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Gainsco Insurance Co. v. Amoco Production Co.8/19/2002
tion of its own policy constituted first- party bad faith. The ruling of the district court was correct.
5. The plain meaning of the language of the total pollution exclusion, as understood by a person in the position of the insured, is that it applies only to the concept of environmental pollution. In the instant case, the exclusion did not negate coverage for the Abraham wrongful death action. Gainsco's denial of coverage based on the total pollution exclusion was, therefore, wrongful. The ruling of the district court was correct.
6. The wording of the insured contract exclusion in Gainsco's policy--wording that originated with Gainsco and exists in no other insurance policy--is ambiguous and must be construed against Gainsco. Since there was no dispute that both Amoco and Abraham/Kobbe would be found at fault, Amoco was not solely liable, and the exclusion did not preclude coverage for Amoco's indemnity claim against Andrews. The ruling of the district court was correct.
7. An insurer who is providing a defense to its insured, but who has declined an offer to settle within policy limits, is not bound by a settlement between the insured and the claimant where the insurer was not given prior notice of the terms of the settlement and was not given an opportunity to participate. In the present case, Amoco and Andrews settled without informing Gainsco of a key settlement term, that being the mandatory dismissal with prejudice of the third-party implied indemnity complaint Gainsco had filed against Kobbe on behalf of Andrews. Gainsco was prejudiced by this lack of notice because it lost the ability to pursue Kobbe, or even to determine Kobbe's share of the fault for Abraham's death. Kobbe's immunity from tort liability under the worker's compensation statutes did not bar the implied indemnity claim. The district court failed even to rule on this issue; it should have ruled in Gainsco's favor.
8. An insurer who is providing a defense under a reservation of rights, and who declines an offer to settle within policy limits, may be held liable for the full amount of a reasonable settlement between the insured and the claimant. In the instant case, however, the settlement between Amoco and Andrews was objectively unreasonable because the settlement amount greatly exceeded the amount of Andrews' risk. The ruling of the district court that Gainsco was liable for the full settlement amount was in error.
9. As stated above, an insurer who is providing a defense under a reservation of rights, and who declines an offer to settle within policy limits, may be held liable for the full amount of a reasonable settlement between the insured and the claimant. In the instant case, however, for two reasons, the settlement is not enforceable against Gainsco. First, as also stated above, the amount of the settlement was objectively unreasonable. And second, the record reveals no justification for the required dismissal with prejudice of the implied indemnity claim against Kobbe. Gainsco was prejudiced by this unreasonable settlement. Were the amount, alone, unreasonable, Gainsco could be held liable just for its policy limits. But here, dismissal of the implied indemnity action completely foreclosed Gainsco from pursuing Kobbe for its share of the damages. Consequently, Gainsco's obligations under the policy have been voided.
10. Under the "law of the case" doctrine, a court's decision on an issue of law made at one stage of a case must be followed in later stages of the same case. This doctrine does not apply when the question involves raising an issue on appeal that was not raised below. While we generally will not consider issues not raised below, we will do so whe
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