Sabins v. Commercial Union Ins. Companies

• Decision Date: 07 February 2000
• Docket Number: No. 99-CV-135-J.,99-CV-135-J.
• Citation: 82 F.Supp.2d 1270
• Parties: Terri Lynn SABINS, Personal Representative of the Estate of Gerald Allen Sabins, Deceased Plaintiff, v. COMMERCIAL UNION INSURANCE COMPANIES, Defendant.
• Court: U.S. District Court — District of Wyoming

82 F.Supp.2d 1270

Terri Lynn SABINS, Personal Representative of the Estate of Gerald Allen Sabins, Deceased Plaintiff, v. COMMERCIAL UNION INSURANCE COMPANIES, Defendant.

No. 99-CV-135-J.

United States District Court, D. Wyoming.

February 7, 2000.

Joseph E. Darrah, Darrall & Darrall, Powell, Donald James Rissler, Central Wyoming Law Associates, Riverton, WY, for plaintiff.

George E. Powers, Jr., Sundahl Powers Kapp & Martin, John A Coppede, Rothgerber Johnson & Lyons, Cheyenne, Christopher M. Bechhold, Thompson Hine & Flory, Cincinnati, OH, for defendant.

ORDER DENYING IN PART, AND GRANTING IN PART, COMMERCIAL UNION INSURANCE COMPANIES' MOTION FOR SUMMARY JUDGMENT

ALAN B. JOHNSON, Chief Judge.

This matter is before the court on defendant Commercial Union Insurance Companies' (Commercial Union) motion for summary judgment.

ISSUES

1. Did Commercial Union Insurance Companies or Northern Assurance Company of America have a duty to defend Anthony Clark and Mark Hunter under an insurance policy issued to Beartooth Construction against a wrongful death action in Park County?

2. Is Commercial Union Insurance Companies entitled to judgment as a matter of law on plaintiff's claim for bad faith?

FINDINGS OF FACT

1. The Defendant, Commercial Union Insurance Companies, is a liability insurance company incorporated in the State of Massachusetts and licensed to do business in the State of Wyoming. There is complete diversity of the parties to this case under 28 U.S.C. § 1332(a)(1) as there is diversity of citizenship between the plaintiff and the defendant, and the amount in controversy exceeds $75,000, exclusive of interest and costs. Plaintiff's complaint seeks judgment in an amount of $700,000. (Defendant's Notice of Removal at 2, Complaint at 1, Answer at 2)

2. On or about October 11, 1992, a commercial general liability insurance policy was issued to a partnership known as Beartooth Construction. (Defendant's Brief in Support of Motion for Summary Judgment, Exhibit 1)

3. The policy declarations show:

"Commercial Union Insurance Companies Boston, Massachusetts 02108 Issued by Northern Assurance Company of America"

4. The insurance policy provided:

The following coverages apply only when caused by an occurrence insured by this policy and not otherwise excluded:

1. Bodily Injury and Property Damage Liability

We cover all sums which the insured is legally required to pay as damages because of bodily injury or property damage.

3. Bodily Injury to Employees

Coverage does not apply:

a. to bodily injury to any employee of the insured arising out of and in the course of his employment by the insured for which the insured may be held liable as an employer or in any other capacity.

Defense

We have the right and duty to defend the insured against any claim or suit seeking damages payable under this policy, even if the charges of the suit are groundless, false or fraudulent. However, we have no duty to defend any suit for bodily injury, property damage, personal injury or advertising injury not covered by this policy. We may investigate and settle any claims as we see fit. After the policy limit of insurance has been used up by payment of judgements or settlements, we will not be obligated to defend any suit.

5. On May 28, 1993 Mr. Gerald Allen Sabins died while helping Anthony Clark, Mark Hunter and Mark Zentner unload sheet metal from a truck.

6. On June 4, 1993, Mr. Wayne Huff, an insurance adjuster for Commercial Union, interviewed Mr. Mark Hunter concerning Mr. Sabins' employment relationship with Beartooth Construction. (Plaintiff's Brief in Opposition to Defendant's Motion for Summary Judgment, Exhibits 1.3, 3.3) Mr. Hunter stated that:

a. Mr. Sabins was a full time employee for Beartooth Construction. (Id. at 3)

b. Mr. Sabins "was our partner, he uh, like our comrade in arms, okay an', an', an' he felt like the company was his as much as ours, you know, I mean we, that's the way it was, you know." (Exhibit 1.3 at 6)

c. As to social security, "Um, we just take it out on personal, we, we, what we did is uh, we took out our, and Gerald did this too, was we took what we made through the company and just declared it as personal income tax, an' then took out our uh, income, er' social security an' stuff then." (Id. at 29)

d. "...[H]er he was, we considered him a partner ourselves, but there was nothin' on paper work that I could show her, [Wyoming Occupational Health and Safety Division investigator] she was wantin' me to show her that. Uh, believe me if I could show that he was I would, because I would, they would not be able to do anything to me if he was a partner, but I've got no way to, ta' do any of that. Uh, Gerald, it was, it was an agreement with us you know. Uh, it was, we all workin' at our own risk, an', an he realized that, that's how it was kinda." (Id. at 30)

