Magallan v. Zurich Am. Ins. Co.

• Decision Date: 12 September 2017
• Docket Number: Case No. 16-CV-0668-CVE-FHM
• Parties: ASHLEY NICHOLE MAGALLAN, individually, and as surviving spouse and next friend of Jesus Magallan, Jr., deceased, Plaintiff, v. ZURICH AMERICAN INSURANCE COMPANY, Defendant, and ZURICH AMERICAN INSURANCE COMPANY, Third-Party Plaintiff, v. WYOMING CASING SERVICE, INC., Third-Party Defendant.
• Court: U.S. District Court — Northern District of Oklahoma

ASHLEY NICHOLE MAGALLAN, individually,and as surviving spouse and next friend of Jesus Magallan, Jr., deceased, Plaintiff, v. ZURICH AMERICAN INSURANCE COMPANY, Defendant,andZURICH AMERICAN INSURANCE COMPANY, Third-Party Plaintiff, v. WYOMING CASING SERVICE, INC., Third-Party Defendant.

Case No. 16-CV-0668-CVE-FHM

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF OKLAHOMA

September 12, 2017

OPINION AND ORDER

Now before the Court are Ashley Nichole Magallan's (Magallan) motion for partial summary judgment (Dkt. # 74), and Zurich American Insurance Company's (Zurich) motion for summary judgment (Dkt. # 80). In order to fully address Zurich's motion (Dkt. # 80), the Court must first rule on Zurich's Daubert¹ motion regarding plaintiff's proposed expert Diane Luther (Dkt. # 85).

I.

This case arises from an automobile accident that resulted in the death of Magallan's husband, Jesus Magallan, Jr. Dkt. # 2-1, at 6. Magallan is, and Jesus Magallan, Jr. was, a resident of Texas. On February 17, 2015, Jesus Magallan, Jr. and Pedro Ochoa were passengers in a pickup truck being driven by Robert Kirk and owned by Wyoming Casing Service, Inc. (Wyoming Casing). Dkt. # 74, at 12-13; Dkt. # 80, at 5. All three men were employees of Wyoming Casing, and were acting within the scope of their employment. Dkt. # 74, at 13; Dkt. # 80, at 5. Wyoming Casing is a North Dakota corporation, with its principal place of business in North Dakota. The pickup truck was involved in an automobile accident with another vehicle in Freedom, Oklahoma, resulting in injuries to Ochoa and Kirk and the death of Jesus Magallan, Jr. Dkt. # 74, at 13; Dkt. # 80, at 5. Zurich determined that Kirk caused the accident by turning in front of the other vehicle. Dkt. # 80-2, at 2. Magallan does not now dispute that Kirk caused the accident. Dkt. # 80, at 5; Dkt. # 93, at 10. At the time of the accident, Wyoming Casing had purchased workers' compensation insurance and business automobile insurance policies issued by Zurich or its affiliate.² Dkt. ## 71-12, 80-5. Zurich is an Illinois corporation, with its principal place of business in Illinois.

The named insured of the business automobile insurance policy is Wyoming Casing, and the policy period is September 1, 2014 to September 1, 2015. Dkt. # 80-4. The policy includes a business auto coverage form that describes Wyoming Casing's "covered autos liability" coverage. Dkt. # 80-5. The business auto coverage form states that Zurich "will pay all sums an 'insured'legally must pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies, caused by an 'accident' and resulting from the ownership, maintenance or use of a covered 'auto.'" Dkt. # 80-5, at 2. According to the policy's declarations, "any auto" is covered under the covered autos liability coverage. Dkt. # 80-4, at 2; Dkt. # 80-5, at 1. The business auto coverage form includes sections titled "Who Is An Insured" and "Exclusions." Dkt. # 80-5, at 2-3. Three exclusions are relevant to this case. First, the workers' compensation exclusion, which excludes "[a]ny obligation for which the 'insured' or the 'insured's' insurer may be held liable under any workers' compensation . . . law." Id. at 3. Second, the employee indemnification and employer's liability exclusion, which excludes bodily injury to an employee that "aris[es] out of and in the course of . . . [e]mployment by the 'insured.'" Id. at 4. Third, the fellow employee exclusion, which excludes bodily injury to "[a]ny fellow 'employee' of the 'insured' arising out of and in the course of the fellow 'employee's' employment." Id.

The business automobile insurance policy contains several endorsements, three of which are relevant to this case: the Oklahoma uninsured motorists (UM) coverage endorsement (Dkt. # 80-6), the auto medical payments coverage endorsement (Dkt. # 80-7), and the broadened coverage for named individuals endorsement (Dkt. # 80-10). The UM endorsement has a coverage limit of $1,000,000 "per accident." Dkt. # 80-6, at 1. In addition, it states that it modifies the business auto coverage form, and the provisions of that coverage form apply unless modified by the UM endorsement. Id. According to the UM endorsement, Zurich "will pay, in accordance with Title 36, Oklahoma Statutes, all sums the 'insured' is legally entitled to recover as compensatory damages from the owner or driver of an 'uninsured motor vehicle.'" Id. at 1. The endorsement defines "uninsured motor vehicle" as a land motor vehicle or trailer:

a. For which no liability bond or policy at the time of an 'accident' provides at least the amounts required by the applicable law where a covered 'auto' is principally garaged;

b. That is an underinsured motor vehicle. An underinsured motor vehicle is a motor vehicle or 'trailer' for which there is a liability bond or policy at the time of an accident, the liability limits of which are less than the amount of the claim of the person or persons making such a claim, regardless of the amount of coverage of either of the parties in relation to each other;

c. For which an insuring or bonding company denies coverage or is or becomes insolvent; or

d. That is a hit-and-run vehicle and neither the driver nor owner can be identified.

