Higby Crane Services, LLC v. National Helium, LLC

FILED
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
August 14, 2017
TENTH CIRCUIT
Elisabeth A. Shumaker
Clerk of Court
HIGBY CRANE SERVICES, LLC;
NATIONAL INTERSTATE
INSURANCE COMPANY,
Plaintiffs - Appellants/
Cross-Appellees,
v. Nos. 16-3271 & 16-3279
(D.C. No. 6:10-CV-01334-JAR-GLR)
NATIONAL HELIUM, LLC, a (D. Kan.)
Delaware company; DCP
MIDSTREAM, LP, a Delaware limited
partnership,
Defendants - Appellees/
Cross-Appellants.
ORDER AND JUDGMENT *
Before KELLY, MURPHY, and BACHARACH, Circuit Judges.
I. Introduction
Appellee/Cross-Appellant DCP Midstream, LP (“DCP”) negligently started
a fire that damaged a crane belonging to Appellant/Cross-Appellee Higby Crane
*
This order and judgment is not binding precedent except under the
doctrines of law of the case, res judicata, and collateral estoppel. It may be cited,
however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th
Cir. R. 32.1.
Services, LLC (“Higby”). At the time of the fire, the crane was located on the
grounds of a gas processing plant (the “National Helium Plant”) owned by DCP’s
wholly owned subsidiary, National Helium, LLC. Higby’s insurer, Appellant
National Interstate Insurance Co. (“National”), paid for the damage under the
terms of a commercial inland marine policy. National and Higby (collectively
“Plaintiffs”) then sued DCP, seeking to recover the cost to repair the crane. On
September 28, 2015, the district court granted DCP’s motion for summary
judgment, concluding the anti-subrogation rule barred recovery by National
against DCP because DCP was National’s insured under a commercial general
liability policy that also covered the loss. Several months later, the district court
granted Plaintiffs’ motion for summary judgment on DCP’s request for attorney’s
fees.
In Appeal No. 16-3271, Plaintiffs challenge the grant of summary judgment
in favor of DCP, arguing any promise Higby made to procure insurance covering
DCP for DCP’s own negligence is void under Colorado law. See Colo. Rev. Stat.
§ 13-21-111.5(6). In Appeal No. 16-3279, DCP argues the district court erred by
granting summary judgment to Plaintiffs on the attorney’s fee issue.
Exercising jurisdiction over both appeals pursuant to 28 U.S.C. § 1291, this
court reverses the grant of summary judgment to DCP in Appeal No. 16-3271 and
affirms the grant of summary judgment to Plaintiffs in Appeal No. 16-3279.
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II. Background
Additional facts detailing the genesis of this ongoing dispute between
Plaintiffs and DCP are fully set out in this court’s prior opinion in this matter.
Higby Crane Servs., LLC v. Nat’l Helium, LLC, 751 F.3d 1157, 1159-60 (10th
Cir. 2014). Relevant to this appeal, Higby and DCP 1 entered into an agreement
titled Master Service Agreement (“MSA”) on November 1, 2001. Pursuant to its
terms, the MSA “establish[ed] certain general terms and conditions which shall
apply to and become part of each and every contract, whether written or oral,
entered into between the parties.” One of those terms and conditions required
Higby to “carry and pay for” commercial general liability (“CGL”) insurance
coverage and to name DCP as an additional insured under the policy (the
“Additional Insured Provision”). Six years later, Higby obtained the policy at
issue here—a CGL policy from National—for the period from September 13,
2007, through September 13, 2008 (the “CGL Policy”).
In August 2008, DCP telephoned Higby and requested it to perform a job at
the National Helium Plant (the “2008 Work Order”). A Higby crew began work
on August 19, 2008, but was unable to complete the project because DCP did not
have a required part. When the Higby crew arrived at the National Helium Plant
the next day, it learned a flash fire had damaged Higby’s crane, rendering it
1
At the time the MSA was executed, DCP was known as Duke Energy Field
Services, LP.
