CORDERO MIN. CO. v. US Fidelity and Guar. Ins. Co., 02-72.

• Decision Date: 15 April 2003
• Docket Number: No. 02-72.,02-72.
• Citation: 67 P.3d 616,2003 WY 48
• Parties: CORDERO MINING COMPANY, a Delaware corporation; Transcontinental Insurance Company, a New York corporation; and Continental Casualty Company, an Illinois corporation, Appellants (Plaintiffs), v. UNITED STATES FIDELITY AND GUARANTEE INSURANCE COMPANY, a Minnesota company; and The Barlow Agency, a Wyoming corporation, Appellees (Defendants).
• Court: Wyoming Supreme Court

67 P.3d 616

2003 WY 48

CORDERO MINING COMPANY, a Delaware corporation; Transcontinental Insurance Company, a New York corporation; and Continental Casualty Company, an Illinois corporation, Appellants (Plaintiffs), v. UNITED STATES FIDELITY AND GUARANTEE INSURANCE COMPANY, a Minnesota company; and The Barlow Agency, a Wyoming corporation, Appellees (Defendants).

No. 02-72.

Supreme Court of Wyoming.

April 15, 2003.

Jeffrey S. Wittebort of Walberg, Dagner & Tucker, P.C., Centennial, Colorado; and Paul Kapp, Cheyenne, Wyoming, Representing Appellants.

Judith Studer of Schwartz, Bon, Walker & Studer, Casper, Wyoming, Representing Appellee United States Fidelity and Guarantee Insurance Company.

Timothy W. Miller of Reeves & Miller, Casper, Wyoming, Representing Appellee The Barlow Agency.

Before HILL, C.J., and GOLDEN, LEHMAN, KITE, and VOIGT, JJ.

KITE, Justice.

[¶ 1] Cordero Mining Company (Cordero), a subsidiary of Kennecott Energy Company (Kennecott), contracted for work to be done at its mine in Campbell County. The general contractor and subcontractor were required to procure insurance naming Cordero as an additional insured. However, the subcontractor's policy failed to do so. After settling claims made against Cordero by an injured worker, the general contractor's insurer, Transcontinental Insurance Company and Continental Casualty Company (together CNA), and Cordero filed claims against the subcontractor's insurer, United States Fidelity and Guarantee Insurance Company (USF & G), and its agent, The Barlow Agency (Barlow), including claims for reformation of the insurance policy, negligence in failing to name Cordero, and breach of contract on the basis that Cordero was an intended third-party beneficiary. The district court granted summary judgment for USF & G and Barlow as to all claims. We affirm the summary judgment but on different grounds than those relied upon by the district court.

ISSUES

[¶ 2] From the parties' lengthy statements of the issues, we find the following issues determinative:

1. Whether Cordero was an intended third-party beneficiary of, first, Barlow's promise to procure insurance for the subcontractor from USF & G and, second, the insurance policy issued to the subcontractor by USF & G; and

2. Whether the subcontractor's acceptance of the policy naming Kennecott as an additional insured defeats the third-party beneficiary and negligence claims.

FACTS

[¶ 3] Cordero contracted with the general contractor, Production Industries Corporation (PICOR), in February of 1997 for construction of a coal loading system for the Rojo mine in Campbell County. The Cordero-PICOR contract required PICOR to obtain insurance naming the "Company Group" as an additional insured. The "Company Group" is defined in the contract as including Cordero, Kennecott, and each of their respective subsidiaries. PICOR obtained insurance from CNA in April of 1997 naming Cordero as an additional insured.

[¶ 4] The Cordero-PICOR contract also required PICOR to ensure that all subcontractors hired to perform work on the project obtained insurance coverage naming the Company Group as an additional insured. By purchase order dated March 3, 1997, PICOR subcontracted with L & T Fabrication & Construction, Inc. (L & T) to construct platforms for the coal loading system. The PICOR-L & T purchase order required L & T to obtain insurance naming PICOR and Cordero as additional insureds. In an attempt to comply with the purchase order, L & T procured insurance from USF & G through Barlow. The certificates issued by USF & G, dated March 19 and 21, 1997, respectively, named PICOR and Kennecott—but not Cordero—as additional insureds.

[¶ 5] L & T understood its contract with PICOR required it to procure insurance naming Cordero as an additional insured and knew the certificate it received from Barlow named Kennecott rather than Cordero as an additional insured. Yet L & T accepted the certificate as written and transmitted it to PICOR. No one contacted L & T or Barlow at the time the certificate was issued concerning the failure to name Cordero as an additional insured. It was not until L & T employee Shayne DeGaugh was seriously injured when a co-worker dropped a steel handrail on his head in August of 1997, approximately four months after the insurance certificate was issued, that Cordero contacted L & T concerning the failure to name it as an additional insured on the certificate.

