Liberty Mutual allegedly stonewalled a $5.86 million settlement for years, only to deny coverage after its own lawyers negotiated the deal.
A federal lawsuit in Utah accuses Liberty Mutual of systematically denying insurance coverage obligations before reversing course multiple times, leaving another insurer to pay a multimillion-dollar bill for a workplace injury case.
Berkley National Insurance Company and Quick Sand Inc. filed suit in the United States District Court for the District of Utah, alleging the insurer breached its duty to defend and indemnify parties in a fracking accident that injured a worker.
The case stems from a June 4, 2018 incident at an oil well site in Uintah County, Utah, where Spencer Strode, a Quick Sand employee, was injured while hauling silica sand for fracking operations. Strode and his wife later sued EP Energy, which owned the well, and Tops Well Services LLC, which had contracted Quick Sand for the job.
Under its master service agreement with Tops Well, Quick Sand had agreed to name both Tops Well and EP Energy as additional insureds on its liability policies and to indemnify them for bodily injury claims. Quick Sand carried commercial general liability coverage through First Liberty Insurance Corporation with $1 million in limits, plus umbrella coverage through Liberty Insurance Corporation providing an additional $4 million.
When Tops Well tendered its defense to Liberty Mutual in December 2019, the insurer refused. In a February 10, 2020 letter, Liberty Mutual denied the tender entirely, stating there was no "potential for coverage" under its policies, according to the complaint.
The denial triggered repeated demands. Berkley, which insured Tops Well, pressed Liberty Mutual to reconsider between May 2020 and January 2021. Meanwhile, Berkley paid defense costs on behalf of Tops Well and EP Energy totaling $111,823.94 through February 2022.
Liberty Mutual's position shifted in early 2022. On Jan. 20, the company agreed to defend Quick Sand in a separate lawsuit Tops Well had filed seeking a declaration of Quick Sand's contractual indemnity obligations. Liberty Mutual accepted the defense without issuing a reservation of rights letter, the complaint states.
One month later, Liberty Mutual agreed to defend Tops Well and EP Energy in the injury lawsuit itself, acknowledging that allegations suggested "damages plaintiffs sustained were caused, in whole or in part, by Quick Sand or someone on Quick Sand's behalf."
The policy language provides coverage for additional insureds "but only with respect to liability for bodily injury, property damage or personal and advertising injury caused, in whole or in part, by: 1. Your acts or omissions; or 2. The acts or omissions of those acting on your behalf."
But Liberty Mutual soon attempted to narrow its coverage commitment. In June and July 2022, the insurer sent letters claiming "there is no indemnity obligation if Quick Sand is not negligent."
The parties reached a settlement in October 2023 calling for payment of $5 million plus 12 percent interest. Liberty Mutual's appointed defense counsel primarily negotiated the deal. Yet on November 15, 2023, Liberty Mutual declined to contribute, claiming no conduct by Quick Sand had occurred that would trigger coverage.
A state court judge granted summary judgment in favor of Tops Well on July 1, 2024, finding that Quick Sand was required to indemnify Tops Well regardless of fault under the master service agreement.
Despite having defended Quick Sand in that lawsuit without reservation, Liberty Mutual denied all coverage on Nov. 20, 2024.
In January 2025, Liberty Mutual's coverage counsel claimed the insurer had found case law suggesting it would be liable only for "that small portion for which Strode/Quick Sand was found to be liable." The complaint alleges Liberty Mutual never identified this case law.
On April 2, 2025, Liberty Mutual acknowledged that if Quick Sand or Strode caused less than 10 percent of the injury, "then Liberty must insure Tops and EP up to policy limits." But the insurer then claimed coverage was limited to $1 million, not $5 million.
At a May 12, 2025 mediation, Liberty Mutual offered no more than $1 million. Two days later, the parties settled for $5,862,893. Berkley paid the full amount.
The state court entered an amended judgment on Aug. 22, 2025, holding Quick Sand liable for $6,063,956.52, including the settlement, unpaid defense costs of $108,180.44, and attorney fees of $46,441.54.
The lawsuit seeks declarations that Liberty Mutual breached its duties, along with claims for breach of contract, bad faith, and breach of fiduciary duty. Berkley is pursuing damages exceeding $6 million, plus attorney fees topping $217,000, and punitive damages.
No determination has been made on the allegations.
