Summit Bank & Trust v. Am. Modern Home Ins. Co.

• Decision Date: 09 October 2014
• Docket Number: Civil Action No. 12–cv–02395–JLK
• Parties: Summit Bank & Trust, a Colorado Corporation, Plaintiff, v. American Modern Home Insurance Company, an Ohio Corporation, Defendant.
• Court: U.S. District Court — District of Colorado

71 F.Supp.3d 1168

Summit Bank & Trust, a Colorado Corporation, Plaintiff

v.American Modern Home Insurance Company, an Ohio Corporation, Defendant.

Civil Action No. 12–cv–02395–JLK

United States District Court, D. Colorado.

Signed October 9, 2014

Adam F. Aldrich, Kenneth Ronald Bennington, Bennington, Johnson, Biermann & Craigmile, LLC, Denver, CO, for Plaintiff.

Christopher John Shannon, Patrick Quinn Hustead, The Hustead Law Firm, P.C., Denver, CO, for Defendant.

ORDER DENYING AHMIC'S MOTION FOR SUMMARY JUDGMENT FOR FAILURE TO COMPLY WITH INSURANCE POLICY TERMS

Kane, U.S. Senior District Judge

This case involves a disputed insurance claim for losses incurred by the burglary of a large vacant building in Greeley, Colorado. Defendant American Modern Home Insurance Company (“AMHIC”) moves for summary judgment, Doc. 55, against Plaintiff Summit Bank & Trust (“Summit”), which brings the following four claims: bad faith breach of insurance contract, breach of contract, violations of C.R.S. § 10–3–1115 and 1116, and declaratory judgment per 28 U.S.C. § 2201 and Fed. R. Civ. P. 57. AMHIC argues that Summit's claims must fail because Summit did not comply with terms of the insurance policy. Based on the following, I DENY the Motion.

I. JURISDICTION AND VENUE

I have personal jurisdiction over AMHIC as: (a) it did business in the State of Colorado at times material to this action; (b) it purposefully availed itself of the rights and privileges of the State of Colorado at times material to this action; and (c) it committed the acts described below with resulting consequences in the State of Colorado.

I have subject matter jurisdiction over this matter per 28 U.S.C. § 1332 as the amount in controversy exceeds the sum of $75,000, and Summit and AMHIC are citizens of different states. I have supplemental jurisdiction over all other claims per 28 U.S.C. § 1367 as they form part of the same case or controversy. Per 28 U.S.C. § 1391, venue is proper in the District of Colorado as: (a) AMHIC transacted business in the State of Colorado, and (b) the events and omissions giving rise to Summit's claims occurred in the State of Colorado.

II. SUMMARY JUDGMENT STANDARD AND RULES OF INSURANCE CONTRACT INTERPRETATION

I repeat the catechism that summary judgment is appropriate where “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a) ; Adamson v. Multi. Cmty. Diversified Servs., Inc., 514 F.3d 1136, 1145 (10th Cir.2008). A fact is material if it could affect the outcome of the suit under governing law; a dispute of fact is genuine if a rational jury could find for the nonmoving party on the evidence presented. Adamson, 514 F.3d at 1145. In weighing these standards, I draw all reasonable inferences in favor of the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

The meaning of each term in an insurance contract is to be determined as a matter of Colorado law, with any ambiguity resolved in favor of Summit, as the insured. See Pompa v. Am. Family Mut. Ins. Co., 520 F.3d 1139, 1141 (10th Cir.2008). Mere disagreement between the parties about the meaning of a term, however, does not create ambiguity. Union Rural Elec. Ass'n v. Public Utils. Comm'n, 661 P.2d 247, 251 (Colo.1983). One may not read an ambiguity into a term where none exists in order then to resolve the resulting ambiguity against the insurer. Martinez v. Hawkeye–Sec. Ins. Co., 195 Colo. 184, 576 P.2d 1017, 1019 (1978) (“[C]ourts will not force an ambiguity in order to resolve it against an insurer.”). Also, the mere fact that a term may be susceptible to multiple interpretations, or that it may have different dictionary definitions in different contexts, does not alone create an ambiguity. See id. ; see also Allstate Ins. Co. v. Juniel, 931 P.2d 511, 513 (Colo.App.1996). To the contrary, and as a matter of basic semantics, a term is only ambiguous when it is reasonably susceptible to multiple interpretations in the context in which it is used. Juniel, 931 P.2d at 513 ; Terranova v. State Farm Mut. Auto. Ins. Co., 800 P.2d 58, 60 (Colo.1990).

