Marathon Pipeline Co. v. Maryland Cas. Co., 97-CV-1037-J.

• Decision Date: 08 May 1998
• Docket Number: No. 97-CV-1039-J.,No. 97-CV-1037-J.,97-CV-1037-J.,97-CV-1039-J.
• Citation: 5 F.Supp.2d 1252
• Parties: MARATHON PIPELINE COMPANY and Platte Pipeline Company, Plaintiffs, v. MARYLAND CASUALTY COMPANY, Defendant.
• Court: U.S. District Court — District of Wyoming

5 F.Supp.2d 1252

MARATHON PIPELINE COMPANY and Platte Pipeline Company, Plaintiffs, v. MARYLAND CASUALTY COMPANY, Defendant.

No. 97-CV-1037-J.

No. 97-CV-1039-J.

United States District Court, D. Wyoming.

May 8, 1998.

Richard E. Day, Ann M. Rochelle, Williams Porter Day & Neville, Casper, WY, for Marathon Pipe Line Co.

J. Kent Rutledge, Stephen Andrew Fermelia, Lathrop & Rutledge, Cheyenne, WY, James C. Nielsen, Wright Robinson Osthimer & Tatum, San Francisco, CA, for Maryland Cas. Co.

Judith A. Studer, Schwartz Bon Walker & Studer, Casper, WY, for Platte Pipeline Co.

ORDER GRANTING DEFENDANT MARYLAND'S MOTION FOR SUMMARY JUDGMENT ON COVERAGE ISSUE

ALAN B. JOHNSON, Chief Judge.

This matter came before the court on October 31, 1997, for hearing on Defendant's motion for summary judgment. The court has considered the entire file and is fully advised.

Platte Pipeline Company (Platte), the owner of an energy pipeline and related properties, uses Marathon Oil Company (Marathon) to manage its operations in Casper, Wyoming. In 1994, Marathon entered into a service contract with Steel Structures, Inc. (SSI). The purpose of the contract was not to specify actual work SSI would perform for Marathon, but rather to establish a contractual relationship between the two companies for any work SSI might perform at Marathon's request. One of the terms of the contract required SSI to have insurance that would indemnify Platte or Marathon for any liability arising from SSI's work performed on Platte's and Marathon's behalf.

During the summer of 1996, Marathon asked SSI to hire Justis Berg, a high school student looking for seasonal employment between his junior and senior year. Under this scheme, Mr. Berg would appear on SSI's employment books, but Marathon would reimburse SSI for all employment costs under the service contract, including wages and workers compensation premiums. However, Marathon would be responsible for Berg's training and for any equipment he would operate. All of Berg's work would be under Marathon's supervision.

On June 28, 1996, Justis Berg was severely injured when the mowing tractor he was driving overturned. As a result of the accident, Berg eventually lost a leg.

On the day of the accident, defendant Maryland Casualty Co. (Maryland) insured SSI. This insurance included a Commercial General Liability (CGL) policy augmented with a Supplemental Employer's Liability coverage. In addition to its own coverage under the policy, SSI had asked for and had received endorsements, which included both Platte and Marathon as additional insureds.

Following the accident, Berg submitted a claim to Maryland that was denied by letter dated October 1, 1996. Denial was based on the policy's "workers' compensation" exclusion and the general exclusion of coverage to permanent employees. This denial, however, did not address whether coverage was available under the employer's supplemental insurance policy carried by SSI. Also, the denial was silent on the issue of whether claimant Berg was a temporary worker hired on a seasonal basis, which is an exception to the policy's permanent employee exclusion.

In March of 1997, Berg filed suit against Platte and Marathon, Case No. 97-CV-1013-J. On April 14, Platte and Marathon notified Maryland of the Berg lawsuit and asked it to defend Platte and Marathon as the "additional insured" of SSI's CGL policy. Under Wyoming law, an insured has 45 days to accept or deny coverage. Wyo. Stat. § 26-15-123. Maryland did not respond to Platte's and Marathon's repeated request over several months to provide a defense. On July 11, 1997, Platte and Marathon filed this action seeking a declaration that the SSI policy provided coverage for Berg's claims against them.

On August 15, 1997, Maryland informed Platte and Marathon that it agreed to defend them in the underlying Berg action, but only under a reservation of rights. The next month, the Berg suit was settled prior to the commencement of trial. It settled for an undisclosed amount without Maryland accepting any liability or paying any amount under its policy.

