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WBI Energy Transmission, Inc. v. Colony Ins. Co.

United States District Court, D. Montana, Missoula Division

September 29, 2014

WBI ENERGY TRANSMISSION, INC., Plaintiff,
v.
COLONY INSURANCE COMPANY and NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, Defendants

Page 1195

For WBI Energy Transmission, Inc., Plaintiff: Eric Ryan Henkel, Fred Simpson, LEAD ATTORNEYS, REEP BELL & LAIRD, Missoula, MT.

For Colony Insurance Company, Defendant: Brian L. Taylor, LEAD ATTORNEY, HALL & EVANS, LLC, Billings, MT.

For National Union Fire Insurance Company of Pittsburgh, PA, Defendant: Amy O. Duerk, LEAD ATTORNEY, Robert J. Phillips, PHILLIPS HAFFEY P.C., Missoula, MT; Joseph P. Lang, LEAD ATTORNEY, PRO HAC VICE, BATES CAREY NICOLAIDES LLP, Chicago, IL; Matthew J. Fink, LEAD ATTORNEY, PRO HAC VICE, NICOLAIDES FINK THORPE MICHAELIDES SULLIVAN LLP, Chicago, IL.

Page 1196

ORDER

DONALD W. MOLLOY, UNITED STATES DISTRICT JUDGE.

Introduction

Plaintiff WBI Energy Transmission, Inc. (" WBI" ) initiated this declaratory judgment action against Defendants Colony Insurance Company (" Colony" ) and National Union Fire Insurance Company of Pittsburgh, PA (" National Union" ) seeking a declaration that WBI is covered by insurance policies issued by Colony and National Union and that Colony and National Union have a duty to defend and indemnify WBI in a lawsuit filed against WBI in the Montana Seventh Judicial District Court. (Amended Complaint, Doc. 41.) Now before the Court are the parties' respective motions for summary judgment. (Docs. 60, 69, 77, 88.) The Court has jurisdiction under 28 U.S.C. § 1332(a)(1). WBI's motions for partial summary judgment are granted, and Colony's and National Union's motions for summary judgment are denied.

Background

Sometime near August 19, 2008, WBI entered into a Construction Agreement with Pro Pipe Services, Inc. (" Pro Pipe" ) to replace a high-pressure, natural gas pipeline in Richland County, Montana (" the Project" ). (WBI SUF, Doc. 71 at 2; Construction Agreement, Doc. 71-1.) To complete the Project, Pro Pipe subcontracted with Underground Boring Specialties, Inc. (" Underground Boring" ). (Doc. 71 at 5; Colony SUF, Doc. 63 at 3.)

Under the Construction Agreement, Pro Pipe was required to maintain insurance coverage to protect WBI against liability for damages arising out of the work provided for under the Construction Agreement. (Doc. 71 at 3; Doc. 71-1 at 16.) To satisfy this requirement, Pro Pipe procured a commercial general liability insurance policy through Colony with Policy

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Number GL120867 (" the Colony Policy" ) and a commercial excess/umbrella liability insurance policy through National Union with Policy Number BE2595633 (" the National Union Policy" ). (Doc. 71 at 4; Certificate of Liability Insurance, Doc. 63-4 at 1.)

Around November 10, 2008, an employee of Pro Pipe, Dave Shanks (" Shanks" ), was operating a backhoe on the Project site when the backhoe bucket accidentally struck an active, natural gas pipeline, which caused the pipeline to rupture. (Doc. 71 at 5.) The rupture allegedly caused a blast wave that resulted in injuries to Shanks. ( Id. ) Shanks filed a personal injury lawsuit against WBI and Underground Boring in state court (" the underlying lawsuit" ). ( Id. ; Underlying Complaint, Doc. 71-3.) Shanks alleged that a cause of his injuries was the acts and omissions of both WBI, as the pipeline owner and operator, and Underground Boring, as the excavator responsible for the location of the pipeline entrance and exit pit and drilling the underground borehole for the Project. (Doc. 71-3.)

In a letter dated April 13, 2012, WBI tendered Shanks's claim to Pro Pipe and its insurers, Colony and National Union, for defense and indemnity of WBI, insisting that WBI is an " additional insured" under both Policies and that Shanks's claim is covered by certain provisions of the Construction Agreement and the Policies. (Doc. 71 at 7; WBI Tender, Doc. 63-5.) In a letter dated, April 20, 2012, Colony denied any obligation to defend or indemnify WBI in the underlying lawsuit. (Doc. 71 at 7; Colony Denial, Doc. 63-6.) National Union did not respond to WBI's tender of defense and indemnity. (Doc. 41 at 6.) WBI began defending the underlying lawsuit and on June 26, 2012, filed the instant lawsuit against Colony and National Union seeking, inter alia, a declaration of coverage under the Policies. (Doc. 41.)

Standard

A party is entitled to summary judgment if it can demonstrate that " there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). Summary judgment is warranted where the documentary evidence produced by the parties permits only one conclusion. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

Analysis

Usually, a duty-to-defend case focuses solely on whether the complaint in the underlying litigation sets forth sufficient facts to invoke coverage under an insurance policy. See United Natl. Ins. Co. v. St. Paul Fire & Marine Ins. Co., 214 P.3d 1260, 1269 (Mont. 2009). Here, however, Colony and National Union dispute that they are insurers of WBI in the first instance. Therefore, before reaching whether Colony and National Union have a duty to defend WBI in the underlying lawsuit, WBI must first establish that it is insured under the Colony and National Union Policies. Travelers Cas. & Sur. Co. v. Ribi Immunochem Research, Inc., 2005 MT 50, 326 Mont. 174, 108 P.3d 469, 476 (Mont. 2005) (" We agree with those courts that have allocated the initial burden to the insured to establish that the claim falls within the basic scope of coverage and shifted to the insurer the burden to establish that the claim specifically is excluded." ).

I. Additional Insured Status

This threshold issue depends on the terms of the Colony and National Union Policies and the Construction Agreement. " The construction and interpretation of a contract is a question of law for [a

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c]ourt to decide." In re Estate of Burrell, 2010 MT 280, 358 Mont. 460, 245 P.3d 1106, 1111 (Mont. 2010) (internal quotation marks omitted). " When the language of a contract is clear and unambiguous, the language controls, and there is nothing to construe or interpret." Id. Likewise, " [t]he interpretation of an insurance contract is a question of law." United Natl. Ins. Co., 214 P.3d at 1265. " [W]hen the language of a policy is clear and explicit, the policy should be enforced as written." Id. " When a court reviews an insurance policy, it is bound to interpret its terms according to their usual, common sense meaning as viewed from the perspective of a reasonable consumer of insurance products." Steadele v. Colony Ins. Co., 2011 MT 208, 361 Mont. 459, 260 P.3d 145, 149 (Mont. 2011). Policies are to be construed " strictly against the insurer and in favor of the insured." Id.

A. Colony Policy

WBI argues it is insured by Colony because it is an " additional insured" as defined by the Colony Policy. (Doc. 70 at 8-22.) The Policy provides in its Commercial General Liability Coverage Form under Section I - Coverages:

[Colony] will pay those sums that the insured becomes legally obligated to pay as damages because of " bodily injury" or " property damage" to which this insurance applies. [Colony] will have the right and duty to defend the insured against any " suit" seeking those damages. However, [Colony] will have no duty to defend the insured against any " suit" seeking damages for " bodily injury" or " property ...

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