Opinion ID: 160861
Heading Depth: 2
Heading Rank: 1

Heading: Coverage under the Endorsement

Text: 15 The endorsement provision modifying SSI's policy to include Marathon as an additional insured provides that: WHO IS AN INSURED (Section II) is amended to include as an insured the person or organization shown in the Schedule, but only with respect to liability arising out of your ongoing operations performed for that insured. App., Vol. 1 at 205. Marathon was listed in the Schedule as follows: SCHEDULE 16 Name of Person or Organization: MARATHON PIPELINE ATN: LISA MERSHAD, P.O. BOX 4816 HOUSTON, TX 77253-4816 RE: BUILDING ERECTION Id. 2 17 The district court granted summary judgment to Maryland Casualty on the coverage issue, holding Marathon did not qualify as an additional insured under these facts. The court first rejected Maryland Casualty's argument that Marathon was only an additional insured for operations relating to building erection, holding instead that all of SSI's operations, including hiring Mr. Berg and giving Marathon the exclusive use of his services, were covered. However, the court interpreted the contract language to require negligence on the part of the named insured before coverage is triggered. Because SSI, the named insured, was not the alleged negligent party, the court held the endorsement provision did not apply. See Marathon, 5 F. Supp. 2d at 1257 (holding that because SSI's duties with respect to Mr. Berg were carried out competently, the initial condition bringing Marathon under policy as additional insured remained unmet). In its denial of Marathon's motion to reconsider, the district court further clarified that this final conclusion was based on the undisputed fact that Marathon, not SSI, controlled every aspect of Mr. Berg's work, including the initial decision to hire him. See Order Denying Motion to Reconsider, App., Vol. 1 at 918. The court reaffirmed its original holding that Mr. Berg's injuries did not arise out of SSI's ongoing activities for Marathon. See id. at 920. After reviewing the undisputed facts and applying Wyoming law, we disagree. We conclude that Marathon qualifies as an additional insured under the endorsement for its liability to Mr. Berg. 18 Initially, we agree with the district court that the language RE: BUILDING ERECTION under Marathon's name and address does not limit Marathon's coverage as an additional insured to those activities relating solely to SSI's construction of buildings for Marathon. According to Maryland Casualty, because Mr. Berg was not involved in constructing buildings when he was injured, the endorsement provision did not cover Marathon's subsequent liability. As the district court aptly noted, an obscure reference to the primary insured's business description . . . does not adequately inform an additional insured of the potential limitation. Marathon, 5 F. Supp. 2d at 1255. 19 We also agree with the district court that the placement of this reference under the heading name and organization, and not in some other prominent location where limitations to the endorsement attach, cannot limit coverage. See id. This is particularly true given the fact that this reference is not printed in the section limiting coverage to Marathon's liability arising out of SSI's ongoing operations, the only language plainly limiting coverage under the endorsement. Although Maryland Casualty argues that disregarding this language renders it meaningless, whether this language was intended by the parties to be a limitation is at the very least ambiguous and thus must be read in favor of Marathon. See Ulrich v. United Serv. Auto. Ass'n., 839 P.2d 942, 948 (Wyo. 1992). 20 Maryland Casualty contends that because SSI's operations are described as the erection of buildings, its conduct in providing Mr. Berg's services was not an ongoing operation within the meaning of the endorsement, and Marathon therefore does not qualify as an additional insured under these facts. Because an ongoing operation is undefined in the policy, we look to the common and ordinary meaning of the words to determine whether SSI's conduct here can be so classified. See Farmers Ins. Exch., 844 P.2d at 1101. 21 The dictionary defines ongoing, when used as an adjective, as that [which] is going on; that [which] is actually in progress. Webster's Third New International Dictionary (Unabridged 2000) at 1576. Operations is defined as a doing or performing esp[ecially] of action. Id. at 1581. The common and ordinary meaning of this phrase is that a company's ongoing operation is simply those things that the company does, as opposed to the meaning suggested by Maryland Casualty which would limit ongoing operations to mean only the core or most prominent operations that a company might undertake. 3 22 The undisputed facts show that SSI's ongoing operations included hiring specified individuals at Marathon's request to work under Marathon's sole direction and control. See Dep. of Randy Farmer, President of SSI, App., Vol. 1 at 258-60 (describing similar arrangements over the past thirty years); Dep. of Dean Dick, Marathon employee, App., Vol. 1 at 268 (SSI provided temporary workers for Marathon's use to perform general roustabout work); Dep. of Marilyn Griffith, Maryland Casualty Claims Adjuster, App., Vol. 4 at 1066 (SSI informed her that it had been loaning employees to other business entities for over twenty years). The occasional nature of this activity does not negate the fact that it was an ongoing operation for SSI. 4 Given that Maryland Casualty chose not to define this term as limited to the named insured's most frequent or core operations, the common and ordinary meaning of the words informs a reasonable insured in Marathon's position that the endorsement covers risks associated with SSI's activity of hiring and paying individuals who worked solely under Marathon's control. At the very least, this limitation is ambiguous as to whether the parties intended to cover the risks associated with SSI's activities in this regard and therefore must be read in favor of the insured. 