Contractor Needs Permission of Insurer to be Protected by an Owner-Controlled Insurance ProgramTeam 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 American 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. DISCUSSIONTeam ignored that the enrollment in Westar's OCIP was not automatic. Since Team never enrolled nor was it even invited to enroll in Westar's OCIP, nor did Zurich ever give written approval to a transfer of coverage from Furmanite to Team, coverage did not exist.The Change Order did not contain a mention of insurance coverage or the OCIP. There is no ambiguity in the language of the change order from Finally, Team raises a perfunctory claim of promissory estoppel. Since there was no allegation that Westar knew about the reporting it could hardly have expected to induce Team's reliance. Nor was there any evidence of a promise by Zurich to provide insurance coverage to Team.The Tenth Circuit affirmed the judgment.ZALMA OPINIONWhen Team's parent company acquired Furmanites parent company and took over the work originally done by Furmanite it assumed that it was covered under the OCIP but did nothing to confirm the fact, proving that breaking it up into its component part and will cost Team $222 million. Insurance, even a contract as complex as an OCIP, must be fulfilled and to gain the coverage Westar needed to allow them to apply, Team needed to file an application with Zurich and Zurich had to agree. None of those things happened and Team had no coverage.(c) 2023 Barry Zalma & ClaimSchool, Inc.Please tell your friends and colleagues about this blog and the videos

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