Great Northern Ins. Co. v. Greenwich Ins. Co.
(3rd Cir. (Pa.) March 24, 2010)
Atlas Resources owned and operated several natural gas wells. A February 2004 blowout at one of the wells resulted in insurers with the Chubb Group of Insurance Co. (“Chubb”), including Great Northern Insurance Company and the Federal Insurance Co., paying more than $1.6 million in cleanup costs and property damage. The insurers filed suit against Greenwich Insurance Company (“Greenwich”), which also insured Atlas Resources, demanding equitable contribution.
The United States District Court for the Western District of Pennsylvania granted judgment in Greenwich’s favor, ruling that Chubb was not entitled to contribution under Pennsylvania law unless it could show that the payments it made were made on behalf of Atlas Resources, as opposed to its parent company.
Plaintiff appealed, arguing that the lower court erred in disregarding Atlas Resources’ drilling contract with Gene D. Yost & Sons Inc., which contained an assumption of liability clause requiring Atlas Resources to indemnify for claims arising from its drilling. Plaintiff argued that this clause proved Atlas Resources was liable for the damage caused by the blowout.
The Third Circuit disagreed, stating that this clause did not prove that the payments that plaintiff made were made on behalf of Atlas Resources. It merely provided a basis for Atlas Resources’ liability. It remained possible, however, that plaintiff paid nothing on behalf of Atlas Resources. Accordingly, the contractual indemnification argument “gets us no further into the second element of an equitable contribution claim.” Plaintiff also argued that the lower court’s ruling essentially handed significant authority to claims adjusters by making it their job to allocate liability in insurance claims. The court rejected this argument as well, stating that “[a] claims adjuster’s determination of respective liability, while certainly helpful, would not have been the only evidence that might have aided the district court.” Evidence of the insureds’ comparative negligence, a mutual insured’s acknowledgement of shared liability, or even an effort to reduce general allegations to specific quantities might guide a court’s analysis. The court held that a claim for equitable contribution calls upon the power of the court to design a remedy that is fair. Fairness cannot be fashioned from speculation.
Accordingly, judgment for Greenwich was proper. A copy of the decision can be found here.
Toni Frain and Jeff Kingsley