Colo. Special Dists. Prop. & Liab. Pool v. Lyons

Decision Date02 March 2012
Docket NumberNo. 10CA2571.,10CA2571.
PartiesCOLORADO SPECIAL DISTRICTS PROPERTY AND LIABILITY POOL, Plaintiff–Appellee, v. William S. LYONS, III; and William S. Lyons, Jr., Defendants and Third–Party Plaintiffs–Appellants, v. County Technical Services, Inc., Third–Party Defendant–Appellee.
CourtColorado Court of Appeals

OPINION TEXT STARTS HERE

Nathan, Bremer, Dumm & Myers, P.C., J. Andrew Nathan, Marni Nathan Kloster, Denver, Colorado, for PlaintiffAppellee and Third–Party DefendantAppellee.

Roberts Levin Rosenberg, P.C., Bradley A. Levin, Kerri J. Atencio, Denver, Colorado, for DefendantsAppellants.

Opinion by Judge LOEB.

¶ 1 Defendants, William S. Lyons Jr. and William S. Lyons III (the Lyonses), appeal the district court's order, pursuant to C.R.C.P. 12(b)(1), dismissing their claim for bad faith breach of insurance contract against plaintiff, Colorado Special Districts Property and Liability Pool (the Pool), and third-party defendant, County Technical Services, Inc. (CTSI), on the ground that the Pool and CTSI are immune from liability under the Colorado Governmental Immunity Act (CGIA). We affirm and remand with directions.

I. Background and Procedural History

¶ 2 The following facts are undisputed for the purposes of this appeal.

¶ 3 In early 2006, several banks purchased bonds issued by Lincoln Creek Metropolitan District (the District), a quasi-municipal corporation located in Douglas County. The District issued the bonds to finance construction of a proposed master-planned residential community called Lincoln Creek Village. The Lyonses were members of the District's board of directors. The Lyonses were also on the board of directors of LCV, LLC, which was the developer of Lincoln Creek Village.

¶ 4 As pertinent here, the banks brought an action (the underlying lawsuit) against LCV and the Lyonses in La Plata County District Court, alleging claims for damages arising from the offering and sale of the bonds issued by the District. The Lyonses requested that the Pool defend and indemnify them in the underlying lawsuit, pursuant to a certificate of insurance (the insurance policy) issued to the District by the Pool. Initially, the Pool agreed to defend the Lyonses, subject to a reservation of rights.

¶ 5 Subsequently, the Pool filed a complaint for declaratory judgment in this action, in which it asked the district court to find that the Pool had no duty to defend or indemnify the Lyonses in the underlying lawsuit. The Pool argued that the Lyonses were not covered under the insurance policy because the banks in the underlying lawsuit did not name the District as a defendant or sue the Lyonses in their capacity as members of the District's board of directors. Instead, the Pool argued that the banks were suing the Lyonses only in their capacity as “developers” and not in their capacity as members of the District's board of directors. Accordingly, the Pool argued that, for purposes of the underlying lawsuit, the Lyonses were not covered by the insurance policy.

¶ 6 In response to the Pool's complaint for declaratory judgment, the Lyonses filed a combined answer, counterclaim, and third-party complaint. The Lyonses answered the allegations contained the Pool's complaint and asserted two counterclaims against the Pool for breach of contract and bad faith breach of insurance contract. Characterizing CTSI as the “administrator for [the insurance policy] on behalf of the Pool,” the Lyonses also named CTSI as a third-party defendant on the bad faith breach of insurance contract claim. In their answer to the Lyonses' counterclaim and third-party complaint, the Pool and CTSI expressly raised immunity under the CGIA as a defense.

¶ 7 As pertinent to this appeal, the Pool and CTSI then filed a motion to stay proceedings regarding the Lyonses' counterclaims and third-party claim, with the exception of any proceedings regarding a motion to dismiss under C.R.C.P. 12(b)(1) and the CGIA. After considering the Lyonses' response opposing the motion to stay, the district court granted the Pool and CTSI's motion to stay.

¶ 8 Thereafter, the Pool and CTSI filed a motion to dismiss the Lyonses' bad faith breach of insurance contract claim under C.R.C.P. 12(b)(1) and the CGIA. In their motion, which was supported by affidavits and documentary evidence, the Pool and CTSI argued that the CGIA was applicable to the Lyonses' claim of bad faith and that the Pool and CTSI were both “public entities” and, therefore, immune under the CGIA.

¶ 9 The Lyonses filed a response to the motion to dismiss, in which they argued that CTSI was not a public entity; that the Lyonses provided the Pool and CTSI with adequate notice of their claims, as required by the CGIA; and that the Lyonses should be permitted to conduct discovery on the question whether the Pool and CTSI waived their immunity by resolution under section 24–10–104, C.R.S.2011. In their response, the Lyonses conceded that the Pool was a public entity under the CGIA. The Lyonses also filed a motion to stay proceedings in this case pending the resolution of all claims in the underlying lawsuit.

