basin and Badlands agreed to indemnify XTO from claims brought against XTO by their employees and subcontractors, and XTO agreed to indemnify Missouri Basin and Badlands for claims brought against them by XTO's employees...

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  • Chapter 6 Insurance Coverage in an Environmental Case: Focus on Claims Handling
    • United States
    • FNREL - Special Institute Litigating an Energy, Natural Resources, or Environmental Case (FNREL)
    • Invalid date
    ...the insured; and (v) the insured made reasonable efforts to address the situation. Berkley National Insurance Co. v. XTO Energy, Inc., 556 F.Supp.3d 981, 1008 (D.N.D. 2021). This paper will address some of the issues and potential areas of dispute that have arisen in the application of this......

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