In True Oil Co. v. Mid-Continent Cas. Co., No. 05-8028, 2006 WL 7287752 (10th Cir. Mar. 23, 2006), the Tenth Circuit Court of Appeals ruled that parties did not have a valid insured contract within the meaning of a CGL policy.

 

True Oil owned and operated gas and oil wells and contracted with Pennant Service Company to perform work on one of its wells. The parties executed a service contract, which included an indemnity provision under which Pennant agreed to indemnify and hold True Oil harmless for its negligence in performing its operations. Pennant was also required by the agreement to name True Oil as an additional insured on its CGL policy.

 

True Oil obtained two certificates of insurance, one stating that True Oil was an additional insured when required by an insurance contract; the other stated that True Oil was an additional insured on Pennant's CGL policy.

 

A Pennant employee was injured while working on True Oil's well and sued True Oil, stating that “it negligently supervised the project and failed to implement safety precautions properly.” True Oil sought defense under Pennant's policy, which was issued by Mid-Continent Casualty Company.

 

Mid-Continent denied True Oil's request for defense and said that the indemnity provision of the service contract was “void as violative of public policy under Wyo. Stat. Ann. § 30-1-131 and therefore True Oil was not covered under Pennant's CGL policy.”

 

While the court acknowledged that the terms of the service agreement would appear to meet the policy's definition of an “insured contract,” Wyoming law voids such agreements. Wyo. Stat. Ann. § 30-1-131 prohibits “the contractual shifting of liability for a party's own negligence in connection with certain contracts relating to oil, gas, or water wells and mineral mines.”

 

Thus, the court said, “We conclude that no 'insured contract' within the meaning of the CGL policy existed between Pennant and True Oil. As such, True Oil was not an additional insured under the policy, and, accordingly, Mid-Continent was not obligated to provide for True Oil's defense or other liabilities resulting from the Pennant employee's injury.”