Filed: Feb. 26, 2020
Latest Update: Feb. 26, 2020
Summary: FILED United States Court of Appeals PUBLISH Tenth Circuit UNITED STATES COURT OF APPEALS February 26, 2020 Christopher M. Wolpert FOR THE TENTH CIRCUIT Clerk of Court _ LEXINGTON INSURANCE COMPANY, Plaintiff - Appellant/Cross- Appellee, v. Nos. 18-8072 & 18-8080 PRECISION DRILLING COMPANY, L.P., f/k/a Grey Wolf Drilling Company, LP; LLOYD'S OF LONDON SYNDICATE #4711, a/k/a Aspen Syndicate #4711; LLOYD'S OF LONDON SYNDICATE #33; LLOYD'S OF LONDON SYNDICATE #1209; ACE GLOBAL MARKETS, Defendants -
Summary: FILED United States Court of Appeals PUBLISH Tenth Circuit UNITED STATES COURT OF APPEALS February 26, 2020 Christopher M. Wolpert FOR THE TENTH CIRCUIT Clerk of Court _ LEXINGTON INSURANCE COMPANY, Plaintiff - Appellant/Cross- Appellee, v. Nos. 18-8072 & 18-8080 PRECISION DRILLING COMPANY, L.P., f/k/a Grey Wolf Drilling Company, LP; LLOYD'S OF LONDON SYNDICATE #4711, a/k/a Aspen Syndicate #4711; LLOYD'S OF LONDON SYNDICATE #33; LLOYD'S OF LONDON SYNDICATE #1209; ACE GLOBAL MARKETS, Defendants - ..
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FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS February 26, 2020
Christopher M. Wolpert
FOR THE TENTH CIRCUIT Clerk of Court
_________________________________
LEXINGTON INSURANCE COMPANY,
Plaintiff - Appellant/Cross-
Appellee,
v. Nos. 18-8072 & 18-8080
PRECISION DRILLING COMPANY,
L.P., f/k/a Grey Wolf Drilling Company,
LP; LLOYD'S OF LONDON
SYNDICATE #4711, a/k/a Aspen
Syndicate #4711; LLOYD'S OF LONDON
SYNDICATE #33; LLOYD'S OF
LONDON SYNDICATE #1209; ACE
GLOBAL MARKETS,
Defendants - Appellees/Cross-
Appellants.
_________________________________
Appeal from the United States District Court
for the District of Wyoming
(D.C. No. 2:12-CV-00070-ABJ)
_________________________________
Mark J. Sobczak (Matthew J. Fink with him on the briefs), Nicolaides Fink Thorpe
Michaelides Sullivan, LLP, Chicago, Illinois, for Plaintiff–Appellant/Cross–Appellee.
Robert J. Walker (John M. Walker with him on the briefs), Hickey & Evans, LLP,
Cheyenne, Wyoming, Defendant–Appellee/Cross–Appellant.
_________________________________
Before PHILLIPS, EBEL, and O’BRIEN, Circuit Judges.
_________________________________
PHILLIPS, Circuit Judge.
_________________________________
In an earlier appeal, we ruled that Wyoming’s anti-indemnity statute would not
defeat possible insurance coverage to an additional insured. In this second appeal and
cross-appeal, we must decide whether the district court correctly ruled that
additional-insured coverage exists under the applicable insurance policies; whether
the district court entered judgment for the additional insured in an amount greater
than the policy limits; and whether the district court correctly ruled that the
additional insured was not entitled to prejudgment interest and attorneys’ fees. We
conclude that the district court ruled correctly on each issue, so we affirm.
BACKGROUND
I. Factual Background
At all relevant times, Ultra Resources, Inc. (“Ultra”), held a lease for a
Wyoming well site. In January 2007, Ultra contracted with Upstream International,
LLC (“Upstream”), under a Master Service Agreement to manage the well site. The
Ultra-Upstream contract required Upstream to obtain insurance policies with a stated
minimum amount of coverage for Ultra and Ultra’s contractors and subcontractors.
To do so, Upstream obtained two policies from Lexington Insurance Company
(“Lexington”)—a General Liability Policy (“General Policy”) and a Commercial
Umbrella Policy (“Umbrella Policy”). Lexington issued and delivered the two
policies in Texas.
