                                                               F I L E D
                                                       United States Court of Appeals
                                                               Tenth Circuit
                                 PUBLISH
                                                               JUN 19 2000
                 UNITED STATES COURT OF APPEALS
                                                             PATRICK FISHER
                                                                   Clerk
                               TENTH CIRCUIT



AIR LIQUIDE AMERICA
CORPORATION, a Delaware
corporation,

      Plaintiff-Appellee,
v.

CONTINENTAL CASUALTY
COMPANY, an Illinois corporation;
STAFFING RESOURCES OF
OKLAHOMA, an Oklahoma
corporation,

      Defendants-Third-Party
      Plaintiffs-Appellants,
                                               No. 99-5022
v.

CIGNA PROPERTY AND
CASUALTY INSURANCE
COMPANY, a Connecticut
corporation,

      Third-Party Defendant-
      Appellee,

     and

SAMUEL CANADA,

      Third-Party Defendant.
                 Appeal from the United States District Court
                   for the Northern District of Oklahoma
                           (D.C. No. 97-CV-315-H)


Edward J. Main (James K. Secrest, II with him on the briefs), Tulsa, Oklahoma,
for Appellants.

Paula E. Litt, Schopf & Weiss, Chicago, Illinois (Paula W. Render, Schopf &
Weiss, and W. Kirk Turner, Newton, O’Connor, Turner & Auer, Tulsa,
Oklahoma, with her on the briefs) for Appellee Air Liquide.

John R. Woodard, III and Paula J. Quillin of Feldman, Franden, Woodard &
Farris, Tulsa, Oklahoma, filed a brief for Appellee Third-Party Defendant Cigna
Property & Casualty Insurance Company.



Before EBEL, Circuit Judge, McWILLIAMS, Senior Circuit Judge, and
BRISCOE, Circuit Judge.


EBEL, Circuit Judge.



      This is an appeal from the district court’s grant of summary judgment in a

dispute between two businesses and their insurance companies. The dispute turns

on which of two insurance policies provides primary coverage for a vehicular

accident. Defendants/Third Party Plaintiffs-Appellants Continental Casualty

Company (“Continental”) and Staffing Resources of Oklahoma, Inc. (“Staffing

Resources”) (collectively, “Appellants”) contend the district court erred in

granting summary judgment to Plaintiff-Appellee Air Liquide America

                                       -2-
Corporation (“Air Liquide”) and Third Party Defendants-Appellees CIGNA

Property and Casualty Company (“CIGNA”) and Mr. Samuel Canada (“Canada”)

(collectively, “Appellees”). The district court exercised jurisdiction pursuant to

28 U.S.C. § 1332. We exercise jurisdiction pursuant to 28 U.S.C. § 1291, and we

AFFIRM in part and REVERSE in part.

                                 BACKGROUND

      Air Liquide manufactures and distributes industrial gases, operating a

distribution facility in Pryor, Oklahoma. Air Liquide employed Canada as a truck

driver for the Pryor depot until December of 1991, when Canada retired. Air

Liquide indicated to Canada its desire to employ him in a temporary capacity in

the summer of 1992, but Air Liquide learned that rehiring Canada would prevent

him from collecting various retirement benefits. As a result, Air Liquide referred

Canada to the employment agency of Blazer Services (the predecessor in interest

to Staffing Resources) in the summer of 1992. Blazer Services, and then Staffing

Resources, 1 arranged to provide Canada to Air Liquide in exchange for a 42.5%

surcharge on Canada’s wages. This arrangement continued each summer from

1992 to 1996.




      1
        Staffing Resources acquired Blazer Services in 1995. Hereinafter,
Staffing Resources and Blazer Services are referred to interchangeably.

                                        -3-
      On August 1, 1996, Canada was involved in a vehicular accident while

driving an Air Liquide delivery truck, causing serious injuries to various

individuals. The injured parties alleged Canada’s negligence caused the accident

and they sought damages both from Staffing Resources and Air Liquide as well as

from Canada in separate proceedings.