Id. at 4. The UM coverage endorsement also contains sections titled "Who Is An Insured" and "Exclusions." The UM endorsement states that "[a]nyone 'occupying' a covered 'auto'" is an insured. According to the business auto declarations, only automobiles owned by Wyoming Casing are "covered autos" under the UM endorsement. Dkt. # 80-4, at 2; Dkt. # 80-5, at 1. It is undisputed that Magallan, Kirk, and Ochoa were defined first party insureds under the UM endorsement, as they were occupants of a covered auto. Dkt. # 80-6, at 1-2. The UM endorsement lists five exclusions to the coverage. The most relevant to this case is the direct or indirect benefit exclusion, which states that UM coverage "does not apply to . . . [t]he direct or indirect benefit of any insurer or self-insurer under any workers' compensation . . . law." Id., at 2.

The auto medical payments endorsement also modifies the business auto coverage form. Dkt. # 80-7, at 1. This endorsement states that Zurich "will pay reasonable expenses incurred for necessary medical and funeral services to or for an 'insured' who sustains 'bodily injury' caused by 'accident.'" Id. The auto medical payments endorsement contains an employee bodily injury exclusion, which excludes any bodily injury to an employee "arising out of and in the course of employment by [Wyoming Casing]." Id.

The broadened coverage for named individuals endorsement also modifies the business auto coverage form. Dkt. # 80-10, at 1. This endorsement states that the following is added to the "Who Is An Insured" sections of the UM and auto medical payments endorsements: "[a]ny individual named in the Schedule and his or her 'family members' are 'insureds' while 'occupying' or while a pedestrian when being struck by any 'auto' you don't own except . . . [a]ny 'auto owned by that individual or by any 'family member.'" Id. at 2. The individuals listed in the schedule are Steve Halvorson and Londa Halverson.³ Steve Halvorson is the owner and president of Wyoming Casing. Dkt. # 80, at 22.

After the automobile accident, Magallan, individually and as surviving spouse of Jesus Magallan, Jr., filed a first party UM claim with Zurich on or about July 7, 2015. Id.; Dkt. # 93, at 10. Zurich denied her UM claim on or about February 8, 2016. Dkt. # 80, at 6; Dkt. # 93, at 10. Magallan also filed a workers' compensation claim in Oklahoma on December 7, 2015. Dkt. # 80, at 5. Magallan was awarded benefits for her workers' compensation claim in June 2016. Id. Magallan filed this suit in Delaware County District Court on October 3, 2016. Dkt. # 2-1, at 1. Her petition alleges claims for breach of contract, bad faith, and declaratory relief against Zurich, and negligence and wrongful death against John Christopher Crelia, the driver of the other automobile involved in the accident.⁴ Id. The suit was filed in Delaware County because Crelia was at the time a resident there. Zurich removed the suit to this Court (Dkt. # 2) and filed a counterclaim (Dkt. # 11) against Magallan and a third-party complaint (Dkt. # 15) against Wyoming Casing, both seekingdeclaratory judgment regarding Zurich's obligations under the business automobile insurance policy.⁵

Paula Nevin is the Zurich claims handler who processed Magallan's UM claim. Dkt. # 80, at 13. Prior to writing her denial letter, in addition to her investigation, Nevin reviewed the claims file and business automobile insurance policy, and requested and received the Oklahoma workers' compensation statute from one of Zurich's Oklahoma lawyers. Her denial was approved by her team manager, who was designated within Zurich as a "coverage champion," or expert. Dkt # 93, at 17. She did not, however, seek the advice of an Oklahoma attorney, or ask Zurich's underwriting department for a coverage opinion. Id.

Nevin's denial letter-which can only be described as convoluted-lists a mix of policy exclusions as the bases for denying Magallan's claim, including: (1) workers' compensation is the exclusive remedy for auto liability and medical payments coverage; (2) auto liability and medical payments coverages do not apply to workers who suffer bodily injury caused by a fellow employee in the course of employment; (3) Crelia was not at fault, so Magallan is not entitled to UM coverage; and (4) Magallan is also not entitled to UM coverage because any award would benefit an insurer under Oklahoma's workers' compensation laws. Dkt. # 74-4. Importantly, although she does not explain this in her letter, Nevin never considered whether Magallan might be entitled to UM coverage as against Kirk, who was an insured under the policy and at fault for the accident, but excluded from liability under the fellow employee...