Praetorian Ins. Co. v. Axia Contracting, LLC, Civil Action No. 17-cv-2034-WJM-SKC
| Decision Date | 23 September 2020 |
| Docket Number | Civil Action No. 17-cv-2034-WJM-SKC |
| Citation | 488 F.Supp.3d 1042 |
| Parties | PRAETORIAN INSURANCE COMPANY, Plaintiff, v. AXIA CONTRACTING, LLC, and 255 Blackhawk Hospitality, LLP, Defendants. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Kelly L. Kafer, Peter J. Morgan, Morgan Rider Riter Tsai, P.C., Denver, CO, for Plaintiff.
Michael Philip Murray, Scott Warren Wilkinson, Davis & Ceriani, P.C., Denver, CO, for Defendants.
ORDER DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT
Plaintiff Praetorian Insurance Company ("Praetorian") brought this lawsuit seeking a declaratory judgment that it has no obligation to pay insurance benefits under a builder's risk policy issued to Defendants Axia Contracting, LLC ("Axia") and 255 Blackhawk Hospitality, LLP ("Blackhawk") (jointly, "Defendants").
This matter is before the Court on Praetorian's Renewed Motion for Summary Judgment ("Motion"). (ECF No. 83.) For the reasons explained below, the Motion is denied.
Summary judgment is warranted under Federal Rule of Civil Procedure 56 "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." Fed. R. Civ. P. 56(a) ; see also Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248–50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A fact is "material" if, under the relevant substantive law, it is essential to proper disposition of the claim. Wright v. Abbott Labs., Inc. , 259 F.3d 1226, 1231–32 (10th Cir. 2001). An issue is "genuine" if the evidence is such that it might lead a reasonable trier of fact to return a verdict for the nonmoving party. Allen v. Muskogee , 119 F.3d 837, 839 (10th Cir. 1997).
In analyzing a motion for summary judgment, a court must view the evidence and all reasonable inferences therefrom in the light most favorable to the nonmoving party. Adler v. Wal-Mart Stores, Inc. , 144 F.3d 664, 670 (10th Cir. 1998) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) ). In addition, the Court must resolve factual ambiguities against the moving party, thus favoring the right to a trial. See Houston v. Nat'l Gen. Ins. Co. , 817 F.2d 83, 85 (10th Cir. 1987).
On June 19, 2017, Defendants were in the process of constructing a hotel (the "Project") at 255 Blackhawk Street, Aurora, Colorado (the "Property"). (ECF No. 83 ¶ 1.) Blackhawk owned the Property, and Axia was the general contractor for the Project. (Id. ¶¶ 2–3.)
Early in the morning on June 19, 2017, a fire occurred at the Property damaging the unfinished hotel structure. (Id. ¶ 4.) The City of Aurora Fire Department investigated the fire and a fire investigator concluded that it was "result of an intentional and direct human act" and classified the fire as "incendiary ... that is deliberately set with the intent to cause the fire." (Id. at ¶ 5; ECF No. 83-1 at 10 (emphasis in original).)
At the time of the fire, Praetorian had issued to Defendants a builder's risk insurance policy, policy number P0033IM106828-00 (the "Policy"). (ECF No. 83 ¶ 6.) The Policy covers perils during the course of construction, subject to the terms and conditions of the Policy, including the terms of the Builders’ Risk Coverage as well as any endorsements and schedules identified on the schedule of coverages. (Id. ¶¶ 7–8; see ECF No. 83-2.) Under the Policy, Praetorian is responsible for "risks of direct physical loss or damage unless the loss is limited or caused by a peril that is excluded." (ECF No. 83-2 at 20.)
The Policy includes a "Protective Devices Schedule" and a "Protective Devices Endorsement" ("PDE"). (ECF No. 83-2 at 50–51.) The Protective Devices Schedule lists the following protective devices or services:
(ECF No. 83 ¶ 10; ECF No. 83-2 at 50.) The PDE added both "other conditions" and "perils excluded." Under "other conditions," the PDE stated:
Protective Devices – "You" are required to maintain, at all times during the policy period, the protective devices and services described on the Protective Devices Schedule.
(ECF No. 83 ¶ 9; ECF No. 83-2 at 51.) Under "perils excluded," the PDE added the following language:
(ECF No. 83 ¶ 9; ECF No. 83-2 at 51.) The PDE similarly excludes losses caused by theft in the absence of a Protective Safeguard that provides theft protection. (ECF No. 83 ¶ 9; ECF No. 83-2 at 51.)