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inoperable. DCP concedes the fire was caused by its own negligence.
In addition to the CGL Policy, National insured Higby for direct physical
loss to Higby’s property under the terms of a separate commercial inland marine
policy (“CIM Policy”). National paid Higby for its loss pursuant to the terms of
the CIM Policy. Id. at 1158. National and Higby then brought this action against
DCP, seeking to recover the amount of the loss. 2 After the matter was removed
from Kansas state court to federal district court, Plaintiffs filed a motion for
summary judgment which was granted by the district court. Id. at 1160. On
appeal, this court reversed the district court’s ruling and remanded the matter for
further proceedings. Id. at 1167.
On remand, the district court was again presented with cross-motions for
summary judgment. In their motion, Plaintiffs argued, inter alia, that the anti-
subrogation rule did not bar their claims against DCP because Higby owed no
contractual duty to procure insurance covering DCP for the loss at issue. Relying
on a Colorado statute enacted in July 2007, Plaintiffs asserted Colorado law
expressly prohibits any construction contract requiring one party to indemnify,
insure, or defend another party against liability arising out of the negligence or
2
National claimed a right of subrogation through Higby. See Cont’l Divide
Ins. Co. v. W. Skies Mgmt., Inc., 107 P.3d 1145, 1148 (Colo. App. 2004) (“Under
the doctrine of equitable subrogation, when an insurer has paid its insured for a
loss caused by a third party, it may seek recovery from the third party.”).
Plaintiffs allege both Higby and National made payments to repair the damage to
Higby’s crane.
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fault of the indemnitee. See Colo. Rev. Stat. § 13-21-111.5(6). Accordingly,
Plaintiffs argued, any agreement between the parties requiring Higby to carry
insurance covering DCP for DCP’s own negligence was unenforceable.
The district court denied Plaintiffs’ motion and granted DCP’s motion in
part. The court concluded Colo. Rev. Stat. § 13-21-111.5(6) (the “Anti-
Indemnification Statute”) was inapplicable because the MSA was the operative
contract and it was entered into prior to the Statute’s July 2007 effective date.
The court further concluded Plaintiffs’ action was barred by the anti-subrogation
rule because the CGL Policy covered DCP for the damage to Higby’s crane. 3
Subsequently, the district court denied DCP’s request for attorney’s fees.
Plaintiffs appeal from the grant of summary judgment to DCP and the
denial of its motion for summary judgment. DCP cross-appeals from the denial of
its request for attorney’s fees.
III. Plaintiffs’ Appeal
This court reviews the disposition of a motion for summary judgment de
novo, applying the same standard as the district court. Cornhusker Cas. Co. v.
Skaj, 786 F.3d 842, 849 (10th Cir. 2015). Summary judgment is only appropriate
3
Plaintiffs argued the CGL Policy excluded coverage for damage to
property owned by Higby. Because Higby owned the crane, Plaintiffs asserted
DCP’s negligence was not covered under the terms of the CGL Policy. The
district court ruled in DCP’s favor and Plaintiffs challenge that ruling in this
appeal. Because we conclude the Anti-Indemnification Statute prohibits the
coverage at issue, it is unnecessary to address this issue.
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if “the movant shows that there is no genuine dispute as to any material fact and
the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).
Applying the applicable standard, the district court erred by granting summary
judgment in favor of DCP.
National claims a right of subrogation in this matter through Higby for
amounts paid to Higby under the CIM Policy. See supra n.2. DCP has
consistently argued the anti-subrogation rule bars the claims raised in the suit
because DCP is an insured of National under the CGL policy and the CGL Policy
also covers the loss at issue. 4 See DeHerrera v. Am. Family Mut. Ins. Co., 219
P.3d 346, 351 (Colo. App. 2009) (“Under the anti-subrogation rule, an insurer
may not seek recovery against its insured on a claim arising from the risk for
which the insured was covered.”). The district court identified the central
question presented in the cross-motions for summary judgment as “whether the
anti-subrogation rule prohibits [this] subrogation action against DCP for loss
resulting from DCP’s negligence.”
