United States District Court, N.D. Oklahoma
ASHLEY NICHOLE MAGALLAN, individually, and as surviving spouse and next friend of Jesus Magallan, Jr., deceased, Plaintiff,
ZURICH AMERICAN INSURANCE COMPANY, Defendant, and ZURICH AMERICAN INSURANCE COMPANY, Third-Party Plaintiff,
WYOMING CASING SERVICE, INC., Third-Party Defendant.
OPINION AND ORDER
V.EAGAN UNITED STATES DISTRICT JUDGE
before the Court are Ashley Nichole Magallan's (Magallan)
motion for partial summary judgment (Dkt. # 74), and Zurich
American Insurance Company's (Zurich) motion for summary
judgment (Dkt. # 80). In order to fully address Zurich's
motion (Dkt. # 80), the Court must first rule on Zurich's
Daubert motion regarding plaintiff's proposed
expert Diane Luther (Dkt. # 85).
case arises from an automobile accident that resulted in the
death of Magallan's husband, Jesus Magallan, Jr. Dkt. #
2-1, at 6. Magallan is, and Jesus Magallan, Jr. was, a
resident of Texas. On February 17, 2015, Jesus Magallan, Jr.
and Pedro Ochoa were passengers in a pickup truck being
driven by Robert Kirk and owned by Wyoming Casing Service,
Inc. (Wyoming Casing). Dkt. # 74, at 12-13; Dkt. # 80, at 5.
All three men were employees of Wyoming Casing, and were
acting within the scope of their employment. Dkt. # 74, at
13; Dkt. # 80, at 5. Wyoming Casing is a North Dakota
corporation, with its principal place of business in North
Dakota. The pickup truck was involved in an automobile
accident with another vehicle in Freedom, Oklahoma, resulting
in injuries to Ochoa and Kirk and the death of Jesus
Magallan, Jr. Dkt. # 74, at 13; Dkt. # 80, at 5. Zurich
determined that Kirk caused the accident by turning in front
of the other vehicle. Dkt. # 80-2, at 2. Magallan does not
now dispute that Kirk caused the accident. Dkt. #
80, at 5; Dkt. # 93, at 10. At the time of the accident,
Wyoming Casing had purchased workers' compensation
insurance and business automobile insurance policies issued
by Zurich or its affiliate. Dkt. ## 71-12, 80-5. Zurich is an
Illinois corporation, with its principal place of business in
named insured of the business automobile insurance policy is
Wyoming Casing, and the policy period is September 1, 2014 to
September 1, 2015. Dkt. # 80-4. The policy includes a
business auto coverage form that describes Wyoming
Casing's “covered autos liability” coverage.
Dkt. # 80-5. The business auto coverage form states that
Zurich “will pay all sums an ‘insured'
legally must pay as damages because of ‘bodily
injury' or ‘property damage' to which this
insurance applies, caused by an ‘accident' and
resulting from the ownership, maintenance or use of a covered
‘auto.'” Dkt. # 80-5, at 2. According to the
policy's declarations, “any auto” is covered
under the covered autos liability coverage. Dkt. # 80-4, at
2; Dkt. # 80-5, at 1. The business auto coverage form
includes sections titled “Who Is An Insured” and
“Exclusions.” Dkt. # 80-5, at 2-3. Three
exclusions are relevant to this case. First, the workers'
compensation exclusion, which excludes “[a]ny
obligation for which the ‘insured' or the
‘insured's' insurer may be held liable under
any workers' compensation . . . law.” Id.
at 3. Second, the employee indemnification and employer's
liability exclusion, which excludes bodily injury to an
employee that “aris[es] out of and in the course of . .
. [e]mployment by the ‘insured.'”
Id. at 4. Third, the fellow employee exclusion,
which excludes bodily injury to “[a]ny fellow
‘employee' of the ‘insured' arising out
of and in the course of the fellow ‘employee's'
business automobile insurance policy contains several
endorsements, three of which are relevant to this case: the
Oklahoma uninsured motorists (UM) coverage endorsement (Dkt.
