Riverdale Peaks Homeowners Ass'n v. Auto-Owners Ins. Co.
| Decision Date | 18 April 2012 |
| Docket Number | Civil Action No. 11-cv-01920-WJM-MJW |
| Parties | RIVERDALE PEAKS HOMEOWNERS ASSOCIATION, a Colorado Nonprofit Corporation, LLOYD LAND, and EILEEN LAND Plaintiffs, v. AUTO-OWNERS INSURANCE COMPANY, a Michigan Company Defendant. |
| Court | U.S. District Court — District of Colorado |
Plaintiffs Riverdale Peaks Homeowners Association ("Riverdale"), Lloyd Land, and Eileen Land (collectively "Plaintiffs") bring claims against Defendant Auto-Owners Insurance Company ("AIC") for breach of contract, bad faith breach of insurance contract, and failure to defend in violation of Colo. Rev. Stat. § 10-3-1116. (ECF No. 1.) These claims arise out of Defendant's denial of coverage and failure to provide a defense for Plaintiffs in an underlying federal court lawsuit.
Before the Court are Plaintiffs' Motion for Partial Summary Judgment regarding Defendant's Duty to Defend Plaintiffs Lloyd and Eileen Land (ECF No. 7) and Defendant's Motion for Summary Judgment (ECF No. 11). For the reasons set forth below, Defendant's Motion for Summary Judgment is granted, which moots the need to consider the Plaintiffs' Motion for Partial Summary Judgment.
Summary judgment is appropriate only if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Henderson v. Inter-Chem Coal Co., Inc., 41 F.3d 567, 569 (10th Cir. 1994). Whether there is a genuine dispute as to a material fact depends upon whether the evidence presents a sufficient disagreement to require submission to a jury or conversely, is so one-sided that one party must prevail as a matter of law. Anderson v. Liberty Lobby, 477 U.S. 242, 248-49 (1986); Stone v. Autoliv ASP, Inc., 210 F.3d 1132 (10th Cir. 2000); Carey v. U.S. Postal Service, 812 F.2d 621, 623 (10th Cir. 1987).
A fact is "material" if it pertains to an element of a claim or defense; a factual dispute is "genuine" if the evidence is so contradictory that if the matter went to trial, a reasonable party could return a verdict for either party. Anderson, 477 U.S. at 248. The Court must resolve factual ambiguities against the moving party, thus favoring the right to a trial. Quaker State Mini-Lube, Inc. v. Fireman's Fund Ins. Co., 52 F.3d 1522, 1527 (10th Cir. 1995); Houston v. Nat'l General Ins. Co., 817 F.2d 83, 85 (10th Cir. 1987).
The following facts are taken from the record and are undisputed: Riverdale, a homeowner's association, is a Colorado nonprofit corporation. (Compl. at 1-2 (ECF No. 1.)) Plaintiff Lloyd Land is a director and officer of Riverdale, and Plaintiff Eileen Land is a member of Riverdale. (Id.) Defendant AIC is a Michiganinsurance company with a branch office in Colorado. (Id.)
In March 2008, AIC issued an insurance policy to Riverdale as the named insured. This insurance policy was twice extended until March 20, 2011. The Court refers to the policies issued by Defendant over this three-year span collectively as the singular "Policy."1
The Policy contains a Commercial General Liability form ("CGL Coverage Form") which details the general liability coverage provided by the Policy. (2008 Policy at 15.) The Policy also includes a Habitational Association Directors and Officers Liability Endorsement ("D&O Endorsement") that provides coverage for liability arising from errors and omissions, negligent acts, and breaches of duty related to the activities of officers or directors of Riverdale in the course of discharging their duties. (D&O Endorsement, 2008 Policy.) Further, the Policy contains a Members Endorsement which modifies the Policy to include liability coverage to Riverdale members, subject to the terms and conditions set forth in the CGL Coverage Form. (2008 Policy at 4.) Under the Policy's Members Endorsements, both Mr. and Mrs. Land are "insured" individuals. (Id.)
filed a lawsuit in the U.S. District Court for the District of Colorado against both Lloyd Land and Eileen Land (the "Underlying Action"). (Underlying Action Complaint, attached to Pls'. SJ Motion, Ex. 4.) The Underlying Action Complaint brings claims against Mr. and Mrs. Land for violations of the federal Racketeer Influenced and Corrupt Organization Act ("RICO") and the Colorado Organized Crime and Control Act ("COCCA"). (Id.)
