Opinion ID: 4510491
Heading Depth: 4
Heading Rank: 1

Heading: coverage a bodily injury and property

Text: DAMAGE (Section 1 – Coverages) only. 2. The person or organization is only an additional insured with respect to liability arising out of “your work” or “your product” for that additional insured. Appellant’s App. vol. 1 at 94. The policy further defines “[y]our work” as “[w]ork or operations performed by you [Upstream] or on your behalf[.]” Appellant’s App. vol. 1 at 65, 124. The district court noted that Lexington’s entire additional-insured argument depended on its “very specific use of the phrase ‘work for.’” Lexington Ins. Co., 2018 WL 8807146, at . In evaluating Lexington’s argument, the court reviewed what work Upstream had performed at the well site (through its independent contractor, Jent). Id. After reciting Jent’s management role, including his overseeing safety protocols and helping “Precision’s employees operate the drilling rig better to make the well more productive[,]” the court concluded that Upstream performed work (through Jent) “for” Precision. Id. We review de novo a district court’s interpretation of policy language. See Sonnett v. First Am. Title Ins. Co., 2013 WY 106, ¶¶ 5–7, 309 P.3d 799, 803–04 (Wyo. 2013); see also Marathon Ashland Pipe Line LLC v. Maryland Cas. Co., 243 F.3d 1232, 1236 (10th Cir. 2001). In Wyoming, courts give insurance policy language its plain meaning. N. Fork Land & Cattle, LLLP v. First Am. Title Ins. Co., 2015 WY 150, ¶ 14, 362 P.3d 341, 346 (Wyo. 2015). 16 Whether Lexington’s two policies cover Precision against Jent’s claims depends on the meaning of subsection B.2. With the names of the parties inserted, we read this provision as providing Precision coverage as an additional insured when Precision is liable to a third party and the liability arises from work performed by Upstream for Precision. As we weigh this language, we see the two prepositions— “by” and “for”—as particularly important.12 In denying coverage, Lexington rests its case on “for.”13 Lexington reads a right-of-control component into that word. From that, it argues that because Upstream, not Precision, had a right to control Jent, his work was “for” Upstream, not Precision. Otherwise stated, Lexington argues that Upstream’s work could not be “for” Precision unless Upstream’s work was subject to Precision’s control. Appellant’s Opening Br. 39. We reject Lexington’s position that the word “for” in subsection B.2 requires that Precision have a right to control the work. First, as mentioned, subsection B.2 12 We note that Lexington reads past the “by” and its significance. It misreads subsection B.2 as encompassing Upstream’s work performed for Precision. See Appellant’s Opening Br. 37, 39 (“Endorsement 17 simply limits additional insured coverage to those for whom Upstream performs work.”); id. at 47 (“Because Upstream did not perform work or operations for Precision, Precision is not entitled to any additional insured coverage.”). 13 Lexington does not contest Endorsement 17’s additional prerequisites to coverage—that Precision qualifies as an additional insured under subsection A above and that Precision’s liability to Jent arises from work performed by Upstream (meaning we have no occasion to decide whether Precision’s sole negligence as Jent pleaded in his complaint suffices to invoke coverage under Endorsement 17). 17 requires that the work be performed by Upstream. That alone requires that Upstream have had the right to control those performing its work. “Work performed by Upstream” (Jent’s supervision) cannot be work subject to Precision’s right of control.14 Thus, we conclude that reading “for” as Lexington does would render coverage under Endorsement 17 a nullity and result in illusory coverage. See Lexington Ins. Co., 2018 WL 8807146, at  (“Lexington attempts to construe the phrase ‘work for’ in such a limited and tortured way that it would thwart the general object of the Lexington Policies.”). The district court concluded that Jent had acted “for” Precision after noting that Jent had “performed some level of safety oversight on the drilling rig and actively tried to help Precision’s employees operate the drilling rig better to make the well more productive.” Id. For several reasons, we agree with this approach and interpret work “by” Upstream “for” Precision as including work “on behalf of” Precision. First, Jent was supervising the disassembly of Precision’s valuable property— the drilling rig. He supervised to help ensure the safety of Precision’s rig and employees. Second, the record reveals that Jent was not an unwelcome interloper thrust on Precision, but a key part of Precision’s efforts. Jent’s expertise is 14 Jent acknowledged that he was employed by Upstream at Ultra’s request, and that Upstream paid him. Jent was Upstream’s representative at the well site. Lexington acknowledges that Upstream controlled Jent’s work. See Appellant’s App. vol. 3 at 689 (“Upstream retained Jent to fulfill Upstream’s obligations to Ultra under the Ultra-Upstream contract.”). 