Old Republic Ins. Co. v. Durango Air Service, Inc.

• Citation: 283 F.3d 1222
• Decision Date: 15 March 2002
• Docket Number: No. 01-1051.,01-1051.
• Parties: OLD REPUBLIC INSURANCE COMPANY, a Pennsylvania corporation, Plaintiff-Appellant, v. DURANGO AIR SERVICE, INC., a Colorado corporation; Donley E. Watkins; Ellen Roberts, as Personal Representative of the Estate of Morten Borcher; Jamie L. Ross, individually and as surviving spouse of Colt H. Ross, deceased, and as natural parent of Jaylie B. Ross and Jaida S. Ross, minor children of Colt H. Ross; Crystal L. Ross, individually and as surviving spouse of Jon Dirk Ross, deceased, and as natural parent of Jon Talon Ross, Tessa M. Ross, Starr L. Ross, and Cash D. Ross, minor children of Jon Dirk Ross; Amber Anne Ross; and Brandi L. Ross, Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

Page 1222

283 F.3d 1222

OLD REPUBLIC INSURANCE COMPANY, a Pennsylvania corporation, Plaintiff-Appellant, v. DURANGO AIR SERVICE, INC., a Colorado corporation; Donley E. Watkins; Ellen Roberts, as Personal Representative of the Estate of Morten Borcher; Jamie L. Ross, individually and as surviving spouse of Colt H. Ross, deceased, and as natural parent of Jaylie B. Ross and Jaida S. Ross, minor children of Colt H. Ross; Crystal L. Ross, individually and as surviving spouse of Jon Dirk Ross, deceased, and as natural parent of Jon Talon Ross, Tessa M. Ross, Starr L. Ross, and Cash D. Ross, minor children of Jon Dirk Ross; Amber Anne Ross; and Brandi L. Ross, Defendants-Appellees.

No. 01-1051.

United States Court of Appeals, Tenth Circuit.

March 15, 2002.

John W. Grund; Della S. Nelson, with him on the briefs, Grund & Breslau, P.C., Denver, CO, for Plaintiff-Appellant.

Zane R. Moseley of Zarlengo, Mott, Zarlengo & Winbourn, P.C., Denver, CO, for Defendant-Appellee Durango Air Service, Inc.; John D. McClune of Schaden, Katzman, Lampert & McClune, Broomfield, CO, for the Ross Defendants-Appellees; Reed L. Winbourn of Zarlengo, Mott, Zarlengo & Winbourn, P.C., Denver, CO; Bruce A. Lampert of Schaden, Katzman, Lampert & McClune, Broomfield, Colorado; and G. Raymond Goodwin of Watrous Ehlers Mielke & Goodwin, P.C., Littleton, CO, with them on the briefs, for Defendants-Appellees.

Before TACHA, Chief Judge, GARTH,^* and BRISCOE, Circuit Judges.

GARTH, Circuit Judge.

This appeal involves the interpretation of two insurance policies after a fatal airplane crash. Although we initially determined that we did not have proper appellate jurisdiction over the matters presented, that infirmity has since been cured by an agreement of the parties to dismiss with prejudice any claims outstanding in the district court. On the merits, we now affirm the district court's decision granting summary judgment in favor of the Defendants-Appellees.

I.

This case arose from an airplane crash on October 10, 1995, in which the pilot, Morten Borcher ("Borcher"), and both passengers, Colt H. Ross and Jon Dirk Ross (collectively "Decedents"), were killed. Durango Air Service ("Durango") owned the aircraft and employed the pilot. As a result of the accident, the wives and children of the Decedents brought a wrongful death suit in state court against Durango, Donley E. Watkins ("Watkins"), the president of, and a substantial shareholder in, Durango, and Ellen Roberts ("Roberts"), as the personal representative of Borcher's estate. (App.24.) Durango, Watkins, and Borcher (hereinafter "the Insureds") were insured by Plaintiff-Appellant Old Republic Insurance Co. ("Old Republic") under two policies, commonly referred to as the Aviation Policy and the "CGL" Policy, the Airport Liability Policy.

In a Colorado state court proceeding, the Insureds confessed judgment in favor of the Decedents' families in the amount of $4.05 million. (App. 133, 194-95.) Old Republic had rejected a settlement of $800,000. The Colorado state court entered judgment upon the Insureds' Confession of Judgment on January 26, 1999. In response to the state court's judgment, Old Republic paid the Insureds $200,000 pursuant to the Aviation Policy's $100,000 per passenger liability limit. It paid them nothing under the CGL Policy.

Old Republic then filed a declaratory judgment action in the United States District Court for the District of Colorado on October 29, 1998, claiming that the $200,000 it had already paid the Insureds was the limit of its liability under the Aviation Policy, and that Old Republic had no obligations to the Insureds under the CGL Policy. (App.21-23.) It sought a declaratory judgment that it had discharged the full extent of its obligation to indemnify the Insureds.

