Mcmurry Const. v. Community First Ins.

• Decision Date: 15 June 2007
• Docket Number: No. 06-271.,06-271.
• Citation: 160 P.3d 71,2007 WY 96
• Parties: W.N. McMURRY CONSTRUCTION CO., a Wyoming corporation, Appellant (Plaintiff), v. COMMUNITY FIRST INSURANCE, INC. WYOMING, a Wyoming corporation, BW Insurance Agency, Inc., and Ohio Casualty Insurance Company, an Ohio corporation, Appellees (Defendants).
• Court: Wyoming Supreme Court

160 P.3d 71

2007 WY 96

W.N. McMURRY CONSTRUCTION CO., a Wyoming corporation, Appellant (Plaintiff), v. COMMUNITY FIRST INSURANCE, INC. WYOMING, a Wyoming corporation, BW Insurance Agency, Inc., and Ohio Casualty Insurance Company, an Ohio corporation, Appellees (Defendants).

No. 06-271.

Supreme Court of Wyoming.

June 15, 2007.

Representing Appellant: W.W. Reeves of Park Street Law Office, Casper, Wyoming.

Representing Appellee BW Insurance Agency, Inc.: Richard A. Mincer and Billie L.M. Addleman of Hirst & Applegate, P.C., Cheyenne, Wyoming. Argument by Mr. Mincer.

Representing Appellee Ohio Casualty Insurance Company: Patrick J. Murphy and Ryan Schwartz of Williams, Porter, Day & Neville, P.C., Casper, Wyoming. Argument by Mr. Murphy.

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

VOIGT, Chief Justice.

[¶ 1] A construction company appeals from summary judgments granted to an insurance agency and an insurance company in a controversy primarily involving a builder's risk insurance policy. The construction company also appeals from the district court's denial of its motion to amend its complaint. We affirm the denial of the motion to amend, but reverse the summary judgments in part and remand this matter to the district court for further proceedings consistent herewith.

ISSUES

[¶ 2] 1. Whether the builder's risk policy claims, including reformation, were barred by the construction company's failure to read the insurance documents or by its failure to mitigate damages?

2. Whether the district court erred in denying the construction company's motion to amend its complaint?

FACTS

[¶ 3] Early in 2005, McMurry Construction obtained a contract from the State of Wyoming to construct two steel buildings at the State Fairgrounds in Douglas. McMurry Construction's bid was $5,521,299.00-$3,368,761.00 for a livestock pavilion and $2,298,759.00 for a multi-purpose show center.¹ The contract required McMurry Construction to obtain builder's risk insurance covering 100% of the contract amount.² Anticipating this requirement, McMurry Construction had turned to BW Insurance, the agency it typically used, to procure premium estimates for the builder's risk and other insurance and bonding requirements of the project. BW Insurance's employees estimated a premium of $8,415.00 for the builder's risk insurance on the originally estimated contract price of $4,500,000.00. McMurry Construction used that premium estimate in calculating its bid.

[¶ 4] Upon learning that McMurry Construction would be awarded the contract, BW Insurance sent an insurance application to Ohio Casualty, seeking "blanket" builder's risk coverage for the two buildings because both buildings were to be insured under the same contract number. The contract amount was stated in the application to be $5,524,000.00. Because Ohio Casualty does not issue "blanket" builder's risk policies — meaning one limit covering multiple buildings — Ohio Casualty asked BW Insurance to break out the values of the two buildings. In turn, BW Insurance contacted McMurry Construction to obtain those figures. Misunderstanding what information was being sought, a McMurry Construction employee mistakenly gave BW Insurance the invoice amounts for the steel packages — $603,003.00 for the livestock pavilion, and $365,147.00 for the multi-purpose show center. Those figures were then relayed from BW Insurance to Ohio Casualty, where they were inserted as the operative coverage amounts in the builder's risk policy. The premium charged to McMurry Construction was, as a result, reduced from the estimate of $8,415.00 to $3,659.00.³

[¶ 5] BW Insurance mailed a certificate of insurance to McMurry Construction on March 2, 2005, showing the amount of builder's risk coverage to be $968,150.00. The policy was mailed to McMurry Construction a few days later, once again containing the builder's risk coverages of $603,003.00 and $365,147.00 for the two buildings. On March 15, 2005, BW Insurance faxed another copy of the certificate of insurance to McMurry Construction at the latter's request, and on March 18, 2005, again at McMurry Construction's request, BW Insurance faxed to it a copy of the policy's declarations page. The declarations page, as the certificate of insurance, showed the builder's risk coverage to be $968,150.00. McMurry Construction does not contest the fact that nobody in its offices read the certificate, the declarations page, or the policy upon their receipt.