# 80-6), the auto medical payments coverage endorsement (Dkt.
# 80-7), and the broadened coverage for named individuals
endorsement (Dkt. # 80-10). The UM endorsement has a coverage
limit of $1, 000, 000 “per accident.” Dkt. #
80-6, at 1. In addition, it states that it modifies the
business auto coverage form, and the provisions of that
coverage form apply unless modified by the UM endorsement.
Id. According to the UM endorsement, Zurich
“will pay, in accordance with Title 36, Oklahoma
Statutes, all sums the ‘insured' is legally
entitled to recover as compensatory damages from the owner or
driver of an ‘uninsured motor vehicle.'”
Id. at 1. The endorsement defines “uninsured
motor vehicle” as a land motor vehicle or trailer:
a. For which no liability bond or policy at the time of an
‘accident' provides at least the amounts required
by the applicable law where a covered ‘auto' is
b. That is an underinsured motor vehicle. An underinsured
motor vehicle is a motor vehicle or ‘trailer' for
which there is a liability bond or policy at the time of an
accident, the liability limits of which are less than the
amount of the claim of the person or persons making such a
claim, regardless of the amount of coverage of either of the
parties in relation to each other;
c. For which an insuring or bonding company denies coverage
or is or becomes insolvent; or
d. That is a hit-and-run vehicle and neither the driver nor
owner can be identified.
Id. at 4. The UM coverage endorsement also contains
sections titled “Who Is An Insured” and
“Exclusions.” The UM endorsement states that
“[a]nyone ‘occupying' a covered
‘auto'” is an insured. According to the
business auto declarations, only automobiles owned by Wyoming
Casing are “covered autos” under the UM
endorsement. Dkt. # 80-4, at 2; Dkt. # 80-5, at 1. It is
undisputed that Magallan, Kirk, and Ochoa were defined first
party insureds under the UM endorsement, as they were
occupants of a covered auto. Dkt. # 80-6, at 1-2. The UM
endorsement lists five exclusions to the coverage. The most
relevant to this case is the direct or indirect benefit
exclusion, which states that UM coverage “does not
apply to . . . [t]he direct or indirect benefit of any
insurer or self-insurer under any workers' compensation .
. . law.” Id., at 2.
auto medical payments endorsement also modifies the business
auto coverage form. Dkt. # 80-7, at 1. This endorsement
states that Zurich “will pay reasonable expenses
incurred for necessary medical and funeral services to or for
an ‘insured' who sustains ‘bodily injury'
caused by ‘accident.'” Id. The auto
medical payments endorsement contains an employee bodily
injury exclusion, which excludes any bodily injury to an
employee “arising out of and in the course of
employment by [Wyoming Casing].” Id.
broadened coverage for named individuals endorsement also
modifies the business auto coverage form. Dkt. # 80-10, at 1.
This endorsement states that the following is added to the
“Who Is An Insured” sections of the UM and auto
medical payments endorsements: “[a]ny individual named
in the Schedule and his or her ‘family members' are
‘insureds' while ‘occupying' or while a
pedestrian when being struck by any ‘auto' you
don't own except . . . [a]ny ‘auto owned by that
individual or by any ‘family member.'”
Id. at 2. The individuals listed in the schedule are
Steve Halvorson and Londa Halverson. Steve Halvorson is the owner
and president of Wyoming Casing. Dkt. # 80, at 22.
the automobile accident, Magallan, individually and as
surviving spouse of Jesus Magallan, Jr., filed a first party
UM claim with Zurich on or about July 7, 2015. Id.;
Dkt. # 93, at 10. Zurich denied her UM claim on or about
February 8, 2016. Dkt. # 80, at 6; Dkt. # 93, at 10. Magallan
also filed a workers' compensation claim in Oklahoma on
December 7, 2015. Dkt. # 80, at 5. Magallan was awarded
benefits for her workers' compensation claim in June
2016. Id. Magallan filed this suit in Delaware
County District Court on October 3, 2016. Dkt. # 2-1, at 1.
