Coverage Analysis
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STATE BY STATE SURVEY

WYOMING
 (10th Circuit)

  ACCIDENTS OR OCCURRENCES

  In Compass Ins. Co. v. Cravens, Dargan and Co., 748 P.2d 724 (Wyo. 1988), the Supreme Court of Wyoming held that an oil spill resulting from vandals who trespassed onto the insured's property and opened tank valves was an "accident" from the insured's standpoint.  In general, however, the Supreme Court has given a relatively narrow interpretation to the grant of coverage.  In Action Ads, Inc. v. Great American Ins. Co., 685 P.2d 42 (Wyo. 1984), the court refused to find a duty to defend the underlying claim for breach of contract, even though the complaint alleges the possibility that the breach had occurred negligently.  The court found that the insured's "potential liability in this case stemmed not from its own negligent activity but from a contractual obligation."  Id. at 45.  Similarly, in St. Paul Fire & Marine Ins. Co. v. Campbell County School District, 612 F.Supp. 285, 287 (D. Wyo. 1985), the federal district court held that damages claimed by a teacher as the result of her being fired by the insured school district were the foreseeable result of deliberate acts and therefore not an "occurrence."   An insured who has a diminished capacity for independent judgment may still be entitled to coverage for deliberate acts. Morris v. Farmers Ins. Exchange, 771 P.2d 1206 (Wyo. 1989)(intoxication).  

  A claim based on misrepresentation is not an "accident" inasmuch as the insured intends the victim to rely on the communication.  First Wyoming Bank v. Continental Ins. Co., 860 P.2d 1094, 1100 (Wyo. 1993).
 

  ALLOCATION AND SCOPE ISSUES

  The Wyoming Supreme Court declared in Shoshone Trust Bank v. Pacific Employers Ins. Co., 2000 Wyo. LEXIS 67 (Wyo. April 20, 2000) that it would not follow a Buss approach to the allocation of defense costs in “mixed” cases.  Therefore, if there are “mixed” covered and non-covered claims, the insurer must pay the full cost of defense and may not later seek reimbursement from the policyholder for that portion of the costs that is solely attributable to non-covered claims.  On the other hand, the court declared that the insurer was not obligated to prosecute counterclaims that the insured had brought on its own behalf. The Wyoming Supreme Court, citing an unpublished federal district court decision, concluded that an insurer has no right to recoup defense costs if some of the claims presented against its policyholder trigger a contractual duty to defend. 
 

  APPELLATE PROCEDURES

  All appeals are heard directly by the Wyoming Supreme Court.
 

  BAD FAITH

  Unfair or deceptive consumer practices are proscribed by Wyo. Stat. § 40-12-101 (1993).

  Under Wyoming law, an insurer may be held liable for bad faith if its coverage position is not "fairly debatable." First Wyoming Bank v. Continental Ins. Co., 860 P.2d 1064 (Wyo. 1993) (reaffirming tort cause of action for third party claims).  In ISLIC v. University of Wyoming, 850 F.Supp. 1509 (D. Wyo. 1994), the District Court refused to recognize a tort claim for the insured's handling of the defense of a liability claim where the insurer had refused to participate in the defense at all.

  The Wyoming Supreme Court has declined to recognize a private right of action based on claimed violations of unfair trade practice statutes. Herrig v. Herrig, 833 P.2d 487 (Wyo. 1992).

  A liability insurer may be sued for failing to settle a third-party claim within policy limits.  Western Casualty & Surety Co. v. Fowler, 390 P.2d 602 (Wyo. 1964).  However, a judgment in excess of policy limits is a prerequisite to a claim against a liability insurer for failure to settle within policy limits.  Jarvis v. Farmers Insurance Exchange, 1997 WL 745480 (Wyo. December 4, 1997).  

  Such claims may be pursued in tort. Shrader v. State Farm Mut. Auto. Ins. Co., 882 P.2d 813, 825 (Wyo. 1994)(recognizing tort claim for breach of implied covenant).

  In order to recover damages for emotional distress, an insured must allege that as a result of the insurer's breach of the duty of good faith and fair dealing, the insured has suffered substantial other damages, such as economic loss, in addition to emotional distress.  State Farm Mutual Auto Ins. Co. v. Shrader, 882 P.2d 813 (Wyo. 1994).  Hospital bills and other medical costs for treating the emotional distress are insufficient to establish this "other economic damage."  Farmers Ins. Exchange v. Shirley, 1998 WL 229542 (Wyo. May 8, 1998).  
  An insurer may be held liable in bad faith for its investigation of a first party claim even if the claim is ultimately determined to be outside the scope of its coverage.  State Farm Mut. Auto Ins. v. Shrader, 882 P.2d 813 (Wyo 1994); Hatch v. State Farm Fire & Cas. Co., 842 P.2d 1089 (Wyo. 1992).