The parties agree that at the time of the fire, the Project jobsite was "not enclosed with chain link fencing at least 6 feet in height, and because the jobsite was not completely enclosed in such fencing, all entrance and access gates were not securely locked." (ECF No. 83 ¶ 12; ECF No. 53 ¶ 12.)
Defendants sought coverage from Praetorian for losses and damages caused by the fire. (ECF No. 83 ¶ 13.) On August 23, 2017, Praetorian denied coverage for failure to comply with the Policy. (Id. ¶ 14.)
The same day that Praetorian denied coverage for losses from the fire, it filed the instant action seeking a declaratory judgment that it was not required to pay for losses at Defendants’ jobsite. (ECF No. 1 at 4–6, ¶¶ 19–28.) In response, Defendants filed counterclaims seeking a declaratory judgment regarding the parties’ rights, obligations and duties under the Policy, as well as claims for breach of contract and statutory and common law bad faith. (ECF No. 23 at 19–22, ¶¶ 58–78.)
At a scheduling conference before U.S. Magistrate Judge Kristen L. Mix, the parties requested that discovery be conducted in two phases: an initial period focused on insurance coverage issues and a second period, if necessary, on Defendants’ counterclaims. (ECF Nos. 41–42.) Judge Mix granted the request.2 (ECF No. 41.)
On April 11, 2018, Praetorian filed a motion for summary judgment asserting:
(1) that the Policy did not provide coverage due to Defendants’ failure to comply with the Policy, which was a condition of coverage; and (2) that coverage under the Policy was also precluded by an exclusion for losses caused by fire. (ECF No. 50.) Defendants filed their response on May 9, 2018 (ECF No 54), Praetorian filed its reply on June 6, 2018 (ECF No. 59), and Defendants filed their sur-reply on June 13, 2018 (ECF No. 60).
The Court sought supplemental briefing from the parties addressing "the materiality of the requirement to maintain the protective devices and services described on the Protective Devices Schedule." (ECF No. 62.) Specifically, the Court asked the parties to address "the question of whether Defendants’ failure to erect and maintain a chain link or similar security fencing at least six feet high completely enclosing the entire jobsite constitutes a material breach of the insurance contract." (Id. ) The parties simultaneously submitted their supplemental briefs on February 22, 2019. (ECF Nos. 63–64.)
On March 1, 2019, the Court granted summary judgment in favor of Praetorian, determining that: (1) the erection and maintenance of a security fence was a material term of the Policy; (2) Defendants’ failure to comply with this term was a material breach of the Policy; and (3) Praetorian was excused from its contractual obligation to provide coverage for Defendants’ loss as a result of the fire. (ECF No. 65.) Because the Court resolved the Motion on the issue of material breach, it did not address Praetorian's other arguments in favor of summary judgment. (Id. at 11.) Defendants appealed the Court's order. (ECF No. 68.)
On December 31, 2019, the Tenth Circuit determined that the Court erred in concluding that Defendants’ failure to maintain fencing and secured access was a material breach of the Policy. (ECF No. 76 at 4–5.) The action was remanded to consider the alternative bases raised in Praetorian's Motion for Summary Judgment.3 (Id. at 5.)
On February 18 and 28, 2020, Defendants and Praetorian, respectively, submitted supplemental briefing on the Motion. (ECF Nos. 84, 87.)
The present dispute is, at heart, one of contract interpretation. Under Colorado law,4 courts construe insurance policies "using general principles of contract interpretation." Greystone Constr., Inc. v. Nat'l Fire & Marine Ins. Co. , 661 F.3d 1272, 1283 (10th Cir. 2011). Therefore, absent an ambiguity, a policy's language is construed according to its plain meaning. Id. However, in recognition of the unique relationship between insurer and insured, courts "construe ambiguous provisions against the insurer and in favor of providing coverage to the insured." Id. at 1284 (citing Cyprus Amax Minerals Co. v. Lexington Ins. Co. , 74 P.3d 294, 299 (Colo. 2003) ). Courts look to the policy as a whole to determine whether an ambiguity is present. Cary v. United of Omaha Life Ins. Co. , 108 P.3d 288, 290 (Colo. 2005) (en banc). Disagreements regarding policy interpretation do not necessarily signal, or create, an ambiguity. Id. Rather, "[a]n insurance policy is ambiguous if it is susceptible on its face to more than one reasonable interpretation." Id. One may not read an ambiguity into a...
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