Her petition alleges claims for breach of contract, bad
faith, and declaratory relief against Zurich, and negligence
and wrongful death against John Christopher Crelia, the
driver of the other automobile involved in the
accident. Id. The suit was filed in
Delaware County because Crelia was at the time a resident
there. Zurich removed the suit to this Court (Dkt. # 2) and
filed a counterclaim (Dkt. # 11) against Magallan and a
third-party complaint (Dkt. # 15) against Wyoming Casing,
both seeking declaratory judgment regarding Zurich's
obligations under the business automobile insurance
Nevin is the Zurich claims handler who processed
Magallan's UM claim. Dkt. # 80, at 13. Prior to writing
her denial letter, in addition to her investigation, Nevin
reviewed the claims file and business automobile insurance
policy, and requested and received the Oklahoma workers'
compensation statute from one of Zurich's Oklahoma
lawyers. Her denial was approved by her team manager, who was
designated within Zurich as a “coverage champion,
” or expert. Dkt # 93, at 17. She did not, however,
seek the advice of an Oklahoma attorney, or ask Zurich's
underwriting department for a coverage opinion. Id.
denial letter-which can only be described as convoluted-lists
a mix of policy exclusions as the bases for denying
Magallan's claim, including: (1) workers'
compensation is the exclusive remedy for auto liability and
medical payments coverage; (2) auto liability and medical
payments coverages do not apply to workers who suffer bodily
injury caused by a fellow employee in the course of
employment; (3) Crelia was not at fault, so Magallan is not
entitled to UM coverage; and (4) Magallan is also not
entitled to UM coverage because any award would benefit an
insurer under Oklahoma's workers' compensation laws.
Dkt. # 74-4. Importantly, although she does not explain this
in her letter, Nevin never considered whether Magallan might
be entitled to UM coverage as against Kirk, who was an
insured under the policy and at fault for the accident, but
excluded from liability under the fellow employee exclusion.
At her deposition, Nevin explained that she did not consider
Kirk uninsured or underinsured, despite the fact that
Magallan was precluded from recovering against him. Dkt #
74-2, at 34-35.
judgment pursuant to Federal Rule of Civil Procedure 56 is
appropriate where there is no genuine dispute as to any
material fact and the moving party is entitled to judgment as
a matter of law. Celotex Corp. v. Catrett, 477 U.S.
317, 322-23 (1986); Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 250 (1986); Kendall v. Watkins, 998
F.2d 848, 850 (10th Cir. 1993). The plain language of Rule
56(c) mandates the entry of summary judgment, after adequate
time for discovery and upon motion, against a party who fails
to make a showing sufficient to establish the existence of an
element essential to that party's case, and on which that
party will bear the burden of proof at trial.
Celotex, 477 U.S. at 317. “Summary judgment
procedure is properly regarded not as a disfavored procedural
shortcut, but rather as an integral part of the Federal Rules
as a whole, which are designed ‘to secure the just,
speedy, and inexpensive determination of every
action.'” Id. at 327 (quoting Fed.R.Civ.P.
the moving party has carried its burden under Rule 56(c), its
opponent must do more than simply show that there is some
metaphysical doubt as to the material facts. Where the record
taken as a whole could not lead a rational trier of fact to
find for the non-moving party, there is no ‘genuine
issue for trial.'” Matsushita Elec. Indus. Co.
v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986)
(citations omitted). “The mere existence of a scintilla
of evidence in support of the plaintiff's position will
be insufficient; there must be evidence on which the [trier
of fact] could reasonably find for the plaintiff.”
Anderson, 477 U.S. at 252. In essence, the inquiry
for the Court is “whether the evidence presents a
sufficient disagreement to require submission to a jury or
whether it is so one-sided that the party must prevail as a
matter of law.” Id. at 251-52. In its review,
the Court construes the record in the light most favorable to
the party opposing summary judgment. Garratt v.