2
In October 2007, Upstream employed Darrell Jent as an independent
contractor/consultant (calling him its “company man”) to help it manage some of
Ultra’s well sites. Appellant’s App. vol. 1 at 218, 240.
In March 2008, Ultra contracted with Precision Drilling (“Precision”) to
operate a drilling rig at the well site. Precision maintained a separate insurance policy
with Lloyd’s of London (“Lloyd’s”), covering Precision for primary and excess
liability. Then in August or September, in coordination with Ultra, Upstream re-
assigned Jent from his work duties as rig manager on a different rig at an Ultra well
site to supervise Precision’s rig, hoping to improve the rig’s performance and get it
on budget. Appellees’ Principal Br. 4 (“Jent was assigned by Upstream to Rig #841
[Precision] to fulfill the contractual obligations set forth within the Ultra-Upstream
Contract.”). Several times, Jent (after consulting with Ultra) temporarily shut down
the rig for deficiencies in Precision’s performance. Jent enforced safety protocols on
the rig, sometimes reprimanding Precision employees for violations. Further, Jent
advised Ultra to drug test some Precision rig hands after correctly suspecting they
were using methamphetamine.
Sometime before December 27, 2008, Precision scheduled a rig-down
operation so that it could move its rig to another site.1 That day, Jent held two safety
meetings with Precision employees about the rig-down operation. As one part of the
operation, Precision needed to lower the rig derrick. As that happened, Jent stood on
1
We cannot describe this activity in better detail, because we lack the
necessary information to do so from the briefs and record.
3
the rig’s platform, overseeing the removal of the rig’s leg pins. The leg pins helped
secure the rig deck. Jent was concerned with the pins’ removal “because a lot of
times those guys, they’ll hit those pins and they’ll come flying out . . . [and can] hit
[someone] in the forehead [if they are] standing in the wrong place.” Appellant’s
App. vol. 2 at 320. Precision’s employees safely removed the pins.
Jent assumed that Precision employees had already attached and tightened all
A-leg bolts. In fact, Precision employees had loosened the A-leg bolts—which attach
the A-legs to the derrick—and had not properly secured these bolts. After supervising
the pin removal, Jent had just left the rig floor and reached “the top step leading
down from the rig floor” when the derrick fell because of the “defectively bolted ‘A-
legs’ attaching the derrick to the rig floor.” Appellant’s App. vol. 1 at 150, vol. 2 at
391. Jent was seriously injured after being thrown from the steps.
II. Procedural Background
Jent sued Precision for negligence. Precision was the lone defendant. Jent
based his negligence claim on Precision’s employees having “previously loosened”
the A-leg bolts and having failed to “properly re-attach and tighten” the bolts.
Appellant’s App. vol. 1 at 150. Jent further alleged that Precision’s employees had
failed to pin the steps down to the rig. Jent alleged that these failures led to “[o]ne of
the A-legs [coming] loose from the rig floor, causing the derrick to crash
down. . . . When the derrick crashed, the steps fell and catapulted [Jent] off the
steps.” Id. ¶ 24.
4
After being served with the complaint, Precision demanded that Ultra defend
and indemnify it as required by the Ultra-Precision drilling contract. Ultra, in turn,
demanded that Upstream defend Precision under the insurance policies required by
the Ultra-Upstream Contract. In February 2011, Upstream tendered the claim to its
insurer, Lexington, which agreed to defend Precision subject to a full reservation of
its rights. In February 2012, Lexington exercised its reserved rights and denied any
duty to defend or indemnify Precision against Jent’s claims. Lexington told Precision
and its insurer, Lloyd’s, that it denied coverage and left it to Precision and Lloyd’s to
defend against Jent’s suit. In April 2012, Precision and Lloyd’s attended a mediation
conference and settled Jent’s claims for $3 million (Lexington chose not to attend
and denied liability for any part of the settlement).
After the settlement, Lexington filed a declaratory-judgment action against
Precision, Lloyd’s, and Upstream, seeking a court ruling that it owed no duty to
defend or indemnify Precision against Jent’s claims. In support, Lexington argued
that “Wyoming[’s] Anti-Indemnity Statute applies to Precision’s claim for defense
and indemnity,” which would void any insurance coverage to Precision under the
Lexington-Upstream policies. See Wyo. Stat. Ann. § 30-1-131 (2012); Appellant’s
App. vol. 2 at 339.
