By Jeffrey T. Donner, Esq.

August 27, 2026

An insurer’s duty to defend is not always defeated simply because the underlying plaintiffs did not accuse the named insured of wrongdoing. In DCP Operating Company, LP v. St. Paul Fire and Marine Insurance Co., No. 2:24-cv-00628-SMD-KRS (D.N.M. Jan. 23, 2026), a federal court applying New Mexico law held that St. Paul had to defend DCP as an additional insured even though the underlying personal-injury complaint alleged negligence by DCP, not by St. Paul’s named insured, J&M Welding & Fabrication, Inc.

The decision is important, but its limits are equally important. District Judge Sarah M. Davenport did not decide that St. Paul must indemnify DCP, reimburse the settlement of the underlying lawsuit, or pay damages for bad faith. As to St. Paul’s ultimate payment obligations, the court decided only that the possibility of covered liability was sufficient to trigger a defense. Whether J&M was actually negligent—and whether the settlement was reasonable and made in good faith—remained unresolved.

That distinction between potential coverage and proven liability drove the result.

The Welding Accident and the Contractual Allocation of Risk

DCP operated the Linam Ranch gas-processing plant near Hobbs, New Mexico. It hired J&M under a Master Goods and Services Agreement to perform welding work associated with installing siphons on a gathering line. The siphons were intended to address condensate and vapor buildup in the line.

On October 28, 2021, J&M employees Manuel Saenz and Jose Owens were injured when gas vapor ignited while they were performing welding work. The injured workers and family members later brought a state-court action against DCP. Their complaint alleged that DCP and its personnel were negligent, but it did not expressly allege negligence by J&M.

The contract required J&M to maintain specified insurance and to name DCP and affiliated entities as additional insureds. J&M obtained a commercial general liability policy from St. Paul. The policy used the term “additional protected persons” and extended that status to organizations J&M had agreed in writing to add, but only for covered bodily injury or property damage that “results from” J&M’s work. The endorsement also stated that it would not provide coverage broader than the written contract required.

DCP tendered the personal-injury action to St. Paul for defense and indemnification. St. Paul denied coverage.

The Parties Advanced Competing Interpretations of the Coverage

DCP focused on the endorsement’s “results from your work” language. It argued that the endorsement required only a causal relationship between J&M’s work and the injuries, not an allegation or finding that J&M was negligent. The employees were performing J&M’s welding work when vapor ignited and burned them; according to DCP, that connection was sufficient.

St. Paul read the policy together with the parties’ master agreement. The contract required additional-insured coverage only to the extent of J&M’s contractual indemnity obligations, and those obligations were tied to injury caused by J&M or its personnel or by J&M’s negligent or wrongful acts or omissions. St. Paul therefore argued that DCP was covered only for liability attributable to J&M’s fault. Because the underlying complaint blamed only DCP, St. Paul contended that there was no potentially covered claim to defend.

The court did not simply adopt DCP’s broad causal-connection theory. New Mexico’s anti-indemnity statutes first required the court to determine how much of the parties’ contractual risk transfer was legally enforceable.

New Mexico’s Anti-Indemnity Law Narrowed the Coverage but Did Not Eliminate the Defense

St. Paul invoked two New Mexico statutes. The first, N.M. Stat. Ann. § 56-7-2, restricts indemnity agreements associated with oil, gas, or water wells and mineral mines. The court held that this oilfield statute did not apply. J&M’s work occurred on a line near a gas-processing facility and supported downstream transportation and processing; it was not drilling, well servicing, or another operation performed at or functionally integral to the wellhead. In reaching that conclusion, the court relied substantially on Holguin v. Fulco Oil Services, LLC, 2010-NMCA-091, 149 N.M. 98, 245 P.3d 42, and distinguished St. Paul Fire & Marine Insurance Co. v. Sedona Contracting, Inc., 474 F. Supp. 3d 1211, 1219–20 (D.N.M. 2020).

The second statute, N.M. Stat. Ann. § 56-7-1, restricts indemnity and insurance obligations in contracts relating to the construction, alteration, repair, or maintenance of real property. The court held that this construction anti-indemnity statute did apply. The welding and siphon-installation work constituted maintenance or improvement of a structure on real property and therefore fell within the construction statute.

As a result, the master agreement could not require J&M to indemnify or insure DCP for DCP’s own negligence. The court treated the agreement as enforceable only to the extent DCP’s loss was attributable to J&M’s negligence or fault. The statute did not independently rewrite St. Paul’s policy; it limited the master agreement’s enforceable additional-insured requirement, and that limitation flowed into a policy endorsement that expressly prohibited coverage broader than the written contract required. In other words, DCP did not prevail on the theory that any injury merely connected to J&M’s work necessarily created coverage.

That narrowing of the available coverage did not end the duty-to-defend analysis. It merely identified the covered possibility: liability caused, at least in part, by J&M’s conduct. The next question was whether the underlying allegations and the information reasonably available to St. Paul left that possibility open.

