Carolina Cas. Ins. Co. v. Burlington Ins. Co., Nos. 18-8071 & 18-8077

• Decision Date: 27 February 2020
• Docket Number: Nos. 18-8071 & 18-8077
• Citation: 951 F.3d 1199
• Parties: CAROLINA CASUALTY INSURANCE COMPANY, Plaintiff Counterclaim Defendant - Appellant/Cross-Appellee, v. BURLINGTON INSURANCE COMPANY, Defendant Counterclaimant - Appellee/Cross-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

951 F.3d 1199

CAROLINA CASUALTY INSURANCE COMPANY, Plaintiff Counterclaim Defendant - Appellant/Cross-Appellee,

v.BURLINGTON INSURANCE COMPANY, Defendant Counterclaimant - Appellee/Cross-Appellant.

Nos. 18-8071 & 18-8077

United States Court of Appeals, Tenth Circuit.

FILED February 27, 2020

Jon M. Hughes of McMickle, Kurey & Branch, LLP, Alpharetta, Georgia (Scott W. McMickle of McMickle, Kurey & Branch, LLP, Alpharetta, Georgia; Kevin F. Amatuzio and Lori K. Bell of Montgomery, Amatuzio, Chase, Bell & Jones, LLP, Denver, Colorado, with him on the briefs), for Plaintiff Counterclaim Defendant – Appellant/Cross-Appellee.

Thomas H. Crouch of Meagher & Geer, PLLP, Scottsdale, Arizona, for Defendant Counterclaimant – Appellee/Cross-Appellant.

Before PHILLIPS, EBEL, and O’BRIEN, Circuit Judges.

PHILLIPS, Circuit Judge.

In this appeal and cross-appeal, we must decide which of two insurers’ insurance policies covers bodily injuries suffered in a well-site fire ignited by use of a cigarette lighter. Carolina Casualty Insurance Company and Burlington Insurance Company had earlier issued policies to RW Trucking, LLC. By design, the two policies dovetail each other’s coverage. Each insurer contends that the other is solely liable to indemnify the insureds, RW Trucking and its driver Jason Metz, for damages arising from David Garza’s bodily injuries suffered in the fire. After Burlington and Carolina jointly settled Garza’s claims, with each reserving its rights against the other, Carolina filed this declaratory-judgment action, contending that it had no duty to defend or indemnify RW Trucking or Metz, and seeking reimbursement of its paid portion of Garza’s settlement. On cross motions for summary judgment, the district court ruled (1) that Carolina owed a duty to defend but not a duty to indemnify; (2) that Burlington owed a duty to indemnify (and so implicitly, also a duty to defend); (3) that Carolina paid its share of the settlement as a volunteer, disabling itself from recovering its portion of the settlement payment from Burlington; and (4) that Carolina owed Burlington for half the total defense costs. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm in part and reverse in part.

BACKGROUND

I. The Well-Site Accident

RW Trucking pumps fracking water from frac tanks at oil-well sites and hauls it away for disposal. Metz worked as a driver for RW Trucking.¹ On March 23, 2014, Metz was at a New Mexico well site pumping fracking water from a frac tank into his truck’s trailer (an enclosed tank). In preparing to do so, Metz backed his trailer to the frac tank, got out of his truck, and hooked a hose from the trailer to the frac tank. To empty the frac tank, he used a pump attached to his work truck,² powered by the truck’s engine. When the trailer reached capacity, Metz turned off the pump and disengaged the hose. According to Metz, he then left a ticket in the truck of another well-site worker, Garza. Metz testified that as he began walking back to his truck’s cab from its passenger side, and about sixty feet from the frac tanks, he flicked his lighter to light a cigarette. This ignited fumes and caused the flash fire that injured Garza (as well as Metz and another nearby RW Trucking employee).

Garza described the incident slightly differently. Garza testified that Metz was "[l]oading up his water truck" when Metz flicked his lighter. App. at 730 (Deposition of David Garza at 80:8). Garza said that, when the fire occurred, he was within arms’ length of Metz discussing with him and another truck driver which tanks needed emptying that day.

II. The Resulting Personal-Injury Lawsuit

In November 2014, Garza sued in New Mexico state court the well-site operator (Devon Energy Production Company, L.P.), Metz, RW Trucking, and KT Investments, Inc., alleging premises liability and negligence. The complaint’s factual section states in full:

9. Devon is and was at all relevant times the operator of a well known as Cotton Draw Unit, Well No. 214H, located in Eddy County, New Mexico (the "well site").

10. As the operator, Devon was responsible for the design, construction, maintenance, repair, inspection, structure assembly, installation, upkeep, and safety of the well site and the well site equipment.

11. On March 23, 2014, there was an explosion at the well site in which Plaintiff was injured. The explosion happened after Defendant Metz lit a cigarette and because Defendant Devon failed to properly inspect, maintain, and operate the well site.

