Bangert Bros. Const. Co., Inc. v. Americas Ins. Co.

• Decision Date: 29 July 1994
• Docket Number: Civ. A. No. 93-Z-1937.
• Citation: 888 F. Supp. 1069
• Parties: BANGERT BROTHERS CONSTRUCTION CO., INC., Plaintiff, v. AMERICAS INSURANCE COMPANY and Allendale Mutual Insurance Company, Defendants.
• Court: U.S. District Court — District of Colorado

888 F. Supp. 1069

BANGERT BROTHERS CONSTRUCTION CO., INC., Plaintiff, v. AMERICAS INSURANCE COMPANY and Allendale Mutual Insurance Company, Defendants.

Civ. A. No. 93-Z-1937.

United States District Court, D. Colorado.

June 21, 1995.

Nunc Pro Tunc July 29, 1994.

William J. Bourke, III, Jack D. Henderson, Clanahan, Tanner, Downing & Knowlton, P.C., Denver, CO, Kyle E. Hart, M.T. Fabyanske, Carrie A. Green, Dwight G. Rabuse, Fabyanske, Svoboda, Westra, Davis & Hart, P.A., Minneapolis, MN, for Bangert Bros Const. Co., Inc.

John D. Phillips, Jr., Hall & Evans, Denver, CO, Danny G. Shaw, Gerardo R. Barrios, Phelps Dunbar, New Orleans, LA, for Americas Ins. Co.

Stephen D. Gurr, Brownstein, Hyatt, Farber & Strickland, P.C., James A. Clark, Baker & Hostetler, Denver, CO, John D. Shuff, Lynn J. Grano, Andrew G. Dulaney, Robins, Kaplan, Miller & Ciresi, San Francisco, CA, for Allendale Mut. Ins. Co.

ORDER GRANTING SUMMARY JUDGMENT

WEINSHIENK, District Judge.

This matter is before the Court on remand from the United States Court of Appeals for the Tenth Circuit, Bangert Bros. Construction Co. v. Americas Insurance Co., No. 94-1412, (10th Cir. May 1, 1995) (order of remand for written opinion), in order for this Court to explain more fully the decision to grant summary judgment in favor of defendants.

Plaintiff entered a contract with the City and County of Denver to construct runways at Denver International Airport. Plaintiff subcontracted with CSI Trucking, Inc., to supply the concrete needed for the runways, and CSI subcontracted with Kiewit Western to manufacture the concrete. Specifications in the contract with the City of Denver required the sand hopper of the concrete mixing machine to be covered by a "scalper screen" to prevent clay balls and other foreign objects from mixing with the concrete. Kiewit failed to provide the required screen, allowing clay balls to be incorporated into the concrete. In addition, the cement mixture used reacted unfavorably with other concrete ingredients. As a result, the runways cracked and developed lumps from the clay balls.

As a direct consequence of these problems, the City of Denver refused to compensate plaintiff until the work met contract specifications. In this action, plaintiff seeks reimbursement from defendants for all sums it has or may become legally obligated to pay as a result of the defective work. Plaintiff also seeks an order requiring defendants to defend plaintiff against any claims filed by the City of Denver.

Defendant Americas Insurance Company filed a Motion For Judgment on the Pleadings which the Court treated as a motion for summary judgment. Defendant Allendale Mutual Insurance Company also filed a motion for summary judgment. A hearing on these two motions was held on July 26, 1994, at which time summary judgment was granted in favor of both defendants in a ruling from the bench. This memorandum opinion is being issued in support of that ruling at the request of the Court of Appeals for the Tenth Circuit.

Summary judgment is appropriate when "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Ash Creek Mining Co. v. Lujan, 934 F.2d 240, 242 (10th Cir.1991). The relevant inquiry is whether the evidence presents a sufficient disagreement to require submission to a fact finder or whether it is so one-sided that one party must prevail as a matter of law. Anthony v. United States, 987 F.2d 670, 674 (10th Cir. 1993); Merrick v. Northern Natural Gas, Co., 911 F.2d 426, 429 (10th Cir.1990). Only disputes over facts that might affect the outcome of the case will preclude the entry of summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Allen v. Dayco Prods., Inc., 758 F.Supp. 630, 631 (D.Colo.1990).