Plaintiffs assert the CGL Policy cannot cover DCP for the loss at issue
because the Additional Insured Provision is void under Colorado’s Anti-
Indemnification Statute which bars a construction business from contracting out
4
In its motion for summary judgment, DCP argued it was immaterial for
purposes of the anti-subrogation rule “that the loss was paid under a CIM Policy
and the coverage DCP would seek is under the CGL Policy.” Because the
Additional Insured Provision is void under the Anti-Indemnification Statute, it is
not necessary to address the correctness of this argument.
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liability for its own negligence. Colo. Rev. Stat. § 13-21-111.5(6). The statute is
based on the Colorado legislature’s finding that the use of contract provisions to
shift financial responsibility for such negligence circumvents the intent of tort
law. Id. § 13-21-111.5(6)(a)(III). Any provision in a construction agreement that
requires one party to purchase insurance covering the other party for liability
resulting from the other party’s own negligence is void as against public policy.
Id. § 13-21-111.5(6)(d)(I). Because DCP concedes it is solely responsible for the
fire that damaged Higby’s crane, if the Anti-Indemnification Statute applies to the
operative contract between DCP and Higby the anti-subrogation rule is
inapplicable because DCP is not covered by the CGL Policy for the loss at issue.
As it did before the district court, DCP argues the MSA is the operative
contract between itself and Higby. Because the MSA predates the Anti-
Indemnification Statute, DCP takes the position the Statute does not apply
retroactively to invalidate the Additional Insured Provision in the MSA. See
Riley v. People, 828 P.2d 254, 257 (Colo. 1992) (“Legislation is presumed to have
prospective effect unless a contrary intent is expressed by the General
Assembly.”). Plaintiffs argue the 2008 Work Order, which was entered into after
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the effective date of the Anti-Indemnification Statute, is the operative contract. 5
We agree.
The MSA specifically states that its purpose is to “establish certain general
terms and conditions which shall apply to and become part of each and every
contract, whether written or oral, entered into between the parties.” “Contracts
Between the Parties” is thereafter defined as “[a]ny [written or oral] contract
whereby [Higby] agrees to perform work and/or provide items of equipment,
machinery, materials or supplies for [DCP].” Higby did not agree to perform any
work for DCP pursuant to the terms of the MSA. It did, however, so agree on
August 18, 2008, when it orally entered into the 2008 Work Order. The
unchallenged evidence in the record confirms this oral contract.
Higby received a call from DCP requesting that Higby send a crane to the
National Helium Plant at 10:00 a.m. on August 19, 2008, to be used to lift a heat
exchanger. Higby accepted the job, sending the crane to the agreed-upon location
at the agreed-upon time. Higby’s crane was damaged while it was completing the
work it orally agreed to perform. Pursuant to its terms, the MSA established the
general terms and conditions of the oral agreement. Thus, the 2008 Work Order
5
DCP argues that Plaintiffs have waived the argument that the 2008 Work
Order is the operative contract because it was not presented to the district court.
The district court’s order, however, specifically states: “Plaintiffs argue that the
MSA is not the contract at issue, but instead the critical inquiry under the [Anti-
Indemnification Statute] is the date the parties entered into the contract pertaining
to the work that Higby was performing at the time of the fire. That work order
was issued August 18, 2008, one year after the effective date of the statute.”
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is the operative contract between the parties and is applicable to the loss at issue.
It contains the general terms and conditions set out in the MSA, including the
Additional Insured Provision, and the specific terms and conditions mutually
agreed to by the parties on August 18, 2008.
Because the 2008 Work Order was a new contract entered into after the
effective date of the Anti-Indemnification Act, Higby’s agreement to obtain
insurance covering DCP for DCP’s own negligence is void under Colorado law.
Id. § 13-21-111.5(6)(d)(I). Accordingly, National is not DCP’s insurer for
purposes of the loss at issue and the anti-subrogation rule does not apply.