      Staffing Resources is insured by Continental; Air Liquide is insured by

CIGNA. The CIGNA policy issued to Air Liquide, however, is not a typical

liability insurance policy. Rather, it establishes that Air Liquide’s deductible

under the policy ($1M) is exactly equal to the policy’s limits ($1M). Thus, it is

actually a form of self-insurance, under which Air Liquide is responsible for its

own losses and CIGNA acts merely as a surety that Air Liquide will be able to

pay any judgment covered under the policy. Such arrangements are known as

“fronting” policies. See Rory A. Goode, Note, Self-Insurance as Insurance in

Liability Policy “Other Insurance” Provisions, 56 Wash. & Lee L. Rev. 1245,

1257 (1999).

      Air Liquide filed a declaratory judgment action against Continental and

Staffing Resources in the United States District Court for the Northern District of

Oklahoma, seeking a determination that Continental’s policy (with Staffing

Resources) provided for a defense and primary indemnification of the underlying

claims to Air Liquide . Continental and Staffing Resources then named CIGNA


                                         -4-
and Canada as third party defendants, seeking a declaration that CIGNA’s policy

provided a defense and primary indemnification. Air Liquide, Continental, and

Staffing Resources all filed cross-motions for summary judgment. The district

court concluded that Canada and Air Liquide were insureds under the Continental

policy, that Air Liquide’s self-insurance policy did not constitute “other

collectible insurance,” and that therefore the Continental policy offered primary

coverage. The district court further held that Continental owed Air Liquide a

defense. Continental and Staffing Resources now appeal from this judgment.

                                   DISCUSSION

      “A federal court sitting in diversity applies the substantive law . . . of the

forum state.” Barrett v Tallon, 30 F.3d 1296, 1300 (10th Cir. 1994).

Accordingly, we look to Oklahoma law for guidance on the interpretation of these

insurance policies. 2


      2
         We are aware of Oklahoma’s choice of law rule providing that, where
there are
       motor vehicle insurance cases involving conflicting state laws . . .
       [t]he validity, interpretation, application and effect of the provisions
       of a motor vehicle insurance contract should be determined in
       accordance with the laws of the state in which the contract was made,
       unless those provisions are contrary to the public policy of
       Oklahoma, or unless the facts demonstrate that another jurisdiction
       has the most significant relationship with the subject matter and the
       parties.
Bohannon v. Allstate Ins. Co., 820 P.2d 787, 797 (Okla. 1991). In its brief, Air
Liquide asserts (without directing us to supporting evidence in the record) that its
                                                                         (continued...)

                                         -5-
      2
       (...continued)
policy with CIGNA was “negotiated, placed and executed in Texas” and thus
Texas law should apply on the duty to defend issue. (AL Aple. Br. at 46.)

       However, throughout the proceedings below, both the parties and the
district court have argued and applied Oklahoma law in interpreting these
insurance contracts. In its brief to this court, Air Liquide suggests that it
preserved the right to challenge on appeal choice of law issues on matters not
presented to the district court. (See AL Aple. Br. at 46 n.7) We doubt, however,
whether any such reservation can be accomplished by a lone footnote in Air
Liquide’s response to defendants’ motion for summary judgment, which reads:
“The law applicable to the CNA [Continental] Auto Policy may be Texas law,
because Staffing Resources and its insurance broker are located in Texas.
However, like Oklahoma law, Texas law requires that insurance contracts be
construed broadly in favor of coverage.” (Aplt. App. 1458.) If anything, this
footnote appears to amount to a concession that Air Liquide discerns no
meaningful difference between Oklahoma and Texas law on this issue.