18 uncontroverted—he had “conducted a rig down more than 20 times.” Appellant’s App. vol. 1 at 207. Third, Precision had already dropped a rig during a rig-down operation. Jent attributed that failure to Precision’s having improperly placed that rig’s pins, and he wanted to ensure that this did not happen again. Fourth, Jent worked with the Precision employees to prevent workers from being hit by flying pins when standing in the wrong place. For whose benefit was the work performed by Upstream (Jent’s supervision) done? For Precision’s benefit. Further, even if we determined that “for” as used in Endorsement 17, subsection B.2 was somehow susceptible to two meanings, we would resolve the ambiguity in Precision’s favor, not Lexington’s. Century Sur. Co. v. Jim Hipner, LLC, 2016 WY 81 ¶ 5, 377 P.3d 784, 787 (Wyo. 2016) (“Where the terms [of an insurance policy] are ambiguous, they are strictly construed against the insurer . . . because insurance policies are contracts of adhesion where ‘the insured has little or no bargaining power to vary the terms.’” (quoting N. Fork Land & Cattle, LLLP, ¶ 14, 362 P.3d at 346)); see also Marathon Ashland Pipe Line LLC, 243 F.3d at 1241–42 (concluding that ambiguous policy language must be interpreted in favor of the additional insured). III. Lexington Is Responsible to Cover the Entire $3 Million Settlement. After our remand, Lexington filed a motion for summary judgment, contending for the first time that Endorsement 3 of the Umbrella Policy sets Lexington’s policy limits at $2 million. In its pre-remand summary-judgment motion, Precision sought reimbursement for the full amount of the Jent settlement—$3 million. Back then, 19 Lexington raised no policy-limits defense, all through the first appeal. After remand, the district court ruled that Lexington had forfeited its newly made policy-limits argument because “Lexington did not mention the issue of maximum coverage in their filings related to the first cross motions for summary judgment, nor did they mention it before the [Tenth] Circuit[.]” Lexington, 2018 WL 8807146, at . The district court noted that Lexington was itself raising the policy-limits argument, not simply responding to a Precision argument (as Lexington was responding to Precision’s additional-insured-coverage argument). Id. at . On appeal, Lexington argues that it did not forfeit this argument and that by ruling otherwise, the district court legally erred by increasing the policy limits beyond what the policy allowed. We now turn to that argument. We choose not to consider the district court’s forfeiture ruling, because even if it erred, Lexington would still lose. For the reasons below, we conclude that the policy limits exceed the $3 million judgment. The General Policy contains a $1 million “Each Occurrence” limit. The Umbrella Policy contains a $5 million “Each Occurrence” limit. The Umbrella Policy’s Endorsement 3, deletes and replaces that policy’s “Section IV - Limits of Insurance.” Appellant’s App. vol. 1 at 132. Two sections of Endorsement 3 are important. First, subsection B sets the Umbrella Policy’s limits at $5 million. Id. But Endorsement 3 further limits the amount of coverage if the conditions of subsection D apply. That subsection reads as follows: 20 [T]he most we will pay for damages under this policy on behalf of any person or organization to whom you are obligated by a written “insured contract” to provide insurance such as is afforded by this policy is the lesser of the limits of insurance shown in Item 3 of the Declarations or the minimum limits of insurance you agreed to procure in such written “insured contract.” Id. (emphasis added). So to decrease the policy limits under subsection D, Lexington must show that an “insured contract” requires a lesser amount than $5 million. Here is the $1 million-dollar question (whether policy limits here are $2 million or $3 million): Is there an “Insured Contract” requiring $2 million in coverage, not more? The Umbrella Policy resolves this question with its definition of “Insured Contract”: “Insured Contract” means that part of any contract or agreement pertaining to your business under which any “Insured” assumes the tort liability of another party to pay for “bodily injury” or “property damage” to a third person or organization. Tort liability means a liability that would be imposed by law in the absence