Cudd Pressure Control, Inc. v. New Hampshire Ins. Co.
| Decision Date | 15 April 2016 |
| Docket Number | No. 14-6148,14-6148 |
| Parties | CUDD PRESSURE CONTROL, INC., Plaintiff - Appellant, v. NEW HAMPSHIRE INSURANCE COMPANY; NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Defendants - Appellees. |
| Court | U.S. Court of Appeals — Tenth Circuit |
(W.D. Okla.)
ORDER AND JUDGMENT*Before HARTZ, HOLMES, and MATHESON, Circuit Judges.
Cudd Pressure Control, Inc. ("Cudd") brought suit against its employers' liability insurers claiming that they breached their insurance contracts and breached the duty of good faith and fair dealing by failing to indemnify Cudd for a settlement and by failing to adequately investigate claims against Cudd. The district court held that the insurance contracts covered only an employer's liability for accidental bodily injury that was not intentionally caused by the employer, and that the employee's claim had only alleged intentional harm. It therefore granted summary judgment on all claims to the insurers. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm the district court's judgment.
Cudd Pressure Control is a hydraulic fracturing enterprise that employed Mr. Allen Phillips in its Payne County, Oklahoma operation. In 2008, Mr. Phillips was killed after falling into a proppant injection machine on a worksite in Wheeler, Texas. Mr. Phillips's wife, Tonya Phillips, pursued a workers' compensation claim in Oklahoma under the Oklahoma Workers' Compensation Act, and she was awarded full benefits for herself and two minor children, as well as funeral expenses. Ms. Phillips then sued Cudd in the United States District Court for the Western District of Oklahoma under the "substantial certainty doctrine" that permits an injured employee's suit to proceed as an intentional tort when an employer acted with substantial certainty that injury would occur.
Prior to these events, National Union Fire Insurance Company ("National Union") had issued a multi-state insurance policy providing coverage to Cudd for workers' compensation and employers' liability claims in sixteen states, including Oklahoma. New Hampshire Insurance Company ("New Hampshire") had issued an identical policy covering Cudd in Texas. Both policies covered (as relevant here) only "bodily injury by accident," including bodily injury resulting in death. Aplt. App. at 699, 709. Neither policy covered "bodily injury intentionally caused or aggravated by [the insured]." Id. at 700, 710.
Cudd, through its broker, provided notice to the insurers of Ms. Phillips's claims.1 On September 15, 2011—allegedly almost two years after the insurers received notice—Mr. Ron Mann, who worked for Chartis, the claims administrator for both policies, sent a letter on behalf of National Union denying coverage on the grounds that: (1) the lawsuit did not allege a bodily injury by accident, (2) coverage was excluded because the suit alleged injury intentionally caused by Cudd, and (3) Mr. Phillips's employment was not necessary or incidental to Cudd's work in Oklahoma, and was therefore outside of the states covered by the National Union policy.
The parties agree that National Union has been consistent and unwavering in its position regarding the lack of coverage. In response, Cudd asked for an evaluation of coverage under the New Hampshire policy. Mr. Mann, handling claims for the New Hampshire policy on Chartis's behalf, replied that the New Hampshire policy would also not cover any damages awarded in the suit, because it, too, was limited to accidental bodily injury and did not cover injuries intentionally caused by Cudd. New Hampshire reiterated its position in a formal letter in November 2011.
New Hampshire issued a new letter in January 2012 in which it informed Cudd of a "potential for coverage" and agreed to provide a defense in the Phillips litigation "subject to a reservation of rights." Id. at 754. The letter reserved the right to deny a defense, to not indemnify, or to do both. The letter also reiterated New Hampshire's reasons for finding no coverage under the policy. Nevertheless, New Hampshire continued to provide a defense to Cudd, using counsel of Cudd's own choosing, subject to a reservation of rights. Cudd ultimately moved for summary judgment in the district court on the basis that Ms. Phillips was barred from raising an intentional tort claim because she had already elected the workers' compensation remedy. The district court agreed, and granted summary judgment to Cudd under Oklahoma law.
Ms. Phillips then appealed from the final judgment to our court, which ordered the parties into a mediation conference. Cudd informed both National Union and New Hampshire of the mediation conference and demanded coverage under their policies. Cudd stated that the district court's order set forth facts demonstrating that Mr. Phillips's employment was necessary and incidental to Cudd's work in Oklahoma, and argued that therefore both New Hampshire and National Union should provide coverage under their respective policies. Ms. Tara Barlin, another employee of Chartis, replied that "we will continue to defend the claim as we have been," and that she would be available by phone "to assist in the mediation as needed," but that the coverage decision remained the same. Id. at 806.
