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Gainsco Insurance Co. v. Amoco Production Co.8/19/2002
[ ] The appellant, Gainsco Insurance Company (Gainsco), appeals from an order granting summary judgment to the appellee, Amoco Production Company (Amoco), in an insurance coverage dispute. The district court determined that Gainsco was guilty of both first-party and third-party bad faith in denying coverage and refusing to settle the underlying claim. We reverse and remand to the district court for entry of a judgment in favor of Gainsco.
NATURE OF THE CASE
[ ] Amoco entered into a Well and Lease Service Master Contract (the Contract) with Andrews Trucking Company (Andrews). Under the Contract, Andrews agreed to indemnify Amoco against liability for injury to or death of Andrews' employees and Andrews' subcontractors' employees, even if caused by Amoco's negligence, and agreed to insure this assumption of liability. Andrews then obtained insurance from Gainsco.
[ ] Andrews subsequently subcontracted the work covered by the Contract to Kobbe Construction Company (Kobbe). On November 15, 1991, Brent Abraham (Abraham), a Kobbe employee, was overcome by and died from poisonous hydrogen sulfide gas while emptying a vacuum truck in the Elk Basin Oil Field, an oil field operated by Amoco. The Abraham Estate filed a wrongful death action against Amoco, Andrews, and Kobbe. The claim against Kobbe was dismissed because of worker's compensation immunity.
Summary judgment in favor of Andrews was affirmed on appeal to this Court because Andrews "never assumed any affirmative duties regarding job site safety and, therefore, did not owe the deceased a legal duty." Abraham v. Andrews Trucking Co., 893 P.2d 1156, 1157-58 (Wyo. 1995). Amoco settled for $650,000.00.
[ ] Amoco then initiated the current controversy by suing Andrews under the Contract's indemnity provision. Gainsco provided Andrews a defense and filed a third-party complaint against Kobbe based on equitable implied indemnity. However, Gainsco defended Andrews under a reservation of rights, denying coverage based on two policy exclusions: a "total pollution" exclusion and an "insured contract" exclusion. In late 1994 and again in early 1995, Amoco informed Gainsco that it would settle for $297,000.00, within policy limits, to avoid exposing Andrews to an excess judgment. Gainsco refused the offer. Through separate counsel, Andrews then settled with Amoco on the following terms: (1) Andrews would confess judgment in the amount of $716,490.80 plus interest and attorneys' fees; (2) Amoco would not execute against Andrews, but would look only to Gainsco; (3) Andrews would assign to Amoco any bad faith claims against Gainsco; and (4) Andrews would dismiss its indemnity claim against Kobbe.
[ ] The instant case started when Amoco sued Gainsco as garnishee of the confessed judgment. The parties agreed to treat the case as a declaratory judgment action and both sides filed motions for summary judgment. The district court granted Amoco's motion for summary judgment, and this appeal followed.
ISSUES
[ ] We will restate the separate issues presented by the parties as follows:
1. Did the district court err as a matter of law when it held that Gainsco's rejection of Amoco's settlement offers amounted to third-party bad faith, because Andrews, who negotiated a unilateral settlement agreement, suffered no damages and thus failed to prove an element of the tort of insurance bad faith?
2. Did the district court err as a matter of law when it held that Gainsco's rejection of Amoco's settlement offers amounted to third-party bad faith, because, under Western Cas. & Sur. Co. v. Fowler, 390 P.2d 602 (Wyo. 1964), there could be no bad faith because Amo
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