Precision, Lloyd’s, and Upstream each answered Lexington’s declaratory-
judgment complaint. In their answers, Precision and Lloyd’s requested a declaration
5
that Lexington was indeed liable to reimburse them for defense costs and the full Jent
settlement.2
All parties3 moved for summary judgment, stipulating that they disputed no
material facts and waiving trial. Appellees’ Principal Br. 15 (“Thereafter, the parties
conceded that the case should be resolved by dispositive motion and waived trial.”);
Appellant’s App. vol. 2 at 466 (“There are no factual issues to be resolved at trial,
and . . . Lexington’s request for a determination on the applicability of the Wyoming
Anti-Indemnity Statute to this dispute may be resolved by the Court as a matter of
law.”).
In its motion for summary judgment, Precision asserted that Lexington owed it
coverage under Lexington’s two policies. As support, Precision argued that it was an
“additional insured” under the two policies, which entitled it to $3 million in
coverage needed to settle Jent’s claims.4 Precision also sought its attorneys’ fees,
statutory prejudgment interest, and costs. See Wyo. Stat. Ann. § 26-15-124(c). As a
second matter, Precision also contested that Wyoming’s anti-indemnity statute would
apply to defeat that coverage.
2
Though both Precision and Lloyd’s answered Lexington’s Second Amended
Complaint, neither filed a counterclaim. In their answers, both parties requested a
declaration that they could recover from Lexington.
3
On appeal, Precision refers to itself, Lloyd’s, and ACE Global Markets
collectively as “Precision.”
4
Yet we note that Precision’s coverage argument was incomplete. To have
coverage, Precision needed to satisfy Endorsement 17 to the General Policy, a policy
provision whose terms Precision failed to mention.
6
In its motion for summary judgment, Lexington bypassed the coverage issue
and exclusively argued that Wyoming’s anti-indemnity statute would void any
possible coverage under the Lexington policies. See Wyo. Stat. Ann. § 30-1-131.
The district court granted Lexington’s motion for summary judgment, agreeing
that Wyoming’s anti-indemnity statute would void any possible insurance coverage
due Precision under Lexington’s two insurance policies. Lexington Ins. Co. v.
Precision Drilling Co., No. 12-CV-070-J, 2014 WL 11515822, at *9 (D. Wyo. Dec. 19,
2014).5
On appeal, Lexington defended the district court’s interpretation of
Wyoming’s anti-indemnity statute. Lexington Ins. Co. v. Precision Drilling Co.
(Precision I), 830 F.3d 1219, 1220 (10th Cir. 2016). As part of its doing so, Lexington
pointed to statutes from states other than Wyoming “allow[ing] only those who
purchase a policy to benefit from its terms.”
Id. at 1221. But we reversed, reasoning
that in enacting Wyoming’s anti-indemnity rule6 the “Wyoming Legislature didn’t
5
Upstream had also moved for summary judgment on grounds that it was not a
necessary party because “[n]o relief has been sought against Upstream; no facts are
alleged against Upstream; no causes of action are asserted against Upstream[.]” The
district court agreed, declaring that it was “unable to divine any actual, rather than
hypothetical or speculative, claim that Lexington may have against Upstream.”
Lexington, 2014 WL 11515822, at *9. This ended Upstream’s involvement.
6
Wyoming’s anti-indemnity statute reads:
(a) All agreements, covenants or promises contained in, collateral to or
affecting any agreement pertaining to any well for oil, gas or water, or
mine for any mineral, which purport to indemnify the indemnitee against
loss or liability for damages for:
7
employ the same language found in [those other states’] statutes. Instead, it expressly
allowed the enforcement of any insurance contract[,]” including ones “someone else
had to buy.” Id. In remanding, we acknowledged that “our decision today does not
fully resolve the parties’ dispute,” noting “[b]y way of example only” that the parties
could next litigate “whether Precision qualifies as an additional insured under the
Lexington policies.”
Id. at 1224.