In reviewing a motion for summary judgment, the Court must view the evidence in the light most favorable to the non-moving party. Eaton v. Jarvis Prod. Corp., 965 F.2d 922, 925 (10th Cir.1992); Newport Steel Corp. v. Thompson, 757 F.Supp. 1152, 1155 (D.Colo.1990). All doubts must be resolved in favor of the existence of triable issues of fact. Boren v. Southwestern Bell Tel. Co., 933 F.2d 891, 892 (10th Cir.1991); Mountain Fuel Supply v. Reliance Ins. Co., 933 F.2d 882, 889 (10th Cir.1991).

As a preliminary matter, the Court rules that plaintiff was the contractually obligated party in this case. The fact that plaintiff chose to use a subcontractor rather than do the runway work itself did not relieve plaintiff of any obligations under the contract.

This case centers on Colorado insurance law. Each company offered third-party general liability insurance to plaintiff, which provides coverage to persons or other property from damage resulting from defective contract work. These policies were not intended to serve as performance bonds or builder's risk policies. See A.D. Irwin Investments, Inc. v. Great American Ins. Co., 28 Colo.App. 570, 475 P.2d 633, 635 (1970) (insurance company, by contracting for liability insurance, did not "become a guarantor of perfect performance"). The Court must determine whether the policy provisions excluded defendants from covering plaintiff's faulty workmanship in constructing the runways.

The basic premise of Colorado insurance law was summarized in Houtz v. Union Ins. Co., 865 P.2d 847, 849 (Colo.App. 1993), rev'd on other grounds, Union Ins. Co. v. Houtz, 883 P.2d 1057 (Colo.1994):

An insurance policy is a contract, to be interpreted to carry out the intent of parties, and the language of the policy must be read as a whole. Urtado v. Allstate Insurance Co., 187 Colo. 24, 528 P.2d 222 (1974). Like any other contract, the words and phrases in an insurance policy are to be given their plain, everyday meaning. In re Estate of Daigle, 634 P.2d 71 (Colo. 1981). Obscure definitions and forced construction should be avoided. Allstate Insurance Co. v. Starke, 797 P.2d 14 (Colo. 1990).

The central issue in this case is whether the exclusions incorporated into the Americas and Allendale insurance contracts exempt these insurance carriers from covering plaintiff's defective work. It is settled law that ambiguities in insurance contracts should be construed against the insurer. Republic Ins. Co. v. Jernigan, 753 P.2d 229, 232 (Colo. 1988). To benefit from an exclusionary provision in a particular contract of insurance, the insurer must establish that the exemption applies in the particular case. Am. Family Mut. Ins. Co. v. Johnson, 816 P.2d 952, 953 (Colo.1991). "A mere disagreement between the parties regarding the interpretation of the policy does not create an ambiguity." Union Ins. Co. v. Houtz, 883 P.2d at 1061. When a dispute has arisen between an insurer and its insured, the standard for determining coverage is not what an expert in interpreting policies or clauses would consider their meaning to be, but rather what an ordinary person would reasonably consider the boundaries of coverage to be. Standard Marine Ins. Co. v. Peck, 140 Colo. 56, 342 P.2d 661, 663 (Colo.1959).

Each policy was issued subject to specific exclusions spelled out in the insurance contract. The Americas policy specifically excludes faulty workmanship and defective performance. See Exclusions E, G, and I.¹ Allendale's policy excludes faulty workmanship as well as contamination and cracking. See Group B Exclusions 3, 4, 6 and 7.² The language in each of these exclusions is plain, clear, and unambiguous. In addition, these types of exclusions have been upheld as valid by the Colorado Courts. See Union Ins. Co. v. Kjeldgaard, 820 P.2d 1183, 1187 (Colo.App. 1991) and Ohio Cas. Ins. v. Imperial Contractors, 765 P.2d 1060, 1061-62 (Colo.App. 1988).

The complaint in this case asserts plaintiff's defective work product and performance as the only basis for coverage; it does not allege any action brought by a third party for damage to other property arising from the work performed, nor does it seek recovery for damage to property owned by third parties. Since all of the damaged runways were either cracked or contained clay inclusions resulting from ...