[¶ 6] This case was engendered when the livestock pavilion collapsed as it neared completion on June 11, 2005, due to improper bracing by a subcontractor. The cost to return the building to its condition before it collapsed was $951,715.00. McMurry Construction purchased a new steel building package and reconstructed the livestock pavilion using its own employees. It also reached a proposed settlement agreement with its subcontractor's insurer for $223,315.19.

[¶ 7] Ohio Casualty sent a builder's risk claim analyst to the building site four days after the collapse. The claim analyst estimated the damage amount, applied the policy's under-insured co-insurance penalty to that figure, and then advanced $150,000.00 to McMurry Construction before any formal claim was presented.⁴ Eventually, Ohio Casualty calculated the total policy benefit to be $176,543.19, and, after deducting the $1,000.00 deductible, sent an additional $25,543.19 to McMurry Construction.

[¶ 8] On November 14, 2005, McMurry Construction filed suit against BW Insurance and Ohio Casualty, alleging breach of contract, negligence, and imputed liability, and seeking reformation of the insurance policy.⁵ In its proposed amended complaint, McMurry Construction sought to add new claims that coverage was due it under its commercial general liability (CGL) policy, that Ohio Casualty had wrongfully interfered with its subcontractor settlement by asserting its subrogation claim, that BW Insurance breached fiduciary duties created by its special relationship with McMurry Construction, that Ohio Casualty breached the implied covenant of good faith and fair dealing, and that McMurry Construction was entitled to recover attorney's fees and interest under Wyo. Stat. Ann. § 26-15-124 (LexisNexis 2005) because Ohio Casualty's denial of coverage under the builder's risk policy was unreasonable. Finally, McMurry Construction sought to add a claim against BW Insurance, unrelated to the foregoing, based upon the alleged failure to include a particular employee as a covered driver under the company's business auto policy.

THE DISTRICT COURT DECISION

[¶ 9] Both BW Insurance and Ohio Casualty filed motions for summary judgment. Those motions, and McMurry Construction's motion for leave to amend its complaint, were heard by the district court on August 28, 2006. The gist of BW Insurance's and Ohio Casualty's summary judgment argument, as well as their present argument, was summarized as follows in their joint pre-hearing memorandum:

For purposes of this summary judgment motion, the Court may assume that BW Insurance and Ohio Casualty were each negligent (for not providing the requested $5,521,299 limits in the first instance, and for not catching any error with the $968,150 limits before the building collapsed). The Court may also assume that BW Insurance breached its contract with McMurry Construction by not providing a builder's risk policy with limits of $5,521,299. The Court may even assume, for purposes of this motion, that BW Insurance is deemed to be Ohio Casualty's agent, and that Ohio Casualty would be vicariously liable for any acts, errors, omissions, or breaches of BW Insurance.

[McMurry Construction's] claims for reformation, negligence, negligent misrepresentation, breach of contract and imputed liability are each barred by both the insured's failure to read its policy and the duty to mitigate, or avoid, its damages.

[¶ 10] The district court accepted this argument and, relying upon several Wyoming cases that we will discuss below, granted the summary judgment motions. See infra ¶¶ 14, 21-28. In addition, the district court concluded that the causes of action alleged in the proposed amended complaint related to the builder's risk policy would not survive summary judgment because they were also barred by McMurry Construction's failure to read the insurance documents. The court, therefore, exercised its discretion and denied the motion to amend the complaint as to those causes of action.

[¶ 11] Amendment of the complaint to add the two remaining claims — violation of the separate CGL policy, and failure to provide appropriate business auto coverage — was also denied, but for different reasons. As to the CGL policy, the court found that its coverage was never triggered because McMurry Construction produced no evidence that it had become legally obligated to pay any sums for which Ohio Casualty would be liable.⁶ The district court denied amendment of the complaint to add the business auto policy claim because that claim involved an unrelated factual matter and a separate policy, for which discovery was not complete.

DISCUSSION

Summary Judgment

[¶ 12] Our standard for the review of a summary judgment was set forth in Abraham v. Great Western Energy, LLC, 2004 WY 145, ¶ 12, 101 P.3d 446, 452-53 (Wyo.2004):

When we review a summary judgment, we have before us the same materials as did the district court, and we follow the same standards which applied to the proceedings below. The propriety of granting a motion for summary judgment depends upon the correctness of the dual findings that there is no genuine issue as to any material fact and that the prevailing party is entitled to judgment as a matter of law. A genuine issue of material fact exists when a disputed fact, if proven, would have the effect of establishing or refuting an essential element of an asserted cause of action or defense. We, of course, examine the record from a vantage point most...