Opinion ID: 2598566
Heading Depth: 2
Heading Rank: 2

Heading: L & T's acceptance of the policy naming Kennecott as an additional insured as defeating the third-party beneficiary and negligence claims

Text: [¶ 25] In the complaint, CNA, as assignee of Cordero's rights, alleged Barlow knew the intent of the policy was to benefit Cordero; it was foreseeable, therefore, that Cordero would sustain injury if Barlow failed to designate it as an additional insured; and Cordero in fact sustained injury as a result of Barlow's negligent failure to designate it. The district court dismissed the negligence claim on the grounds that L & T had a duty to review the insurance policy and reject it if it did not comply with the coverage requested; L & T knew, or should have known, Cordero was not named as an additional insured; and Cordero did nothing to ensure proper insurance coverage was in place prior to allowing PICOR and L & T to begin work at the mine. [¶ 26] In support of the district court's ruling, Barlow cites Small v. King, 915 P.2d 1192, 1194 (Wyo.1996), and Feather v. State Farm Fire and Casualty, 872 P.2d 1177, 1181-82 (Wyo.1994), for the principle that an insured has a duty under Wyoming law to read its insurance policy and reject it if it is unacceptable. Barlow claims the evidence clearly establishes L & T knew the certificate listed Kennecott and did nothing about it, thereby relieving Barlow of responsibility for any resulting injury. Barlow claims the insured's duty to read and reject applies in contract and in tort and applies to Cordero as a third-party beneficiary as well as L & T because the former should stand in no better position than the latteri.e., if a claim by L & T would fail for its failure to read and reject, Cordero is barred as well. McWilliams v. Wilhelm By and Through Wilhelm, 893 P.2d 1147, 1149 (Wyo.1995) (tort and contract); Farmers' State Bank of Worland v. Nicholson, 36 Wyo. 221, 254 P. 134 (1927) (third-party beneficiary stands in same position as original party). [¶ 27] Barlow is correct that Wyoming recognizes an insured's duty to read his insurance policy and reject or renegotiate if it fails to conform to the coverage requested. Small, 915 P.2d at 1194; Feather, 872 P.2d at 1181. Barlow is also correct that the duty to read applies in cases where an insured claims the insurer failed to exercise reasonable care in providing the insurance requested. Id. These principles are also applicable to third-party beneficiary claims. [¶ 28] In Wyoming, a duty of reasonable care arising from a contract may extend to third-party beneficiaries of the contract in proper circumstances. Tidwell v. HOM, Inc., 896 P.2d 1322, 1325 (Wyo.1995). However, third-party beneficiary claims arising out of an alleged failure to exercise ordinary care are subject to the same defenses as would be available in an action between the actual parties to the contract. John D. Calamari & Joseph M. Perillo, The Law of Contracts § 17.10 (4th ed.1998). [¶ 29] Applying this rule to the present facts leads to the conclusion that Barlow may assert the defense against Cordero that L & T failed to read and reject the policy just as it could assert that defense against L & T. There is no dispute that L & T knew Kennecott, rather than Cordero, was designated as an additional insured and did nothing to correct it. Under these circumstances, USF & G was entitled to summary judgment on the third-party beneficiary claim. [¶ 30] The same analysis applies to CNA's negligence claim against Barlow. The duty to mitigate unquestionably applies in tort just as it applies in contract. McWilliams, 893 P.2d 1147. Although the question of whether a party injured due to the negligence of another is generally a question of fact, summary judgment is appropriate where reasonable minds could not differ that the plaintiff had ample right and opportunity to avoid the loss and yet took no action. Garnett, 2001 WY 94, ¶ 6, 33 P.3d 114, ¶ 6; Moore v. Continental Insurance Company, 813 P.2d 1296, 1300-01 (Wyo.1991). Here, the evidence is undisputed that L & T knew four months before the accident that the policy named Kennecott and did nothing about it. Under these particular circumstances, summary judgment was appropriate on the negligence claim. [¶ 31] Barlow also claims summary judgment was appropriate because, contrary to the terms of the Cordero-PICOR contract, Cordero allowed work to begin on the project without making sure PICOR and L & T had the required insurance. Citing Moore, Barlow contends any damages sustained by Cordero could not be charged against Barlow because Cordero could have avoided them by ensuring the proper insurance coverage was in place before work began. In Moore, after repeatedly receiving late premium payments from the insured, the insurer cancelled the homeowner's policy and refunded the last payment. Upon receipt of the refund, the insured contacted the local agent and was told the policy had been cancelled. Beyond asking the local agent to see if another company would pick up the insurance, the insured did nothing to obtain replacement coverage until after his home was seriously damaged by fire. We affirmed summary judgment for the insurer based upon the insured's failure to act to mitigate his damages. We said: A party may, in certain instances, be required to mitigate his damages, and whether an injured party has exercised reasonable diligence and care in mitigating damages is for the trier of fact to decide. [However,] where reasonable minds could not differ with respect to efforts to mitigate, as here, summary judgment is appropriate. Moore, 813 P.2d at 1300-01 (citation omitted). In reaching this result in Moore, we quoted Restatement (Second) of Contracts § 350 (1981): (1) Except as stated in Subsection (2), damages are not recoverable for loss that the injured party could have avoided without undue risk, burden or humiliation. (2) The injured party is not precluded from recovery by the rule stated in Subsection (1) to the extent that he has made reasonable but unsuccessful efforts to avoid loss. 813 P.2d at 1301. Explaining § 350, we said: The rationale of this principle, which differentiates it from mitigation in a more general sense, is that damages which the plaintiff might have avoided with reasonable effort and without undue risk, expense, or humiliation are either not caused by the defendant's wrong or need not have been, and, therefore, are not to be charged against him. 11 Williston on Contracts § 1353 (3rd ed.1968); 5 Corbin on Contracts § 1039 (1964). Id. [¶ 32] Application of these principles in the present case provides further support for summary judgment. USF & G issued the certificate naming Kennecott as an additional insured on March 21, 1997, approximately four months before Mr. DeGaugh was injured. Although Cordero's contract with PICOR required all insurance coverage to be in place before work on the project began, Cordero did not inspect the certificate or make any inquiry whatsoever to ensure the required insurance coverage was in place. Had Cordero requested proof of the required insurance, as was its right under the PICOR contract, before allowing work to begin or at any time in the four months between issuance of the certificate and the accident, it seems likely a corrected certificate could have been issued. Here, however, Cordero took no action to avoid the loss for which recovery is sought from USF & G. The damages CNA now seeks to recover, as assignee of Cordero's rights, could have been avoided with reasonable effort and without undue risk, expense, or humiliation. Any such damages, therefore, either were not or need not have been caused by the acts of USF & G or Barlow and cannot be charged against them.