Six days later, Cudd informed Ms. Barlin of a settlement demand of $825,000 and requested that Chartis either (1) agree to the amount of the settlement and pay in full, or (2) waive the reasonableness of the amount of the settlement while preserving Chartis's coverage defenses. Ms. Barlin responded the same day "neither consent[ing] to the settlement nor withhold[ing] [Chartis's] consent" because Chartis continued to find that the claims were not covered by the policies and were solely a matter of Cudd's concern. Id. at 809. Cudd then settled the suit with Ms. Phillips for $750,000, and we entered an order dismissing Cudd's appeal in light of the settlement. See Order, No. 12-6154 (10th Cir., filed Aug. 23, 2012). Cudd continued to demand that National Union and New Hampshire cover the settlement, and the insurers continued to maintain that there was no coverage for this claim under their respective policies.
Cudd then filed the present suit against National Union and New Hampshire, asserting claims for breach of contract and breach of the duty of good faith and fair dealing. National Union and New Hampshire moved for summary judgment on the bases that: (1) coverage was properly denied because the Phillips suit did not involve bodily injury by accident, and (2) the policies did not cover Cudd's intentional wrongdoing. The insurers also argued that they acted reasonably and in good faith as a matter of law in denying coverage and refusing to pay non-covered claims. Cudd filed its own motion for summary judgment on the basis that there was coverage under both the National Union and New Hampshire policies. Additionally, Cudd argued that the insurers engaged in bad faith by failing to investigate coverage, denying coverage, and refusing to participate in and fund the settlement.
The district court granted summary judgment to the insurers and denied Cudd's summary-judgment motion. It found, contrary to Cudd's allegations in the present case, that the Phillips suit was governed by Oklahoma law—as the district court in the Phillips case had previously held—and that in any event, the parties' arguments did not present sufficient information for the court to endeavor to determine anew the governing law of that case. Turning to the question of what law governed Cudd's breach-of-contract claims, the court was willing to assume that Texas law governed the claim regarding the New Hampshire policy, and it noted that the parties had relied on Oklahoma law in their arguments concerning the National Union policy. It proceeded to find that Ms. Phillips had not asserted a claim for a bodily injury by accident under either Texas or Oklahoma law, and accordingly found no coverage under either policy. Finally, it reasoned that, because a plaintiff cannot prevail on a bad-faith claim when the plaintiff is not entitled to coverage under the policy at issue, Cudd could not establish the elements of its bad-faith claim. Cudd now appeals.
"We review the district court's grant of summary judgment de novo, applying the same standard used by the court below." Idg, Inc. v. Continental Cas. Co., 275 F.3d 916, 920 (10th Cir. 2001). "Summary judgment is appropriate when, viewing the record in the light most favorable to the nonmoving party, 'there is no genuine dispute over a material fact and the moving party is entitled to judgment as a matter of law.'" Willis v. Midland Risk Ins. Co., 42 F.3d 607, 611 (10th Cir. 1994) (quoting Russillo v. Scarborough, 935 F.2d 1167, 1170 (10th Cir. 1991)). "A 'material fact is one which might affect the outcome of the dispute under the applicable law.'" Meyer v. Conlon, 162 F.3d 1264, 1268 (10th Cir. 1998) (quoting Ulissey v. Shvartsman, 61 F.3d 805, 808 (10th Cir. 1995)). "An issue of material fact is genuine if a reasonable jury could return a verdict for the non-movant." Id. (quoting Kaul v. Stephan, 83 F.3d 1208, 1212 (10th Cir. 1996)). "If there is no genuine issue of material fact in dispute, then we next determine if the substantive law was correctly applied by the district court." Id. (quoting Kaul, 83 F.3d at 1212).
Cudd first asks us to reverse the district court on the issue of whether there was coverage for Ms. Phillips's claim under the insurance contracts. Because we determine that Ms. Phillips's action did not allege an "accident" within the meaning of either Texas or Oklahoma law, we conclude that Cudd was not entitled to coverage under either policy. Accordingly, we affirm the district court's grant of summary judgment to the insurers on this issue.
Before addressing the contracts at issue in this suit, we begin with some observations concerning the Phillips suit that guide our analysis in this case.
We accept for purposes of our...
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