  Judge Johnson ruled that an insured could not pursue a Hatch claim for "procedural bad faith" in Sinclair Oil Corp. v. Republic Ins. Co., 967 F.Supp. 462 (D. Wyo. 1997) despite the insured's claim that its insurers acted in bad faith by delaying making a coverage determination to obtain more files and information from the insured before filing an action for declaratory relief. 
  In order for punitive damages to be awarded, the insurer must be shown to have breached its duty of good faith and to also have been guilty of oppression, fraud or malice by showing evil intent deserving of punishment.  McCullough v. Golden Rule Ins. Co., 789 P.2d 855, 861 (Wyo. 1990).
 

  "BODILY INJURY"

  Held not to encompass claims for mental distress in St. Paul Fire & Marine Ins. Co. v. Campbell County School District, 612 F.Supp. 285 (D. Wyo. 1985)(defamation).
 

  BREACH OF POLICY CONDITIONS

  Wyoming has never considered whether prejudice is an essential element of a late notice defense.  Pacheco v. Continental Cas. Co., 476 P.2d 166 (Wyo. 1970).

  An insured that assumes liability or settles before giving notice will be deemed to have waived any right to coverage due to its untimely notice.    State Farm Mut. Automobile Ins. Co. v. Hollingsworth, 668 F.Supp. 1476 (D. Wyo. 1987). Likewise, the U.S. Court of Appeals for the Tenth Circuit has ruled that a “no action” clause in a CGL policy precluded coverage for the cost of cleaning up contamination from an above-ground storage tank operated by the insured at a truck stop.  In State of Wyoming v. Federated Service Insurance Company, 2000 U.S. App. LEXIS 8839 (10th Cir. May 2, 2000), the court declared that the State was precluded from pursuing a subrogation action against Federated inasmuch as there had never been a legal determination of the insured’s liability nor were the damages known with certainty.  
 

  BURDEN OF PROOF

  Insured held to have burden of proving "sudden and accidental" exception to the pollution exclusion in Sinclair Oil Corp. v. Republic Ins. Co., 929 P.2d 535 (Wyo. 1996).
 

  CHOICE OF LAWS

  Although there is little case law, it appears that Wyoming continues to follow the traditional rule of lex loci delicti, looking to the place of contracting, rather than where the injury occurred. Wessel v. Estate of McGlynn, 752 P.2d 1363 (Wyo. 1988) (workmen's compensation claim); Horowitz v. Schneider National, Inc., 708 F.Supp. 1573 (D. Wyo. 1989).
 

  "CLAIMS MADE" ISSUES

  Requirement that a claim be made against the insured during policy period upheld in The Doctor's Company v. Ins. Corp. of America, 864 P.2d 1018 (Wyo. 1993)(insured's knowledge of likely claim did not trigger coverage).
 

  "DAMAGES" 

  Claims for breach of contract are outside the scope of liability insurance.  Action Ads, Inc. v. Great American Ins. Co., 685 P.2d 42, 45 (Wyo. 1984).

  The Supreme Court of Wyoming held in Compass Ins. Co. v. Cravens, Dargan and Co., 748 P.2d 724, 729-30 (1988) that clean-up costs were an appropriate measure of the "damages" resulting from the pollution of the affected property. 

  Compass was distinguished by the 10th Circuit in State of Wyoming v. Federated Service Insurance Company, 211 F.3d 1279 (10th Cir. 2000)(Unpublished--full text at 2000 U.S. App. LEXIS 15174).  The federal Court of Appeals concluded that the State of Wyoming had no subrogation rights against a service station operator for the cost of cleaning up a gasoline leak inasmuch as the policy’s “no action” clause  precluded any claim against the insurer until such time as the insured’s liability had actually been adjudicated, through trial or by written agreement of the parties, including the insurer.
 

  DECLARATORY JUDGMENT ACTIONS

  Wyoming Supreme Court ruled in Morris v. Farmers Ins. Exchange, 771 P.2d 1206 (Wyo. 1989) that an action for declaratory relief should not be decided in advance of the underlying liability case if coverage turns on an issue that is "crucial to the determination of the underlying liability."

  Attorneys fees may be awarded in a declaratory judgment action under Wyo. Stat. Section 26-15-124(c) if an insurer has acted unreasonably or without cause in refusing to pay the full amount of loss covered by the policy.
 

