BITCO General Insurance Corporation v. Commerce and Industry Insurance Company et al

Filing 71

ORDER denying 57 defendant Commerce and Industry Insurance Company's Motion for Partial Summary Judgment (as more fully set out). Signed by Honorable Vicki Miles-LaGrange on 3/2/2017. (ks)

IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF OKLAHOMA
BITCO GENERAL INSURANCE
CORPORATION f/k/a BITUMINOUS
CASUALTY CORPORATION,
Plaintiff,
vs.
COMMERCE AND INDUSTRY
INSURANCE COMPANY;
NAVIGATOR’S INSURANCE
COMPANY; and ALTERRA AMERICA
INSURANCE COMPANY,
Defendants.

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Case No. CIV-15-206-M

ORDER
Before the Court is defendant Commerce and Industry Insurance Company’s (“CIIC”)
Motion for Partial Summary Judgment, filed April 19, 2016. On May 10, 2016, plaintiff BITCO
General Insurance Corporation (“BITCO”) filed its response, and on May 17, 2016, CIIC filed its
reply. Based upon the parties’ submissions, the Court makes its determination.
I.

Introduction
On August 4, 2012, a fire occurred in Payne County, Oklahoma where IPS Engineering, LLC

(“IPS”), Global Pipeline Construction, LLC (“Global”), and Wilcrest Field Services, Inc.
(“Wilcrest”) were working on a pipeline. Parnon Gathering, Inc. (“Parnon”)1 owned the project and
contracted with IPS to serve as general contractor. IPS subcontracted with Global to perform the

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Parnon is now known as JP Energy Marketing, LLC.

welding work.2 The fire allegedly caused damage to real and personal property and several lawsuits
were filed in Payne County against IPS, Global, Wilcrest, and Parnon (“Underlying Lawsuits”).
The contract between Global and IPS contains the following insurance requirements:
Insurance.
The subcontractor [Global] and its permitted
subcontractors shall carry and maintain during the performance of the
Work the insurance coverages set forth on the attached Exhibit C.
*
*
*
EXHIBIT C
INSURANCE
Subcontractor shall provide and maintain the insurance set forth
below during the performance of this Subcontract.
*
*
*
(b)
Comprehensive or Commercial General Liability Insurance
including contractual liability, covering liabilities assumed by
Subcontractor hereunder, broad form property damage
liability, additional insured and waiver of subrogation,
contractors’ protective, cross-liability and pollution liability
provisions with a limit of not less than $1,000,000 per
occurrence for bodily injury and property damage combined.
*
*
*
(f)
Excess Liability Insurance covering in excess of the other
liability coverages required herein with a limit of not less than
$10,000,000 per occurrence for bodily injury and property
damage combined.
Insurance in (b), (c), (d), (e) and (f) above shall be endorsed to
include IPSE [IPS] and Owner [Parnon] as additional insureds.
All policies of Insurance required above shall contain a waiver of
subrogation in favor of IPSE and its directors, officers, employees,
agents or invitees and Owner.
Construction Subcontract, attached as Exhibit 16 to CIIC’s Motion for Partial Summary Judgment
and Supporting Brief, at APP 464, 469-70.

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CIIC states that IPS also subcontracted with Wilcrest, but BITCO denies this statement as
CIIC provided no evidentiary support for the statement.
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BITCO issued policies numbered CLP 3564132 (primary) and CUP2591149B (excess),
affording coverage to Global as a named insured. The BITCO excess policy defines “insured,” in
part, as:
Any person or organization not described in Paragraphs 2.a., 2.b.,
2.c., 2.d. or 3 above which qualifies as an insured in any “underlying
insurance.” However, that person or organization is an insured only
for damages:
(a)
Which are covered by this insurance; and
(b)
Which are covered by the “underlying insurance” or would be
covered had its applicable limit of insurance not been used
up.
BITCO Commercial Umbrella Policy, attached as Exhibit 15 to CIIC’s Motion for Partial Summary
Judgment and Supporting Brief, at APP 412. The BITCO primary policy (the underlying insurance)
contains an Oil and Gas Extended Liability Coverage endorsement amending the policy’s Who Is
An Insured provision as follows:
A.

AUTOMATIC ADDITIONAL INSUREDS
SECTION II – WHO IS AN INSURED is amended to
include:
Any person or organization for whom you are performing operations
if you and such person or organization have agreed in a written
contract or written agreement executed prior to any loss that such
person or organization will be added as an additional insured on your
policy but only with respect to “bodily injury” or “property damage”
or “personal and advertising injury” caused, at least in part, by your
negligence and with respect to liability resulting from:
1.
your ongoing operations for the additional
insured(s), or
2.
acts or omissions of the additional insured(s)
in connection with their general supervision of
such operations.

BITCO Commercial Lines Policy, attached as Exhibit 14 to CIIC’s Motion for Partial Summary
Judgment and Supporting Brief, at APP 238.

