Gen. Sec. Ind. Co. v. Mt. States Mut. Cas.

Decision Date19 February 2009
Docket NumberNo. 07CA2291.,No. 07CA2292.,07CA2291.,07CA2292.
Citation205 P.3d 529
PartiesGENERAL SECURITY INDEMNITY COMPANY OF ARIZONA, f/k/a Fulcrum Insurance Company, an Arizona corporation, Plaintiff-Appellant, v. MOUNTAIN STATES MUTUAL CASUALTY COMPANY, a New Mexico corporation; American Family Mutual Insurance Company, a Wisconsin corporation; Colony National Insurance Company, a Virginia corporation; Farmers Alliance Mutual Insurance Company, a Kansas corporation; Hartford Insurance Company; and Western Heritage Insurance Company, Defendants-Appellees.
CourtColorado Court of Appeals

Wood, Ris & Hames, P.C., Clayton B. Russell, Denver, Colorado, for Defendant-Appellee Farmers Alliance Mutual Insurance Company.

Fowler, Schimberg & Flanagan, P.C., Katherine Taylor Eubank, Denver, Colorado, for Defendant-Appellee Hartford Insurance Company.

Senter, Goldfarb & Rice, L.L.C., John D. Hayes, Maria T. Lighthall, Denver, Colorado, for Defendant-Appellee Western Heritage Insurance Company.

Opinion by Judge TAUBMAN.

Plaintiff, General Security Indemnity Company of Arizona (GSINDA), appeals the trial court's orders granting summary judgment in favor of six insurance company defendants, American Family Mutual Insurance Company (American), Colony National Insurance Company (Colony), Farmers Alliance Mutual Insurance Company (Farmers), Hartford Insurance Company (Hartford), Mountain States Mutual Casualty Company (Mountain), and Western Heritage Insurance Company (Western). We affirm.

In granting defendants' summary judgment motions, the trial court rejected GSINDA's claims that defendants were obligated to contribute to the defense of GSINDA's insured, Foster Frames, against a third-party construction defect complaint.

The sole issue for review is whether the trial court erred in determining that defendants, who insured Foster Frames' subcontractors (the sub-subcontractors), had no duty to defend Foster Frames as a matter of law because there was no "occurrence" alleged in the underlying complaints of the construction defect litigation. We perceive no error because we conclude that claims of defective workmanship, standing alone, do not constitute an "occurrence." Further, we conclude the broad allegations of "other" or "consequential" damages here are insufficient to give rise to a duty to defend.

I. Background

In 2003, Summit at Rock Creek Homeowners Association, Inc. (HOA) filed suit against D.R. Horton, Inc.—Denver (DRH) for alleged construction defects in the Summit at Rock Creek housing project. Specifically, the HOA asserted, inter alia, that DRH's negligence resulted in property damage and that DRH breached contractual and implied warranties, which also resulted in property damage. Eventually, the HOA settled its claims against DRH.

After the HOA complaint was filed, DRH filed a third-party indemnification complaint against its subcontractors, including Foster Frames. DRH asserted claims of breach of contract, breach of express warranty, and negligence, among others.

Because GSINDA had insured Foster Frames, it defended it against DRH's third-party complaint. The DRH third-party complaint was later dismissed by the trial court, and the dismissal was affirmed by a division of this court. See D.R. Horton, Inc.—Denver v. AAA Waterproofing, Inc., 2008 WL 4516292 (Colo.App. No. 06CA 1874, Oct. 9, 2008) (not published pursuant to C.A.R. 35(f)).

In the trial court, Foster Frames filed a fourth-party complaint against the sub-subcontractors, seeking indemnity if it were found liable to DRH.

The trial court stayed proceedings on Foster Frames' fourth-party claims, pending appeal of the dismissal of the DRH complaint.

In this action, GSINDA filed a complaint against the sub-subcontractors' insurance companies, seeking relief for their failure or refusal to share in the costs of the defense of Foster Frames against the DRH third-party complaint. GSINDA sought a declaratory judgment as to the duties owed by defendants with respect to Foster Frames. It also sought equitable contribution, equitable subrogation, equitable indemnity, and damages, in the nature of reimbursement, from defendants for the costs of defending or indemnifying Foster Frames.

GSINDA filed motions for partial summary judgment against defendants, asserting that as a matter of law the insurance policies issued to the sub-subcontractors obligated defendants to defend Foster Frames against DRH's third-party complaint because the underlying complaints alleged damage arguably covered under the insurance policies. Defendants filed cross-motions for summary judgment.