DCP makes several fruitless attempts to avoid this result. It argues the
2008 Work Order cannot be the operative contract because it does not reference
the MSA. DCP does not explain why each such contract must contain a reference
to the MSA. The MSA clearly states that its terms apply to “each and every
contract, whether written or oral, entered into between the parties.” The purpose
of the MSA is to supply the “general terms and conditions” governing any future
contracts into which the parties may enter. The MSA specifically provides that
its provisions “shall apply to and become part of each and every” subsequent
contract.
DCP also argues the August 2008 project at the National Helium Plant was
an “operation” Higby was required to fulfill under the terms of the 2001 MSA.
This argument fails. No provision in the MSA requires DCP to engage Higby to
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perform any “operation” for DCP and, likewise, no provision requires Higby to
accept any request made by DCP. Instead, the MSA clearly contemplates that any
work will commence only if the parties enter into subsequent contracts pursuant
to the terms of which Higby agrees to “perform work and/or provide items of
equipment, machinery, materials or supplies.”
Finally, DCP asserts the CGL Policy could not have been issued pursuant to
the 2008 Work Order because it was obtained months earlier, on September 13,
2007. While this is true, it is irrelevant. The 2008 Work Order incorporated all
the terms and conditions of the MSA, one of which was the requirement that
Higby name DCP as an additional insured in a commercial general liability policy
and carry that insurance throughout the term of the MSA. Higby agreed to
procure CGL insurance when the MSA was executed in 2001 “in consideration of
having the opportunity to provide services” to DCP. As DCP itself states in
correspondence it sent to Higby in October 2005, Higby could not perform work
for DCP unless it could first prove the coverage was in place. The 2008 Work
Order incorporated Higby’s agreement to carry CGL insurance covering DCP
during the performance of its work for DCP. Thus, the date on which Higby
purchased the CGL Policy has no bearing on whether the 2008 Work Order is the
operative contract. The coverage was latent until the parties entered into the 2008
Work Order pursuant to the terms of which Higby agreed to perform the project at
the National Helium Plant.
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One final issue must be addressed—whether the 2008 Work Order is a
construction agreement under the terms of the Anti-Indemnification Statute. 6
DCP makes no credible argument that it is not. The Anti-Indemnification Statute
defines a construction agreement as “a contract, subcontract, or agreement for
materials or labor for the construction, alteration, renovation, repair, maintenance,
. . . or observation of any building, building site, structure, . . . gas or other
distribution system, or other work dealing with construction or for any moving,
demolition, or excavation connected with such construction.” Colo. Rev. Stat.
§ 13-21-111.5(6)(e)(I). Here, Higby’s work order shows it performed the
following work for DCP: “Pulled off end caps to plug tubes on heat exchangers.”
The work was performed at a gas processing plant. The 2008 Work Order meets
the definition of a construction agreement.
Colorado law prohibits DCP from contracting with Higby to obtain
additional-insured coverage for liabilities arising from DCP’s own negligence.
Thus, any promise Higby made in the 2008 Work Order to provide such coverage
is unenforceable and the CGL Policy does not cover DCP under the circumstances
of this case. Consequently, DCP is not National’s insured for the loss at issue and
the anti-subrogation rule is inapplicable. Because DCP has conceded the damage
6
DCP admits the MSA is governed by Colorado law and does not argue the
2008 Work Order is not also so governed.
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to Higby’s crane was caused by its own negligence, the district court erred by
denying Plaintiffs’ motion for summary judgment.
IV. DCP’s Cross-Appeal
A. Attorney’s Fees
In a cross-motion for summary judgment, DCP argued it was entitled to
recover its attorney’s fees and costs for two reasons. According to DCP, Higby
breached the waiver-of-subrogation provision in the MSA and breached the “other
insurance” provision in the MSA by obtaining the CIM Policy, thereby causing
the CGL Policy to potentially not be primary coverage for the loss at issue.
According to DCP, these two breaches caused it to incur significant attorney’s
fees and costs associated with defending Plaintiffs’ lawsuit. The district court
granted Higby’s cross-motion for summary judgment, concluding Higby did not
breach either provision.