Walker, 164 F.3d 1249, 1251 (10th Cir. 1998).
interpretation of an insurance contract is governed by state
law and, sitting in diversity, we look to the law of the
forum state.” Hous. Gen. Ins. Co. v. Am. Fence Co.,
Inc., 115 F.3d 805, 806 (10th Cir. 1997) (applying
Oklahoma law). In Oklahoma, interpretation of an insurance
contract is a matter of law. Max True Plastering Co. v.
U.S. Fid. and Guar. Co., 912 P.2d 861, 869 (Okla. 1996).
The insured has the burden of showing that his or her claim
is covered under the policy. See U.S. Fid. and Guar. Co.
v. Briscoe, 239 P.2d 754, 756 (Okla. 1952) (noting that
“the contractor must bring himself within the terms of
the policy, before he can establish insurer's liability
thereon”); see also Pitman v. Blue Cross and Blue
Shield of Okla., 217 F.3d 1291, 1298 (10th Cir. 2000)
(explaining that, under Oklahoma law, “the insured has
the burden of showing that a covered loss occurred”).
Once the insured establishes coverage, “the insurer has
the burden of showing that a loss falls within an
exclusionary clause of the policy.” Pitman,
217 F.3d at 1298. Therefore, summary judgment in favor of the
insurer is proper when the undisputed facts show that the
insured has failed to establish a covered claim under its
insurance policy. See, e.g., VBF, Inc. v. Chubb
Grp. of Ins. Cos., 263 F.3d 1226 (10th Cir. 2001)
(affirming the district court's grant of summary judgment
to the insurers where the undisputed facts established that,
under Oklahoma law, the insured's claims were not
covered). Conversely, summary judgment in favor of the
insured is proper when the undisputed facts show the insured
has established a covered claim. See id.
and Zurich have filed cross-motions for summary judgment
regarding Magallan's breach of contract claim. Dkt. ##
74, 80. Zurich also seeks summary judgment on Magallan's
bad faith claim and request for punitive damages. Dkt. # 80,
at 23-28. In response to Zurich's motion, plaintiff
relied in its response on an affidavit of her proposed expert
Diane Luther (Dkt. # 93-4). Although Zurich did not file a
motion to strike the affidavit, it did file a
Daubert motion to exclude her testimony (Dkt. # 85).
To determine if the Court may consider that affidavit in
ruling on summary judgment, it must resolve Zurich's
Daubert motion (Dkt. # 85) seeking to exclude the
testimony of the expert.
argues that she is entitled to recover on her UM claim under
the unambiguous terms of the insurance policy. Zurich argues
that the unambiguous language of the policy excludes
Magallan's UM claim. In interpreting the policy, the
Court applies the Oklahoma rules of construction. See
VBF, Inc., 263 F.3d at 1230. Under Oklahoma law, an
insurance contract should be construed according to the terms
set out within the four corners of the document. First
Am. Kickapoo Operations, L.L.C. v. Multimedia Games,
Inc., 412 F.3d 1166, 1173 (10th Cir. 2005); Redcorn
v. State Farm Fire & Cas. Co., 55 P.3d 1017, 1020
(Okla. 2002); London v. Farmers Ins. Co., Inc. 63
P.3d 552, 554 (Okla.Civ.App. 2002). If the terms of the
contract are “unambiguous, clear and consistent, they
are to be accepted in their ordinary sense and enforced to
carry out the expressed intention of the parties.”
Roads West, Inc. v. Austin, 91 P.3d 81, 88
(Okla.Civ.App. 2003). Ambiguities in an insurance contract
are construed against the insurer. Max True, 912
P.2d at 865. A court should not create an ambiguity in the
policy by “using a forced or strained construction by
taking a provision out of context, or by narrowly focusing on
a provision.” Wynn v. Avemco Ins. Co., 963
P.2d 572, 575 (Okla. 1998). A policy term will be considered
ambiguous only if it can be interpreted as having two
different meanings. Equity Ins. Co. v. City of
Jenks, 184 P.3d 541, 544 (Okla. 2008); Osprey L.L.C.
v. Kelly-Moore Paint Co., 984 P.2d 194, 199 (Okla.