[¶ 6] After the accident, Mr. DeGaugh filed a negligence claim against Cordero and PICOR. They tendered the defense to L & T's insurer, USF & G, which agreed to defend PICOR but declined to defend Cordero because it was not named as an additional insured on L & T's policy. USF & G ultimately settled the claims against PICOR for $100,000. Cordero also tendered the defense to PICOR's insurer, CNA, which after a number of months accepted the defense and, in May of 1999, settled the claims against Cordero for $3,700,000 plus $400,000 in costs and attorney fees. As part of the settlement agreement, Cordero agreed to pay Mr. DeGaugh twenty percent of any amount recovered by it or CNA from USF & G or L & T. In order to effectuate the latter portion of the agreement, Cordero assigned its rights against USF & G to CNA.

[¶ 7] On October 2, 2000, Cordero and CNA filed an amended complaint against USF & G and Barlow. Cordero alleged claims against USF & G for breach of contract as an additional insured, bad faith, and reformation of contract. CNA, by virtue of Cordero's assignment of its rights, alleged claims against Barlow for negligence in failing to name Cordero as an additional insured and for breach of contract on the theory that Cordero was an intended third-party beneficiary of the USF & G policy. Cordero and CNA sought to recover damages in the amount paid in settlement of Mr. DeGaugh's claim plus costs and attorney fees incurred as a result of the DeGaugh action and in pursuing their claims against USF & G and Barlow. USF & G and Barlow filed motions for summary judgment on all the claims, which the district court granted. On appeal, Cordero and CNA challenge the court's ruling on the breach of contract, reformation, and negligence claims. They do not challenge dismissal of the bad faith claim.

STANDARD OF REVIEW

[¶ 8] We review orders granting summary judgment according to the following standards:

Summary judgment is appropriate when no genuine issue as to any material fact exists and the prevailing party is entitled to judgment as a matter of law. A genuine issue of material fact exists when a disputed fact, if it were proven, would have the effect of establishing or refuting an essential element of the cause of action or defense which the parties have asserted. We examine the record from the vantage point most favorable to the party who opposed the motion, and we give that party the benefit of all favorable inferences which may fairly be drawn from the record. We evaluate the propriety of a summary judgment using the same standards and materials as the lower court used. We do not accord deference to the district court's decisions on issues of law.

T.M. Through Cox v. Executive Risk Indemnity Inc., 2002 WY 179, ¶ 7, 59 P.3d 721, ¶ 7 (Wyo.2002) (citations omitted).

[¶ 9] When third-party beneficiary claims are reviewed, the real question is whether the contracting parties intended the contract to be for the direct benefit of a third party. Wyoming Machinery Company v. United States Fidelity and Guaranty Company, 614 P.2d 716, 720 (Wyo.1980). The intention of the parties is to be gleaned from the contract and the circumstances surrounding its execution. Richardson Associates v. Lincoln-DeVore, Inc., 806 P.2d 790, 809 (Wyo.1991). Questions relating to the parties' intent are usually factual, precluding summary judgment; however, where the parties' intent is clear such that reasonable minds could not differ, summary judgment may be appropriate. Examination Management Services, Inc. v. Kirschbaum, 927 P.2d 686 (Wyo.1996); Detroit Institute of Arts Founders Society v. Rose, 127 F.Supp.2d 117 (D.Conn.2001).

[¶ 10] We have said summary judgment is not favored in negligence actions and is, therefore, subject to more exacting scrutiny in such cases. Garnett v. Coyle, 2001 WY 94, ¶ 6, 33 P.3d 114, ¶ 6 (Wyo.2001). However, summary judgment may be affirmed in negligence cases where the record fails to establish the existence of a genuine issue of material fact. Id.

DISCUSSION

A. Cordero as a third-party beneficiary of Barlow's promise to obtain insurance for L & T and of the USF & G policy

[¶ 11] In its decision letter, the district court found Cordero was not a third-party beneficiary of the transaction between L & T and Barlow. Rather, the district court concluded, citing Wyoming Machinery, 614 P.2d at 720, Cordero was an incidental beneficiary and as such acquired no right of action against Barlow. Cordero and CNA argue on appeal that the test for third-party beneficiary status contained in Wyoming Machinery was overruled in Richardson Associates, 806 P.2d 790, and, under the new test, Cordero was a third-party beneficiary to the contract between Barlow and L & T.

[¶ 12] In Wyoming Machinery, the court said:

[A] promise may be made to one person for the benefit of another and a third-party beneficiary may enforce his rights under a contract, although not a party to nor specifically mentioned in the contract; but there is more to it than that. An outsider claiming the right to sue must show that it was intended for his direct benefit. Otherwise he may be only an incidental beneficiary because the compelling provisions of a contract require that his claims be satisfied in order to protect another. However, an incidental beneficiary acquires no right of action against the promisor or promisee.

614 P.2d at 720 (emphasis added). On the basis of these principles, the court held that construction project subcontractors were not third-party...