23 Although we have agreed with the district court thus far, we reject its holding that Marathon's liability did not arise out of SSI's activities. Our review of the undisputed facts convinces us there was a sufficient causal connection between SSI's operations and Mr. Berg's injuries to trigger the additional insured endorsement. Under Wyoming law, arising out of language as used in insurance contracts carries a natural consequence level of causation. Worthington v. State, 598 P.2d 796, 807 (Wyo. 1979) (interpreting automobile insurance policy providing coverage for liability arising out of use of a vehicle); see also Ulrich, 839 P.2d at 949 (reaffirming Worthington). Applying this standard, Marathon's liability must be the natural and reasonable incident or consequence of SSI's ongoing operations for Marathon, the causal connection being reasonably apparent. Id. Coverage will not lie, however, if Marathon's liability was directly caused by some independent or intervening cause wholly disassociated from, independent of or remote from SSI's operations for Marathon. Id. at 948 (quoting Worthington, 598 P.2d at 807). Therein lies the real crux of this dispute: while Marathon argues that Mr. Berg's injuries arose out of SSI's activity of employing persons who worked at Marathon's direction and control, Maryland Casualty contends that Mr. Berg's injuries arose solely out of Marathon's activities, independent and remote from SSI's operations. Because the arising out of language is plain and unequivocal, this is a question of law for this court to resolve. See Farmers Ins. Exch., 844 P.2d at 1102. 24 In the district court's initial published order, it relied on the fact that Mr. Berg was Marathon's employee for concluding that his injuries did not arise out of any of SSI's operations. See Marathon, 5 F. Supp. 2d at 1257. In its denial of Marathon's motion to reconsider, the court clarified that this conclusion was based on the undisputed fact that Marathon, not SSI, controlled every aspect of Mr. Berg's work, including the hiring decision. See App., Vol. 4 at 920. While the district court described its original reliance on Mr. Berg's employment status as used for illustrative purposes and as perhaps overbroad, id. at 918, it reaffirmed its original position by stating there was only one arguable basis for finding the liability could have arisen out of [SSI]'s ongoing operations for Marathon; namely, that Berg was an employee of SSI. Id. We have a different view of the matter. 25 Mr. Berg's employment status is largely immaterial to whether his presence on Marathon's site arose out of SSI's ongoing operations. What is material, and indeed decisive, is that Mr. Berg was present and working at Marathon's site due to SSI's agreement with Marathon to hire and pay individuals who were to work at Marathon's complete direction and control. Moreover, it was foreseeable that such individuals could be hurt as a result of Marathon's negligence. We are persuaded that SSI's act of hiring and paying Mr. Berg at Marathon's request and then sending him out to work under Marathon's sole direction and control was an ongoing operation out of which Mr. Berg's injuries were a natural consequence. We therefore disagree with the district court's ruling that Marathon was not an additional insured for purposes of its liability to Mr. Berg. 26 Finally, Maryland Casualty asserts that the named insured must be primarily negligent, with the additional insured no more than vicariously liable, for this endorsement provision to apply. Under this theory, Mr. Berg's injuries did not arise out of SSI's operations because SSI was not negligent. We have held, however, that an endorsement provision with identical language provides coverage for an additional insured's liability arising out of its own negligence. See McIntosh v. Scottsdale Ins. Co., 992 F.2d 251 (10th Cir. 1993) (applying Kansas law). In McIntosh, we were faced with the same additional insured endorsement provision at issue here and concluded the language was ambiguous as to whose negligence is covered and whose negligence is excluded from coverage. Id. at 254. We therefore interpreted the policy as providing coverage for the additional insured's liability arising out of its sole negligence. Id. This appears to be the majority rule. Accord Mid-Continent Cas. Co. v. Swift Energy Co., 206 F.3d 487, 499 (5th Cir. 2000) (rejecting argument that identical policy language limited endorsement's coverage to additional insured's liability arising from named insured's negligence); Admiral Ins. Co. v. Trident NGL, Inc., 988 S.W.2d 451 (Tex. Ct. App. 1st Dist. 1999) (interpreting identical policy language and holding that coverage provided for additional insured's sole negligence resulting in injuries to named insured's employee) (citing McIntosh holding as the majority rule); Acceptance Ins. Co. v. Syufy Enterprises, 81 Cal. Rptr. 2d 557, 561-62 (Cal. App. Ct. 1999) (identical policy language does not allocate coverage based on named insured's fault). See also Lisa Oonk, The Construction Industry: Coverage Issue Created by Claims Against Additional Insureds, 28 Brief 8, 11 (Summer 1999) (citing McIntosh as illustrative of majority rule and noting that many cases flat out reject arguments that coverage does not exist if the additional insured's liability arises from its own conduct or negligence.). We are not persuaded the language presented here is clearer on that point, and we conclude this policy language does not limit coverage to the additional insured's vicarious liability. 5 Moreover, we believe the Wyoming Supreme Court would adopt this view as Wyoming law. 27 In summary, we hold that Mr. Berg's injuries arose out of SSI's operations because Mr. Berg's presence at the Casper site was a natural consequence of SSI's activity of hiring him and paying his salary while releasing him to Marathon's control. Marathon therefore qualifies as an additional insured under the policy.