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Star Ins. Co. v. Cont'l Res., Inc.

United States District Court, D. North Dakota, Northwestern Division

February 24, 2015

Star Insurance Company, Plaintiff,
v.
Continental Resources, Inc., Cyclone Drilling, Inc., Plaster & Wald Consulting Corp., Torus Specialty Insurance Company, M-I, LLC, Zurich American Insurance Company, National Union Fire Insurance Company of Pittsburgh, PA, and Travelers Property Casualty Company of America, Defendants

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For Star Insurance Company, Plaintiff: Scott K. Porsborg, LEAD ATTORNEY, SMITH BAKKE PORSBORG & SCHWEIGERT, BISMARCK, ND; Syed S. Ahmad, Walter J. Andrews, PRO HAC VICE, Hunton& Williams LLP, McLean, VA.

For Continental Resources Inc, Defendant, Cross Claimant: Lawrence Bender, Michael D. Schoepf, LEAD ATTORNEY, Fredrikson & Byron, PA, Bismarck, ND; Gary S. Chilton, Heidi J. Long, PRO HAC VICE, Holladay & Chilton, PLLC, Oklahoma City, OK.

For Cyclone Drilling, Inc., Defendant, Cross Defendant: Christopher J. Thompson, GRANNDEE, FRISK, AND THOMPSON, FARGO, ND; David D. Schweigert, Schweigert, Klemin & McBride, P.C., Bismarck, ND; Jason R. Vendsel, McGee, Hankla & Backes, Minot, ND.

For Plaster & Wald Consulting Corp., Defendant: Joseph A. Wetch, Jr., Serkland, Lundberg, Erickson, Marcil & McLean, Ltd., Fargo, ND; Ronald H. McLean, Serkland Law Firm, Fargo, ND.

For M-I, LLC, Defendant: Steven J. Adams, LEAD ATTORNEY, PRO HAC VICE, Ryan A. Pittman, PRO HAC VICE, Gable Gotwals, Tulsa, OK.

For Zurich American Insurance Company, Defendant: Tamara L. Novotny, Cousineau McGuire Chartered, Minneapolis, MN.

For National Union Fire Insurance Company of Pittsburgh, PA, Defendant: Richard P. Olson, LEAD ATTORNEY, OLSON BURNS LEE, MINOT, ND; Reagan L. Madison, William D. Perrine, PRO HAC VICE, Perrine, Redemann, Berry, Taylor & Sloan, P.L.L.C., Tulsa, OK.

For Travelers Property Casualty Company of America, Defendant: Paul F. Ebeltoft, LEAD ATTORNEY, Nicholas C. Grant, Ebeltoft Sickler Lawyers PLLC, Dickinson, ND.

For Torus Specialty Insurance Company, Defendant: Troy A. Wolf, LEAD ATTORNEY, FISHER BREN & SHERIDAN, LLP, FARGO, ND; Henry S. Platts, Jr., Joseph A. Love, Thomas C. Wright, PRO HAC VICE, Wright & Close, LLP, Houston, TX.

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ORDER GRANTING IN PART AND DENYING IN PART SUMMARY JUDGMENT

Daniel L. Hovland, United States District Judge.

Before the Court are two motions for summary judgment filed by Plaintiff Star Insurance Company. See Docket Nos. 177 and 219. Also before the Court are motions for summary judgment filed by Defendants Continental Resources, Inc. and Zurich American Insurance Company. See Docket Nos. 213 and 215. In addition, Defendant Travelers Property Casualty Company has filed a motion to dismiss for lack of jurisdiction, or, in the alternative, a motion for summary judgment. See Docket No. 201. The motions have been fully briefed and are ripe for consideration. For the reasons set forth below, the motions are granted in part and denied in part.

I. BACKGROUND

This is a declaratory judgment action brought by Star Insurance Company (" Star Insurance" ) pursuant to 28 U.S.C. § § 2201-2202. The case presents a complex web of disputes involving four oil and gas companies, five insurance companies, and at least seven different insurance policies. The underlying dispute arises out of an explosion and fire at an oil and gas well located near Beach, North Dakota, on or about July 25, 2011, which severely injured three employees of Cyclone Drilling, Inc. (" Cyclone Drilling" ). The Cyclone Drilling employees sued Continental Resources, Inc. (" Continental Resources" ), Plaster and Wald Consulting Corp. (" Plaster & Wald" ), M-I, LLC (" M-I" ), and others for their injuries in state court in the District Court for the Northwest Judicial District of North Dakota, Williams County. The record reveals that all of the claims brought by the three injured Cyclone Drilling employees have now been settled. In settling the claims, the insurance carriers reserved all rights to litigate their coverage disputes in this declaratory judgment action in federal court. Star Insurance commenced this declaratory judgment action on September 7, 2012, seeking a determination of its coverage obligations.

Continental Resources was the operator of the well. Cyclone Drilling, M-I, and Plaster & Wald were subcontractors of Continental Resources performing work at the well site. Cyclone Drilling was the driller. M-I was the drilling fluids consultant. Plaster & Wald was the drilling consultant. Plaster & Wald provided Continental Resources a " company man" on the well site who acted as Continental's eyes and ears on location. Cyclone Drilling, M-I, and Plaster & Wald all had separate master service contracts with Continental Resources.

