WYOMING, March 11 – A Wyoming federal judge ruled that a unit of Sinclair Oil Corp. can maintain a bad faith claim against insurer Infrassure Ltd. under Wyoming law, although the judge has ruled that New York law controls the companies breach of contract claim.
U.S. District Judge Nancy D. Freudenthal denied motions to dismiss filed by Infrassure, of Switzerland, which sought dismissal of Sinclair Wyoming Refining Co.’s bad faith and declaratory judgment claims. Judge Freudenthal wrote: “The court finds that Wyoming law would apply to Sinclair’s bad faith claim because the choice of law language in the [insurance program] is narrow and does not include issues arising related to the performance of the contract.”New York law would have been far more restrictive of the bad faith claim.
The coverage dispute arises out of a September 2013 explosion at a Sinclair refinery in Sinclair, Wyoming. Sinclair alleges it lost $150 million in property damage and lost income. Under Sinclair’s insurance program, Infrassure owes 7.5% of the claim, or about $4.5 million. Infrassure hasn’t payed anything on the claim yet, according to Sinclair,
Judge Freudenthal did not agree with Infrassure that the bad faith claim was controlled by New York Law because it was “inexplicably intertwined” with Sinclair’s contractual claims. She ruled that the policy’s choice of law provision did not preclude Wyoming law from applying to the bad faith claim:
“Even if language requiring ‘construction and interpretation’ of the contract under New York law applied, the application of New York law prohibiting an independent claim for bad faith would be contrary to a fundamental policy in Wyoming, which based on the allegations in the pleading has a materially greater interest than New York in the determination of this issue.”
The case is Sinclair Wyoming Refining Co. v. Infrassure Ltd., case number 2:15-cv-00194, in the U.S. District Court for the District of Wyoming.