In this separate action, Platte and Marathon continue to seek coverage and reimbursement from Maryland under their rights as endorsed additional insureds. They also allege Maryland acted in bad faith. Finally, having obtained an assignment of rights from SSI, Platte and Marathon seek coverage under the insurance contract standing in the shoes of the primary insured.

Maryland moves for summary judgment. Although this motion is titled "Motion for Summary Judgment," the present motion is for partial summary judgment relating to only the insurance-coverage issues. These contract claims are found at sections II and III of the Amended Complaint. The present motion does not cover the alleged breach of the duty to defend.

The standard for the grant or denial of summary judgment is well known:

[S]ummary judgment is appropriate if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. If the movant bears the burden of showing the absence of a genuine issue of material fact, the nonmovant may not rest on its pleadings but must set forth specific facts showing a genuine issue for trial as to those dispositive matters for which it carries the burden of proof.

Mesa Oil, Inc. v. Ins. Co. of North America, 123 F.3d 1333, 1336 (10 Cir.1997).

I. COVERAGE FOR THE ADDITIONAL INSURED UNDER THE POLICY IS NOT LIMITED BY AN OBSCURE REFERENCE TO A BUSINESS OR WORK DESCRIPTION.

Maryland claims that Platte and Marathon are only entitled to coverage under the CGL policy to the extent that SSI was engaged in the work of erecting buildings or remodeling old buildings since these words were expressed on the endorsement pages. Since Berg was mowing a lawn and not constructing a building, Maryland argues that Platte and Marathon cannot recover.

To support its contention, Maryland points to the endorsement pages that add Platte and Marathon as additional insureds. There is one endorsement page for Platte and one endorsement page for Marathon. The purpose of the separate endorsement pages is to add a new insured to the policy and re-define `Who Is An Insured' under the policy. This definition clearly states that additional insured is only covered for liability arising out of the policyholder's work for that additional insured.

The endorsement pages (schedule (FORM B)) also include a section that states the name of the person or organization to which the endorsement pertains. In the case of Platte, its name and address and contact person are listed under this section, immediately followed by a reference which states: "PROJECT: ERECTING BUILDINGS & REMODELING OLD BUILDINGS." On Marathon's endorsement schedule, following its name and address, is written: "RE: BUILDING ERECTION." Here the word `project' is omitted entirely.

While Maryland argues that the mere mention of these work descriptions limits the policy, it ignores the fact that a plain reading of the policy does not reveal any other reference to support its interpretation.

In Howton v. Mid-Century Ins. Co., 819 F.Supp. 1010 (D.Wyo.1993), the court noted that Wyoming law requires interpretation of insurance policies according to five basic tenets.

These tenets are (1) the court should give words their "common and ordinary meaning"; (2) the court should determine what parties reasonably intend from policy's language; (3) the language of the policy should not be so strictly construed as to "thwart the general object of the insurance"; (4) the court should enforce the policy according to its terms absent an ambiguity; and (5) where the court finds ambiguity, the policy should be construed liberally in favor of the insured; if the policy is "fairly susceptible" of two constructions, the court should adopt the one which favors the insured.

Id. at 1011 (quoting Farmers Ins. Exch. v. District Court of the Ninth Judicial Dist., 844 P.2d 1099, 1101-02 (Wyo.1993)).

For Maryland to prevail in its interpretation, at the very least the endorsement should have included language stating that the policy coverage was limited to a specific project. This could have been clearly stated either in the endorsement or the policy language itself, including the definition section which does not define "project." When the insurer tacks onto the name and address an obscure reference to the primary insured's business description, such a reference does not adequately inform an additional insured of the potential limitation. Therefore, it is not a policy limitation.

The language of an insurance policy is to be construed in accordance with the principle that the test is not what the insurer intended its words to mean but what a reasonable person in the position of the insured would have understood them to mean. Wilson v. Hawkeye Cas. Co., 67 Wyo. 141, 215 P.2d 867, at 873-74 (Wyo.1950). If Maryland wished the policy to be so limited it was well within its power to do so with clear and specific language.

Also, Maryland's argument is diminished by the fact that endorsement pages, which serve the identical purpose of indemnifying Platte and Marathon, actually use different language. On Marathon's endorsement page, the word "project" is not used at all, and instead SSI's type of work is merely referenced by "RE:."

In the final analysis, Maryland cannot ignore that these references appear in the "name or organization" column and not at some separate location in the endorsement or policy that references the effect or purpose of these words to which a limitation would attach. It is not that an insurer cannot limit coverage to a specific work project, but that Maryland failed to do so in the policy at issue in this case.

This court concludes that the business descriptions at issue do not by...