Steadfast Ins. Co. v. Berkley Nat'l Ins. Co.

• Decision Date: 21 November 2016
• Docket Number: CIVIL ACTION NO. 2:15–cv–09203
• Citation: 217 F.Supp.3d 904
• Court: U.S. District Court — Southern District of West Virginia
• Parties: STEADFAST INSURANCE COMPANY, et al., Plaintiffs, v. BERKLEY NATIONAL INSURANCE COMPANY, et al., Defendants.

217 F.Supp.3d 904

STEADFAST INSURANCE COMPANY, et al., Plaintiffs,

v.BERKLEY NATIONAL INSURANCE COMPANY, et al., Defendants.

CIVIL ACTION NO. 2:15–cv–09203

United States District Court, S.D. West Virginia, Charleston Division .

Filed November 21, 2016

Andrew S. Dornbos, Don C.A. Parker, Laura Elizabeth Hayes, Spilman Thomas & Battle, Edgar A. Poe, Jr., Julie M. Meeks, Pullin Fowler Flanagan Brown & Poe, Charleston, WV, Louis A. Bove, Bodell Bove, Philadelphia, PA, for Plaintiffs.

C. Leon Sherman, Jeffrey D. Roberts, Marissa A. Cocciolone, Matthew Galen Brouse, Burns White, Dennis A. Watson, Grogan Graffam, Pittsburgh, PA, Anthony C. Sunseri, Burns White & Hickton, Wheeling, WV, Benjamin D. Adams, David H. Carriger, W. Stuart Calwell, The Calwell Practice, Charleston, WV, Jim Cole, Cole Cole & Easley, Victoria, TX, for Defendants.

MEMORANDUM OPINION & ORDER

JOSEPH R. GOODWIN, UNITED STATES DISTRICT JUDGE

Pending before the court are the plaintiff Arch Insurance Company's Motion for Summary Judgment [ECF No. 94] ("Arch's Motion"), the plaintiff Steadfast Insurance Company's Motion for Summary Judgment [ECF No. 92] ("Steadfast's Motion"; together, with Arch's Motion, "the plaintiffs' Motions"), and the defendants Berkley National Insurance Company and Stric–Lan Companies, LLC's Motion for Summary Judgment [ECF No. 89] ("the Defendants' Motion"). The parties have fully briefed each motion, and the matter is ripe for adjudication. For the following reasons, the court GRANTS the plaintiffs' Motions in part and DENIES the plaintiffs' Motions in part. The Defendants' Motion is DENIED .

I. Background

In this declaratory judgment action, I am asked to resolve a dispute regarding the parameters of an insurance policy. Specifically, I must determine whether, when read together with an underlying document, the insurance policy required Berkley National Insurance Company ("Berkley") to provide primary, non-contributory coverage in a legal dispute that it refused to cover—a dispute that was ultimately paid for by the plaintiffs, Arch Insurance Company ("Arch") and Steadfast Insurance Company ("Steadfast").

a. The Master Service and Supply Agreement

HG Energy, LLC ("HG"), a West Virginia LLC, operates oil and gas wells in West Virginia. On October 1, 2012, HG entered into a Master Service and Supply Agreement ("MSSA") with Stric–Lan Companies, LLC ("Stric–Lan"). Steadfast Mot. Summ. J. Ex. A, at 7 [ECF No. 92–1] ("Berkeley Admis."); Steadfast Mot. Summ. J. Ex. C, at 1 [ECF No. 92–3] ("MSSA"). Under this agreement, Stric–Lan, a Louisiana LLC, agreed to provide certain natural gas well services for HG. See MSSA. Importantly, the MSSA requires Stric–Lan to procure insurance and name HG as an "additional insured" under that insurance. Id. at 7. Moreover, the procured insurance is to "be primary in relation to any policies in which any member of [HG] is a named or additional insured." Id.

In addition to the insurance obligations, the MSSA also establishes indemnity obligations for both HG and Stric–Lan. Id. at 8–13. Under the MSSA, Stric–Lan's indemnity obligations are as follows:

B. ALLOCATION OF RISK

1. CONTRACTOR'S INDEMNITY OBLIGATIONS

Contractor [Stric–Lan] shall defend, indemnify, hold harmless, and release Company [HG Energy] from and against any and all claims, losses, damages, demands, causes of action, suits, judgments and liabilities of every kind (including all expenses of court costs and reasonable attorneys' fees) brought or asserted against Company [HG Energy] by any party whomsoever, directly or indirectly arising out of or related to this Agreement and resulting from any claim of loss, damage, injury, illness, or death, including, but not limited to, those described in subparagraphs (a) through (i) below, to the extent that such claims, losses, damages, injuries, illnesses, or death are caused by the negligence (of any degree), strict liability, or willful misconduct of the Contractor [Stric–Lan] , regardless of whether the Company [HG Energy] is negligent in part.

(a) Personal injury to, bodily injury to, emotional or psychological injury to, property or wage loss, benefits loss, or illness or death of Contractor's employee ....

Id. at 9 (emphasis added).¹ Importantly, the MSSA defines contractor as "[Stric–Lan], any parent company of [Stric–Lan], ... and [Stric–Lan's] agents, directors, officers, and employees."Id. at 6.