       Even assuming that we would allow Air Liquide to raise this choice of law
issue on appeal, it has attempted to do so only with respect to the issue of a duty
to defend. (See AL Aple. Br. at 46-47.) With respect to the interpretation of the
word “employee” and Continental’s alleged duty to indemnify Air Liquide under
the policy held by Staffing Resources, Air Liquide has consistently argued
Oklahoma law both at the district court and on appeal. (See Aplt. App. at 1457,
1458, 1461, 1464, 1465, 1466, 1467, 1471 [Air Liquide’s opposition to
defendants’ motion for summary judgment]; AL Aple. Br. at 19, 21, 22, 23, 26,
28.) Thus, with the possible exception of the duty to defend issue, we apply
Oklahoma law to the present case. See Strickland Tower Maint., Inc. v. AT&T
Comm., Inc., 128 F.3d 1422, 1426 (10th Cir. 1997) (“The district court applied
Oklahoma law to this case and neither party challenges that finding on appeal.
Therefore, we accept the view of the district court that Oklahoma law applies.”);
Dr. Pepper Co. v. Adams Inv. Co., No. 90-6078, 1991 WL 148876, at *1 (10th
Cir. Aug. 5, 1991) (unpublished) (“[Although a]rguments can be made that Texas
law does not apply to the awarding of attorney fees . . . [the appellant] . . . made a
deliberate choice to rely on Texas law, and cannot now say that the district court
erred in holding [the appellant] to that choice.”); cf. Southern Star Foods Inc. v.
Northfield Freezing Sys., Inc., 202 B.R. 784, 788 (Bankr. E.D. Okla. 1996)
                                                                         (continued...)

                                         -6-
      We review the district court's grant of summary judgment de novo,
      applying the same legal standard used by the district court. Summary
      judgment is appropriate “if the pleadings, depositions, answers to
      interrogatories, and admissions on file, together with the affidavits, if
      any, show that there is no genuine issue as to any material fact and
      that the moving party is entitled to a judgment as a matter of law.”
      Fed. R. Civ. P. 56(c). When applying this standard, we view the
      evidence and draw reasonable inferences therefrom in the light most
      favorable to the [opposing] party.

Simms v. Oklahoma ex rel. Dep’t of Mental Health & Substance Abuse Servs.,

165 F.3d 1321, 1326 (10th Cir. 1999) (internal citations omitted).




      2
        (...continued)
(effecting a waiver of an agreement’s choice of law provision where “both parties
present the issues in terms of Oklahoma law”).

       With respect to the duty to defend issue, it is not necessary for us to
determine whether Air Liquide’s attempt to resurrect the choice of law issue on
appeal is successful. We would reach the same conclusion under either Texas or
Oklahoma law, both of which require that the clear language of the policy can
negate a duty to defend. Compare National Union Fire Ins. Co. of Pittsburgh v.
Merchants Fast Motor Lines, Inc., 939 S.W.2d 139, 141 (Tex. 1997) (“An
insurer’s duty to defend is determined by the allegations in the pleadings and the
language of the insurance policy.”) with 15 O.S.A. § 427 (establishing that the
duty to defend accompanies a duty to indemnify “unless a contrary intention
appears” from the policy). Although there may be instances in which Texas and
Oklahoma law might reach conflicting results, the present case does not compel
such a divergence.

                                        -7-
I. Coverage

      This issue presents two primary questions: (1) whether Canada was an

insured under Staffing Resources’ policy with Continental; 3 and (2) assuming

question (1) is answered in the affirmative, whether the Continental policy was

excess to Air Liquide’s policy with CIGNA. 4



A. Is Canada an Insured Under the Continental Policy?

      The Continental policy with Staffing Resources provides that “[a]ny

employee of yours is an ‘insured’ while using a covered ‘auto’ you don’t own,

hire or borrow in your business or your personal affairs.” Thus, Canada was an

insured under the policy if all three of the following conditions obtain: (1) He was

an employee of Staffing Resources at the time of the accident; (2) he was using a

“covered ‘auto’” not owned, hired, or borrowed by Staffing Resources; and (3) he


      3
        It is not disputed that if Canada is an insured under the Continental
policy, then Air Liquide is also an insured under that policy because it is “liable
for the conduct of an ‘insured.’”
      4
        It is not disputed that Canada is an insured under the CIGNA policy,
which classifies as insureds “[a]nyone . . . using with your [Air Liquide’s]
permission a covered ‘auto’ you own, hire, or borrow.” Canada was driving a
truck owned by Air Liquide with the company’s permission when the accident
occurred, and thus he is plainly an insured under the CIGNA policy. Likewise,
once we determine, see infra, that Canada was an employee of Staffing Resources
and that the accident arose in the course of that employment, it is clear that
Staffing Resources is also an insured under the CIGNA policy, which purports to
cover “[a]nyone liable for the conduct of an ‘insured.’”

