EMC Ins. Cos. v. Mid–Continent Cas. Co.

• Decision Date: 02 August 2012
• Docket Number: Civil Case No. 10–cv–03005–LTB–KLM.
• Citation: 884 F.Supp.2d 1147
• Parties: EMC INSURANCE COMPANIES, an Iowa corporation, Plaintiff, v. MID–CONTINENT CASUALTY COMPANY, an Oklahoma corporation, Defendant.
• Court: U.S. District Court — District of Colorado

884 F.Supp.2d 1147

EMC INSURANCE COMPANIES, an Iowa corporation, Plaintiff,

v.MID–CONTINENT CASUALTY COMPANY, an Oklahoma corporation, Defendant.

Civil Case No. 10–cv–03005–LTB–KLM.

United States District Court, D. Colorado.

Aug. 2, 2012.

John David Mereness, Gifford Stevens, LLC, Denver, CO, for Plaintiff.

David G. Mayhan, Lawrence Michael Brooks, Jr., Rachel Ollar Entrican, Wells, Anderson & Race, LLC, Denver, CO, for Defendant.

ORDER

LEWIS T. BABCOCK, District Judge.

This matter is before me on two motions. The first is Plaintiff EMC Insurance Companies' (“EMC”) Motion for Partial Summary Judgment [Docs # 24, 25]. The second is Defendant Mid–Continent Casualty Company's (“Mid–Con”) Cross–Motion for Summary Judgment [Doc # 29]. After considering the parties' arguments, for the reasons below, I GRANT both motions in part and DENY them in part according to the instructions below.

I. Background

This is an insurance coverage, contribution, and indemnification action between insurers stemming from an underlying construction and design defect case that settled. EMC and Mid–Con are insurance companies. Only a general presentation of the facts is necessary here, as more specifics will be discussed below.

In 2000, Hans Nielsen Inc. (“HNI”), hired an architect to evaluate the possibility of a 51–unit condominium project in Denver, Colorado (the “Project”). HNI was the named insured of a commercial general liability insurance policy issued by EMC (the “EMC Policy”). The policy was effective from November 28, 2002, to November 28, 2003, and it did not contain any additional insured endorsements apposite here. Nanna Nielsen Smith (“Smith”), was an officer of HNI.

With the design underway, BVPC, LLC (“BVPC”), was created in 2001 as a special purpose entity to develop and construct the Project. BVPC is not owned by HNI, nor is HNI a member or manager of BVPC. Smith, however, served as BVPC's manager during the pertinent time periods.

In 2002, BVPC entered into a construction contract with N.J. Orr Construction Company (“Orr”) for Orr to be the Project's general contractor. Orr was the “Named Insured” in a commercial general liability insurance policy Mid–Con issued (the “Mid–Con Policy”). The policy's effective dates were August 15, 2002, to January 1, 2004. The parties agree that BVPC and HNI are additional insureds under the Mid–Con policy via two endorsements.

Then, in 2003, the homeowner's association for the Project was created (the “Association”), with the Project's declarations recorded in September of that year. BVPC was the Association's original declarant. BVPC was the entity that owned and sold the Project's units to individual purchasers. It began selling units prior to February 2004, at which time the Project's certificate of substantial completion was issued.

In January 2008, the Association filed suit against Smith, HNI, BVPC, Orr, and others, alleging a host of construction and design defect claims (the “Underlying Litigation”). Pursuant to the EMC Policy, EMC provided a defense for HNI and Smith and hired the law firm of Lambdin & Chaney to defend them. After requests from EMC, Mid–Con agreed to defend HNI and BVPC under a reservation of rights and hired the law firm of McConaughy and Sarkissian, PC, to defend them. A reservation of rights enables an insurer to assert future defenses based on noncoverage under the policy. See Signature Dev. Companies, Inc. v. Royal Ins. Co. of America, 230 F.3d 1215, 1217 (10th Cir.2000). Mid–Con refused to provide any defense for Smith.

On May 19, 2009, the retained two law firms, Smith and her personal counsel, EMC, Mid–Con, and BVPC met to address the arrangement of their defenses. There, McConaughy and Sarkissian, PC, the firm retained by Mid–Con, was appointed to represent HNI and BVPC, but the parties agreed that the firm's primary responsibility was to defend BVPC. Lambdin & Chaney, the firm retained by EMC, was appointed to represent HNI and Smith, and the parties agreed that the firm would be primarily responsible for representing HNI and Smith. The Underlying Litigation settled prior to trial. The terms of that settlement are not before me.

Displeased with Mid–Con's defense of HNI and its refusal to defend Smith in the Underlying Litigation, EMC filed this action. EMC alleges, inter alia, that it paid the entire portion of the settlement that released and dismissed HNI and Smith from the Underlying Litigation and that it paid 100 percent of their defense costs. EMC also alleges that Mid–Con failed to provide a defense for Smith and an adequate defense for HNI. EMC claims that the Mid–Con and EMC Policies, together, required Mid–Con to defend Smith and HNI, to contribute to the costs of their defenses and to the settlement on their behalf, and to indemnify EMC for these costs. EMC asserts six claims here: (1) equitable subrogation; (2) equitable contribution; (3) declaratory judgment; (4) unjust enrichment; (5) estoppel; and (6) indemnity. These motions followed.