Finally, the MSSA requires Stric–Lan to defend any claim for which it indemnifies HG. Id. at 12. Should Stric–Lan fail to defend and indemnify a claim that falls under the agreement, Stric–Lan is liable for any amount paid to settle the claim. Id. at 13.

b. The Berkley Insurance Policies

To satisfy its duty to procure insurance pursuant to the MSSA, Stric–Lan issued a certificate of insurance, which evidenced that HG was a "Blanket Additional Insured as Required by Written Contract" on two Berkley policies purchased by Stric–Lan. Steadfast Mot. Summ. J. Ex. D, at 2 [ECF No. 92–4]. Specifically, HG was an "additional insured" under the Berkley Primary Policy and Berkley XS Policy. See Steadfast Mot. Summ. J. Ex. E, at 4 § B.1 [ECF No. 92–5] ("Berkley Primary Policy"); Steadfast Mot. Summ. J. Ex. F, at 4 § III.A [ECF No. 92–6] ("Berkley XS Policy"); MSSA 7. The "Additional Insured" provision of the policies provides coverage to "[a]ny person or organization with whom [Stric–Lan] agree[s] in writing in [the MSSA], to add as an Additional Insured on [Stric–Lan's] policy ... but only with respect to liability arising out of [Stric–Lan's] operations ."² Berkley Primary Policy 4 § B.1 (emphasis added). However, coverage for the "additional insured" is limited to "the lesser of: (a) the coverage and/or limits of this policy; or (b) the coverage and/or limits required by [the MSSA]." Id.

c. The Kunz Incident

In the course of performing its duties under the MSSA, Stric–Lan hired Tyler Kunz to work at an HG well site. Steadfast Mot. Summ. J. Ex. B, at 10 [ECF No. 92–2] ("Stric–Lan Admis."). While he was working for Stric–Lan at the HG site, Mr. Kunz lit a cigarette near a natural gas hazard, resulting in an explosion and significant injury to himself. Id ; Steadfast Mot. Summ. J. Ex. H, at ¶¶ 5–7 [ECF No. 92–8] ("Kunz Compl."). In the present case, Stric–Lan and Berkley both admitted that Mr. Kunz's ill-fated smoke break constituted negligence on Mr. Kunz's part. Stric–Lan Admis. 11; Berkley Admis. 11 [ECF 92–1].

Following his injury, Mr. Kunz sued HG and Stric–Lan, alleging that HG was negligent in maintaining its workplace and Stric–Lan was liable under West Virginia's deliberate intent statute. Kunz Compl. ¶¶ 8–13. Pursuant to the terms of the MSSA and insurance policy, HG sought defense in the Kunz litigation from Stric–Lan and Berkley. See Notice Removal Ex. A, at ¶¶ 44–45 [ECF No. 1–1] ("Compl."). Both Berkley and Stric–Lan refused to defend or indemnify HG. Berkley Admis. 17; Stric–Lan Admis. 17. As a result of Berkley and Stric–Lan's refusal to defend, Arch and Steadfast—companies that provided separate insurance policies for HG—paid for the defense and settlement of the Kunz litigation. Steadfast Mot. Summ. J. ¶¶ 37, 49.

After Stric–Lan and Berkley refused to defend or indemnify HG, Arch and Steadfast brought the present suit to determine whether (1) the Berkley policy provided "additional insured" coverage for HG in the Kunz litigation and (2) the Berkley policy provided primary, non-contributory coverage for the defense and settlement of the Kunz litigation. Compl. ¶ 44.

II. Legal Standard

To obtain summary judgment, the moving party must show that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). In considering a motion for summary judgment, the court will not "weigh the evidence and determine the truth of the matter." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Instead, the court will draw any permissible inference from the underlying facts in the light most favorable to the nonmoving party.

Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587–88, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

Although the court will view all underlying facts and inferences in the light most favorable to the nonmoving party, the nonmoving party nonetheless must offer some "concrete evidence from which a reasonable juror could return a verdict" in his or her favor. Anderson , 477 U.S. at 256, 106 S.Ct. 2505. Summary judgment is appropriate when the nonmoving party has the burden of proof on an essential element of his or her case and does not make, after adequate time for discovery, a showing sufficient to establish that element. Celotex Corp. v. Catrett , 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The nonmoving party must satisfy this burden of proof by offering more than a mere "scintilla of evidence" in support of his or her position. Anderson , 477 U.S. at 252, 106 S.Ct. 2505. Likewise, conclusory allegations or unsupported speculation, without more, are insufficient to preclude the granting of a summary judgment motion. See Dash v. Mayweather , 731 F.3d 303, 311 (4th Cir. 2013) ; Stone v. Liberty Mut. Ins. Co. , 105 F.3d 188, 191 (4th Cir. 1997).

III. Discussion

This case presents several distinct issues. First, because neither Arch nor Steadfast were parties to the contracts at issue in this case, I must resolve whether they have standing to bring their claims. Next, I must establish which state's contract law to apply in the present dispute. Finally, I must determine the parameters of the policy at issue and decide whether, under those parameters, Berkley had a duty to provide primary, non-contributory coverage in the Kunz litigation.

Before proceeding, I will address the parties' unhelpful briefing.³ Under Local Rule 7.1(a)(2) of the Southern District of West Virginia, memoranda of law may be no more than twenty pages. Steadfast ignored that rule and submitted a...