                                        -8-
was engaged in the business or personal affairs of Staffing Resources when the

accident occurred. Appellants do not dispute that the second factor is satisfied.

We answer the remaining questions in the affirmative.

      1. Canada’s Employee Status

      Unfortunately, the Continental policy does not define the term “employee.”

As the parties’ arguments on this point demonstrate, this “policy term . . . is

reasonably susceptible to more than one meaning” as applied to the circumstances

of the present case. Max True Plastering v. United States Fidelity & Guaranty

Co., 912 P.2d 861, 869 (Okla. 1996). Accordingly, we conclude that the term, as

used in the Continental policy and applied to these facts, is ambiguous as a matter

of law. See id. Max True Plastering requires that we construe ambiguous terms

in insurance contracts to conform “with the parties’ reasonable expectations.” Id.

at 868-69. Based on our review of the Continental policy and the circumstances

surrounding Canada’s relationship with Staffing Resources and Air Liquide, and

applying the reasonable expectations test, we conclude that Canada was an

employee of Staffing Resources for insurance purposes.

      First, the language of the Continental policy makes no attempt to exclude

from coverage certain types of employees, depending on whether Staffing

Resources performed the full range of employer functions or merely performed

payroll services. Rather, it purports to include any employee. Second, and quite


                                        -9-
significantly, Staffing Resources’ conduct indicates that it believed it would be

responsible for the actions of individuals it dispatched to drive vehicles for other

companies. To this end, Staffing Resources’ internal Drivers Policy contained the

following statement:

      When we supply drivers to a client we expose ourselves to
      automobile liability claims unless we take steps to avoid the
      exposure. In the event of an accident we could be sued by: any
      person who was injured or had property damaged, . . . or the client’s
      insurance companies to recover their loss from us.

             If the client’s own employee was driving, these actions would
      not be available. All of the loss would be borne by the client or their
      insurance companies. Our objective is to return to that position.
      Failure to follow proper procedures will result in claims being paid
      under our auto insurance which increases our premium company-
      wide.

The procedures set forth included requiring the client to sign a hold-harmless

agreement and requesting that the client name Staffing Resources as an insured on

the client’s insurance policy. In the present case, these procedures were not

followed. Although Staffing Resources’ interpretation of its potential exposure to

liability is not necessarily binding on Continental, it is relevant under the

reasonable expectations doctrine as to whom Staffing Resources thought the

policy covered. This statement by Staffing Resources indicates its belief that

drivers it supplied to a client could give rise to liability on the part of Staffing

Resources and accordingly that such drivers would be covered employees under

the Continental policy.

                                          - 10 -
      Third, the dealings between Staffing Resources and Air Liquide further

indicate that Canada was a Staffing Resources employee. The weekly time sheets

Air Liquide submitted described Canada as a Staffing Resources employee, and

Canada was himself required to sign employment applications in 1992 and 1994,

which stated “I understand that my Employer is Blazer Services and not the

company where I may be assigned to work.” In addition, Staffing Resources

never indicated to Air Liquide that the circumstances of Canada’s hiring altered

his status, and Staffing Resources held out Canada as its employee for federal and

state governmental purposes. Moreover, Staffing Resources provided Air Liquide

a Certificate of Insurance representing that Staffing Resources had the

Continental policy. Although the certificate explicitly declares that it is issued as

a matter of information only and confers no rights upon the certificate holder, nor

does it alter or amend the policies disclosed in the certificate, in light of the

surrounding circumstances it likely confirmed Air Liquide’s impression that

Canada was Staffing Resources’ employee and covered by Staffing Resources’

insurance policy.

