Lafarge North Am. Inc. v. K.E.C.I. Colo. Inc.

• Decision Date: 04 March 2010
• Docket Number: No. 09CA0460.,09CA0460.
• Citation: 250 P.3d 682
• Parties: LAFARGE NORTH AMERICA, INC., d/b/a Lafarge West, Inc., Plaintiff–Appellee,v.K.E.C.I. COLORADO, INC., a Colorado corporation, Defendant–Appellant.
• Court: Colorado Court of Appeals

250 P.3d 682

LAFARGE NORTH AMERICA, INC., d/b/a Lafarge West, Inc., Plaintiff–Appellee,

v.K.E.C.I. COLORADO, INC., a Colorado corporation, Defendant–Appellant.

No. 09CA0460.

Colorado Court of Appeals, Div. VII.

March 4, 2010.

Wells, Anderson & Race, LLC, Larry S. McClung, L. Michael Brooks, Jr., Denver, Colorado, for Plaintiff–Appellee.Senter, Goldfarb, & Rice, L.L.C., Jennifer M. Palmer, Denver, Colorado, for Defendant–Appellant.Opinion by Judge J. JONES.

Defendant, K.E.C.I. Colorado, Inc., appeals the district court's summary judgment ruling that it breached contractual obligations to defend, indemnify, and insure plaintiff, Lafarge North America, Inc. We conclude that (1) K.E.C.I. breached the duty to defend but that it is premature to assess damages for that breach; (2) Lafarge is not entitled to summary judgment on its indemnification claim; and (3) the district court incorrectly construed K.E.C.I.'s duty to insure Lafarge. Therefore, we affirm the judgment in part, reverse it in part, and remand the case for further proceedings.

I. Background

Lafarge was the general contractor for a highway construction project administered by the Colorado Department of Transportation (CDOT). K.E.C.I. provided traffic control services pursuant to a subcontract with Lafarge.

Late one night, a motorcyclist drove onto a highway entrance ramp and collided with a piece of road construction equipment that a Lafarge employee had parked in the only traffic lane of the ramp. The motorcyclist died in the accident; his wife, who was a passenger on the motorcycle, was seriously injured.

The injured wife sued Lafarge, the Lafarge employee who had parked the equipment on the ramp, and K.E.C.I. for negligence. Lafarge demanded that K.E.C.I. provide it a defense and indemnify it for any liability it might have, invoking certain provisions of the subcontract and K.E.C.I.'s insurance policy, on which Lafarge was an additional named insured. K.E.C.I. and the insurer refused Lafarge's demands, essentially for the reasons that (1) K.E.C.I. was not even partially at fault and its duties to defend and indemnify Lafarge apply only if K.E.C.I. was at least partially at fault; and (2) because the insurance policy was only an “excess” coverage policy, (a) there is no duty to defend under the policy, and (b) there is no coverage under the policy to pay Lafarge because Lafarge had not incurred any liability in excess of that covered by its own insurance policy. Lafarge settled the claims against it by paying $700,000 to the injured wife in return for a release.

Lafarge brought this case against K.E.C.I. and two of K.E.C.I.'s insurers. Its amended complaint asserted claims for breach of contract, fraud, and violation of the Colorado Consumer Protection Act. In essence, Lafarge alleged that (1) K.E.C.I. is contractually obligated to indemnify Lafarge for liability arising from Lafarge's own negligence so long as the liability arose in part from K.E.C.I.'s acts or omissions, which it did here; (2) the complaint in the personal injury case triggered K.E.C.I.'s contractual duty to defend Lafarge because it alleged that K.E.C.I. was at least partially at fault for the accident; and (3) the subcontract obligates K.E.C.I. to provide Lafarge with “primary,” not merely “excess” insurance coverage.

The parties agreed to litigate the case in two phases, with the first phase limited to resolving the issues pertaining to interpretation of the indemnity and insurance provisions of the subcontract. After the parties completed discovery on those issues, they filed cross-motions for summary judgment. The district court granted Lafarge's motion and denied K.E.C.I.'s. As relevant here, the court ruled as follows:

• the subcontract unambiguously requires K.E.C.I. to indemnify Lafarge for Lafarge's negligence if K.E.C.I. was at least partially at fault;

• K.E.C.I. had breached the indemnity obligation;

• the subcontract unambiguously requires K.E.C.I. to defend Lafarge if a claim which could trigger K.E.C.I.'s obligation to indemnify Lafarge was asserted against Lafarge;

• K.E.C.I. had breached the duty to defend because the complaint in the personal injury case alleged that both Lafarge and K.E.C.I. were at fault;

• the subcontract unambiguously requires K.E.C.I. to provide Lafarge with primary insurance coverage;

• K.E.C.I. had breached the duty to provide primary insurance; and

• K.E.C.I. is liable to Lafarge for Lafarge's cost of defense and the amount Lafarge paid to settle the personal injury case.

