Gainsco Ins. Co. v. Amoco Production Co.

Decision Date19 August 2002
Docket NumberNo. 00-302.,00-302.
Citation2002 WY 122,53 P.3d 1051
PartiesGAINSCO INSURANCE COMPANY, Appellant (Defendant/Garnishee), v. AMOCO PRODUCTION COMPANY, Appellee (Plaintiff/Garnishor).
CourtWyoming Supreme Court

Donn J. McCall and Hampton K. O'Neill of Brown, Drew & Massey, LLP, Casper, Wyoming, Representing Appellant.

Mark W. Gifford, Casper, Wyoming, Representing Appellee.

Before HILL, C.J., and GOLDEN, LEHMAN,1 KITE, and VOIGT, JJ.

VOIGT, Justice.

[? 1] The appellant, Gainsco Insurance Company (Gainsco), appeals from an order granting summary judgment to the appellee, Amoco Production Company (Amoco), in an insurance coverage dispute. The district court determined that Gainsco was guilty of both first-party and third-party bad faith in denying coverage and refusing to settle the underlying claim. We reverse and remand to the district court for entry of a judgment in favor of Gainsco.

NATURE OF THE CASE

[? 2] Amoco entered into a Well and Lease Service Master Contract (the Contract) with Andrews Trucking Company (Andrews). Under the Contract, Andrews agreed to indemnify Amoco against liability for injury to or death of Andrews' employees and Andrews' subcontractors' employees, even if caused by Amoco's negligence, and agreed to insure this assumption of liability. Andrews then obtained insurance from Gainsco.

[? 3] Andrews subsequently subcontracted the work covered by the Contract to Kobbe Construction Company (Kobbe). On November 15, 1991, Brent Abraham (Abraham), a Kobbe employee, was overcome by and died from poisonous hydrogen sulfide gas while emptying a vacuum truck in the Elk Basin Oil Field, an oil field operated by Amoco. The Abraham Estate filed a wrongful death action against Amoco, Andrews, and Kobbe. The claim against Kobbe was dismissed because of worker's compensation immunity. Summary judgment in favor of Andrews was affirmed on appeal to this Court because Andrews "never assumed any affirmative duties regarding job site safety and, therefore, did not owe the deceased a legal duty." Abraham v. Andrews Trucking Co., 893 P.2d 1156, 1157-58 (Wyo.1995). Amoco settled for $650,000.00. [? 4] Amoco then initiated the current controversy by suing Andrews under the Contract's indemnity provision. Gainsco provided Andrews a defense and filed a third-party complaint against Kobbe based on equitable implied indemnity. However, Gainsco defended Andrews under a reservation of rights, denying coverage based on two policy exclusions: a "total pollution" exclusion and an "insured contract" exclusion. In late 1994 and again in early 1995, Amoco informed Gainsco that it would settle for $297,000.00, within policy limits, to avoid exposing Andrews to an excess judgment. Gainsco refused the offer. Through separate counsel, Andrews then settled with Amoco on the following terms: (1) Andrews would confess judgment in the amount of $716,490.80 plus interest and attorneys' fees; (2) Amoco would not execute against Andrews, but would look only to Gainsco; (3) Andrews would assign to Amoco any bad faith claims against Gainsco; and (4) Andrews would dismiss its indemnity claim against Kobbe.

[? 5] The instant case started when Amoco sued Gainsco as garnishee of the confessed judgment. The parties agreed to treat the case as a declaratory judgment action and both sides filed motions for summary judgment. The district court granted Amoco's motion for summary judgment, and this appeal followed.

ISSUES

[? 6] We will restate the separate issues presented by the parties as follows:

1. Did the district court err as a matter of law when it held that Gainsco's rejection of Amoco's settlement offers amounted to third-party bad faith, because Andrews, who negotiated a unilateral settlement agreement, suffered no damages and thus failed to prove an element of the tort of insurance bad faith?
2. Did the district court err as a matter of law when it held that Gainsco's rejection of Amoco's settlement offers amounted to third-party bad faith, because, under Western Cas. & Sur. Co. v. Fowler, 390 P.2d 602 (Wyo.1964), there could be no bad faith because Amoco's recovery against Andrews could not, as a matter of law, exceed the limits of Andrews' policy with Gainsco?
3. Did the district court err as a matter of law when it held that Gainsco's denial of coverage to Andrews amounted to first-party bad faith, because the total pollution exclusion made the question of coverage fairly debatable?
4. Did the district court err as a matter of law when it held that Gainsco's denial of coverage to Andrews amounted to first-party bad faith, because the insured contract exclusion made the question of coverage fairly debatable?
5. Did the district court err as a matter of law when it held that Amoco's indemnity claim was covered under Andrews' policy with Gainsco, when the total pollution exclusion showed no coverage existed?
6. Did the district court err as a matter of law when it held that Amoco's indemnity claim was covered under Andrews' policy with Gainsco, when the insured contract exclusion showed no coverage existed?
7. Did the district court err as a matter of law when it ignored Gainsco's argument that it was prejudiced when Amoco and Andrews failed to notify it that one term of the settlement agreement was Andrews' dismissal of its third-party complaint against Kobbe?
8. Did the district court err as a matter of law when it held that the stipulated judgment amount of $795,901.00 was a reasonable amount?
9. Did the district court err as a matter of law when it held that the total stipulated judgment amount was enforceable by Amoco against Gainsco?
10. Does the law of the case doctrine prevent Gainsco from raising the argument in this appeal that the express $300,000.00 limit of Andrews' liability contained in the Contract is a complete defense to any bad faith claim asserted by Amoco?
11. Does the indemnity provision of the Contract between Amoco and Andrews violate Wyo. Stat. Ann. ? 30-1-131 (Lexis-Nexis 2001)?

STANDARD OF REVIEW

[? 7] Procedurally, we are reviewing a summary judgment granted in a declaratory judgment action. Declaratory judgments are sought under Wyo. Stat. Ann. ?? 1-37-101 through 1-37-115 (LexisNexis 2001) and summary judgments are governed by W.R.C.P. 56. Declaratory judgment actions are commonly used to contest insurance policy coverage issues. See, e.g., Pribble v. State Farm Mut. Auto. Ins. Co., 933 P.2d 1108 (Wyo.1997)

; Doctors' Co. v. Insurance Corp. of America, 864 P.2d 1018 (Wyo.1993); and Mountain West Farm Bureau Mut. Ins. Co. v. Hallmark Ins. Co., 561 P.2d 706 (Wyo. 1977).

When this court reviews a grant of summary judgment entered in response to a petition for declaratory judgment, we invoke our usual standard for review of summary judgments .... The summary judgment can be sustained only when no genuine issues of material fact are present and the moving party is entitled to judgment as a matter of law.... In this instance, there is no contention that any genuine issue of material fact exists, and our concern is strictly with the application of the law.... We accord no deference to the district court on issues of law and may affirm the summary judgment on any legal grounds appearing in the record.

Wyoming Community College Com'n v. Casper Community College Dist., 2001 WY 86, ? 11, 31 P.3d 1242, 1247 (Wyo.2001).

Our established rules of contract interpretation apply to insurance policies .... Interpretation is the process of ascertaining the meaning of the words used to express the intent of the parties .... The intent of the parties is determined by considering the instrument which memorializes the agreement of the parties as a whole.... This court utilizes a standard of interpretation for insurance policies which declares that the words used are given the plain meaning that a reasonable person, in the position of the insured, understands them to mean ....
If the language is unambiguous, our examination is confined to the "four corners" of an integrated contract and extrinsic evidence is not admitted to contradict the plain meaning.... The language of an insurance policy is ambiguous if it is capable of more than one reasonable interpretation.... Because insurance policies represent contracts of adhesion where the insured has little or no bargaining power to vary the terms, if the language is ambiguous, the policy is strictly construed against the insurer.... However, the language will not be "tortured" to create an ambiguity.

Doctors' Co., 864 P.2d at 1023-24.

THE CONTRACT

[? 8] Andrews' duty to indemnify Amoco is contained in paragraphs 10 and 11(b) of the parties' Contract:

10. In order to eliminate controversies between [Andrews], its Subcontractors and Amoco and its joint owners, if any, and their respective insurers, [Andrews] assumes all liability for and hereby agrees to defend, indemnify and hold Amoco, its joint owner or owners, if any, and their insurers, harmless from and against any and all losses, costs, expenses and causes of action, including attorney's fees and court costs, for injuries to and death of [Andrews'] and its Subcontractor's employees, arising out of, incident to, or in connection with any and all operations under this contract and whether or not such losses, costs, expenses and causes of action are occasioned by or incident to or the result of the negligence of Amoco, its joint owner or owners, if any, and its agents, representatives and employees. [Andrews] agrees to insure this assumption of liability. The liability assumed by [Andrews] pursuant to this clause shall be limited to the amounts carried by [Andrews'] current liability insurance, but in no event shall it be less than the minimum limits set out in Paragraph 11(b), below.
11. ...
...
(b). Comprehensive General Liability Insurance, including Contractual Liability coverage, with minimum limits of $100,000 each person, and $300,000 each occurrence for Bodily Injury
...

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