      Appellants rely primarily on the day-to-day control Air Liquide exercised

over Canada. Staffing Resources notes that Air Liquide told Canada when to

work, supervised his job performance, and that Staffing Resources only received

notice how much Canada worked for Air Liquide during a particular week after


                                          - 11 -
the fact. However, by the very nature of its business, an employment agency has

an atypical employment relationship with the individuals it sends to its clients.

Staffing Resources (and Canada) declared time and again that Canada was

Staffing Resources’ employee. On this record, it is clear as a matter of law that

Canada was an employee of Staffing Resources within the meaning of the

Continental policy.

      2. In the Business of Staffing Resources

      It is similarly clear that Canada was performing the business of Staffing

Resources when the accident occurred. Staffing Resources paid Canada to drive a

truck for its client, Air Liquide, and the accident took place while Canada was

performing these duties. Staffing Resources was in the business of providing

employees to its clients, and, as its Drivers Policy indicates, Staffing Resources

understood that its potential liability extended to incidents that might occur while

its driver was assigned to a client. Canada was therefore acting in the business of

Staffing Resources when the accident occurred.

      Thus, Canada was a Staffing Resources employee driving a covered auto in

the business of Staffing Resources. Accordingly, we hold that Canada and Air

Liquide are insureds under the Continental policy.




                                        - 12 -
B. Is the Continental Policy Excess to the CIGNA Policy?

      Because Canada and Air Liquide (as well as Staffing Resources) are

insureds under the Continental policy, and because Canada and Staffing

Resources (as well as Air Liquide) are insureds under the CIGNA policy, it is

necessary to examine the policies to determine whether each purports to provide

primary or excess insurance for the accident. By its terms, the CIGNA policy

provides primary insurance for this incident: “For any covered ‘auto’ you own,

this Coverage form provides primary insurance.” It is undisputed that Air Liquide

owned the truck Canada was driving at the time of the accident. Thus, the

CIGNA policy purports to be primary.

      The Continental policy provides: “For any covered ‘auto’ you don’t own,

the insurance provided by this Coverage Form is excess over any other collectible

insurance.” The issue thus presented is whether the CIGNA policy constitutes

“other collectible insurance.” Resolving this matter requires us to consider the

significance, if any, of the fact that Air Liquide’s policy with CIGNA is a form of

self-insurance.

      Although Oklahoma apparently has not decided whether self-insurance is

“other collectible insurance,” we believe our decision in Industrial Indemnity Co.

v. Continental Casualty Co., 375 F.2d 183 (10th Cir. 1967), is controlling on this




                                       - 13 -
issue. 5 Industrial Indemnity concerned an incident arising out of two

subcontractors’ work on an Oklahoma oil lease. The first subcontractor,

Halliburton Oil Well Cementing Company (“Halliburton”), was insured by

Continental Casualty Company (“Continental Casualty”); the second, Johnson

Construction Company (“Johnson”), was insured by Industrial Indemnity

Company (“Industrial”). See id. at 184. While en route to the job site, a

Halliburton employee was injured when attempting to disconnect a Halliburton

truck from a Johnson tractor that had towed the truck through the mud. See id.

The Halliburton employee sued Johnson, and Johnson claimed that, in addition to

being an insured under its policy with Industrial, it was an insured under

Halliburton’s policy with Continental Casualty. The court agreed that Johnson

was also an insured under the Continental Casualty policy, and then addressed the

question of how to allocate the loss between the two policies.

      It is apparent from the court’s reasoning that both policies contained

substantially identical “other insurance” clauses purporting to render that policy

excess if there was other insurance. 6 See id. at 185. It is further apparent that

      5
        Industrial Indemnity required us to apply and predict Oklahoma state law.
See id. at 185.
      6
         We note that the terms “other insurance” and “other collectible insurance”
are, for present purposes, substantially identical. See Self-Insurance Against
Liability as Other Insurance Within Meaning of Liability Insurance Policy, 46
A.L.R.4th 707, 709 (1986) (noting that “[c]ourts do not generally distinguish
                                                                       (continued...)