  DISCOVERY ISSUES
   --Claims Manuals
 

   --Drafting History
 

   --Other Policyholder Claims
 

   --Reinsurance Information
 

   --Reserves
 

  DUTY TO DEFEND

  Under Wyoming law, the duty of an insurer to defend a claim is based upon the terms of the policy and the allegations in the underlying complaint.  First Wyoming Bank of Jackson Hole v. Continental Ins. Co., 860 P.2d 1094, 1098 (Wyo. 1993). 

  Held to be broader than the duty to indemnify in Morris v. Farmers Ins. Exchange, 771 P.2d 1206 (Wyo. 1989).  

  PRP letter held to be a "suit" in Hutchinson Oil Company v. Federated Service Ins. Co., 851 F.Supp. 1546 (D. Wyo. 1994).
 

  ESTOPPEL AND WAIVER

 Wyoming has rejected the majority rule that an insured may not use estoppel as a basis for broadening coverage beyond what is actually provided under the written terms of the contract.  Hunter v. Farmers Ins. Group, 554 P.2d 1239, 1243 (Wyo. 1986).  
 

  EXCESS INSURERS

  The U.S. Court of Appeal.s for the Tenth Circuit ruled that an excess insurer was required to defend a case when the primary insurer had wrongfully refused to defend, if the excess coverage was written as being excess of the primary insurance "as warranted."  Hocker v. New Hampshire Ins. Co., 922 F.2d 1476 (10th Cir. 1991).  In such cases, the excess insurer's remedy is an equitable subrogation claim against the primary insurer.
 

  NUMBER OF OCCURRENCES

  No cases.
 

  POLLUTION EXCLUSION

  On December 30, 1996, the Wyoming Supreme Court ruled in Sinclair Oil Corp. v. Republic Ins. Co., 929 P.2d 535 (Wyo. 1996) that the exclusion was unambiguous and would only afford coverage for pollution liability claims if the insured could "identify and establish an event that occurred abruptly or was made or brought about in a short period of time" in order to claim coverage.  The court acknowledged, however, that a discharge might be "sudden" "even though the discharge and the damage may occur over a long period of time after the covered event before the injury is discovered." 

  In a related case pending in the U.S. District Court, Judge Johnson ruled in Sinclair Oil Corp. v. Republic Ins. Co., 967 F.Supp. 462 (D. Wyo. 1997) that Wyoming law would not support claims for fraud or regulatory estoppel based on alleged misrepresentations to state regulators concerning the pollution exclusion which the state Supreme Court has held is unambiguous.

  Previously, a federal court had ruled that the pollution exclusion did not preclude insurer's duty to defend claims arising out of the insured's shipment of waste oil to a recycling facility over a period of years since disputed issues of fact existed as to whether the pollution was "sudden and accidental." Hutchinson Oil Company v. Federated Service Ins. Co., 851 F.Supp. 1546 (D. Wyo. 1994).

  PUNITIVE DAMAGES

  Held not to be against public policy in Sinclair Oil Corp. v. Columbia Cas. Co., 682 P.2d 975 (Wyo. 1984).
 

  STANDARDS FOR POLICY INTERPRETATION

  In order to determine the intent of the parties, courts state that the language of the policy must be given its plain and ordinary meaning.  Kirkwood v. CUNA Mut. Ins. Soc’y, 937 P.2d 206, 208 (Wyo. 1997) (The court determines the intent of the parties by examining the written agreement and by giving the words used the meaning that a reasonable person in the position of the insured would understand them to mean); 

  Words in an insurance policy will be interpreted in accordance with their common and ordinary meaning and will not be "tortured" to create an ambiguity. Eisenbarth v. Hartford Fire Ins. Co., 840 P.2d 945 (Wyo. 1992); McKay v. Equitable Life Assur. Society, 421 P.2d 166, 168 (Wyo. 1966).  However, if a term in a contract is reasonably susceptible of two constructions, the one favorable to the insured will be adopted.  Commercial Union Ins. Co. v. Stamper, 732 P.2d 534, 539 (Wyo. 1987); Doctors Co. v. Insurance Corp. of America, 864 P.2d 1018, 1023 (Wyo. 1993).  On the other hand, a policy is not made ambiguous merely because a disagreement exists between the parties.  Ahrenholtz v. Time Insurance Company, 968 P.2d 946, 949 (Wyo. 1998). 
 

  THEORIES OF ALTERNATIVE LIABILITY

  None adopted.
 

  TRIGGER OF COVERAGE

  No cases.

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