The Insureds filed counterclaims alleging causes of action against Old Republic for breach of contract, willful and wanton breach of contract, negligence, breach of covenant of good faith and fair dealing, and breach of fiduciary duty. (App.128-33.) Among other things (e.g. triple damages, pre- and post-judgment interest, etc.), the counterclaims sought indemnification from Old Republic for the $4.05 million judgment (minus the $200,000 Old Republic already had paid) resulting from the state court wrongful death action. Both the Insureds and Old Republic filed cross-motions for summary judgment on May 14, 1999. (App.154-63.)

The district court denied Old Republic's cross-motion for summary judgment on November 30, 2000. It held in favor of the Insureds, concluding that the full extent of Old Republic's duty of indemnification under its two policies was $1.7 million (Aviation Policy: $700,000; CGL Policy: $1 million). It then dismissed the case with prejudice,¹ but without deciding the Insureds' counterclaims.² The judgment reflecting the district court's decision of November 30, 2000 was entered on December 6, 2000.³ All provisions of the November 30, 2000 order were incorporated into the December 6, 2000 order.

On December 18, 2000, Old Republic filed a Motion for Entry of Judgment Pursuant to Fed.R.Civ.P. 54(b).⁴ The Insureds filed a Motion for Clarification and Reinstatement of their counterclaims on December 21, 2000. Both motions were granted by the district court on January 19, 2001, when the district court certified the December 6, 2000 order as final with no just reason for delay. (App.178-81.) This appeal followed.

II.

Our initial concern after oral argument was that the December 6th order entered by the district court did not constitute a valid Rule 54(b) certification because the Insureds' counterclaims and Old Republic's claim were not separate but were rather inextricably related.

Rule 54(b)'s finality requirement is only satisfied if "the claims resolved are distinct and separable from the claims left unresolved." Oklahoma Turnpike Auth. v. Bruner, 259 F.3d 1236, 1241 (10th Cir. 2001); see also McKibben v. Chubb, 840 F.2d 1525, 1528-29 (10th Cir.1988) (holding that order was final for purposes of Rule 54(b) certification because claims were separable); 19 James Wm. Moore et al., Moore's Federal Practice ¶ 202.06[2] (3d ed.1999).

In its declaratory judgment action, Old Republic sought an interpretation of its policies which would limit its exposure and its indemnification duties to $200,000. The Insureds, on the other hand, through their counterclaims, sought an interpretation of the very same policies and clauses that would provide increased coverage, but that would also indemnify them for their "wrongful death" state judgment. The parties' respective claims were based on identical facts and on the same policies-indeed, on the same clauses of the same policies. Rather than being independent and separable, the record disclosed that the claims of both the Insureds and Old Republic all stemmed from the same occurrence and were inextricably intertwined and related. On appeal, we therefore were prepared to hold that the district court's certification of its December 6th order under Rule 54(b) was improper, as it was not a final order.⁵

Accordingly, having determined that the 54(b) certification had been rendered in error, we were compelled to conclude that we had no appellate jurisdiction and therefore could not address the merits of Old Republic's claim. On January 16, 2002, however, and while our initial opinion was circulating and therefore was not yet filed, the Insureds dismissed their counterclaims, thereby making final that which was non-final. As a result, we now exercise appellate jurisdiction over the district court's order pursuant to 28 U.S.C. § 1291, and review the merits of Old Republic's claim.

III.

We review the district court's grant of summary judgment de novo, applying the same legal standard used by the district court. Wark v. United States, 269 F.3d 1185, 1187 (10th Cir.2001). We also review the district court's interpretation of the insurance policies de novo. Mauldin v. Worldcom, Inc., 263 F.3d 1205, 1211 (10th Cir.2001). We apply Colorado contract law in this case.⁶ Under Colorado law, in the absence of an ambiguity, an insurance contract must be given effect according to the ordinary and accepted sense of the terms contained therein. In the Matter of the Estate of Daigle, 634 P.2d 71, 79 (Colo. 1981) (en banc).

A. The Aviation Policy

The Insureds purchased an Aviation Policy from Old Republic. Although both parties agree that the Insureds are entitled to coverage under the Policy regarding the crash on October 10, 1995, they disagree as to the precise amount. The Insureds contend that the Aviation Policy entitles them to $700,000 in coverage. Old Republic asserts that the Policy limits the Insureds' recovery to $200,000. The district court ruled in favor of the Insureds.

The Aviation Policy's general liability provision represents an agreement by Old Republic:

To pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of bodily injury sustained by any person (excluding any passenger unless the words "Including Passengers" appear in Item 4 of the Declarations) and property damage, caused by an occurrence and arising out of the ownership, maintenance or use of the aircraft.

(App. 77 (emphasis added).)

Item 4 of the Declarations contains the phrase "including passengers." (App.32.) Pursuant to the Policy's Definitions, bodily injury is defined as "bodily injury, sickness, disease or mental anguish sustained by any person which occurs during the policy period, including death at any time resulting therefrom." (App. 81 (emphasis added).)

Old Republic's exposure is limited under the Aviation Policy, however, by a liability limitation provision which reads, in pertinent part:

The total liability of the Company for all damages ... shall not exceed the limit of liability stated in the Declarations as applicable to "each occurrence."

And further provided that if the Declarations are...