                                        - 14 -
Halliburton’s policy with Continental Casualty provided that Halliburton would

reimburse Continental Casualty for any losses. See id. Continental Casualty

argued to this court that “Halliburton was a self-insuror by reason of its

agreement to reimburse the insurance carrier for the losses and hence there was

no ‘other insurance.’” Id. We rejected this argument and affirmed the district

court’s proration of the loss between the policies, stating that “[t]here is no

authority in Oklahoma which would dictate that a distinction should be made

between the nature of the coverage.” Id. at 186. Thus, we held that the fact that

one policy was, in effect, self-insurance did not diminish the applicability of an

“other insurance” clause.

      We follow the reasoning of Industrial Indemnity in the present case and

conclude that Air Liquide’s self-insurance is “other collectible insurance” within

the meaning of the Continental policy. We have found no authority in Oklahoma

contradicting our decision in Industrial Indemnity, and we remain of the opinion

that it reaches the correct result. Air Liquide’s decision to self-insure does not

relieve it from primary liability simply because the underlying accident was also

covered by another insurance policy. Were we to hold otherwise, Air Liquide

would receive the double windfall of avoiding significant premium payments




      (...continued)
      6

among these phrases.”).

                                        - 15 -
under a standard insurance policy and avoiding primary liability for an accident

caused by one of its vehicles. We predict that Oklahoma would not reach such an

inequitable result. 7

       Thus, we conclude that Air Liquide’s CIGNA policy is “other collectible

insurance” within the meaning of the Continental policy, notwithstanding Air

Liquide’s obligation to fully reimburse CIGNA for any losses. 8 As a result, the




       7
        Appellees’ citation of Beech Aircraft Corp. v. United States, 797 F.2d 920
(10th Cir. 1986), is misguided. Beech Aircraft held that self-insurance was not
insurance withing the meaning of a tax code provision allowing for deductibility
of insurance premiums. See id. at 922. Thus, the issue addressed in Beech
Aircraft is plainly distinguishable from the case at bar.

       We also note that at least two of the cases from other jurisdictions relied
upon by the district court are plainly distinguishable from the present case. See
St. John’s Reg’l Health Ctr. v. American Cas. Co., 980 F.2d 1222, 1225 (8th Cir.
1992) (addressing a pooled liability fund); Physician’s Ins. Co. of Ohio v.
Grandview Hosp. & Med. Ctr., 542 N.E.2d 706 (Ohio App. 1988) (addressing a
hospital’s contractual obligation to indemnify an employee). Neither of these
cases involved a fronting policy like the CIGNA policy in the present case, in
which a company that is in the business of insuring against loss acts as a surety
for the self-insured’s ability to satisfy a judgment. We also note that other
jurisdictions have followed the approach of Industrial Indemnity and the case at
bar. See Self-Insurance Against Liability as Other Insurance Within Meaning of
Liability Insurance Policy, 46 A.L.R.4th 707 (1986) § 3[a], 4[a] (collecting
cases); 1 Couch on Insurance 3d § 10:6 (same). In any event, the cases relied
upon by the district court are from other jurisdictions and, hence, are not
controlling, whereas Industrial Indemnity represents controlling Tenth Circuit
authority interpreting Oklahoma law.
       8
        Cf. 15 Couch on Insurance 3d § 217:9 (“Any applicable deductible is
relevant between the insurer and the insured only, and does not apply to
proration.”)

                                       - 16 -
terms of the Continental policy make it excess to the CIGNA policy. 9 Thus, we

reverse the district court’s holding that the Continental policy was primary.