Potential Negligence by J&M Was Enough to Trigger a Defense

Under the New Mexico law applied by the court, the duty to defend is broader than the duty to indemnify. The insurer must defend when the complaint potentially falls within coverage; facts known to the insurer or discoverable through reasonable investigation may also reveal potential coverage. Doubts are resolved in favor of the insured, and the duty continues unless the claim is clearly shown to fall outside the policy.

The underlying complaint did not expressly label J&M negligent. Nevertheless, it placed Saenz, Owens, and the welding operation at the center of the accident: DCP hired the welding contractor, the workers came to the pipeline to perform the work, and the explosion occurred in the course of that operation. The court concluded that those factual allegations left room for questions about the adequacy of J&M’s performance.

The developing evidence reinforced that possibility. A DCP supervisor testified that the workers disregarded instructions to stop operating equipment. Saenz and Owens testified that they did not hear those instructions. Other evidence concerned repeated gas-monitor alarms and whether the workers had been warned. DCP also raised questions about J&M’s training, supervision, equipment, safety procedures, and compliance with the master agreement. The evidence did not establish who was negligent, but it created a genuine dispute over whether J&M might have contributed to the accident.

That uncertainty was decisive. Even under St. Paul’s own narrower interpretation—coverage only for loss attributable to J&M’s negligence—the record did not eliminate the possibility of coverage. St. Paul therefore had a duty to defend.

The court’s reasoning was consistent with two New Mexico Court of Appeals decisions, City of Albuquerque v. BPLW Architects & Engineers, Inc., 2009-NMCA-081, 146 N.M. 717, 213 P.3d 1146, and Windham v. L.C.I.2, Inc., 2012-NMCA-001, 150 N.M. 514, 268 P.3d 528. Those cases recognize that a contractual duty to defend suits potentially arising from the contractor’s conduct can remain enforceable even though anti-indemnity law bars indemnification for the additional insured’s own negligence. Their procedural limits matter: BPLW addressed a contractual defense obligation, and the insurer in Windham conceded that the policy provided a defense and disputed only whether anti-indemnity law made that obligation unenforceable.

The result also resembles First Mercury Insurance Co. v. Cincinnati Insurance Co., 882 F.3d 1289, 1298–1303 (10th Cir. 2018). Applying New Mexico law, the Tenth Circuit found a defense obligation even though the complaint did not name or expressly accuse the subcontractor whose conduct could trigger additional-insured coverage. The allegations and known defenses nevertheless implicated the subcontractor’s work. First Mercury involved different endorsement language and a project-specific policy, so it is a close analogue rather than an exact match.

The ruling also illustrates an important feature of New Mexico law: the analysis is not necessarily confined to the causes of action and labels selected by the underlying plaintiff. In Dove v. State Farm Fire & Casualty Co., 2017-NMCA-051, 399 P.3d 400, the New Mexico Court of Appeals explained that information known to the insurer or disclosed through reasonable investigation may demonstrate potential coverage. That principle mattered in DCP Operating because the discovery record raised a covered possibility that the complaint did not expressly articulate.

A Duty to Defend Was Not a Decision on Indemnity

DCP won partial summary judgment on the duty to defend. St. Paul’s motion for summary judgment on DCP’s breach-of-contract claim was denied. But the court held that indemnity could not be resolved on the present summary-judgment record.

Two separate factual issues remained. First, because DCP had settled the underlying action after St. Paul declined the tender, the court needed a developed record showing that the settlement was reasonable and made in good faith before St. Paul could be required to reimburse it. The January 2026 record did not permit the court to decide those questions.

Second, ultimate indemnity depended on actual fault. The construction anti-indemnity statute limited enforceable coverage to loss caused by J&M’s negligence or fault. The disputed testimony did not establish whether the accident was caused by J&M, DCP, or both. Potential J&M fault was enough for a defense; ultimate indemnity would require proof that J&M’s negligence or fault caused at least part of the covered loss.

The court therefore did not order St. Paul to pay the settlement. It did not decide what portion, if any, of the settlement St. Paul must pay, adjudicate DCP’s bad-faith claim, or rule on its statutory unfair-insurance-practices claim. Describing the decision as a complete coverage victory for DCP would overstate what the court held.

St. Paul’s Other Arguments Did Not Produce Summary Judgment

St. Paul also relied on the injured employees’ inability to sue J&M directly because of workers’ compensation exclusivity. The court rejected that argument. The bar against an employee’s tort claim against the employer did not eliminate separate contractual rights of defense and indemnity held by a third party. That exclusivity may help explain why the underlying complaint asserted no negligence count against J&M; it did not establish that J&M could not have been factually responsible for the accident.

DCP had also sued J&M in Colorado under the master agreement’s forum-selection clause. The Colorado court denied J&M’s motion for summary judgment, but the New Mexico federal court held that the ruling had no collateral-estoppel effect because it was not a final judgment. The Colorado action later settled and was voluntarily dismissed with prejudice without an adjudication of fault or indemnity. At most, the summary-judgment ruling had allowed DCP to pursue indemnity; it did not determine that J&M or St. Paul ultimately owed it.