After returning to district court, Precision and Lexington filed post-remand
motions for summary judgment. Precision’s motion raised two issues: (1) whether it
was entitled to coverage as an additional insured under the Lexington-Upstream
(i) Death or bodily injury to persons;
(ii) Injury to property; or
(iii) Any other loss, damage, or expense arising under either (i)
or (ii) from:
(A) The sole or concurrent negligence of the indemnitee or
the agents or employees of the indemnitee or any
independent contractor who is directly responsible to such
indemnitee; or
(B) From any accident which occurs in operations carried
on at the direction or under the supervision of the
indemnitee or an employee or representative of the
indemnitee or in accordance with methods and means
specified by the indemnitee or employees or representatives
of the indemnitee, are against public policy and are void and
unenforceable to the extent that such contract of indemnity
by its terms purports to relieve the indemnitee from loss or
liability for his own negligence. This provision shall not
affect the validity of any insurance contract or any benefit
conferred by the Worker’s Compensation Law . . . of this
state.
Wyo. Stat. Ann. § 30-1-131.
8
policies, and (2) if so, whether it was entitled to statutory prejudgment interest. And
Precision argued that Lexington had forfeited an ability to contest either issue by its
earlier failure to address either in response to Lexington’s pre-remand motion for
summary judgment.
In its own motion about a month later, Lexington denied having forfeited
anything, pointing to the broad language in our Precision I mandate.7 Addressing the
merits, Lexington does not contest Precision’s status as an “additional insured” under
Lexington’s policies.8 But Lexington emphasized that Precision needed to show more
to qualify for additional-insured coverage—namely, that it met the coverage
7
Precision also requested that the district court strike as untimely Lexington’s
summary-judgment motion in its entirety. See Lexington Ins. Co. v. Precision
Drilling Co., No. 12-CV-70-ABJ, 2018 WL 8807146, at *2 (D. Wyo. Sept. 6, 2018).
But the district court declined to do so, noting that Lexington’s motion for summary
judgment was in substance “very much a response to Precision’s Motion except that
it contained one new issue.”
Id. The court further noted that “Precision even seems to
acknowledge the generally responsive nature of Lexington’s Motion because
Precision’s Reply in large part treats Lexington’s Motion as a response.”
Id. So the
district court denied Precision’s request to strike Lexington’s motion and instead
treated “it as a response.”
Id.
8
Precision is an additional insured under the Lexington policies because it is a
“contractor” under the Ultra-Upstream Master Service Agreement. The General
Policy’s Endorsement 17 amends the “Who is an Insured” section to include “any
person or organization you [Upstream] are required to include as an additional
insured on this policy by a written contract or written agreement in effect during this
policy period.” Appellant’s App. vol. 1 at 94. The Umbrella Policy includes as an
“insured” “[a]ny person or organization, other than the ‘Named Insured’, included as
an additional ‘Insured’ under ‘scheduled underlying insurance’, but not for broader
coverage than would be afforded by such ‘scheduled underlying insurance[.]’”
Appellant’s App. vol. 1 at 119–20. The scheduled underlying insurance includes the
General Policy.
9
conditions imposed by Endorsement 17 to the General Policy. We note that coverage
under Endorsement 17 depends on whether Precision could show (1) liability of
Precision (2) arising out of (3) work performed by Upstream (through Jent), (4) for
Precision. Of these coverage conditions, Lexington disputes only that Precision has
met the fourth condition.
The district court ruled that Lexington had not forfeited its ability to contest
Precision’s additional-insured argument. See Lexington Ins. Co. v. Precision Drilling
Co., No. 12-CV-70-ABJ, 2018 WL 8807146, at *3 (D. Wyo. Sept. 6, 2018). After
disposing of this preliminary question, the district court went on to rule for Precision
on the merits. Addressing Endorsement 17’s disputed fourth condition, the district
court concluded that Jent’s work for Upstream supervising Precision’s rig-down
operation had been “for” Precision.
Id. at *5–6. In support, the district court noted
that Ultra had hired Upstream solely to manage the well site and that Jent was
assigned to Precision’s rig to “perform[] some level of safety oversight on the drilling
rig and actively tr[y] to help Precision’s employees operate the drilling rig better to
make the well more productive.”
Id. at *6. Because of this, the district court
concluded Jent “was performing work for Precision and Precision is an additional
insured.”
Id.
As a fallback, Lexington argued a second point—that its policy limits were $2
million. Here, Lexington directed the court to Endorsement 3 of the Umbrella Policy.