of any contract or agreement. Id. at 120. We read “Insured Contract” as an indemnity contract. An indemnitor assumes another’s tort liability to an injured party. Here, the Master Service Agreement has a paragraph titled “Indemnity,” but nothing in that paragraph requires Upstream (or anyone else) to obtain insurance. That requirement comes in a separate paragraph (and thus in a non-“Insured Contract” part of the Master Service Agreement) titled “Insurance.” So circling back to Endorsement 3, subsection D, Lexington cannot show that the Master Service Agreement’s indemnity provision (so its “insured contract” provision) requires Upstream “to provide insurance as is provided by this policy.” Thus, the policy limits are $1 million under the General 21 Policy and another $5 million under the Umbrella Policy. See Coleman Co. v. Cal. Union Ins. Co., 960 F.2d 1529, 1530 n.1 (10th Cir. 1992) (concluding that umbrella insurance “provides standard excess coverage that attaches after a predetermined amount of primary coverage has been exhausted” (citations omitted)); see also Appellant’s App. vol. 1 at 30 (“The . . . Umbrella Policy contains a limit of $5,000,000 . . . upon exhaustion of all coverage available under the . . . Primary Policy.”). Accordingly, we affirm the district court’s judgment in the amount of $3 million.15 We acknowledge having struggled with this question. After all, we understand that a more-expansive reading of “insured contract” could include both indemnity and insurance on behalf of another party’s liability. Further, doing so would fit with subsection D’s language reading “to provide insurance such as is afforded by this policy.” But Lexington drafted the policy language and defined “insured contract” as it did. If it meant Endorsement 3, subsection D, to reach insurance agreements as required by the Master Service Agreement it simply had to tie that to a term other than “insured contract.” For now at least, Lexington has to live with its language. Shaffer v. WINhealth Partners, 2011 WY 131, ¶ 10, 261 P.3d 708, 711 (Wyo. 2011) (internal quotation marks and citations omitted (“[T]he parties have the right to employ 15 If Endorsement 3, subsection D had applied, the policy limits would have been $2 million. The Master Service Agreement’s Exhibit B required Upstream to procure a minimum of $1 million in “Comprehensive General Liability” insurance and a minimum of $1 million in “Excess Liability” insurance. Appellant’s App. vol. 2 at 356. 22 whatever lawful terms they wish and courts will not rewrite them.”)). And as discussed earlier, even if we read “insured contract” as subject to two meanings, we would still construe “insured contract” against Lexington as the drafter. See Century Sur. Co., ¶ 5, 377 P.3d at 787; Marathon, 243 F.3d at 1241–42. IV. Precision Is Not Entitled to an Award of Prejudgment Interest or Attorneys’ Fees. The final issue is whether the district court properly denied Precision’s request for prejudgment interest and attorneys’ fees. We review a district court’s denial of prejudgment interest “for an abuse of discretion.” Malloy v. Monahan, 73 F.3d 1012, 1019 (10th Cir. 1996) (citing Zuchel v. City & Cty. of Denver, Colo., 997 F.2d 730, 746 (10th Cir. 1993)). As support for its position, Precision relies on Wyo. Stat. Ann. § 26-15-124(c) (2018). In response, Lexington argues that this statute affords Precision no relief because it issued the policies in Texas, not in Wyoming as the statute requires. Precision does not address the substance of Lexington’s argument but rather asserts that Lexington has forfeited this defense by not raising it in its preremand motion for summary judgment. We again turn to the Precision I mandate. Because this court resolved only the anti-indemnity issue in the previous appeal, we did not consider the prejudgment interest and attorneys’ fees issue. See generally Precision I, 830 F.3d 1219. Our mandate in Precision I was broad. See id. at 1224. Aside from acknowledging that the district court had not yet decided “[b]y way of example only . . . whether Precision qualifies as an additional insured under the Lexington policies[,]” we 23 provided no other guidance or limitations for remand. See id. Consistent with this court’s precedent, “the district court [was] to look to the mandate for any limitations on the scope of the remand and, in the absence of such limitations, exercise discretion in determining the appropriate scope.” See West, 646 F.3d at 749. Because we did not provide any limitations, the district court properly exercised its discretion in considering Lexington’s argument. As such, we do no violence to the mandate rule by considering that argument now. Addressing the merits of the