Rocky Mountain Prestress, LLC v. Liberty Mut. Fire Ins. Co.

• Citation: 960 F.3d 1255
• Decision Date: 02 June 2020
• Docket Number: No. 19-1169,19-1169
• Parties: ROCKY MOUNTAIN PRESTRESS, LLC, Plaintiff - Appellant, v. LIBERTY MUTUAL FIRE INSURANCE COMPANY, Defendant - Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

960 F.3d 1255

ROCKY MOUNTAIN PRESTRESS, LLC, Plaintiff - Appellant,

v.LIBERTY MUTUAL FIRE INSURANCE COMPANY, Defendant - Appellee.

No. 19-1169

United States Court of Appeals, Tenth Circuit.

FILED June 2, 2020

Melissa R. Liff (Dennis B. Polk with her on the briefs) of Holley, Albertson & Polk, P.C., Lakewood, Colorado, for Plaintiff–Appellant.

Nicole K. Gorham (Brian J. Spano and Amy D. Wills with her on the brief) of Lewis Roca Rothgerber Christie LLP, Denver, Colorado, for Defendant–Appellee.

Before HARTZ and EID, Circuit Judges.^*

HARTZ, Circuit Judge.

The subcontractor on a building project seeks coverage under the property owner’s insurance policy for the subcontractor’s costs of repairing its faulty work. The district court granted summary judgment in favor of the insurance company on three independent grounds: (1) the subcontractor had not shown that the claimed loss was fortuitous; (2) the claimed loss did not constitute "direct physical loss or damage" as required for coverage under the policy, Aplt. App., Vol. I at 254; and (3) even if there might otherwise have been coverage, the claimed loss fell within the policy’s exclusion for defective workmanship. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm the district court’s decision based on the defective-workmanship exclusion.

I. BACKGROUND

Colorado Center Development, LLC, the owner of certain property in Denver, Colorado, hired J.E. Dunn Construction Company to construct an office building (the Project) on the property. Colorado Center purchased from Defendant Liberty Mutual Fire Insurance Company a Builder’s Risk insurance policy (the Policy). The Policy provides protection against "direct physical loss or damage caused by a covered peril to ‘buildings or structures’ while in the course of construction, erection, or fabrication." Aplt. App., Vol. I at 254. It defines covered perils as "risks of direct physical loss or damage unless the loss is limited or caused by a peril that is excluded." Id. at 263. (Policies that cover "any fortuitous loss not resulting from an excluded risk or from fraud by the insured" are often referred to as "all-risk" policies. Adams-Arapahoe Joint Sch. Dist. No. 28-J v. Cont’l Ins. Co. , 891 F.2d 772, 774 (10th Cir. 1989).) One of the Policy’s exclusions is for "loss or damage consisting of, caused by, or resulting from an act, defect, error, or omission (negligent or not) relating to ... design, specifications, construction, materials, or workmanship." Id. at 265. This exclusion is itself subject to an exception: "[I]f an act, defect, error, or omission as described above results in a covered peril, [Liberty] do[es] cover the loss or damage caused by that covered peril." Id.

General contractor J.E. Dunn hired plaintiff Rocky Mountain Prestress, LLC (RMP) as a subcontractor to perform work including "engineer[ing], supply[ing,] and install[ing] all precast concrete components, connections, and erections aids" and "[s]upply[ing] and install[ing] grout and/or patching of all connections required by the engineering for the structural integrity of the precast." Aplt. App., Vol. I at 125–26. RMP began erecting precast columns at the site on February 1, 2016, finishing this work on June 10, 2016. But because of "potential concerns that arose at another project" relating to "sinking pillars/columns," J.E. Dunn requested RMP to retain a third-party engineering firm to investigate "potential structural issues" with RMP’s work on the Project. Id. at 376. The engineering firm concluded that the Project required "repairs to insufficiently grouted joints between precast concrete column and pilaster elements" at 264 locations throughout the structure. Id. at 325. It submitted a plan detailing the regrouting repairs that would be required at the various faulty joints. It did not note any other structural issues with the Project or describe any other repairs that would be needed. The engineering firm began its investigation in August 2016, and the final grouting repair work was completed in February 2017.