Upon being served with the Underlying Action Complaint, Plaintiffs tendered the same to AlC for a defense. (Compl. at 5.) By letter dated April 11, 2011, AIC declined coverage for Plaintiffs and refused to provide a defense to the Underlying Action.
Defendant moves for summary judgment on all of Plaintiffs' claims. The Court will address each in turn below.
Plaintiffs allege that Defendant breached their insurance contracts, i.e., the Policy, by failing to defend against the Underlying Action and failing to indemnify Plaintiffs for potential damages which could result therefrom. Under Colorado law,2 an insurance company owes its insured both a duty to defend and a duty to indemnify. See Hecla Mining Co. v. N.H. Ins. Co., 811 P.2d 1083, 1086, n. 5 (Colo. 1991). The duty to indemnify relates to the insurer's duty to satisfy a judgment entered against theinsured and is narrower than the duty to defend, which "concerns an insurance company's duty to affirmatively defend its insured against pending claims." Cyprus Amax Minerals Co. v. Lexington Ins. Co., 74 P.3d 294, 299 (Colo. 2003) (internal quotations and citations omitted). Because these duties are separate and distinct, see id., the Court will examine the duty to defend separately from the duty to indemnify.
It is undisputed that Defendant refused to provide a defense for Plaintiffs in the Underlying Action. Plaintiffs allege that this refusal breached the Policy.
"An insurer seeking to avoid its duty to defend an insured bears a heavy burden." Hecla Mining, 811 P.2d at 1089. "[T]he insured need only show that the underlying claim may fall within policy coverage; the insurer must prove it cannot." Compass Ins. Co. v. City of Littleton, 984 P.2d 606, 614 (Colo. 1999) (internal citations and quotations omitted). "An insurer has a duty to defend unless it can show that: (1) the allegations in the complaint against the insured describe only situations which are within the policy exclusions; and (2) there is no factual or legal basis on which the insurer might be held liable to indemnify the insured." TerraMatrix, Inc. v. U.S. Fire Ins. Co., 939 P.2d 483, 486 (Colo. App. 1997). The obligation to defend is not determined by the insured's actual liability to the claimant; instead, the duty to defend arises when the allegations in the complaint, if sustained, would impose a liability covered by the policy. See Hecla Mining, 811 P.2d at 1089.
A court's determination of whether an insurer has a duty to defend is confined to its examination of the four corners of the underlying complaint. See Weitz Co., LLC v.Mid-Century Ins. Co., 181 P.3d 309, 311 (Colo. App. 2007) (internal quotations and citations omitted). "[T]he duty to defend must be determined based solely on a comparison of the allegations of the complaint made against the insured with the insuring provisions of the policy." Employers' Fire Ins. Co. v. W. Guar. Fund Serv., 924 P.2d 1107, 1110 (Colo. App. 1996). The interpretation of the policy provisions is "based upon the principles of contract interpretation." Hecla Mining, 811 P.2d at 1090 (internal citations omitted). Because determination of a duty to defend is based solely on the allegations in the underlying pleading and the terms of the insurance contract, whether a duty to defend exists is a question of law. See Bumpers v. Guarantee Trust Life Insurance Co., 826 P.2d 358, 360 (Colo. App. 1991); see also Apartment Inv. and Management Co. (AIMCO) v. Nutmeg Ins. Co., 593 F.3d 1188, 1193 (10th Cir. 2010).
Here, the Policy's COL Coverage Form provides:
The COL Coverage Form defines the term "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." (Id. at 33.) The CGL Coverage Form also contains an "intentional acts"exclusion, which states that insurance does not apply to: (Id. at 16.)
The Policy's D&O Endorsement further provides:
1. We will pay those sums the insured becomes legally obligated to pay as "damages" because of any negligent act, error, omission or breach of duty directly related to the management of the premises shown in the Declarations, which occurs during the policy period. We will settle or defend, as we consider appropriate, any claim or "suit" for damages covered by this policy . . . .
(Id. at 8.) The D&O Endorsement, in relevant part, specifically excludes liability coverage for the following: (a) "'Bodily injury,' 'property damage', 'personal injury' or 'advertising injury' . . . (e) any...
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