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Additionally, Old Republic General Insurance Corporation (“Old Republic”) issued a policy
numbered A6DG01881100 to IPS, which is a primary insurance policy, and CIIC issued a policy
numbered #15069675, which is an excess insurance policy, to IPS. IPS tendered its defense and
indemnity and Parnon’s defense and indemnity to Global, but Global denied the tender. Both
primary policies have exhausted through settlement of several of the Underlying Lawsuits on behalf
of their respective insureds. CIIC asserts that it is defending IPS and Parnon in the remaining
lawsuits.
CIIC demanded that BITCO assume the defense and indemnity of IPS and Parnon under the
BITCO primary policy, and also the BITCO excess policy after the BITCO primary policy
exhausted. BITCO has declined to provide additional insured coverage to Parnon. BITCO has also
declined to provide coverage to IPS, at this time. Specifically, BITCO asserts that coverage as to
which IPS might be entitled as an additional insured has not yet been triggered through the
exhaustion of the underlying coverage.
CIIC now moves this Court for partial summary judgment against BITCO. Specifically,
CIIC requests judgment in its favor, ordering that BITCO owes a duty to defend IPS and Parnon and
that BITCO owes reimbursement of defense costs to CIIC.
II.

Discussion
A.

Duty to defend

CIIC asserts that IPS and Parnon are additional insureds under BITCO’s policies. CIIC
further asserts that Global is a named insured under the BITCO policies and contractually agreed
to provide additional insured coverage to IPS and Parnon. CIIC also asserts that the plain language
of the BITCO policies and the law demonstrate that BITCO must defend IPS and Parnon in the

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Underlying Lawsuits as a matter of law. BITCO contends, in part, that Oklahoma’s anti-indemnity
statute, Okla. Stat. tit. 15, § 221, expressly precludes BITCO from defending IPS or Parnon for their
own negligence, regardless of any policy or contractual language to the contrary. In its reply, CIIC
asserts that BITCO’s reliance upon Oklahoma’s anti-indemnity statutes is misplaced because the
statute does not obviate BITCO’s duty to defend. Additionally, CIIC asserts that the anti-indemnity
statute does not apply to Global’s contractual obligation to indemnify IPS and Parnon for Global’s
negligence and that any reliance on this statute to deny a duty to defend, especially with respect to
IPS’ and Parnon’s vicarious liability, is improper and contrary to Oklahoma law.
Oklahoma’s anti-indemnity statute provides, in pertinent part:
B. Except as provided in subsection C or D of this section, any
provision in a construction agreement that requires an entity or that
entity’s surety or insurer to indemnify, insure, defend or hold
harmless another entity against liability for damage arising out of
death or bodily injury to persons, or damage to property, which arises
out of the negligence or fault of the indemnitee, its agents,
representatives, subcontractors, or suppliers, is void and
unenforceable as against public policy.
C. The provisions of this section do not affect any provision in a
construction agreement that requires an entity or that entity’s surety
or insurer to indemnify another entity against liability for damage
arising out of death or bodily injury to persons, or damage to
property, but such indemnification shall not exceed any amounts that
are greater than that represented by the degree or percentage of
negligence or fault attributable to the indemnitor, its agents,
representatives, subcontractors, or suppliers.
Okla. Stat. tit. 15, § 221(B),(C).
It is undisputed that the Parnon/IPS contract and the IPS/Global subcontract are
“construction agreements” as those agreements contemplate the construction of the Great Salt Plains
Pipeline. Therefore, subsection (B) of Oklahoma’s anti-indemnity statute would apply in this case
and would prohibit additional insured coverage, and particularly any duty to defend, being afforded
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by BITCO to either IPS or Parnon under the BITCO policies for any claims against IPS or Parnon
that allege the negligence or fault of IPS or Parnon. Further, the Court finds that subsection (C) of
Oklahoma’s anti-indemnity statute would not apply to BITCO’s duty to defend as subsection (C)
is specifically limited to indemnity and does not include the duty to defend. Finally, having
reviewed the complaints in the Underlying Lawsuits, the Court finds that there are no claims being
asserted against IPS or Parnon seeking to hold them vicariously liable for any alleged negligence
of Global; the claims being asserted against IPS and Parnon in the Underlying Lawsuits are for the
alleged negligence of IPS and the alleged negligence of Parnon.
Accordingly, the Court finds BITCO does not have a duty to defend IPS or Parnon and that
CIIC is not entitled to summary judgment on this issue.
B.

Reimbursement of defense costs

CIIC is also seeking reimbursement from BITCO of the defense costs paid by CIIC. Since
the Court has found that BITCO does not have a duty to defend IPS or Parnon, the Court finds that
CIIC would not be entitled to reimbursement of its defense costs from BITCO. Accordingly, the
Court finds that CIIC is not entitled to summary judgment on this issue.
III.

Conclusion
For the reasons set forth above, the Court DENIES CIIC’s Motion for Partial Summary

Judgment [docket no. 57].
IT IS SO ORDERED this 2nd day of March, 2017.

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