II. Standard of Review

I begin by setting forth the appropriate standard of review, as well as general principles for interpreting insurance policies. The parties each move pursuant to Fed.R.Civ.P. 56. That rule allows a party to “move for summary judgment, identifying each claim or defense—on which summary judgment is sought.” Summary judgement per Rule 56 “is appropriate ‘if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.’ ” Klen v. City of Loveland, Colo., 661 F.3d 498, 508 (10th Cir.2011) (quoting Fed.R.Civ.P. 56(a)). Under this standard, the court must view the evidence and draw all reasonable inferences therefrom in the light most favorable to the nonmoving party. Bryant v. Farmers Ins. Exch., 432 F.3d 1114, 1124 (10th Cir.2005). A fact is “material” if, under the applicable substantive law, it is “essential to the proper disposition of the claim.” Adler v. Wal–Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir.1998) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). An issue is “genuine” if “there is sufficient evidence on each side so that a rational trier of fact could resolve the issue either way.” Id. (citing Anderson, 477 U.S. at 248, 106 S.Ct. 2505).

Where, as here, federal jurisdiction is predicated upon diversity, the court applies the substantive law of the forum state. Barrett v. Tallon, 30 F.3d 1296, 1300 (10th Cir.1994). Under Colorado law, the interpretation of insurance policies, like other contracts, present questions of law and are therefore appropriate for summary judgment. Thompson v. Maryland Cas. Co., 84 P.3d 496, 501 (Colo.2004). When interpreting an insurance contract, I try to carry out the parties' intent and reasonable expectations when they drafted the policies. Id. I therefore seek to give the words in a policy their plain and ordinary meaning unless the intent of the parties indicates otherwise. Id. Additionally, I read the provisions of an insurance policy as a whole rather than in isolation. Fire Ins. Exch. v. Sullivan, 224 P.3d 348, 351 (Colo.App.2009). I accordingly construe a policy so as to harmonize all provisions and render none meaningless. Progressive Specialty Ins. Co. v. Hartford Underwriters Ins. Co., 148 P.3d 470, 474 (Colo.App.2006). Where a term in an insurance policyis ambiguous, meaning it is susceptible to more than one reasonable interpretation, I construe the term against the drafter and in favor of providing coverage to the insured. Sachs v. American Family Mut. Ins. Co., 251 P.3d 543, 546 (Colo.App.2010). Mere disagreement of the parties, however, does not establish ambiguity. Nat'l Cas. Co. v. Great Southwest Fire Ins. Co., 833 P.2d 741, 746 (Colo.1992). Nevertheless, I may “neither add provisions to extend coverage beyond that contracted for, nor delete them to limit coverage.” Sachs, 251 P.3d at 546.

III. Discussion

EMC's motion requests summary judgment as to its declaratory judgment claim. That claim seeks the following declarations: (1) Mid–Con breached its duty to defend HNI and Smith; (2) the Mid–Con Policy's coverage to HNI and Smith was primary, and the EMC Policy's coverage was excess; and (3) Mid–Con owes indemnity to HNI and Smith for their cost to settle the Underlying Litigation. Mid–Con's response argues that for numerous independent reasons neither Smith nor HNI were covered under its policy, and therefore Mid–Con had no duty to defend or indemnify them. It further argues that while no duty to defend existed, the defense it provided HNI was nevertheless sufficient. Mid–Con lastly concludes that because its policy covered neither HNI nor Smith in the Underlying Litigation, the primary versus excess coverage issue is moot.

Mid–Con's cross-motion for summary judgment tracks its response to EMC's motion nearly verbatim and was filed just one day later. Compare Def.'s Resp. Doc. # 28, with Def.'s Mot. Doc # 29. The motion simply adds that because Mid–Con had no duty to defend or indemnify, it follows that all of EMC's claims fail as a matter of law. EMC's response to Mid–Con's motion was filed contemporaneously with its reply, and it incorporates all the arguments marshaled therein, but it also argues that even if there was no coverage, some of its remaining claims still stand. Thus, with the exception of how a determination of no coverage for HNI and Smith under the Mid–Con Policy affects EMC's remaining claims, which is addressed only in Mid–Con's motion, the two motions dispute the same issues: (1) whether Mid–Con had a duty to defend Smith or HNI; (2) whether Mid–Con had a duty to indemnify Smith or HNI; and (3) whether the Mid–Con Policy afforded the primary coverage for Smith or HNI. While both motions focus on these issues, they do so for different reasons. EMC seeks their declaration for their own sake. By contrast, Mid–Con's motion uses those issues as the basis for its argument,...