Struble v. American Family Ins. Co.

• Citation: 172 P.3d 950
• Decision Date: 18 October 2007
• Docket Number: No. 06CA0522.,06CA0522.
• Parties: Christopher S. STRUBLE and Carol S. Struble, Plaintiffs-Appellants, v. AMERICAN FAMILY INSURANCE COMPANY, Garnishee, Appellee.
• Court: Court of Appeals of Colorado

172 P.3d 950

Christopher S. STRUBLE and Carol S. Struble, Plaintiffs-Appellants, v. AMERICAN FAMILY INSURANCE COMPANY, Garnishee, Appellee.

No. 06CA0522.

Colorado Court of Appeals, Div. IV.

October 18, 2007.

Mulliken Weiner Karsh Berg & Jolivet, Gregory M. O'Boyle, Colorado Springs, Colorado, for Plaintiffs-Appellants.

Lambdin & Chaney, LLP, L. Kathleen Chaney, Laura Trask Schneider, Denver, Colorado, for Garnishee-Appellee.

Opinion by Judge FURMAN.

In this garnishment proceeding to determine insurance coverage under a commercial general liability (CGL) policy, the judgment creditors, Christopher S. Struble and Carol S. Struble, appeal the summary judgment in favor of the garnishee, American Family Insurance Company. The garnishment arises in connection with a default judgment previously obtained by the Strubles in an action against defendants, Timothy and Cheryl Fox (collectively, Fox) and Central Colorado Roofing of Colorado Springs, Inc. (CCRI). The Strubles alleged Fox was insured under a CGL policy issued by American Family, but the district court ruled otherwise. We reverse and remand for further proceedings.

I. Background

E.C. Schwartz owned Central Colorado Roofing (CCR). American Family had issued a CGL insurance policy to Schwartz, doing business as CCR. The policy provided coverage of $1 million for a single occurrence and $2 million for aggregate policy limits.

Schwartz sold CCR to Fox, who filed articles of incorporation and changed the name of the company from CCR to CCRI. Fox then met with an American Family agent sometime in February 2003 to obtain insurance for CCRI. Fox claimed that at this meeting, the agent sold him an insurance policy.

On February 13, 2003, American Family provided a certificate of insurance to the Piles Peak Regional Building Department. It listed Fox and CCR as insureds and stated the policy was effective until March 30, 2003.

In the meantime, the Strubles contracted with CCRI, using a CCR form contract, to replace their hail-damaged roof. CCRI began to tear off the old roof in early March 2003, leaving an unfinished portion over the kitchen, bathroom, and laundry room exposed to the elements.

On March 17, 2003, a large snowstorm caused significant water damage to the Strubles' house. The Strubles filed suit against Fox, CCRI, their own homeowners insurance carrier, and Schwartz, alleging that, because their roof had been removed and CCRI had not protected their home from the elements properly, they sustained significant property damage.

The Strubles reached a settlement both with their homeowners insurance carrier and with Schwartz, and subsequently obtained a default judgment against Fox and CCRI for $60,686.49.

The Strubles served a writ of garnishment on American Family, seeking to garnish an insurance policy for the payment of the full amount of the default judgment. In its answers to the writ of garnishment, American Family denied any obligation. The Strubles thereafter filed a traverse.

Before a hearing was held on the traverse, American Family filed a motion for summary judgment. Attached to its motion was the Schwartz insurance policy. The effective period of this policy was from February 12, 2003 to February 12, 2004. The policy provided:

Your rights and duties under this policy may not be transferred without our written consent except in the case of death of an individual named insured.

If this policy has been in effect for sixty days or more, or is a renewal of a policy we issued, we may cancel this policy by mailing through first-class mail to the first Named Insured written notice of cancellation . . . [a]t least 45 days before the effective date of cancellation if we cancel for any other reason.

We may only cancel this policy based on one or more of the following reasons[:] . . . [a] substantial change in the exposure or risk other than that indicated in the application and underwritten as of the effective date of the policy unless the first Named Insured has notified us of the change and we accept such change.

The Strubles filed a response to American Family's motion for summary judgment. Attached to its response was an affidavit from Fox and several documents. The Fox affidavit stated:

On November 15, 2002, Bud Schwartz sold the business "Central Colorado Roofing" and his interest in the name "Central Colorado Roofing" to me pursuant to an "Agreement for Sale of Business Assets." I formed the corporation Central Colorado Roofing of Colorado Springs, Inc. to conduct the Central Colorado Roofing business purchased from Mr. Schwartz.