¶ 10 The Pool and CTSI filed a reply brief in support of their C.R.C.P. 12(b)(1) motion, attaching an affidavit from their general counsel that stated that neither the Pool nor CTSI had adopted a resolution waiving immunity under section 24–10–104.

¶ 11 In a written order, the district court found that the CGIA was applicable to the Lyonses' bad faith claim because bad faith breach of an insurance contract is a tort claim that exists independently of the underlying breach of contract claim against the Pool; that both the Pool and CTSI were public entities and were, therefore, immune under the CGIA; and that the Lyonses failed to provide the Pool or CTSI with the required statutory notice of their claims. Accordingly, the district court granted the Pool and CTSI's motion to dismiss the Lyonses' bad faith claim under C.R.C.P. 12(b)(1), which constituted a final judgment subject to interlocutory appeal. § 24–10–108, C.R.S.2011. The court also denied the Lyonses' motion to stay.

¶ 12 This appeal followed.

II. CGIA

¶ 13 The Lyonses contend that the district court erred in dismissing their claim for bad faith breach of insurance contract under the CGIA. We disagree.

A. Standard of Review

¶ 14 The existence of immunity under the CGIA is an issue of subject matter jurisdiction. Colucci v. Town of Vail, 232 P.3d 218, 219 (Colo.App.2009). “As such, if raised before trial, the issue is properly addressed pursuant to a C.R.C.P. 12(b)(1) motion to dismiss....” Corsentino v. Cordova, 4 P.3d 1082, 1087 (Colo.2000); accord Colucci, 232 P.3d at 219. “When the jurisdictional issue involves a factual dispute, a reviewing court employs the clearly erroneous standard of review in considering the [district] court's findings of jurisdictional fact.” Springer v. City & Cnty. of Denver, 13 P.3d 794, 798 (Colo.2000). However, where, as here, the relevant facts are not in dispute and the issue is one of law, an appellate court reviews jurisdictional rulings de novo. Tidwell v. City & Cnty. of Denver, 83 P.3d 75, 81 (Colo.2003); Colucci, 232 P.3d at 219.

¶ 15 Moreover, where, as here, the relevant facts are not in dispute and the issues raised on appeal relate to the proper interpretation of a statute, we review de novo the meaning of a statutory term. See Fogg v. Macaluso, 892 P.2d 271, 273 (Colo.1995) (construction of a statute is a question of law).

¶ 16 In construing a statute, our primary task is to give effect to the intent of the General Assembly, which we do by looking to the plain language of the statute. Colorado Water Conservation Bd. v. Upper Gunnison River Water Conservancy Dist., 109 P.3d 585, 593 (Colo.2005). We must give effect to each word and construe the statute as a whole, giving its terms consistent, harmonious, and sensible effect, while avoiding an illogical or absurd result. Id.

B. Bad Faith Breach of Insurance Contract Claim

¶ 17 The Lyonses first contend that their bad faith breach of insurance contract claim against the Pool and CTSI is a contract claim, not a tort claim. Accordingly, the Lyonses contend that the district court erred in finding that the CGIA was applicable to their claim. We disagree.

¶ 18 The CGIA provides a public entity the defense of sovereign immunity against actions for tort injuries, subject to an enumerated list of exceptions not relevant here. § 24–10–106, C.R.S.2011. Specifically, the CGIA provides that [a] public entity shall be immune from liability in all claims for injury which lie in tort or could lie in tort.” § 24–10–106(1), C.R.S.2011. Accordingly, [t]he CGIA does not apply to actions grounded in contract.” Rocky Mountain Health Maint. Org., Inc. v. Colorado Dep't of Health Care Policy & Fin., 54 P.3d 913, 917 (Colo.App.2001).

¶ 19 Here, the district court found that the Lyonses' bad faith breach of contract claim against the Pool and CTSI was a tort claim that existed independently of the Lyonses' underlying contract claim against the Pool. Specifically, the district court found that “bad faith breach is a tort claim,” and, therefore, “the CGIA may provide immunity against such a claim.” We agree with the district court.

¶ 20 In Jordan v. City of Aurora, 876 P.2d 38 (Colo.App.1993), a division of this court expressly held that bad faith breach of an insurance contract is a tort claim, concluding as follows: [B]ecause a claim of bad faith is a tort, and none of the exceptions contained in § 24–10–106 apply, the claim is barred by sovereign immunity.” Id. at 41. On appeal, the Lyonses argue that Jordan was wrongly decided and that we should decline to follow it. However, in our view, Jordan was correctly decided and is dispositive of the Lyonses' contention here. Indeed, Jordan is consistent with a long line of appellate cases in Colorado concluding that bad faith breach of an insurance contract is a tort claim, not a...

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