In Carolina Casualty Insurance Co. v. Burlington Insurance Co., 951 F.3d 1199 (10th Cir. 2020), the 10th Circuit Court of Appeals, applying Wyoming law, held that a fire at a fracking wellsite did not arise from an employee’s auto-related conduct.
In this case, Jason Metz was in the process of pumping fracking water from a frack truck at an oil pumping site when a fire occurred. The fire erupted when Metz decided to light a cigarette with his cigarette lighter. A spark from the lighter ignited a flash fire from the fumes in the area of the pumping site. The auto carrier (Carolina Casualty) disputed coverage with the CGL carrier (Burlington). The complaint was brought by another employed worker at the site, David Garza. Garza sued Metz and his employer, RW Trucking. A settlement was ultimately received with joint contributions being made from Metz, RW, Carolina Casualty, and Burlington. A pay and chase litigation then ensued regarding which entity was responsible for the settlement.
The underlying lawsuit alleged that Metz and RW had created a dangerous worksite condition which allowed Metz negligence in lighting a cigarette while surrounded by petroleum fumes to cause the fire.
The 10th Circuit held that an explosion that occurred at the fracking oilwell site was not the natural and reasonable consequence of the truck usage. At the time of the accident Metz was loading his truck with fracking waste. Even though the truck may have played some role in the fire, the auto policy contained a mobile equipment exclusion which would have applied since the pump Metz had been operating would have qualified as mobile equipment as defined by the policy (equipment affixed to a motor vehicle that was principally used for other business purposes). After finding that Carolina Casualty did not act as a volunteer in contributing to the settlement because it did so under an ROR, the mutual understanding of the parties being that they would later litigate responsibility for coverage, the Court then held that Burlington was obligated to cover the loss under the CGL policy. The Court observed that both the CGL and auto policies dovetailed with each other. Burlington’s auto exclusion was held to not apply for the same reasons that the auto policy issued by Carolina Casualty did not apply.