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MID Continent Casualty Co. v. Engelke

United States District Court, D. Montana

June 27, 2018




         Before the Court are Defendant Alan Engelke's Motion fr Summary Judgment (Doc. 41), Defendant Dry Prairie Rural Water Authority's Motion fr Summary Judgment (Doc. 44), and Plaintiff Mid Continent Casualty Company's Motion fr Partial Summary Judgment (Doc. 48). For the following reasons, Defendants' motions are granted in part and denied in par, and Mid-Continent's Motion fr Partial Summary Judgment is granted in part ad denied in par.

         I. Statement of Facts

         In the fall of 2013, Dry Prairie hired Alan Engelke, an excavator in northeaster Montana, to assist in extending Dry Prairie's water lines to real property owed by Joseph Picard. (Doc. 55-5 at 12:18-23). Dry Prairie needed Engelke to dig a trench on Picard's property, in which Dry Prairie would place underground water lines for a new house on the property. (Id. at 15:10-17). At that time, Engelke had an independent contractor's exemption with the State of Montana. (Doc. 47-2 at 38:20-24).

         After Dry Prairie marked the excavation route, Engelke spoke with Picard and looked over the property. (Doc. 50-1 at 26:2-4; Doc. 55-1 at 14:5-15:8). Picard advised Engelke that there were underground lines beneath the property, including a saltwater disposal line from an oil well (the Anvil Well) approximately three quarters of a mile away. (Id.). Based on his work in the field, Engelke knew that a salt water disposal line is used to transfer salt water from the oil pump to a salt water recovery station during the oil pumping process. (Id. at 14:15-15:16). Based on Picard's description of where he thought the salt water line was located, Engelke believed his excavation trenching would not reach the salt water line. (Id. at 14:5-15:8). Picard also told Engelke that there would be some lines that may not be in use any more and not to worry about them. (Id. at 14:8-10; 14:25-15:3).

         Engelke also contacted Montana's One-Call Notification Center to obtain information concerning the location of underground facilities on Picard's property. (Id. at 8:6-9). A One-Call ticket was generated on September 29, 2013, identifying those individuals or entities registered with the Notification Center with underground facilities in the area of Engelke's proposed work. (Id.). While some lines were identified on the ticket, the saltwater disposal line was not, since the then-owner of the Anvil Well, Windy Butte, had not registered the location of the line with the Notification Center. (Doc. 47-3 at 65:10-19).

         Shortly after obtaining the One-Call ticket, Engelke began his excavation. (Doc. 55-1 at 8:6-10). He provided his own equipment and insurance for the job. (Doc. 47-2 at 37:14-22). While excavating, Engelke felt a "pop," and both ends of a line came to the surface. (Id. at 8:8-17). The line was not in use and appeared to Engelke to be abandoned. (Id. at 10:8-15). After hitting the line, Engelke spoke with Picard. Picard told Engelke that he also believed the line was abandoned because a local construction company had previously hit a line fairly close to the one Engelke hit, which they determined had been abandoned. (Doc. 47-4 at 15:23-16:25). Picard went out to see the line and told Engelke he was pretty sure the line was abandoned and that any active line ran elsewhere. He told Engelke that if it were him, he would bury the line. (Id. at 25:20-23). Engelke buried the line and finished the project. (Doc. 50-2 at 23:25-24:5). He billed Dry Prairie a set amount for the job. (Doc. 47-2 at38:11-15).

         Unfortunately, Engelke had hit the saltwater disposal line, which was placed back into operation a few months later. (Doc. 50-3 at 39:11-14). Because of the damage to the line, salt water running through the line was discharged into the ground, causing damage. (Id. at 39:11-40:11). By the time the line was placed back into service, the Anvil Well with which the saltwater disposal line was associated, had transferred ownership twice. (Id. at 57-5 at ¶ 4). At the time the discharge occurred, the Anvil Well was, and still is, owned by Avery Bakken. (Id. at ¶¶ 3-4). It is disputed whether the saltwater disposal line at issue transferred with the Anvil Well during the ownership transfers. (Doc. 53-1 at 73:2-76:18).

         Nevertheless, Avery Bakken was charged by the State Oil and Gas Commission to clean up the release. (Id.) Mid-Continent insured Avery Bakken's loss. (Doc. 54-3). Mid Continent now stands in Avery Bakken's shoes seeking subrogation. The parties have stipulated that all previous owners of the Anvil Well during the relevant time frame are the same company for purposes of this lawsuit.

         II. Applicable Law

         Federal Rule of Civil Procedure 56(a) entitles a party to summary judgment "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." A movant may satisfy this burden where the documentary evidence produced by the parties permits only one conclusion. Anderson v. Liberty Lobby Inc., 477 U.S. 242, 251 (1986). "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment." Id. at 247-48. There must be a genuine dispute as to any material fact, which is a fact "that may affect the outcome of the case." Id. at 248.

         In considering a motion for summary judgment, the court may not weigh the evidence or make credibility determinations, and the court must construe all facts in the light most favorable to the non-moving party. Nelson v. City of Davis, 571 F.3d 924, 928 (9th Cir.2009) (citation omitted). When presented with cross-motions for summary judgment on the same matters, the court must "evaluate each motion separately, giving the non-moving party the benefit of all reasonable inferences." American Civil Liberties Union of Nevada v. City of Las Vegas, 333 F.3d 1092, 1097 (9th Cir. 2003).

         III. Discussion

         Under the Montana Dig Law, codified at Mont. Code. Ann. § 69-4-501, et seq., owners of underground facilities like water lines or fiber optic cables register their underground lines with a One-Call Notification Center. Prior to excavating in a particular area, an excavator must call into the Notification Center and provide the location of their intended excavation operations. The Notification Center issues a ticket that identifies the registered underground lines in the area. The ticket is provided to the excavator and the registered owners of the underground lines existing in that particular location. The underground owners then have a period of time to go on site and mark the location of their lines so that the excavator does not hit them. The Dig Law also provides direction in the event that an excavator encounters unmarked underground facilities during excavation.