In or around February 2003, I met with [the agent] to discuss obtaining insurance from American Family Insurance Company for Central Colorado Roofing. I informed [the agent] when we met that I had purchased Central Colorado Roofing from Mr. Schwartz, and we discussed the fact that I needed to insure Central Colorado Roofing. [The agent] did not inform me of any issues with obtaining the insurance, and he proceeded to write a policy of insurance. At that time, I entered into an agreement with American Family Insurance for a policy of general liability insurance issued to Central Colorado Roofing, and I paid approximately two months of insurance premiums by providing a check payable to American Family Insurance to [the agent].

When I left [the agent]'s office, I believed I was insured by American Family Insurance, and I acted accordingly. If I would have known that American Family Insurance took the position that my company was not insured, I would not have paid the premiums to American Family Insurance, and I would have cleared up the misunderstanding regarding the state of Central Colorado Roofing's insurance prior to performing work for customers such as [the Strubles].

At some point, I received notice from American Family Insurance that [it] did not intend to extend the policy beyond March 30, 2003.

Notes of a telephone conversation, taken by American Family, discussed the meeting Fox had with the American Family insurance agent. The agent told Fox that, because CCRI's business would be sixty percent commercial roofing, American Family would not renew the Schwartz policy. American Family sent out a nonrenewal notice that extended the Schwartz policy forty-five days, or until March 30, 2003. The agent did not know why American Family issued the certificate of insurance in Fox's name.

An internal memo between two employees of American Family questioned whether American Family would allow a policy to continue after a change in ownership without being rewritten completely.

An email between two employees of American Family stated the company would not provide coverage for Fox because of the amount of commercial roofing work done by the business. It further stated, "[A]pparently we have a cancellation effective for 3/30/03."

American Family filed its reply, and submitted the affidavit of a Colorado manager that stated Fox and CCRI were not named insureds on the Schwartz policy, and American Family records showed no policies issued to Fox or CCRI. The affidavit of the insurance agent for American Family likewise stated Fox and CCRI were not named insureds on a policy, and that, because of CCRI's business plans, American Family refused to insure them. It further stated:

Instead of canceling on February 12, 2003, the policy renewal date, American Family extended the Bud Schwartz, DBA Central Colorado Roofing policy . . . for a forty-five day period, through March 30, 2003.

Because the Bud Schwartz, DBA Central Colorado Roofing policy . . . was extended for 45 extra days, on February 13, 2003, a new Certificate of Insurance was issued to the Pikes Peak Regional Building Department by my office.

My office accidentally issued the Certificate of Insurance in Tim Fox's name, but showed the Business as Central Colorado Roofing. The certificate should have been issued in Bud Schwartz' name.

Tim Fox and Central Colorado Roofing of Colorado Springs, Inc. never filled out an application for insurance, and a separate policy of insurance from American Family Insurance was never issued in either Tim Fox's name or to Central Colorado Roofing of Colorado Springs, Inc. [sic]

After reviewing the affidavits, the district court agreed with American Family and granted the motion for summary judgment. The court found that American Family had not issued a new policy to Fox or CCRI, that as a matter of law the certificate of liability insurance did not create a contractual relationship, and that the policy issued to Schwartz was not transferable. The Strubles appeal the district court's summary judgment.

II. Standard of Review

Appellate review of summary judgment is de novo. Aspen Wilderness Workshop, Inc. v. Colo. Water Conservation Bd., 901 P.2d 1251, 1256 (Colo.1995).

Summary judgment is appropriate when the pleadings and supporting documents demonstrate that no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. C.R.C.P. 56(c). A material fact is one that will affect the outcome of the case. GE Life & Annuity Assurance Co. v. Fort Collins Assemblage, Ltd., 53 P.3d 703, 706 (Colo.App. 2001). When the pleadings and affidavits show material facts are in dispute, it is error to grant summary judgment. The facts must be viewed in the light most favorable to the nonmovant. Id.

III. Summary Judgment

The Strubles contend the district court erred in granting summary judgment in favor of American Family, and genuine issues of material fact exist as to whether Fox was covered under an American Family policy. We agree.

American Family's motion for summary judgment was filed in the context of a C.R.C.P. 103 garnishment proceeding. In such a proceeding, the judgment creditor's rights against the garnishee are no greater than those of the judgment debtor. See State v. Elkins, 84 Colo. 409, 414, 270 P. 875, 877 (1928). "[U]nder C.R.C.P. 103, the judgment creditor who is...