But the district court cut this argument short. It deemed Lexington’s policy-limits
argument forfeited, because Lexington had failed to “address any of the substance of
10
Precision’s First Motion for Summary Judgment [pre-remand] in its response but
instead re-argued its statutory argument.” Lexington Ins. Co., 2018 WL 8807146, at
*4. It further noted that Lexington did not “mention the issue of maximum coverage
in their filings related to the first [pre-remand] cross motions for summary judgment,
nor did they mention it before the 10th Circuit.”
Id.
Finally, the district court denied Precision’s request for costs, prejudgment
interest, and attorneys’ fees.
Id. at *6; see also Wyo. Stat. Ann. § 26-15-124(c)
(2018). The court concluded that to obtain the requested relief under this statute,
Lexington needed to show something that it could not—that Lexington had issued
and delivered the policies in Wyoming, not Texas. Lexington Ins. Co.,
2018 WL
8807146, at *6.
At the end of the day, the district court entered judgment for Precision against
Lexington for the Jent settlement amount of $3 million. Id. The parties have cross-
appealed.
DISCUSSION
We first identify the standard of review. Next we address whether Lexington’s
policies provide Precision coverage as an additional insured. Then we address
Lexington’s policy-limits argument. Finally we address Precision’s challenge to the
district court’s denial of prejudgment interest and attorneys’ fees.
I. Standard of Review
This case presents an unusual procedural posture. As mentioned, in the pre-
remand round of summary-judgment motions, the parties informed the district court
11
that they disputed no material facts and waived trial. And as part of their post-remand
summary-judgment motions, the parties once again agreed that there were “no issues
of material fact.” Appellees’ Principal Br. 14 (citing Appellees’ Suppl. App. at 14
(Precision stated “there remain no factual issues to submit to a jury” and the
remaining issue “can only be resolved, as a matter of law, by the Court.”));
Appellant’s App. vol. 3 at 683 (Lexington agreed that there were no disputes of
material fact needing resolved).9
Accordingly, the district court resolved the summary-judgment arguments as if
the parties had presented evidence at a bench trial. In this situation, we do not apply
the ordinary standard of review for summary judgment. This means, contrary to
Lexington’s position on appeal, that we do not resolve disputed facts in the
nonmovant’s favor or grant it all favorable inferences. Here, with the parties’
agreement, the district court was the ultimate fact finder.
Though we have not yet announced the appropriate standard of review to apply
in this circumstance, other circuits have done so. They have concluded that when the
district court has decided a case on summary judgment after the parties have waived
a trial, the appeals court reviews legal conclusions de novo and factual findings for
clear error. We join those circuits and adopt that standard of review. E.g., Federacion
de Empleados del Tribunal Gen. de Justicia v. Torres, 747 F.2d 35, 36 (1st Cir. 1984)
9
Though Lexington added a “Disputed Material Facts” section to its second
motion for summary judgment, it identified no disputed material facts. Instead,
Lexington disagreed with Precision’s position that Lexington had forfeited the
“additional insured” argument.
12
(concluding that the district court’s factual inferences could be set aside only if they were
clearly erroneous, reasoning that “the parties considered the matter to have been
submitted below as a case ready for decision on the merits”); Satellite Television &
Associated Res., Inc. v. Cont’l Cablevision of Va., Inc., 714 F.2d 351, 353–54 (4th Cir.
1983) (concluding that because the district court had decided the case “based on
affidavits, exhibits and jointly stipulated facts submitted by the parties[,]” the appeals
court should review the case “as one tried by the District Court[,]” meaning it could
“upset a finding of fact made by the court only if the finding is judged by us to be clearly
erroneous”); Vetter v. Frosch,
599 F.2d 630, 632 (5th Cir. 1979) (concluding that
when a case is essentially a “trial on a stipulated record” all inferences must be drawn
“in favor of the district court’s decisions which could be reversed on issues of fact
only in the event it was found clearly erroneous”); Starsky v. Williams,
512 F.2d 109,
111 (9th Cir. 1975) (same).
Here, Precision and Lexington filed cross motions for summary judgment.