issue, we agree with Lexington that Precision obtains no relief from § 26-15-124. Section 26-15-101 lays out the scope of Wyoming’s insurance code. This statute allows prejudgment interest and attorneys’ fees for “all insurance contracts and annuity contracts except: . . . (ii) Policies or contracts not issued for delivery in this state nor delivered in this state[.]” Id. (emphasis added). The Lexington policies were issued in Texas, so the Wyoming insurance code, including § 26-15-124, is inapplicable. Precision also fails to show that Lexington’s refusal to reimburse Precision for the Jent settlement was unreasonable or without cause as required by § 26-15-124(c). Though it initially agreed to defend Precision, Lexington withdrew its defense prior to the settlement, refused to reimburse Precision and Lloyd’s for the settlement, and instead sought a declaration that it had no obligation to reimburse Precision for the settlement because of Wyoming’s anti-indemnity statute. Precision contends this was without cause. Precision largely hangs its argument on our prior rejection of Lexington’s anti-indemnity statute argument. But just because we reversed the 24 district court’s ruling, that does not by itself render Lexington’s actions per se without cause or unreasonable. The district court made no finding that Lexington’s actions were unreasonable or without cause, as required by the statute, and we decline to do so here. Lexington had a cogent argument for seeking declaratory judgment that it was not liable to reimburse Precision for the settlement with Jent. This argument is one that other jurisdictions have accepted. See Precision I, 830 F.3d at 1221 (this court did not find it persuasive that Oklahoma, Colorado, and Kansas have enacted statutes expressly providing support for Lexington’s argument). Lexington, although ultimately unsuccessful, argued that reimbursing Precision’s settlement payment would amount to an indemnity action, which Wyoming’s anti-indemnity statute would bar. The district court found this argument plausible and in fact ruled in its favor on the issue. Though we ultimately reversed that ruling, two different interpretations of statutory language, with one ultimately being unsuccessful, does not create an unreasonable withholding of payment. Paulino v. Chartis Claims, Inc., 774 F.3d 1161, 1164 (8th Cir. 2014) (“[T]he fact that the insurer’s position is ultimately found to lack merit is not sufficient by itself to establish the first element of a bad faith claim. Rather, the focus is on the existence of a debatable issue, not on which party was correct.” (internal quotation marks, alterations, and citations omitted)). Because Precision fails to show that the district court abused its discretion and fails to adequately show that Lexington unreasonably or without cause withheld 25 payment, we affirm the district court’s holding that Precision is not entitled to prejudgment interest or attorneys’ fees under § 26-15-124(c). On appeal, for the first time, Precision argues alternatively that it is entitled to prejudgment interest under the common law. We disagree. Precision contends that it preserved this issue by requesting common-law prejudgment interest in both rounds of summary judgment. But we see nothing there except a request for statutory prejudgment interest. For instance, in the first round of summary judgment, Precision states that it is entitled to recover interest “at the rate of ten percent.” Appellant’s App. vol. 1 at 243. As Precision acknowledges, Wyoming provides a statutory rate of ten percent for prejudgment interest, while common law provides for a seven percent rate. We disagree that Precision sought prejudgment interest under both the Wyoming statutes and its common law. The “Proposed Findings Of Fact and Conclusions of Law” also requests only statutory interest, failing to mention common-law interest. In Precision’s second round of summary-judgment briefing, it requested ten percent prejudgment interest under § 25-12-124(c), again without mentioning any common-law right. In its reply brief in its second round of summary-judgment motions, Precision included a single sentence generally asserting that the court has “independent discretion to award [Precision] pre-judgment interest.” Appellant’s App. vol. 3 at 727. But it later requested prejudgment interest of ten percent. A single, vague request for interest in a reply brief only, followed by a reference to statutory prejudgment interest does not suffice. Because Precision failed to request common-law interest until this appeal, Precision has waived that argument. We agree 26 with the district court’s denial of Precision’s request for prejudgment interest and attorneys’ fees.