Hartford Cas. Ins. Co. v. Trinity Universal Ins. Co. of Kan.

• Decision Date: 28 July 2015
• Docket Number: Civ. No. 12–01110 MV/KK
• Parties: Hartford Casualty Insurance Company, Plaintiff, v. Trinity Universal Insurance Company of Kansas, Trinity Universal Insurance of Kansas, Trinity Universal Insurance Company as successor in interest to Amtrust Insurance Company of Kansas, Inc., and Zurich American Insurance Company, Defendants; and Zurich American Insurance Company, Trinity Universal Insurance Company of Kansas, and Trinity Universal Insurance Company, Third–Party Plaintiffs, v. Mountain States Mutual Casualty Company and Twin City Fire Insurance Company, Third–Party Defendants; and Mountain States Mutual Casualty Company, Third–Party Plaintiff, v. Trinity Universal Insurance Company of Kansas, Trinity Universal Insurance Company, Zurich American Insurance Company, and John Does I–XIX, Third–Party Defendants.
• Court: U.S. District Court — District of New Mexico

158 F.Supp.3d 1183

Hartford Casualty Insurance Company, Plaintiff,
v.
Trinity Universal Insurance Company of Kansas, Trinity Universal Insurance of Kansas, Trinity Universal Insurance Company as successor in interest to Amtrust Insurance Company of Kansas, Inc., and Zurich American Insurance Company, Defendants;
and
Zurich American Insurance Company, Trinity Universal Insurance Company of Kansas, and Trinity Universal Insurance Company, Third–Party Plaintiffs,
v.
Mountain States Mutual Casualty Company and Twin City Fire Insurance Company, Third–Party Defendants;
and
Mountain States Mutual Casualty Company, Third–Party Plaintiff,
v.
Trinity Universal Insurance Company of Kansas, Trinity Universal Insurance Company, Zurich American Insurance Company, and John Does I–XIX, Third–Party Defendants.

Civ. No. 12–01110 MV/KK

United States District Court, D. New Mexico.

Signed July 28, 2015

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Kevin M. Lougachi, Wayne S. Karbal, Karbal Cohen Economou Silk & Dunne LLC, Chicago, IL, Randal W. Roberts, Simone Roberts & Weiss PA, Albuquerque, NM, for Plaintiff.

Natalie Lucas, Laura Schneider, Nancy Lopez Pearl, Pearl Schneider LLC, Denver, CO, P. Scott Eaton, James P. Barrett, Eaton Law Office PC, Terry R. Guebert, Ramona G. Bootes, Guebert Bruckner P.C., Albuquerque, NM, Jane E. Young, McElroy, Deutsch, Mulvaney & Carpenter LLP, Greenwood Village, CO, for Defendant.

MEMORANDUM OPINION AND ORDER

MARTHA VÁZQUEZ, UNITED STATES DISTRICT JUDGE

THIS MATTER comes before the Court on the Second Amended Complaint by Mountain States for Cross–Claims Against the Trinity and Zurich Parties & Third–Party Complaint Against Colorado Casualty & John Does I–XIX (“Second Amended Complaint”) [Doc. 197], Trinity's Motion for Partial Summary Judgment Concerning Mountain States' Third Party Complaint (“Trinity's Motion for Summary Judgment”) [Doc. 163], and Zurich American Insurance Company's (“Zurich”) Motion and Memorandum for Partial Summary Judgment Re: Mountain States Mutual Casualty Company's Claims Regarding Okland (“Zurich's Motion for Summary Judgment”) [Doc. 193]. The Court having considered the motions, briefs, and relevant law, finds that the Court has subject matter jurisdiction over Mountain States' claims in its Second Amended Complaint, that Trinity's Motion for Summary Judgment is not well taken and will be denied, and that Zurich's Motion for Summary Judgment is not well taken and will be denied.

BACKGROUND

This insurance coverage lawsuit arises out of an underlying action filed in the District Court of La Plata County, Colorado (“Underlying Action”), in which the Rivergate Lofts Condominium Owners Association asserted various construction defect claims against Rivergate Loft Partners, LLC (“RLP”), the owner and developer of a multi-use condominium development located in Durango, Colorado (the “Project”), Okland Construction Company, Inc. (“Okland”), one of the general contractors for the Project, and various other defendants. Plaintiff Hartford, which issued commercial general liability policies to RLP, filed this coverage action seeking to recover from Trinity¹ and Zurich (“Defendants”) approximately $1.6 million in defense and $150,000 in indemnity costs that Hartford incurred defending and settling the Underlying Action on RLP's behalf.

Hartford alleges that Beaty Construction, Inc. (“Beaty”), a subcontractor which did masonry work at the Project, entered into certain contracts with Okland, which obligated Beaty to name RLP as an additional insured with respect to Beaty's work on the Project. Trinity and Zurich insured Beaty. The insurance policies issued by Trinity and Zurich contain automatic

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additional insureds provisions, which Hartford contends automatically extended coverage under the policies to RLP. Hartford alleges that Trinity and Zurich owe it the defense costs it incurred and the indemnity it paid on RLP's behalf to defend and settle the Underlying Action.