1999). However, the Oklahoma courts “will not impose
coverage where the policy language clearly does not intend
that a particular individual or risk should be covered,
” and neither a “split in authority over whether
a certain term is ambiguous, ” nor “the fact that
the parties disagree” alone is sufficient to establish
an ambiguity. BP Am., Inc. v. State Auto Prop. & Cas.
Ins. Co., 148 P.3d 832, 835-36 (Okla. 2005).
Magallan, Jr. was an insured under the definition contained
in the UM endorsement, because it is undisputed that he was a
passenger in a vehicle owned by Wyoming Casing when the
accident occurred. Moreover, it is undisputed that Kirk
caused the accident. The vehicle Kirk was driving is an
underinsured motor vehicle under the policy because there was
liability insurance for the vehicle under the Wyoming Casing
business automobile policy, but the liability insurance
precludes a claim by Magallan because Jesus Magallan, Jr. was
a fellow employee of Kirk. See Dkt. # 80-5, at 2-4.
Therefore, Magallan is entitled to recover on her UM claim
unless it is excluded. Zurich argues that five exclusions in
the policy preclude Magallan's UM claim: (1) the
workers' compensation exclusion in the business auto
coverage form, (2) the employee indemnification and
employer's liability exclusion in the business auto
coverage form, (3) the fellow employee exclusion in the
business auto coverage form, (4) the employee bodily injury
exclusion in the auto medical payments endorsement, and (5)
the direct or indirect benefit exclusion in the UM
endorsement. Dkt. # 80, at 14.
first three exclusions that Zurich asserts apply to
Magallan's UM claim are found in the business auto
coverage form. Dkt. # 80-5). Zurich argues that these
exclusions apply because the business auto liability
exclusions apply to all claims and that the UM endorsement
exclusions supplement the business auto liability
exclusions. Magallan argues that the business auto liability
exclusions do not apply here because the UM endorsement
exclusions supplant the business auto liability
exclusions for UM claims. The Court agrees with Magallan;
Zurich's interpretation of the policy is unsupportable as
a matter of contract law.
the structure of the policy indicates that the business auto
liability exclusions apply only to liability coverage (as
opposed to UM coverage). The business auto liability
exclusions are contained in “Section II - Covered Autos
Liability Coverage.” The section is divided into three
subsections: “Coverage, ” which includes a
description of the auto liability coverage and “Who Is
An Insured”; “Exclusions”; and “Limit
of Insurance.” See Dkt. # 80-5, at 2-6. The UM
endorsement is structured in a similar manner, with sections
for “Coverage, ” “Who Is An Insured,
” “Exclusions, ” “Limits Of
Insurance, ” “Changes of Conditions, ” and
“Additional Definitions.” See Dkt. #
80-6. Because the policy is structured so that the exclusions
appear separately under each type of insurance coverage, the
logical interpretation is that the exclusions apply only to
the insurance coverage under which they are listed. This
distinction is reinforced by the fact that these are entirely
different types of insurance. Liability coverage provides
compensation to third parties on behalf of the insured for
damage and injuries incurred when the insured driver is at
fault. See 6 New Appleman on Insurance Law
Library Edition § 61.03 (Jeffrey E. Thomas ed.,
2017). Whereas UM coverage provides compensation to the
insured for damage and injuries incurred when an uninsured or
underinsured motorist is at fault. See id. at §
if the business auto liability exclusions are applied to UM
claims, it would violate the well established rule that
contracts should be read to give meaning to each provision.
See BP Am., 148 P.3d at 835; see also
Appleman § 5.03 (“To the extent an
interpretation makes another term or provision meaningless,
that interpretation should be rejected in favor of an
interpretation that preserves meaning.”). Both the
business auto liability form and UM endorsement contain
identical exclusions for bodily injuries arising out of war,
other military action, or government insurrection.
See Dkt. # 80-5, at 5; Dkt. # ...