II. Duty to Defend

      It remains for us to determine which policy or party has the responsibility

for defending the insureds in the legal actions filed by the victims in connection

with Canada’s accident. Appellants contend that CIGNA owes Staffing

Resources a defense and that, if CIGNA does not fulfill this obligation, then

under the CIGNA policy the duty devolves onto Air Liquide. Air Liquide, in turn,

argues that it and Canada are owed a defense under the Continental policy.

A. CIGNA

      As we read its Deductible Endorsement, the CIGNA policy expressly

disclaims any duty to defend. The relevant provision reads:

      You have entered into an agreement with the claim service
      organization shown in the Schedule (the “Claim Service
      Organization”), whereunder the Claim Service Organization shall
      provide investigation, administration, adjustment, and settlement
      services, and shall provide for the defense of all claims or “suits”
      arising under this policy. Accordingly, you agree with us that we


      9
        In light of our conclusion the Continental policy is excess, we need not
address Appellants’ arguments that the “MCS-90" endorsement attached to the
CIGNA policy automatically renders it primary.

       We do note, however, that the attachment of the MCS-90 endorsement
supports our characterization of the CIGNA policy as “other collectible
insurance,” in that, vis-à-vis the public, the endorsement renders the policy more
like a standard risk-shifting insurance policy.

                                       - 17 -
       shall not have any duty to defend any such “suit,” or to pay with
       respect to any claim or “suit” any ALAE [Allocated Loss Adjustment
       Expense].

The “Claim Service Organization” is identified as “Ward THG,” 10 which appears

to be an entity separate from CIGNA. Thus, the endorsement indicates that Air

Liquide has arranged with a third party to provide adjustment and defense

services and that CIGNA is relieved of any duty to defend. Accordingly, CIGNA

has no duty to defend any insured, including Staffing Resources, under the

policy. 11

B. Air Liquide

       The CIGNA policy expressly disclaims any duty to defend, and there is no

indication in the policy that Air Liquide owes a defense to Staffing Resources.

The Deductible Endorsement reveals that Air Liquide has contracted with a third

party to provide adjustment and defense services, but that in no way obligates Air

Liquide to provide a defense to additional insureds. Simply put, the CIGNA




       10
         Ward THG is actually identified as the “Claims Handling Organization”
in the schedule which is a part of the same page of the endorsement, but it is clear
that Ward THG is the designated Claim Service Organization.
       11
         We are not persuaded by Appellants’ argument that the Endorsement’s
use of the word “accordingly” indicates that the duty to defend devolves upon
CIGNA if Air Liquide refuses to defend an additional insured. Such a reading is
not supported by the unambiguous and plain meaning of the language relieving
CIGNA of “any duty to defend.”

                                       - 18 -
policy eliminates a duty to defend, and Appellants’ attempts to locate any such

duty within the policy are misguided.

C. Continental

      The Continental policy provides that “We [Continental] have the right and

duty to defend any ‘insured’ against a ‘suit’ asking for such damages.” As we

have previously explained, both Canada and Air Liquide are insureds under the

Continental policy. Although the Continental policy disclaims the duty to defend

a suit “to which this insurance does not apply,” the Continental policy does apply

to this incident–it is merely excess in indemnification coverage to the CIGNA

policy. We therefore conclude that, by the plain terms of its policy with Staffing

Resources, Continental is obligated to defend Canada and Air Liquide.

                                  CONCLUSION

      Although we agree with the district court’s conclusion that Canada was an

employee of Staffing Resources and therefore was an insured along with Air

Liquide under the Continental policy, we find that the CIGNA policy is “other

collectible insurance” as contemplated by the Continental policy. As a result, for

purposes of liability indemnification, the Continental policy is, by its terms,

excess to the CIGNA policy, and the CIGNA policy is primary. The district

court’s judgment to the contrary is therefore REVERSED. However, as the

Continental policy imposes a duty on the insurer to defend all insureds, and the


                                        - 19 -
CIGNA policy contains no duty to defend, the district court’s judgment imposing

a duty upon Continental to defend Canada and Air Liquide is AFFIRMED. This

matter is REMANDED to the district court for such further proceedings as may be

appropriate.




                                      - 20 -