Zurich and Trinity filed third-party complaints against Mountain States Mutual Casualty Company (“Mountain States”) and Twin City Fire Insurance Company. Mountain States insured San Juan Insulation and Drywall, Inc. (“San Juan”) and Vendola Plumbing and Heating, Inc. (“Vendola”). Defendants allege that Mountain States' policies covering San Juan and Vendola give rise to insurance coverage for RLP and Okland as additional insureds in the Underlying Action. In their third-party complaints, Defendants allege that Mountain States had a duty to defend RLP in the Underlying Action under the policies they issued to San Juan and Vendola and that Mountain States failed to do so. Zurich and Trinity further allege that to the extent they are obligated to reimburse Hartford for any sums, Mountain States is likewise obligated to pay.

Mountain States thereafter filed third-party claims against Trinity and Zurich in its First Amended Complaint for Cross–Claims Against the Trinity and Zurich Parties and Third Party Complaint Against John Does I–XX (“First Amended Complaint”) [Doc. 161]. In support of its third-party claims against Trinity and Zurich, Mountain States alleges, among other things, that Defendants had a duty to defend RLP and Okland in the Underlying Action and that Defendants are obligated to bear a share of the costs to defend and/or indemnify RLP and Okland in the Underlying Action. Mountain States also alleges that it paid more than its equitable share of Okland's defense costs when it settled a “preceding sister action”—herein referred to as the “Travelers Action”—that was a “derivative lawsuit of the Underlying Action asserted against Mountain States by the insurer [Travelers² ] of Okland for repayment of defense costs and fees in the Underlying Action.” [Doc. 161 at 5].

Mountain States thereafter amended its First Amended Complaint to add third-party claims against Colorado Casualty Insurance Company (“Colorado Casualty”) and John Does I–XIX. [Doc. 197]. In this Second Amended Complaint, Mountain States alleges the same claims against Colorado Casualty and the John Doe defendants as it alleges against Trinity and Zurich. [Id. ].

In the Travelers Action, Travelers sued Mountain States, Trinity, Zurich, and State Farm Fire and Casualty Company seeking the relief of equitable contribution from these defendant-insurers for defense fees and costs that Travelers paid on behalf of its insured Okland in the Underlying Action. [Doc. 163–4 at 2]. Travelers alleged that the defending insurers had a duty to defend Okland because of Okland's status as an additional insured under the relevant policies issued by the defendant-insurers. [Id. ]. Travelers and Zurich reached a settlement in the Travelers Action and Travelers' claims against Zurich were dismissed with prejudice on June 21, 2013. [Doc. 193–1]. Travelers also reached a settlement with Trinity and a settlement with Mountain States, and the court dismissed with prejudice Travelers' claims against these defendants in October 2013. [Doc. 163–16]. None of the defendants in the Travelers Action asserted

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crossclaims for contribution against any of their co-defendants. [Doc. 163–5 at 10; Doc. 193–1 at 2; Doc. 163–16 at 2].

On November 6, 2014, Trinity filed its Motion for Summary Judgment, asking the Court to award partial summary judgment in Trinity's favor. [Doc. 163]. Specifically, Trinity asked the Court to dismiss with prejudice Mountain States' “claims for relief ... related to Mountain States' and Trinity's respective obligations for Okland's defense costs incurred in the Underlying Action, and Mountain States['] claims for relief seeking reimbursement from Trinity for Okland's defense costs incurred in the Underlying Action.” [Doc. 163–1 at 25].

On November 25, 2014, Zurich filed its Motion for Summary Judgment, asking the Court to award partial summary judgment in its favor. [Doc. 193]. Specifically, Zurich asks the Court to dismiss with prejudice Mountain States' claims seeking allocation of Okland's defense costs and reimbursement from Zurich of those defense costs. [Id. at 18].

On May 4, 2014, the Court issued an order requesting additional briefing on Trinity's Motion for Summary Judgment and Zurich's Motion for Summary Judgment (“May 4, 2014, Order”) [Doc. 314]. The Court's order explained that Zurich, in support of its Motion for Summary Judgment, “contends that Mountain States' claims against it are crossclaims governed by Federal Rule of Civil Procedure 13(g), and that the claims are improper because they do not arise out of the same transaction or occurrence that is the subject matter of the original action or of a counterclaim as required by Rule 13(g).” [Id. at 2 (citation omitted) ]. The Court further noted that, in support of Trinity's Motion for Summary Judgment, “Trinity agrees with Zurich that Mountain States' claims are improper but, unlike Zurich, Trinity does not rely upon Rule 13(g) in support of this contention,” but “[r]ather ... relies upon Rule 14(a)(3), which, in the context of defining when a defending party may bring in a third party, sets forth the claims a plaintiff may assert against a third-party defendant,” and which “contains the same threshold standard as that in Rule 13(g) : i.e., both Rules require the claims they permit to arise out of the transaction or occurrence that is the subject matter of the original claims in this action.” [Id. (citations omitted) ]. The Court requested “additional briefing with respect to whether the Federal Rules upon which the parties rely [to support their motions for summary judgment] are applicable to Mountain States' claims against Trinity and Zurich.” [Id. at 3].

On May 4, 2014, the Court issued a sua sponte order on Mountain States' Second Amended Complaint for Cross–Claims Against the Trinity and Zurich Parties & Third–Party Complaint Against Colorado Casulaty & John Does I–XIX (“Sua Sponte Order”). [Doc. 315]. The Court requested briefing on the question whether Mountain States' claims against...