Wyoming Supreme Court Rules Refinery Company Can Seek Extracontractual Insurance Recovery Against Holdout InsurerIn a landmark victory for policyholders, the Supreme Court of Wyoming found that a subsidiary of Sinclair Oil can invoke statutory bad faith damages  after prevailing in a coverage dispute with its insurer, Infrassure. The court rejected the district court’s analysis that supported the insurer’s narrow interpretation of the state’s insurance code. On certification from the 10th Circuit, the court found that a policy was “delivered” in Wyoming because the policyholder and the covered risk were in Wyoming. Per the court’s decision, proof of physical delivery beyond the stated headquarters address, to a Wyoming address, was not required.

Sinclair sought business interruption insurance recovery from Infrassure and other insurers after a 2013 fire and explosion at its petroleum refinery in Sinclair, Wyoming. The Swiss insurer spurned a settlement between Sinclair and the market of quota share participants and instead sought to litigate the loss. After a panel of appraisers affirmed that the loss value was actually higher than the market settlement that Infrassure rejected – a decision which Bradley later successfully defended on Sinclair’s behalf on appeal to the 10th Circuit – Sinclair sought to recover its attorney’s fees and enhanced interest at 10% under a provision in the Wyoming Insurance Code permitting a fee award and pre-judgment interest when an insurer “refuses to pay the full amount of a loss covered by the policy and that the refusal is unreasonable or without cause.” Although the policy insured a Wyoming company as additional insured and covered refining facilities located in Wyoming, the insurer argued that Sinclair could not invoke Wyoming’s bad faith remedies found in the insurance code, which excludes policies not “issued for delivery” or “delivered” in Wyoming. The Wyoming federal district court agreed with Infrassure’s contention that because there was no proof of physical delivery to the insured in Wyoming, Wyoming law did not apply. On appeal, the 10th Circuit accepted the suggestion from Sinclair’s appellate counsel (Marc James Ayers, with Bradley’s Appellate Practice Group), that the court certify the unsettled and novel question to Wyoming’s highest court to determine the applicability of the statute.

The Wyoming Supreme Court declined to adopt the insurer’s strict interpretation, finding after canvassing the law of many other jurisdictions, that the purpose of Wyoming’s insurance laws was to “protect public welfare and Wyoming residents from being taken advantage of by sophisticated insurance companies,” and that achieving this public purpose mandated a liberal interpretation of the law’s application to Wyoming interests. The court adopted a rule articulated by the New York courts, holding that a policy is “delivered or issued for delivery” in a state when it “covers both insureds and risks” located in that state. Because the Sinclair subsidiary and the insured refinery were in Wyoming, Sinclair was entitled to the protections mandated by the insurance law.

Although the Wyoming Supreme Court’s unanimous ruling directly addresses only Wyoming law, policyholders in other states should consider the impact of the ruling as persuasive authority for a broad application of favorable extracontractual remedies. Most jurisdictions permit fee shifting in at least some instances, and a strategy for recovering the policyholder’s legal expense in addition to the value of the insured loss should be considered at the outset of the litigation. Sinclair’s successful argument, as well as the strategy of seeking certification to a state’s highest court when appropriate, highlights tools that other policyholders may use in master commercial property insurance policies to maximize business interruption insurance recovery.

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Photo of Marc James Ayers Marc James Ayers

Marc James Ayers represents individual, corporate and governmental clients before state and federal appellate and trial courts. Marc is listed in Best Lawyers in America in the field of Appellate Law, and has handled numerous appeals in the U.S. Courts of Appeals, the…

Marc James Ayers represents individual, corporate and governmental clients before state and federal appellate and trial courts. Marc is listed in Best Lawyers in America in the field of Appellate Law, and has handled numerous appeals in the U.S. Courts of Appeals, the Alabama Supreme Court, the Alabama Court of Civil Appeals, and other state appellate courts. He has also represented clients on petitions for certiorari and amicus curiae briefs to the U.S. Supreme Court. He is a member of Bradley Arant Boult Cummings LLP’s Appellate Litigation Group. View articles by Marc

Photo of G. Benjamin Milam G. Benjamin Milam

Ben Milam practices in the areas of financial services litigation and policyholder insurance coverage. Ben represents mortgage lenders on a variety of claims, including unfair trade practices, wrongful foreclosure, the Fair Credit Reporting Act (FCRA), the Fair Debt Collection Practices Act (FDCPA), the…

Ben Milam practices in the areas of financial services litigation and policyholder insurance coverage. Ben represents mortgage lenders on a variety of claims, including unfair trade practices, wrongful foreclosure, the Fair Credit Reporting Act (FCRA), the Fair Debt Collection Practices Act (FDCPA), the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA). He also represents policyholders in insurance coverage disputes, including title and liability insurance matters.

Photo of Geoffrey Greeves Geoffrey Greeves

Geoffrey Greeves recovers insurance proceeds for corporate policyholders in disputed claims, coverage litigation matters, adversary proceedings, and using arbitration, mediation and negotiation. Geoffrey is first and foremost a trial lawyer. He routinely handles business tort litigation from inception through appeal. Spanning 20 years…

Geoffrey Greeves recovers insurance proceeds for corporate policyholders in disputed claims, coverage litigation matters, adversary proceedings, and using arbitration, mediation and negotiation. Geoffrey is first and foremost a trial lawyer. He routinely handles business tort litigation from inception through appeal. Spanning 20 years in insurance recovery practice in hotly disputed insurance claims involving man-made and natural disasters such as 9/11, the Nashville floods, ValuJet flight 592, the Deepwater Horizon incident, earthquakes in Chile and Japan, Superstorm Sandy and various other hurricanes, Geoffrey has achieved numerous eight-figure settlements for his clients.

Photo of A. Kate Margolis A. Kate Margolis

Kate Margolis provides insurance coverage advice for policyholders. She knows that insurance coverage is essential to the long-term viability of any business. Kate helps policyholders preserve coverage both before and after a claim arises. She advises regarding terms and conditions and potential gaps…

Kate Margolis provides insurance coverage advice for policyholders. She knows that insurance coverage is essential to the long-term viability of any business. Kate helps policyholders preserve coverage both before and after a claim arises. She advises regarding terms and conditions and potential gaps in coverage when clients are evaluating their insurance programs.  For example, cyber insurance has fast become a crucial part of any insurance program. Kate recently co-authored the Guide to Cyber Insurance: Building a Program, Procuring Coverage, Managing Claims and Litigating Disputes, published by RIMS, the Risk Management SocietyTM.

When coverage disputes do arise, Kate is committed to cost-effective and creative solutions to achieve a satisfactory business resolution if possible and unrelenting advocacy when litigation is warranted. Kate has helped clients navigate roadblocks to coverage for nearly 20 years.