Both parties submitted additional briefing as requested by the district court. The
parties submitted the case to the district court for final resolution on their contested
issues of law. The parties stipulated that they did not dispute the underlying facts. So
advised, the district court decided the case on its merits. In that circumstance, we
review the district court’s legal conclusions de novo and its fact findings for clear
error.
13
II. Precision Is Entitled to Lexington’s Additional-Insured Coverage Because
Precision’s Liability Arises Out of Work Performed by Upstream for
Precision.
A. The Scope of Remand Under the Mandate Rule
In Precision I, we acknowledged that our decision “does not fully resolve the
parties’ dispute.” 830 F.3d at 1224. We remanded for the district court to do so,
mentioning the additional-insured issue as an example of an issue still needing
resolved.
Id. “[T]he scope of the mandate on remand in the Tenth Circuit is carved
out by exclusion: unless the district court’s discretion is specifically cabined, it may
exercise discretion on what may be heard.” See Dish Network Corp. v. Arrowood
Indem. Co.,
772 F.3d 856, 865 (10th Cir. 2014) (alterations in original) (internal
quotation marks omitted) (quoting United States v. West,
646 F.3d 745, 749 (10th
Cir. 2011)).
As mentioned, the district court initially resolved the case based on
Wyoming’s anti-indemnity statute. See Lexington Ins. Co., 2014 WL 11515822, at
*9. Doing so relieved the district court from deciding the preliminary coverage issue
under Lexington’s policies. Had the district court reached the coverage issue, it
would have seen that Precision had not sufficiently analyzed the additional-insured
issue. Nowhere did Precision argue how it was entitled to coverage under
Endorsement 17 of the General Policy.10 Absent Precision’s doing so, Lexington had
10
Precision bears the initial burden of establishing it was covered under the
Lexington-Upstream policies. See Hursch Agency, Inc. v. Wigwam Homes, Inc., 664
P.2d 27, 31 (Wyo. 1983) (“[T]he insured has the burden of proving that its loss was
14
nothing to respond to on that point. For this reason, as well as our broad mandate in
Precision I, we agree with Lexington that it did not forfeit its ability to contest
coverage, especially under Endorsement 17. In short, we affirm the district court’s
conclusion that Lexington did not forfeit its argument on additional-insured
coverage.
B. Precision Is Entitled to Coverage Under Lexington’s Policies.
As we examine the district court’s post-remand judgment in favor of Precision
on policy coverage, Endorsement 17 of the General Policy takes center stage:
A. Section II - Who Is An Insured is amended to include any person or
organization you are required to include as an additional insured on
this policy by a written contract or written agreement[11] in effect
during this policy period and executed prior to the “occurrence” of the
“bodily injury” or “property damage.”
due to an insured risk[.]” (citation omitted)); see also Gilbert Tex. Constr., L.P. v.
Underwriters at Lloyd’s London, 327 S.W.3d 118, 124 (Tex. 2010) (citing Ulico Cas.
Co. v. Allied Pilots Ass’n,
262 S.W.3d 773, 782 (Tex. 2008)). If Precision proves
coverage, then Lexington bears the burden of establishing an exclusion applies. See
Gilbert Tex. Constr.,
L.P., 262 S.W.3d at 782 (“If the insured proves coverage, then
to avoid liability the insurer must prove the loss is within an exclusion.”) (citation
omitted); see also Hursch Agency,
Inc., 664 P.2d at 31.
11
The Ultra-Upstream Master Service Agreement requires Upstream
to procure and maintain, at its sole expense, with solvent Insurers and
insurers acceptable to [Ultra], policies of insurance in favor of [Ultra], its
subsidiary, affiliated and related companies, and their working interest
owners, co-lessees, co-owners, contractors and subcontractors and any
others for whom any of the foregoing may be acting; and the agents,
directors, officers, employees of any one or more of the above named or
described parties (hereinafter all collectively referred to as “Company”)
in the minimum amounts outlined in the Exhibits attached hereto and
made a part hereof Exhibit “A” and Exhibit “B”.
Appellant’s App. vol. 1 at 246, ¶ 3.1.
15
B. The insurance provided to the above described additional insured
under this endorsement is limited as follows:
1. COVERAGE A BODILY INJURY AND PROPERTY
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 *6. 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 *6 (“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 *4. 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 *3. 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 pre-
remand 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.
CONCLUSION
For the above reasons, we affirm the district court.
27