Finally, St. Paul argued that DCP Midstream lacked standing because DCP Operating had signed the master agreement. The court concluded that the corporate structure demonstrated DCP Operating’s indirect control of DCP Midstream and denied summary judgment on that ground.

Florida Law Would Not Necessarily Produce the Same Analysis

Florida businesses and practitioners should not assume that a Florida court would follow every step of DCP Operating. Florida ordinarily determines the duty to defend by comparing the allegations of the underlying complaint with the policy. Even when the actual facts differ, the allegations generally control. Jones v. Florida Insurance Guaranty Ass’n, Inc., 908 So. 2d 435, 442–43 (Fla. 2005). The New Mexico court, by contrast, also relied on information known or reasonably discoverable by the insurer, including disputed deposition testimony developed after the underlying complaint was filed.

Florida law also makes the precise wording of the additional-insured endorsement critical. In Container Corp. of America v. Maryland Casualty Co., 707 So. 2d 733, 735–37 (Fla. 1998), the Florida Supreme Court held that broad operations-based language covered an additional insured’s own negligence because the policy contained no express limitation to vicarious liability. The Court also held that the indemnity agreement did not control because the policy did not incorporate it.

By contrast, in Garcia v. Federal Insurance Co., 969 So. 2d 288, 292–94 (Fla. 2007), the Court held that coverage “with respect to liability because of acts or omissions” of the named insured was limited to vicarious liability and was narrower than “arising out of” language. Garcia expressly declined to decide the separate duty-to-defend issue, but it demonstrates how a few words can materially change the scope of additional-insured coverage.

St. Paul’s endorsement—covering injury that “results from” J&M’s work, subject to a limitation tying coverage to the written contract—does not squarely match either Florida decision. A Florida outcome should therefore not be predicted categorically. The case is useful to Florida readers primarily as a warning to examine the exact endorsement, the underlying contract, the governing anti-indemnity law, and the jurisdiction’s particular method for determining the duty to defend.

Practical Lessons for Businesses, Contractors, and Insurers

Read both documents—and determine whether the policy incorporates the contract. Blanket additional-insured endorsements commonly condition coverage on a written agreement and may prohibit coverage broader than the contract requires. The indemnity, additional-insured, primary-and-noncontributory, and defense provisions should be reviewed as a coordinated risk-transfer package, not as isolated clauses. Contractual limits do not automatically narrow a policy endorsement that does not incorporate them.

Do not rely on a certificate of insurance. A certificate may show that insurance exists, but it ordinarily does not create coverage or reveal the endorsement’s limiting language. The executed contract, complete policy, and actual additional-insured endorsement are the documents that matter.

A tender should identify every factual basis for potential coverage. In a jurisdiction that permits consideration of facts beyond the complaint, the additional insured should provide the operative contract, endorsement, accident evidence, and other information showing how the named insured’s work or conduct may be implicated. The tender should be supplemented when discovery or investigation reveals additional covered facts. In a complaint-focused jurisdiction such as Florida, counsel must pay particular attention to the pleaded allegations and any recognized exception to the ordinary rule.

Anti-indemnity statutes are activity-specific and jurisdiction-specific. The same contract can produce different results depending on the governing law and the legal classification of the work. In DCP Operating, work on gas infrastructure fell outside New Mexico’s oilfield statute but within its construction statute. That classification materially narrowed the available coverage.

Preserve the record supporting any settlement. When an insurer refuses to defend and the insured later settles, the coverage dispute may then turn on the settlement’s reasonableness and good faith. The insured should document the liability exposure, damages analysis, negotiations, notice to the carrier, and reasons for settling.

Do not confuse a defense ruling with an indemnity ruling. The duty to defend often turns on possibility; indemnity turns on the facts ultimately established. A court can require an insurer to fund a defense while leaving every question about payment of a judgment or settlement for later resolution.

The Narrow but Important Holding

DCP Operating does not establish that every additional insured is entitled to a defense whenever an accident occurs during a contractor’s work. Nor does it establish that broad “results from” language overrides a written-contract limitation or an anti-indemnity statute.

Its narrower lesson is more useful: when the policy covers liability attributable to the named insured, the absence of an express allegation against that insured does not necessarily end the inquiry—at least under New Mexico law. If the allegations and reasonably discoverable facts leave open the possibility that the named insured contributed to the loss, the insurer may still owe the additional insured a defense even though actual indemnity remains uncertain.

The decision is a federal trial-court ruling applying New Mexico law, not a nationwide rule or binding appellate precedent. But it is a careful illustration of why additional-insured disputes turn on the interaction among four things: the policy wording, the underlying contract, the governing anti-indemnity statute, and the facts known or reasonably discoverable at tender and as the record later develops.

This article is provided for general informational purposes and is not legal advice. Insurance-coverage questions depend on the governing law, the complete policy and endorsements, the operative contracts, and the specific facts of the claim.