7. On June 4, 1993, Mr. Wayne Huff interviewed Mr. Anthony Clark. Mr. Clark informed Mr. Huff that:

a. Beartooth Construction was a partnership, but that there's no contract in writing. (Plaintiff's Brief in Opposition to Defendant's Motion for Summary Judgment, Exhibit 1.4 at 4)

b. "Gerald was a partner as far as...other than on paper work, we was just a partnership. His name was not on any paper work, cause he was have legal problems with an ex-wife." (Id. at 3)

c. Mr. Sabins was treated as a partner equally. (Id. at 4)

d. Mr. Sabins did not have check writing authority because of his ex-wife. (Id. at 4)

e. "Uh, we pretty much base our pay on $500.00 a week and that's what we pay each other.... All three of us take the same....same basic draw and the we (inaudible) s[sic] up an account ta' fer our tax money (inaudible) which we would draw out equally to (inaudible)." (Id. at 6)

f. As to social security and worker's compensation, "Well that's uh, bein' a self employed, you're not required to carry workman's comp., so we don't, didn't carry workmans' compensation and social security and the medicare is uh, when you file your income tax at the end of the year, bein' self employed they g[sic] their share."

8. On July 21, 1993, Mr. Al Cope interviewed Mr. Clark, who stated:

a. As to whether Mr. Sabins was an employee or an independent contractor, "That's, he was a self-employed...it's hard to explain, there's three guys started the company and Gerald, cause of a ex-wife, his name could be put on no paperwork and uh, we formed Beartooth Construction as an entity in which we could all work as independent contractors for, in order to be licensed and insured." (Plaintiff's Brief in Opposition to Defendant's Motion for Summary Judgment, Exhibit 1.5 at 1, from Commercial Union claims file)

b. He stated that, "Yes, we all worked up the bids....We all worked together ....No employees other than the three of us workin.'" (Id. at 3)

c. As to investment capital and whether all three put in equal shares, "Yeah, every nickel we could scrap [sic] up the last two years." (Id. at 8)

9. A report prepared by Jules Bell of the Wyoming Occupational Health and Safety Division on June 22, 1993 states that:

On 05-30-93, when Bell was conducting interviews with Clark and Hunter, she was advised that Sabins was part owner of Beartooth Construction. Bell informed Clark and Hunter that she would need positive proof (something on paper) that Sabins was part owner. The investigation was put on hold.... On 06-09-93, Bell was advised by Clark and Hunter that Sabins was not part owner and he was an employee of Beartooth Construction. Bell then proceeded with the investigation.

(Plaintiff's Brief in Opposition to Defendant's Motion for Summary Judgment, Exhibit 1.6, at 3, from Commercial Union claim file)

10. On September 28, 1993, in a claim referral slip from Wil Mendez, claims examiner for Commercial Union, to Ms. Alaine Greger, home claims representative for Commercial Union, Mr. Mendez advised Ms. Greger that:

I think that in the long run — the decedent will be deemed an employee rather than a partner.... If the decedent is deemed an employee, which in my opinion he is — then the matter should be deferred. I do not see anywhere in the underwriting file or the Declaration page anything other than Beartooth Construction. No where are the names of the partners mentioned.

(Plaintiff's Brief in Opposition to Defendant's Motion for Summary Judgment, Exhibits 2.4, 3.1)

11. In a taped interview with Jules Bell of the Wyoming Occupational Health and Safety Division on May 30, 1993, Mr. Anthony Clark stated, "[Gerald] was a partner, an owner, we didn't consider him as an employee at all." (Plaintiff's Brief in Opposition to Defendant's Motion for Summary Judgment, Exhibit 3.3.3)¹

12. In a taped interview with Jules Bell of the Wyoming Occupational Health and Safety Division on May 30, 1993, Mr. Hunter explained:

O.K., well, Gerald was a, he was a partner with us. The three of us were equal partners in the company. He did everything that I would do or Tony would do either one. We always kind of shared equally and changed jobs around as we did, whoever was doing that particular thing is what he did.

Yes, he is [part owner in that you know he has this claimed on the income tax]. He is covered under our contract of liability insurance as being a full part owner and on our insurance what we would do is pay all of our expenses out of any money, out of our gross profits or gross money, we'd pay all of the expenses and then we would equally divide it amongst the three of us any profit.

(Plaintiff's Brief in Opposition to Defendant's Motion for Summary Judgment, Exhibit 3.3.4)

13. On June 16, 1995, Commercial Union wrote a letter to Mr. Hunter and Mr. Clark that Northern Assurance Company of America denied and disclaimed liability to defend or pay any judgment under the Beartooth Construction insurance policy based on the allegations in the complaint that Gerald A. Sabins was an employee of Beartooth Construction. (Defendant's Brief in Support of Motion...