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Gainsco Insurance Co. v. Amoco Production Co.8/19/2002
ts; (2) Gainsco warned Andrews early on that Andrews might have some personal liability; (3) Gainsco did not raise the indemnity limitation argument in a pleading or motion; and (4) Gainsco did not appeal the judgment. Even if some or all of these allegations are true, however, they miss the point. To begin with, third-party bad faith occurs, if at all, when the offer of settlement is rejected. The central element of a tort of third-party bad faith is the objectively unreasonable rejection of a settlement offer within policy limits. Application of that standard in the instant case leads to the inescapable conclusion that rejection of the $297,000.00 settlement offer was not objectively unreasonable because, with Andrews' contractual obligation limited to $300,000.00, there was no reasonable risk of an excess judgment.
[ ] The Contract's provisions were before the district court when summary judgment was granted to Amoco in an amount grossly in excess of the contractual obligation. Both the indemnity obligation and the limitation on that obligation were unambiguous. Had they been ambiguous, the rules of construction require the court to construe contracts so as to give meaning to all terms. Moncrief v. Louisiana Land and Exploration Co., 861 P.2d 516, 524 (Wyo. 1993). Here, it was error for the district court to give meaning to the indemnity obligation of paragraph 10 without also giving meaning to the limitation thereon contained in the same paragraph. Thus, it was also error for the district court to grant summary judgment to Amoco on its third-party bad faith claim because Gainsco had a bona fide belief, under an objective standard, that there could be no excess judgment.
Issue No. 3: Did the district court err as a matter of law when it held that Gainsco's denial of coverage to Andrews amounted to first-party bad faith, because the total pollution exclusion made the question of coverage debatable?
[ ] To reiterate, first-party bad faith occurs when an insurer, in bad faith, refuses to pay an insured's direct claim for policy benefits. First-party bad faith is the knowing or reckless denial of a claim without a reasonable basis for such denial. Under an objective standard, the question is whether the validity of the claim is fairly debatable. Such validity is fairly debatable if a reasonable insurer would have denied or delayed payment of benefits under the existing circumstances.
[ ] "The logical premise of the debatable . . . standard is that if a realistic question of liability does exist, the insurance carrier is entitled to reasonably pursue that debate without exposure to a claim of violation of its duty of good faith and fair dealing." McCullough v. Golden Rule Ins. Co., 789 P.2d 855, 860 (Wyo. 1990). Also implicated is the question of "'whether the facts necessary to evaluate the claim are properly investigated and developed or recklessly ignored and disregarded.'" Id. (quoting Anderson v. Continental Ins. Co., 85 Wis.2d 675, 271 N.W.2d 368, 376-77 (1978)).
[ ] In the instant case, the precise issue is if it was fairly debatable whether the pollution exclusion in the insurance policy meant Gainsco had not provided coverage for Abraham's death from exposure to hydrogen sulfide gas. Neither of Wyoming's two published opinions dealing with the pollution exclusion are helpful in answering this question. See Sinclair Oil Corp. v. Republic Ins. Co., 929 P.2d 535, 540-43 (Wyo. 1996) (meaning of "sudden and accidental" in exception to pollution exclusion) and Compass Ins. Co. v. Cravens, Dargan and Co., 748 P.2d 724, 727-28 (Wyo. 1988) (meaning of "property damage" and "occurrence"). Nationwide, however, there appear to be dozens of cases that have addres
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