The trial court granted defendants' cross-motions for summary judgment in six separate orders and determined that defendants were not obligated to defend Foster Frames as a matter of law because the property damage alleged by the HOA was not caused by an "occurrence," as defined in defendants' insurance policies.

The trial court certified its summary judgment orders pursuant to C.R.C.P. 54(b) as final and appealable. GSINDA now appeals.

The trial court stayed all other issues in the insurance coverage action, pending resolution of DRH's appeal of the trial court's dismissal of its third-party complaint.

II. Coverage of Defective Workmanship Under Insurance Policies

GSINDA contends that the trial court erred in not following Hoang v. Monterra Homes (Powderhorn) LLC, 129 P.3d 1028 (Colo.App.2005) (Monterra Homes), rev'd on other grounds sub nom. Hoang v. Assurance Co. of Am., 149 P.3d 798 (Colo.2007), in its determination that the underlying HOA complaint and the DRH third-party complaint did not allege an "occurrence."

More specifically, GSINDA argues that the trial court should have applied Monterra Homes to determine that because the sub-subcontractors did not know, intend, or expect property damage to result from their work, the HOA complaint and DRH third-party complaint sufficiently alleged that defective workmanship by DRH resulted from an accident. Thus, in GSINDA's view, the underlying complaints alleged an occurrence that triggered coverage under the policies. We perceive no error in the trial court's orders because we conclude a claim of defective workmanship, standing alone, does not allege an occurrence.

We review a trial court's summary judgment order de novo. West Elk Ranch, L.L.C. v. United States, 65 P.3d 479, 481 (Colo.2002). Summary judgment is appropriate when the pleadings and supporting documentation demonstrate that no genuine issue of material fact exists and that the moving party is entitled to summary judgment as a matter of law. Id. The nonmoving party is entitled to the benefit of all favorable inferences from the undisputed facts, and all doubts as to the existence of a triable issue of fact must be resolved against the moving party. Id.

The sole issue here is whether the underlying complaints—the HOA complaint and the DRH third-party complaint-alleged an occurrence that would trigger a duty to defend under the insurance policies defendants issued to the sub-subcontractors. We conclude that they did not.

We review a trial court's interpretation of an insurance policy de novo, applying ordinary principles of contract interpretation. Cyprus Amax Minerals Co. v. Lexington Ins. Co., 74 P.3d 294 (Colo.2003). We give words in an insurance policy their plain and ordinary meaning, unless the policy evinces a contrary intent. McGowan v. State Farm Fire & Casualty Co., 100 P.3d 521, 522 (Colo.App.2004). We read policy provisions as a whole, rather than in isolation. Id. We cannot rewrite, add, or delete provisions in our interpretation. Id.

In determining whether a duty to defend exists, a trial court must limit its examination to the four corners of the underlying complaint. Cyprus Amax Minerals, 74 P.3d at 299.

An insurer's duty to defend arises when the underlying complaint against the insured alleges any facts that might fall within the coverage of the policy. Hecla Mining Co. v. New Hampshire Ins. Co., 811 P.2d 1083, 1089 (Colo.1991) (citing Douglass v. Hartford Ins. Co., 602 F.2d 934, 937 (10th Cir.1979)).

An insurance company has a duty to defend if the allegations in the complaint could impose liability under the policy. Id. (citing Douglass, 602 F.2d at 937). Alternatively, an insurance company has a duty to defend if the allegations in the complaint state a claim which is potentially or arguably within the policy coverage or if there is some doubt as to whether a theory of recovery within the policy coverage has been pleaded. Id. (citing City of Willoughby Hills v. Cincinnati Ins. Co., 9 Ohio St.3d 177, 459 N.E.2d 555, 558 (1984)).

With these principles in mind, we review the allegations of the complaint against the sub-subcontractors, which is based on the allegations in the HOA and DRH complaints. Then we review the terms of the insurance policies.

As relevant here, the HOA complaint alleged:

2. The Community's existing 226 units were completed in approximately February 2001.

....

31. On information and belief, these errors [enumerated in ¶ 30 of the complaint], deficiencies and defects, for which defendants are legally liable, have caused, and continue to cause, actual property damage, loss of use and/or other losses to the Association, and consequential damage to, and the loss of use of, various elements of the Project, over time, from the date those areas were first put to...

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