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Great West Casualty Co. v. XTO Energy, Inc.

United States District Court, D. North Dakota

January 3, 2019

Great West Casualty Company, Plaintiff,
v.
XTO Energy, Inc., Wildcat Trucking, LLC, Charles Branch, Brian Groover, and Petroleum Experience, Inc., Defendants,

          ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

          Daniel L. Hovland, Chief Judge

         Before the Court is the Plaintiff Great West Casualty Company's (“Great West”) motion for summary judgment filed on July 27, 2017. See Doc. No. 38. The Defendant Wildcat Trucking, LLC (“Wildcat”) filed a response in opposition to the motion and a cross-motion for summary judgment on September 14, 2017. See Doc. Nos. 50 and 53. The Defendant Petroleum Experience, Inc. (“Petroleum Experience”) filed a response in opposition to the motion on September 14, 2017. See Doc. No. 52. The Defendant XTO Energy, Inc. (“XTO”) filed a response in opposition to the motion on September 21, 2017. See Doc. No. 55. Great West filed a reply brief on October 6, 2017. See Doc. No. 58. At the Court's direction, the parties filed supplemental briefs on October 1, 2018. See Doc. Nos. 70, 72, 73, 75. XTO included a motion for attorney's fees in its supplemental brief. See Doc. Nos. 75 and 82. A telephone status conference with the parties was held on December 21, 2018. For the reasons set forth below, Great West's motion for summary judgment is granted. Wildcat's motion for summary judgment and XTO's motion for attorney's fees are denied.

         I. BACKGROUND

         On September 18, 2008, XTO and Wildcat entered into a Master Service Agreement (“MSA”) which called for Wildcat to perform work for XTO from time to time and pursuant to job specific work orders, on oil and gas wells owned and operated by XTO. See Doc. No. 41-3. The MSA contained an indemnification clause obligating Wildcat to indemnify and hold harmless the XTO Group, which includes XTO, from all claims and injuries arising out of performance of the agreed upon work. See Doc. No. 41-3, § 10.1. The MSA also required Wildcat to secure and maintain insurance and name the XTO Group as an additional insured. See Doc. No. 41-3, §§ 11.1 and 11.4. Wildcat was insured by Great West. See Doc. No. 41-4. XTO is an additional named insured on the policy Great West issued to Wildcat. See Doc. No. 41-4, p. 46. The MSA qualifies as an “insured contract” under the policy, meaning the policy covers the indemnity obligation Wildcat owes to XTO pursuant to the MSA. See Doc. Nos. 41-4, pp. 64 and 75; 59-1, p. 8.

         Great West is a Nebraska corporation based in South Sioux City, Nebraska. XTO is a Texas corporation based in Fort Worth, Texas. Wildcat is a Nebraska corporation based in Sidney, Montana. The Great West policy was issued by Stieg & Associates in Billings, Montana.

         On July 18, 2014, Wildcat employees Charles Branch and Brian Groover drove to a oil well located in Williston, North Dakota, which was owned by XTO, in order to deliver fresh water. Both Branch and Groover suffered serious injuries when a flash fire occurred while they were at the well site.

         On or about January 27, 2016, Branch commenced a personal injury lawsuit in federal court in North Dakota. See Charles Branch v. XTO Energy, Inc. et al, No. 1:16-cv-010, (“Branch Lawsuit”). On or about February 1, 2016, Groover commenced a nearly identical personal injury lawsuit in federal court in North Dakota. See Brian Groover v. XTO Energy, Inc., et al, No. 1:16-cv-015, (“Groover Lawsuit”).

         In both lawsuits it is alleged that on the day of the incident, “XTO was in the process of removing plugs from the well after it had been ‘fracked' and recovering fluids and energized gases used in the fracking of the well.” See Doc. Nos. 41-1, ¶ 7 and 41-2, ¶ 7. XTO retained various contractors to participate in such activities, including Petroleum Experience, Inc., a consulting company, which provided an employee “to oversee the flow back operation” on behalf of XTO. See Doc. Nos. 41-1, ¶ 8 and 41-2, ¶ 8.

