ontractor Needs Permission of Insurer to be Protected by an
Owner-Controlled Insurance Program
Team Industrial Services, Inc. (Team) found it had incurred a $222
million judgment against it in a wrongful-death lawsuit arising out of a
steam-turbine failure in June 2018 at a Westar Energy, Inc. (Westar)
power plant.
Team sought indemnity for the judgment from Westar, Zurich AmeCrican
Insurance Company (Zurich), and two other insurance companies, arguing
that it was, or should have been, provided protection by Westar's
Owner-Controlled Insurance Program (OCIP) through insurance policies
issued by Zurich and the two other insurers.
In Team Industrial Services, Inc. v. Zurich American Insurance Company,
et al, No. 22-3275, USCA, Tenth Circuit (November 29, 2023) resolved the
dispute acknowledging that Team's arguments were well reasoned and
creative.BACKGROUNDIn 2013 Westar instituted its OCIP, through which
contractors and subcontractors could obtain insurance protection for
work performed at covered locations.
Westar had discretion to decide which contractors would be eligible to
enroll in the OCIP. Eligible contractors had to complete enrollment
forms to be considered for participation. During the time relevant to
this dispute, insurance was provided by a Zurich policy, whose premiums
were paid by Westar. According to Zurich's policy, an enrolled
contractor's "rights and duties under this policy may not be transferred
without [Zurich's] written consent." (emphasis added)Westar never made
Team eligible to enroll in the OCIP.
Team never submitted an enrollment application, and it was never
enrolled. Team's parent company acquired Furmanite's parent
company.Although Team and Furmanite became "sister companies," they were
distinct legal entities and never merged. Team assumed Furmanite's
workload at the power plant. Furmanite's insurance coverage under the
Westar OCIP continued even though its service contract had been retired.
Furmanite's coverage continued, even after it perhaps should have
ended.Team argued to the District Court that it inherited Furmanite's
coverage under the OCIP.The District Court ruled that Change Order No. 2
unambiguously retired Furmanite's MSA and left Team's MSA as the sole
governing document.