         Mid-Continent argues that once Engelke uncovered the saltwater disposal line, he had a duty, evidenced by certain sections of the Dig Law, to stop his excavation operations and advise the line owner or the One-Call Notification Center that he had damaged the line. (Doc. 45 at 8-9). Mid-Continent argues that summary judgment on liability is appropriate because Engelke did not stop excavating and instead buried the line, allowing the damage to remain, which ultimately resulted in property damage once the Anvil Oil well was placed back into service and saltwater leached out of the damaged line. (Doc. 49 at 8-13). Mid-Continent asserts this duty exists under both a common law negligence theory and a negligence per se theory. (Doc. 49, Doc. 54 at 27).

         Dry Prairie asserts that Mid-Continent is not entitled to maintain this subrogation action because it has not made its insured/subrogor whole. Additionally, Defendants argue that Mid-Continent's negligence per se theory fails because Engelke did not breach the statute and Mid-Continent is not a member of the class the statute intends to protect. (Doc. 43 at 6-8; Doc. 45 at 4-8). Defendants argue that Mid-Continent's common law negligence claim is pre-empted by Montana's Dig Law, codified at Mont. Code Ann. 69-4-501, et seq. (Doc. 43 at 5; Doc. 45 at 4). Dry Prairie also argues that even if Mid-Continent's common law claim is not pre-empted, Mid-Continent cannot establish a prima facie case of negligence because it does not have an expert who can establish that Engelke's actions were negligent. (Doc. 52 at 6-9). The court addresses each of these arguments in turn.

         1. Mid-Continent is Entitled to Pursue Subrogation

         In Montana, an insured must be "totally reimbursed for all losses as well as all costs" before the insurer is entitled to seek subrogation against a third party. Swanson v. Hartford Ins. Co. of Midwest, 46 P.3d 584, 587 (Mont. 2002). Dry Prairie argues that Mid-Continent has not reimbursed Avery Bakken for the full amount Avery Bakken paid out for property damage resulting from the saltwater release. (Doc. 52 at 4). As a result, Dry Prairie argues that Mid-Continent cannot pursue its claim for subrogation under Montana law. The undisputed facts before the court reflect otherwise.

         Jeff Avery testified by affidavit that Mid-Continent fully paid Avery Bakken for all the amounts Avery Bakken paid in connection with the saltwater release. (Doc. 61-1 at 8). Additionally, in its discovery responses, Mid-Continent sets out all the amounts it expended on clean up, including those amounts paid to Avery Bakken, which amounts to full reimbursement. (See Doc. 55-4 at 2). Dry Prairie has not produced any evidence that disputes Avery's testimony or the amounts listed in Mid-Continent's discovery responses. Accordingly, the court finds that Mid-Continent is entitled to stand in the shoes of Avery Bakken and its subrogation claim may lawfully proceed.

         2. Mid-Continent's Claims are not Preempted

         Relying on the recent case AT&T Corporation v. Jackson Utilities, LLC, 2017 WL 2296994 (D. Mont. 2017), Defendants argue that Mid-Continent's common law negligence claims are preempted by the Montana Dig Law, Mont. Code Ann. § 69-4-501 et seq., so only Mid-Continent's negligence per se claim may move forward. The court disagrees.

         First, Defendants read the court's preemption determination in Jackson too broadly. There, AT&T brought negligence and negligence per se claims against Jackson, an excavator, because Jackson damaged an AT&T underground fiber optic cable while excavating. Id. at *6. AT&T's negligence claim centers on the damage Jackson caused to its fiber optic cable during excavation. Jackson, 2017 WL 2296994 at * 1. In contrast, Mid-Continent's negligence claim focus on Engelke's conduct after he damaged the saltwater disposal line, and the ensuing saltwater release that stemmed from that conduct, not damage to the line itself. (See Doc. 61 at 11, stating "[t]he focus is on Engelke's negligent acts and omissions after he struck and damaged the Line and the cause of damages that flowed from those negligent acts and omissions." (Emphasis in original)).

         The distinction between AT&T's claim and Mid-Continent's claim is critical. While the Dig Law carves out statutorily-mandated remedies and damage fees for excavator-caused damage to underground facilities like fiber optic lines and saltwater disposal lines, see Mont. Code Ann. § 69-4-505(1)-(2), it does not address restoration damages that stem from excavator-caused damage to the underground facility, like a saltwater release. In other words, the Dig Law declares excavators' duties with respect to calling, reporting, and trenching while located within the vicinity of underground facilities, and sets out liability and damages when excavators damage underground facilities. See gen. Mont. Code Ann. § 69-4-501, et seq. As a result, under Montana law, no common law claim may exist with respect to such claims. Mont. Code Ann. § 1-1-108, ("there is no common law in any case where the law is declared by statute.55). Accordingly, under circumstances like those in Jackson, a claimant may bring a claim for a statutory violation, but not a negligence claim, whether it be common law or negligence per se.[1]

         Significantly, however, the Dig Law specifically provides that remedies other than those covered by the Dig Law may be pursued in the event of an excavator's negligence. See Mont. Code Ann § 69-4-505(4) ("[t]he act of obtaining information as required by this part... does not excuse the excavator from liability for any damage or injury resulting from the excavator's negligence."). This language signals that the Legislature intended to carve out specific statutory remedies for damages caused to underground facilities, but no more. In other words, claims for restoration damages, like Mid-Continent's, are not preempted by the statute, and may proceed under a negligence theory. The court turns to those two theories.

         3. ...

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