A party may recover attorney’s fees based upon a showing of a material
breach of the MSA. See Bernhard v. Farmers Ins. Exch., 915 P.2d 1285, 1287
(Colo. 1996) (“As a general rule, in the absence of a statute, court rule, or private
contract to the contrary, attorney fees are not recoverable by the prevailing party
in either a contract or tort action.” (footnote omitted)). Even assuming Higby
breached the two relevant provisions of the MSA, 7 any such breach was not
7
Because we reverse the district court’s entry of summary judgment in
favor of DCP on the merits of Plaintiffs’ claims, DCP is no longer the prevailing
(continued...)
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material under the unique facts of this case. The purpose of both the waiver-of-
subrogation provision and the other-insurance provision is to preserve DCP’s
rights under the Additional Insured Provision. DCP’s assertion that Higby
breached the waiver-of-subrogation provision and the other-insurance provision is
simply another avenue by which DCP attempts to enforce the Additional Insured
Provision. Because the Additional Insured Provision is void as to the loss at issue
in this matter, any breach of those provisions is not material.
B. Breach of the MSA
DCP argues that if the grant of summary judgment in its favor is reversed,
this court should remand this matter to the district court to permit the court to
revisit its ruling that Higby did not breach the MSA by failing to purchase CGL
insurance covering DCP for DCP’s own negligence. Plaintiffs counter that the
MSA was not breached because parties cannot contract around the requirements
of Colorado law.
This court has concluded any promise Higby made to purchase insurance
covering DCP for the loss at issue is void under Colorado’s Anti-Indemnification
7
(...continued)
party in Plaintiffs’ subrogation action. DCP’s claim of entitlement to attorney’s
fees, however, is based on its counter-claim that Higby breached the MSA by
“permitting or failing to preclude” National’s subrogation action. Nowhere in its
appellate brief does DCP identify the other damages it sought for the alleged
breaches of the MSA. Plaintiffs, however, do not argue DCP’s claim for
attorney’s fees was not properly pleaded. See Lawry v. Palm, 192 P.3d 550, 569-
70 (Colo. App. 2008) (discussing the availability of attorney’s fees as either
consequential or special damages).
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Statute which bars a construction business from contracting out liability for its
own negligence. Colo. Rev. Stat. § 13-21-111.5(6). Colorado “[c]ourts will not
enforce contracts or contract terms that are void as contrary to public policy.”
Norton Frickey, P.C. v. James B. Turner, P.C., 94 P.3d 1266, 1267 (Colo. App.
2004). Accordingly, as a matter of law, DCP cannot show that Higby breached its
agreement to provide such coverage and it is unnecessary to remand this matter
for further proceedings. See Colo. Rev. Stat. § 13-21-111.5(6)(d)(I) (determining
that contract provisions like the one at issue here are “void as against public
policy”).
V. Conclusion
The district court’s grant of summary judgment in favor of DCP in Appeal
No. 16-3271 is reversed. The matter is remanded with instruction to enter
judgment in favor of Plaintiffs based on this court’s conclusion that the anti-
subrogation rule is inapplicable because the Additional Insured Provision of the
2008 Work Order is void, in relevant part, 8 pursuant to the terms of the Colorado
Anti-Indemnification Statute.
8
Because the issue is not before us, we express no opinion on whether the
Additional Insured Provision is enforceable as to coverage for claims not based
on DCP’s own negligence. We note, however, that the severability clause of the
MSA states as follows: “If any provision of this Agreement shall be held invalid,
illegal or unenforceable, the validity, legality or enforceability of the other
provisions of this Agreement shall not be affected thereby, and there shall be
deemed substituted for the provision at issue a valid, legal and enforceable
provision as similar as possible to the provision at issue.”
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The district court’s grant of summary judgment in favor of Plaintiffs on the
attorney’s fee issue raised in Appeal No. 16-3279 is affirmed.
ENTERED FOR THE COURT
Michael R. Murphy
Circuit Judge
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