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Shell Oil Co. v. National Union Fire Ins. Co.4/30/1996
FUKUTO, J.
Defendant National Union Fire Insurance Company of Pittsburgh, Pa. (National) appeals from a judgment after court trial, awarding plaintiff Shell Oil Company (Shell) damages for breach of a liability insurance policy. National raises numerous issues, the primary ones being whether National provided coverage for an accident that resulted from Shell's sole negligence, and if so whether National yet fulfilled its contractual duties by paying its policy limit in settlement for a coinsured. Shell cross-appeals from the judgment insofar as it did not award attorney fees for this action, which Shell claimed under Washington state law. We affirm the judgment in all respects.
I. STATEMENT
In September 1985, Shell entered into "Contract 169" (the contract) with S.I.P. Engineering, Inc. (S.I.P.), for performance of engineering work on Shell's oil refinery in Anacortes, Washington. Paragraph 6.2 of the contract obligated S.I.P. to defend and indemnify Shell, up to $5 million, for any claims, liabilities or expenses on account of personal injury or property loss arising out of S.I.P.'s or its subcontractors' work, "but excepting when the injury ... or damage is caused by the sole negligence of a party otherwise indemnified [i.e., Shell]."
Paragraph 7.1 of the contract provided that during its term S.I.P. would maintain specified insurance, "satisfactory to Shell," including workers' compensation (P 7.1(a)), employers' liability (P 7.1(b)), auto liability (P 7.1(c)), and, under paragraph 7.1(d), "Comprehensive General Liability Insurance, including product/completed operations coverage and contractual liability coverage for [S.I.P.'s] obligations hereunder to defend and/or indemnify Shell, with limit of $1,000,000 each occurrence for bodily/personal injury, death and property damage combined." Finally, as here relevant, paragraph 7.2 of the contract provided that "To the fullest extent permitted by law, all insurance policies maintained by [S.I.P.] in accordance with paragraph 7.1 above and any other insurance maintained applicable to [S.I.P.'s] performance hereunder shall include Shell and any parties in joint operation with Shell as additional insureds ...."
In fulfillment of its insurance obligations under paragraphs 7.1 and 7.2, S.I.P. provided, inter alia, a $1 million comprehensive general liability policy from National (the policy). In its definitions of whom it insured, the policy provided that "if specifically required to be included as a named insured, this policy shall include as a named insured any person or organization to whom the named insured [i.e., S.I.P.] is obligated by virtue of a contract, entered into before loss, to provide insurance such as is afforded by this policy, but only to the extent required by said contract and not to exceed the coverages and the limits of liability afforded by this policy." Three other insurance companies--Lexington, Pacific Employers, and Granite State (the excess insurers)--provided insurance over National's to a limit of $5 million. The excess policies covered the same persons as did National's.
On January 29, 1986, Donald Vaughn, an employee of one of S.I.P.'s subcontractors, suffered severe injuries from a high-voltage electrical circuit while performing work at Shell's refinery in connection with the contract. S.I.P. reported the accident to National. On May 16, 1986, Vaughn sued S.I.P. and Shell for negligence in federal court in Seattle. Shell also was sued, in subrogation, by the subcontractor's workers' compensation carrier. S.I.P. tendered its own defense to National, which accepted and agreed to pay the lawyers S.I.P. had retained.
Shell did not immediately tender
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