In Mid-Continent Casualty Company v. True Oil, Mid-Continent brought a declaratory judgment action to determine if it had a duty to defend and indemnify True Oil in a lawsuit brought by Van Norman. Van Norman was an employee of Pennant, Mid-Continent’s insured. Pennant agreed to indemnify True Oil for claims resulting from either Pennant or True Oil’s negligence. Initially, it was determined there was no duty to indemnify True Oil for its own negligence based on a Wyoming statute. But then, Van Norman amended his claims, and said that True Oil was vicariously liable. True Oil ended up settling the Van Norman claims just before trial. Pennant stipulated to the reasonableness of the settlement. It was later determined that Pennant was 100% at fault for the accident, but before the settlement, a summary judgment motion by True Oil had been denied. The trial court found there was a duty to defend and indemnify True Oil under the contractual liability clause, and the Tenth Circuit affirmed.
The Tenth Circuit dismissed the argument that rulings made before the vicarious liability claims were asserted precluded a finding of coverage. But res judicata does not “preclude litigation of a claim or cause of action that had not been asserted. . .” Indemnity for vicarious liability was not precluded under Wyoming law.
The settlement payment was for indemnification, not breach of contract as Mid-Continent claimed. True Oil was potentially liable when it settled, so it was not a volunteer, as claimed. Finally, Mid-Continent was liable for all attorneys fees, not just the fees incurred after the vicarious liability allegations were added. “Pennant was well aware of True Oil’s vicarious liability risk . . . and agreed . . . to indemnify True Oil for any damages resulting therefrom.” Pennant assumed liability in the contract for the attorneys fees True Oil paid to defend itself against claims for which, as it turned out, Pennant was 100%
responsible. True Oil’s 2001-2005 attorney fees are covered by the contract which triggered Mid-Continent’s coverage for “damages” that it agreed to cover in its CGL policy. Summary judgment for True Oil was affirmed.