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Wyoming Supreme Court: Sinclair Can Seek Attorney Fees From Insurer

May 10, 2021 | Posted in : Coverage of Fees, Fee Award, Fee Dispute, Fee Entitlement / Recoverability, Fee Issues on Appeal, Fee Jurisprudence, Fee Statute, Fees & Insurance Policy, Fees Paid by Insurers, Practice Area: Insurance Litigation

A recent Reuters story by Debra Cassens Weiss, “Wyoming Top Court Sides With Sinclair Refinery On Fee Award Question” reports that a Sinclair refinery can seek attorneys’ fees from Swiss insurer Infrassure under Wyoming law even though the policy was not issued in Wyoming or physically delivered in the state, the Wyoming Supreme Court held in answer to a certified question from the 10th U.S. Circuit Court of Appeals.

In its first interpretation of a fee award statute that applies only to insurance policies “delivered” or “issued for delivery in” Wyoming, the high court found the law “clearly and unambiguously provides that an insurance contract is issued for delivery in Wyoming if the policy issued is intended to protect an insured in Wyoming against risks in Wyoming.”

The decision paves the way for Sinclair Wyoming Refining Company’s second appellate win following a 2013 fire and explosion that slowed production for seven months.  The 10th Circuit last year affirmed that Infrassure must pay its contractual share of the business-interruption loss, but asked the Wyoming Supreme Court for input on the fee-award statute.  According to the Wyoming Supreme Court’s order, the refinery was an additional named insured under coverage obtained its parent company, The Sinclair Companies, and underwritten by 18 insurers on the London market.

After the 2013 explosion, the refinery sought $100 million from its insurers but agreed to a $60 million settlement.  By 2015, all the insurers had paid their shares except for Infrassure, which demanded arbitration.  The arbitration panel independently concluded that the loss was $60 million and ordered Infrassure to pay its $4.5 million share. U.S. District Judge Nancy Freudenthal confirmed the arbitration award in 2018.

However, Freudenthal dismissed the refinery’s claim for attorneys’ fees for wrongful denial under Wyoming’s insurance code.  She concluded that the statute did not apply because Infrassure had “issued” its policy in London or Zurich and there was no evidence the policy had ever been physically “delivered.”  Although both The Sinclair Companies and Sinclair Wyoming Refining Co are Wyoming corporations, Freudenthal found it more significant that the only address mentioned in the policy was for the parent company’s risk-management offices in Utah.

Like Freudenthal, the Wyoming Supreme Court acknowledged that courts “are split on whether statutory language referencing an insurance policy be ‘delivered’ or ‘issued for delivery’ should be construed strictly or liberally.”  The justices, however, adopted the more liberal view of the New York Appellate Division, which considers two factors – the location of the insured, and the location of the risk to be insured – to determine whether a policy was “issued for delivery” in New York.

That reading is consistent with the Wyoming law’s purpose “to protect public welfare and Wyoming residents from being taken advantage of by sophisticated insurance companies,” the opinion says.  “(A)bsent an insurance contract unambiguously stating otherwise, if the location of the insured and the location of the risk to be insured are both in Wyoming, an insurance policy is intended to be delivered and is ‘issued for delivery’ in Wyoming, the court concluded.