At the time of the accident, Cyclone Drilling's relationship with Continental Resources was defined by a master service contract dated February 15, 1999, and an International Association of Drilling Contractors Drilling Bid Proposal and Daywork Drilling Contract (" IADC Drilling Contract" ) with an effective date of December 15, 2010. Both the master service contract and the IADC Drilling Contract with Cyclone Drilling contain indemnity

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provisions in favor of Continental Resources.

Star Insurance provides insurance coverage to Cyclone Drilling. See Docket Nos. 6-7 and 6-11. The primary policy provides general liability coverage with limits of $1 million per occurrence (defined as an " accident" ) and $2 million in aggregate. See Docket No. 6-7, p. 70. An umbrella policy provides excess coverage with a limit of $5 million per occurrence and $5 million in the aggregate. See Docket No. 6-11. Continental Resources is named as an additional insured in the Star Insurance policies. See Docket No. 6-4, p. 4.

Zurich American Insurance Company (" Zurich" ) insures Continental Resources. See Docket No. 6-9. The Zurich primary policy has limits of $1 million per occurrence and $2 million in aggregate. See Docket No. 6-9, p. 2.

National Union Fire Insurance Company of Pittsburgh, PA (" National Union" ) also insures Continental Resources. The National Union umbrella policy has limits of $25 million per occurrence and $25 million in the aggregate. See Docket No. 6-13 at 3.

Travelers Property Casualty Company of America (" Travelers" ) insures M-I. See Docket No. 6-10. The Travelers policy has limits of $1 million per occurrence and $10 million in the aggregate. See Docket No. 6-10, p. 21.

Continental Resources and M-I seek defense and indemnification from Cyclone Drilling and/or Star Insurance. Star Insurance is providing a defense to Continental Resources under the Star Insurance primary policy subject to a full reservation of its rights. Star Insurance denies that it is obligated to defend or indemnify M-I. Star Insurance has paid $2 million in defense of Continental and toward settlement of the underlying personal injury claims. M-I requested that Continental Resources defend and indemnify it in connection with the underlying claims, and Continental Resources has done so.

In an order granting partial summary judgment dated January 23, 2014, this Court ordered and declared as follows:

1) The IADC Drilling Contract supersedes the master service contract entered into between Continental Resources and Cyclone Drilling. The IADC Drilling Contract, including the insurance and indemnity provisions, is the controlling agreement between Continental Resources and Cyclone Drilling with respect to the work at the well site where the underlying accident occurred on or about July 25, 2011.
2) Cyclone Drilling was contractually obligated to provide Continental Resources with a minimum of $2 million in insurance coverage with respect to the work at the well site where the underlying accident occurred.
3) Plaster & Wald is a " consultant" within the meaning of paragraph 14.13 of the IADC Drilling Contract and is entitled to all the indemnification protections specified in the contract.
4) Cyclone Drilling owes Continental Resources an indemnity obligation as per the terms of the IADC Drilling Contract entered into between the parties on or about December 15, 2010.

See Docket No. 174, p. 22.

On September 4, 2014, Star Insurance, Plaster & Wald, and Torus Specialty Insurance Company (" Torus" ) filed a joint stipulation of voluntary dismissal. See Docket No. 221. The Court adopted the stipulation and dismissed the claims between

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the parties without prejudice on September 5, 2014. See Docket No. 222.

II. STANDARD OF REVIEW

Summary judgment is appropriate when the evidence, viewed in a light most favorable to the non-moving party, indicates that no genuine issues of material fact exist and that the moving party is entitled to judgment as a matter of law. Davison v. City of Minneapolis, Minn., 490 F.3d 648, 654 (8th Cir. 2007); see Fed.R.Civ.P. 56(a). Summary judgment is not appropriate if there are factual disputes that may affect the outcome of the case under the applicable substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). An issue of material fact is genuine if the evidence would allow a reasonable jury to return a verdict for the non-moving party. Id.

The Court must inquire whether the evidence presents a sufficient disagreement to require the submission of the case to a jury or whether the evidence is so one-sided that one party must prevail as a matter of law. Diesel Mach., Inc. v. B.R. Lee Indus., Inc., 418 F.3d 820, 832 (8th Cir. 2005). The moving party bears the responsibility of informing the court of the basis for the motion and identifying the portions of the record which demonstrate the absence of a genuine issue of material fact. Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011). The non-moving party may not rely merely on allegations or denials in its own pleading; rather, its response must set out specific facts showing a genuine issue for trial. Id.; Fed.R.Civ.P. 56(c)(1). The court must consider the substantive standard of proof when ruling on a motion for summary judgment. Anderson, 477 U.S. at 252.

III. LEGAL DISCUSSION

A. STAR INSURANCE'S MOTION FOR PARTIAL SUMMARY JUDGMENT

Star Insurance raises two legal issues in its motion for partial summary judgment. The first issue relates to the scope of insurance coverage Continental Resources is entitled to from Star Insurance. The second issue relates to the scope of indemnity Continental Resources is entitled to from Cyclone Drilling. Star Insurance contends its obligation to Continental Resources and Cyclone Drilling's obligation to Continental Resources are capped at $2 million. Before addressing these issues the Court will address the issue of standing raised by Continental Resources in its response to the motion.

1. STANDING

Continental Resources contends that Star Insurance, as a non-party to the IADC Drilling Contract, lacks standing with respect to the second issue raised in its motion relating to the scope of indemnity Cyclone Drilling owes Continental Resources under the IADC Drilling Contract. Star Insurance contends it is entitled to have its insured's obligations ...


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