12. Plaintiff suffered serious burns and other injuries.

Id. at 329. Garza alleged that Metz owed him a duty to exercise ordinary care, which Metz breached, and that RW Trucking had negligently hired, trained, supervised, and retained its agents and had not trained, controlled, directed, or supervised its employees as a reasonable employer would have done.

Garza filed an amended complaint nearly two years later. There, he re-alleges the same claims as in the original complaint—but added vicarious liability as an additional theory supporting his claim against RW Trucking—with a few additional factual allegations. The factual section now states in full:

9. Devon is and was at all relevant times the operator of a well known as Cotton Draw Unit, Well No. 214H, located in Eddy County, New Mexico (the "well site").

10. As the operator, Devon was responsible for the design, construction, maintenance, repair, inspection, structure assembly, installation, upkeep, and safety of the well site and the well site equipment.

11. At all times relevant to this lawsuit, Defendant R W Trucking’s business was to haul water at the Cotton Draw Unit under a contract with Devon. R W Trucking entered into contracts with other entities, including KT Investments, Inc., to carry out R W Trucking’s work under the Devon contract. In order to carry out its duties under the contract with R W Trucking, it was necessary for KT Investments to associate drivers.

12. Truck drivers were essential to R W Trucking’s business. R W Trucking hired, trained, supervised, and retained Jason Metz as a driver. It was within Metz’[s] job duties to drive to particular well sites, talk to personnel at the well sites, and take direction from other personnel as to where to go and what fluids to haul.

13. R W Trucking retained contractual control over the details of Jason Metz’[s] work, and exercised actual control over the details of Jason Metz’[s] work. R W Trucking performed a road test of Jason Metz and had ultimate authority to accept or reject Jason Metz as a driver. R W Trucking dispatched Jason Metz, thus telling him where to go and when to be there. R W Trucking provided Jason Metz with all necessary equipment to perform the job, including the tractor and trailer that Jason Metz drove. R W Trucking had control over whether to terminate Jason Metz’[s] employment as a driver, and had control over whether to discipline Jason Metz for violations of R W Trucking’s policies and procedures.

14. In addition, KT Investments, Inc. and R W Trucking, LLC were engaged in a joint venture and/or partnership. They shared in profits and losses from work performed at the Cotton Draw Unit. When Jason Metz worked at the Cotton Draw as a driver for R W Trucking, he was instructed to identify himself only as an agent of R W Trucking. The truck Jason Metz drove bore the emblem of R W Trucking.

15. On March 23, 2014, there was an explosion at the well site in which Plaintiff was injured. The explosion happened after Defendant Metz lit a cigarette and because Defendant Devon failed to properly inspect, maintain, and operate the well site.

16. Plaintiff suffered serious burns and other injuries.

Id. at 588–89.

Garza also alleges that Devon breached its duty to him by its "failure to store oil in a way that would stop or limit the release of explosive gas into the atmosphere." Id. at 590. But the amended complaint provides no additional factual allegations regarding Metz and RW Trucking.

In 2015, Burlington defended RW Trucking against Garza’s claims, and in 2016 defended Metz too. Both defendants had tendered their defense³ to Burlington, which defended under a reservation of rights. In October 2016, RW Trucking’s counsel sent Carolina a letter asking whether Carolina intended to indemnify it for any damages awarded to Garza. In November 2016, Burlington tendered RW Trucking’s defense to Carolina. A few days later, Carolina’s coverage counsel acknowledged having received RW Trucking counsel’s letter and advised that it would need about a week to respond. In January 2017, Metz’s counsel tendered his defense to Carolina. On January 23, 2017, Carolina responded to Metz’s counsel, stating that it was "reviewing all coverage issues involved in this matter and reserv[ing] all rights under the Motor Carrier policy referenced above." Id. at 811. Carolina further advised that it planned to attend a mediation scheduled for January 31, 2017. That same day, Carolina responded identically to RW Trucking counsel’s letter. At the mediation conference, Garza settled his claims for $850,000—Burlington paid $415,000 on behalf of RW Trucking and Metz; Carolina, $375,000 on behalf of RW Trucking; and Devon, $60,000 on its own behalf.

In the settlement agreement, Carolina and Burlington reserved "all rights between themselves to seek reimbursement/contribution/subrogation/indemnity, etc. from the other for the contributions made to the settlement amounts set forth herein." Id. at 1023. In a release signed after settlement, they also reserved the "right to bring any claims that they have or may have against one another arising from their coverage and/or defense of the claims asserted in the Lawsuit." Id. at 1028.

III. The Insurance-Coverage Dispute

On the day of the accident, RW Trucking had in force a commercial-automobile policy from Carolina, and a commercial-general-liability policy from Burlington. In January 2017, after the settlement, Carolina sued Burlington in the District of Wyoming for...