To ascertain whether a certain provision is ambiguous, “the instrument's language must be examined and construed in harmony with the plain and generally accepted meaning of the words employed, and reference must be made to all the provisions of the agreement.” Radiology Professional Corp. v. Trinidad Area Health Ass'n, 195 Colo. 253, 256, 577 P.2d 748, 750 (1978) (citing Christmas v. Cooley, 158 Colo. 297, 406 P.2d 333 (1965) ). While exclusionary clauses exempting the insurer from providing coverage in certain circumstances must be written in clear and specific language and construed in favor of coverage, a court may not add, delete, or rewrite terms to extend coverage. McGowan v. State Farm Fire & Cas. Co., 100 P.3d 521, 523 (Colo.App.2004). The review of the contract must strive to give effect to all provisions so that none is rendered meaningless. Chandler–McPhail v. Duffey, 194 P.3d 434, 437 (Colo.App.2008).

III. FACTS

City Center West LP (“CCW”) is the owner of a former Hewlett–Packard scanner manufacturing facility located at 700 71st Avenue, Greeley, CO 80634 (the “Property”). Summit is the mortgagee and holds a first deed of trust on the Property. Because CCW had failed to maintain property insurance coverage for the Property, Summit as mortgagee force placed an insurance policy on the Property. Specifically, Summit obtained a Blanket Mortgage Security Insurance Policy, No. BM14–6835–0836 (the “Policy”), from AMHIC for the Property. The premium for the Policy has been paid and the Policy period extends from April 27, 2009 to until it is cancelled.

The Policy provided coverage for damage caused by vandalism or malicious mischief, which was defined as “the willful and malicious damage to or destruction of the property covered.” The Policy delimited that coverage, however, by stating that AMHIC shall not be liable for loss if the Property has been vacant¹ beyond a period of 30 consecutive days immediately preceding the loss, unless AMHIC has been notified of such vacancy, the appropriate premium has been paid therefore and Summit had secured the Property and conducted periodic inspections of the interior and exterior. The Policy did not specify the method or means by which the Property should be secured or the frequency of the periodic inspections required.

The Policy also contained a clause enumerating certain duties that the insured and its mortgagor must comply with after a loss. One of these duties is “produce for examination, with permission to copy, all records and documents that we may require.” The Policy further provides that “No action shall be brought unless there has been compliance with the policy provisions and the action is started within one year after the loss.”

The 270,000 square foot Property consists of multiple buildings, multiple levels, and multiple wings, bays, labs, and rooms. In May 2011, the electricity to the Property was shut off by CCW rendering the magnetic locking system on the doors inoperable. With the magnetic locks no longer effective, CCW fastened the doors shut with metal chains. The police reports indicate that several doors were fastened with “twine or chain.” Mr. Ron Maes, the Property's maintenance person, states that twine was never used, but that cables were used and also chains. Further, Mr. Maes explains that some doors were fastened with metal locks (the kinds with keys, e.g. Master Lock®), hasps, plates, and deadbolts. There was no alarm system or video surveillance at the Property at the time of the burglary. No representative of CCW or Summit conducted any inspection of the interior or exterior of the Property between July 8, 2011 and when the burglary was discovered by Mr. Maes on September 23, 2011.

Between July 8, 2011 and September 23, 2011, therefore, the Property was broken into and burglarized (the “Incident”). The insurance claim at issue in this action concerns this Incident. Copper piping and conduit, among other things, were stolen from the Property. The burglars damaged the Property to extract the copper piping and conduit. At least some portion of the damages to the Property was caused by theft and burglary. Before the Incident, there had been two other occurrences where individuals had broken into the building and damaged the Property, but Summit did not believe the losses from these occurrences exceeded the Policy deductible of $20,000 and did not report them.

Summit submitted a claim based on the damage caused by this burglary to AMHIC. After receipt of the claim, AMHIC requested documentation relating to the security in place at the Property prior to the burglary, as well as inspections that were conducted, on November 8, 2011, February 6, 2012, February 21, 2012, February 24, 2012, March 20, 2012, and September 10, 2012. Summit did not respond to these repeated written requests. Summit did, however, discuss with AHMIC verbally the security in place at the time of the Incident and offered AMHIC full access to the Property. AMHIC accepted that offer and, on October 17, 2011, Mr. Maes guided AMHIC's claims adjustor on her three-hour inspection of the Property, during which time she documented the damage with 150 photographs.

One week later, Mr. Maes followed-up with AMHIC's claims adjustor and indicated that CCW retained a cost-to-repair expert, Todd Hager, to assess the Property for damage. On November 3, 2011, AMHIC's claims adjustor spoke with Mr. Hager, who provided AMHIC with a verbal assessment of the damage following his own inspection. A written assessment was prepared by Mr. Hager and submitted to AMHIC in mid-November 2011 and a cost-to-repair estimate was submitted in late December 2011. The primary assessment included an overview of the damage with photographic references. During a follow-up inspection on November...