         Another contractor, T &R Transport, was hired to “maintain, manage, and perform filtration services necessary to recover flow back water.” See Doc. Nos. 41-1, ¶ 10 and 41-2, ¶ 10. In doing so, it used a diesel-powered generator and hydraulic pump. According to the complaints, it is well known that during the filtration project, hydrocarbon vapor clouds can form that are extremely flammable. See Doc. Nos. 41-1, ¶ 11 and 41-2, ¶ 11. It is therefore necessary to set back equipment capable of becoming an ignition source to prevent ignition of the hydrocarbon vapors. The generator and hydraulic pump were ignition sources and allegedly “located near the frac tank from which production water was being pumped” in violation of XTO's safety procedures and industry standards. See Doc. Nos. 41-1, ¶ 13 and 41-2, ¶ 13.

         As Branch and Groover were delivering fresh water to the well site, the generator/hydraulic pump unit ignited a hydrocarbon vapor cloud emitting from the frac tanks which resulted in a flash fire. See Doc. Nos. 41-1, ¶ 14 and 41-2, ¶ 14. Branch and Groover suffered burn injuries as a result of the flash fire. The lawsuits generally allege that the defendants were negligent in locating the equipment too close to the frac tanks in violation of XTO's safety guidelines and industry standards and/or in ensuring that such guidelines and standards were followed.

         On August 10, 2015, counsel for Branch sent a pre-suit settlement demand to XTO and Petroleum Experience. On September 2, 2015, XTO tendered the Branch settlement demand to Wildcat and its insurers pursuant to the applicable provisions of the MSA. See Doc. No. 41-5. XTO also claimed that pursuant to the terms of the MSA, it was an additional insured under Wildcat's insurance policies.

         On November 9, 2015, James River Insurance Company, on behalf of Petroleum Experience, also tendered the Branch settlement demand to XTO pursuant to a MSA in place between XTO and Petroleum Experience. See Doc. No. 41-6. XTO, in turn, tendered Petroleum Experience's tender to Wildcat and its insurers on November 13, 2015. See Doc. No. 41-7. In its letter, XTO stated that Petroleum Experience was part of the XTO Group and pursuant to the MSA between XTO and Wildcat, Wildcat was required to provide a defense and indemnity to Petroleum Experience, and the XTO Group was an additional insured on Wildcat's insurance policies.

         On February 24, 2016, XTO tendered the Groover Lawsuit to Wildcat and its insurers seeking defense and indemnity. See Doc. No. 41-8. In doing so, XTO referenced the MSA between XTO and Wildcat and its status as an additional insured under Wildcat's policies.

         On April 18, 2016, Wildcat's insurer, Great West, accepted the tender and provided a defense to XTO in the Branch Lawsuit subject to a full reservation of rights. See Doc. No. 77, pp. 3-14. On November 3, 2016, Great West sent Wildcat and XTO a supplemental reservation of rights letter accepting the tender of both the Branch and Groover lawsuits. See Doc. No. 59-1. In its letter, Great West agreed to provide XTO a defense, subject to a full reservation of rights, and subject to a determination by a court of its coverage obligations. See Doc. No. 59-1, p. 9.

         On November 7, 2016, Great West filed this declaratory judgment action in federal court seeking a declaration that the policy it issued to Wildcat contains a hydrofracking exclusion which excludes any coverage for the Branch and Groover lawsuits. See Doc. No. 1. A related coverage lawsuit was filed by Northfield Insurance Company against XTO and Wildcat in federal court in North Dakota on March 8, 2017. See Northfield Ins. Co. v. XTO Energy, Inc., No. 1:17-cv-047.

         A global mediation was held in February of 2018. Great West participated in the mediation. The Groover and Branch lawsuits did not settle at the mediation, but discussions continued and settlement agreements were executed in both cases in May of 2018. See Doc. Nos. 73-1. XTO, Wildcat, and Great West all contributed funds to settle the Branch and Groover lawsuits. The Northfield coverage action was also settled and dismissed in June of 2018. Great West has declined to dismiss its coverage suit, maintaining it was not a party to the settlement agreements in the Branch and Groover personal injury lawsuits.[1]

         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 (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. ACTUAL CONTROVERSY

         Before the Court addresses the summary judgment motions, it must decide whether an actual controversy remains after the underlying personal injury cases were settled. The Defendants contend Great West participated in and contributed to the settlement and should be bound by the release which accompanied the settlement. In addition, they contend the settlement renders the coverage action moot. Great West ...


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