K.E.C.I. moved for reconsideration. It asserted that the court had misinterpreted the subcontract and had erred by finding it liable for indemnity when there had been no factual determination that it was even partially at fault for the accident. In denying K.E.C.I.'s motion, the court again rejected K.E.C.I.'s arguments concerning interpretation of the subcontract and found (for the first time) that K.E.C.I. had waived its right to contest its liability for indemnification by breaching its duty to defend.

The district court certified its summary judgment as final. K.E.C.I. appeals.

II. Discussion

K.E.C.I. raises the following contentions on appeal:

(1) The district court erred in granting summary judgment in Lafarge's favor on the duty to indemnify because

(a) the indemnification clause unambiguously provides that K.E.C.I. is liable only for its own negligence,

(b) the clause is at least ambiguous on that score, and

(c) it may challenge its alleged duty to indemnify Lafarge even if it breached its duty to defend.

(2) The court erred in finding that it had breached the duty to indemnify because the issue of breach was not before the court and no fact finder has found that it was at least partially at fault.

(3) The court erred in finding that K.E.C.I. has a duty to defend because, again, it is liable only for its own negligence; therefore, it only has a duty to defend Lafarge where Lafarge is alleged to be vicariously liable for K.E.C.I.'s acts, and no such liability was alleged in the personal injury case.

(4) The court erred in construing the insurance clause to require K.E.C.I. to provide Lafarge with primary insurance coverage because

(a) the clause does not contain any language imposing such a requirement, or

(b) the clause is ambiguous, and that ambiguity should he resolved against Lafarge under the relevant extrinsic evidence.

(5) The court erred in determining that K.E.C.I. had breached the contractual duty to insure because the issue of breach was not before the court.

We address these contentions in turn.

A. Standard of Review

We review a district court's entry of summary judgment de novo. A.C. Excavating v. Yacht Club II Homeowners Ass'n, Inc., 114 P.3d 862, 865 (Colo.2005). The construction of a contract (including the question whether the contract is ambiguous) is a question of law, which we also review de novo. East Ridge of Fort Collins, LLC v. Larimer & Weld Irrigation Co., 109 P.3d 969, 974 (Colo.2005); Boulder Plaza Residential, LLC v. Summit Flooring, LLC, 198 P.3d 1217, 1220 (Colo.App.2008).

B. Construction of the Subcontract

1. Duty to Indemnify

a. Construction of the Indemnity Clause

The indemnity clause at issue here, section 10(b) of the subcontract, provides as follows:

[K.E.C.I.] further specifically obligates [itself] to [Lafarge] in the following respects, to wit: ...

(b) To indemnify [Lafarge] against and save [it] harmless from any and all claims, suit, or liability for injuries to property, injuries to persons including death, and from any other claims, suits, or liability on account of [sic], arising in whole or in part of [sic] any act or omission of [K.E.C.I.], or any of [its] officers, agents, employees or servants....

We construe an indemnity agreement in accordance with the same principles that govern the interpretation of contracts generally. Boulder Plaza, 198 P.3d at 1221; Mid Century Ins. Co. v. Gates Rubber Co., 43 P.3d 737, 739 (Colo.App.2002). Therefore, we must strive to effectuate the contracting parties' intent, as determined primarily from the contract language. East Ridge, 109 P.3d at 974; Boulder Plaza, 198 P.3d at 1221. To do this, we look to the language of the provision at issue, giving the words and phrases used therein their plain and ordinary meanings, and to any other related provisions so as to interpret the contract in a way that harmonizes and gives effect to all its provisions. East Ridge, 109 P.3d at 974; Boulder Plaza, 198 P.3d at 1221; Mid Century, 43 P.3d at 739.

If, after applying these principles, we conclude that the provision is unambiguous, we must apply it as written. B & B Livery, Inc. v. Riehl, 960 P.2d 134, 136 (Colo.1998); Mapes v. City Council, 151 P.3d 574, 577 (Colo.App.2006). A contract provision is ambiguous “ ‘if it is fairly susceptible to more than one interpretation.’ ” Dorman v. Petrol Aspen, Inc., 914 P.2d 909, 912 (Colo.1996) (quoting Fibreglas Fabricators, Inc. v. Kylberg, 799 P.2d 371, 374 (Colo.1990)); accord East Ridge, 109 P.3d at 974. However, the mere fact the parties express different opinions as to the meaning of the provision does not itself establish that there is an ambiguity. Cherokee Metropolitan Dist. v. Simpson, 148 P.3d 142, 146 (Colo.2006); East Ridge, 109 P.3d at 974.

In construing the indemnity clause here, we are also mindful of the following principles:

• An indemnity provision that a party contends renders the indemnitor liable for the indemnitee's conduct must contain “ ‘clear and unequivocal language to that effect.’ ” Public Service Co. v. United Cable Television of Jeffco, Inc., 829 P.2d 1280, 1283 (Colo.1992) (quoting Williams v. White Mountain Constr. Co., 749 P.2d 423, 426 (Colo.1988)); accord Boulder Plaza, 198 P.3d at 1221. However, the failure to refer specifically to the indemnitee's negligent conduct in the agreement does not render “an otherwise unambiguous indemnity provision insufficient to indemnify the indemnitee from its...