In the meantime, in November 2016, RMP submitted a claim to Liberty seeking coverage under the Policy.¹ Liberty’s loss-investigation notes from November 2016 reflect the difficulty it experienced in attempting to gather more information about the nature and basis of RMP’s claim. On January 3, 2017, a Liberty loss investigator summarized his understanding of the claim:

In review of the documents submitted the damage deals with sinking pillars/columns. The investigation by the structural engineering firm was requested by [RMP] and was "based on potential concerns that arose at another project and at the request of JE Dunn". The ... report [by the third-party] structural engineer[ ] indicates "insufficiently grouted joints between precast concrete column and pilaster elements" are being investigated. The joints are being shimmed and regrouting repairs appear to be underway. The plans that have been provided indicate that there are 264 locations throughout the structure that are being addressed.

Id. at 321.

In March 2017 the loss investigator traveled to Denver to inspect the building himself. The appellate appendix prepared by RMP contains no indication of any further activity by either party on the claim until December 2017, when RMP filed a lawsuit in Colorado state court against Liberty. The appendix also contains no indication that the Project required any repairs other than the regrouting remediation work recommended by the third-party engineering firm.

In its complaint RMP raised four claims for relief: (1) breach of contract, (2) insurance bad faith, (3) statutory damages for insurance bad faith, and (4) declaratory judgment on the question of insurance coverage. Liberty removed the action to the United States District Court for the District of Colorado based on diversity jurisdiction.

Following written discovery, Liberty filed a motion for summary judgment. RMP opposed the motion on the merits; it did not request additional time for discovery or inform the court under Fed. R. Civ. P. 56(d) that it was unable to present facts essential to its opposition. The district court agreed with Liberty that RMP’s claimed loss from the regrouting remediation work was not entitled to coverage under the terms of the Policy and accordingly granted summary judgment in favor of Liberty.

II. DISCUSSION

"We review the district court’s grant of summary judgment de novo, applying the same standards that the district court should have applied." Tesone v. Empire Mktg. Strategies , 942 F.3d 979, 994 (10th Cir. 2019) (internal quotation marks and brackets omitted). "The court shall grant summary judgment 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). In applying this test, "we consider the evidence in the light most favorable to the non-moving party." Tesone , 942 F.3d at 994 (internal quotation marks omitted). For there to be a " ‘genuine’ " dispute of fact, "there must be more than a mere scintilla of evidence"; "[t]o avoid summary judgment, the evidence must be such that a reasonable jury could return a verdict for the nonmoving party." Vitkus v. Beatrice Co. , 11 F.3d 1535, 1539 (10th Cir. 1993). Thus, "unsupported and conclusory statement[s] ... , even from experts, are insufficient to defeat summary judgment," Roberts v. Jackson Hole Mountain Resort Corp. , 884 F. 3d 967, 977 (10th Cir. 2018), and "[s]ummary judgment may be granted if the evidence is merely colorable or is not significantly probative," Vitkus , 11 F.3d at 1539.

The parties agree that this diversity case is governed by the substantive law of Colorado. When Colorado law has not addressed the specific issue before us, our task is to predict how the Colorado Supreme Court would rule. See Siloam Springs Hotel, L.L.C. v. Century Sur. Co. , 906 F.3d 926, 930–31 (10th Cir. 2018). To make this prediction, we may look to "lower state court decisions, decisions of other states, federal decisions, and the general weight and trend of authority." Id. (brackets and internal quotation marks omitted). "A federal district court’s state-law determinations are entitled to no deference and are reviewed de novo." Id . at 931 (internal quotation marks omitted).

Under Colorado law, "[a]n insurance policy is merely a contract that courts should interpret in line with well-settled principles of contract interpretation." Cyprus Amax Minerals Co. v. Lexington Ins. Co. , 74 P.3d 294, 299 (Colo. 2003). One of these well-settled principles is the rule that "a court should seek to give effect to all provisions so that none will be rendered meaningless." Pub. Serv. Co. of Colo. v. Wallis & Cos. , 986 P.2d 924, 933 (Colo. 1999) (internal quotation marks omitted). "In undertaking the interpretation of an insurance contract, courts should be wary of rewriting provisions, and should give the words contained in the contract their plain and ordinary meaning, unless contrary intent is evidenced in the policy." Cyprus Amax , 74 P.3d at 299. "However, because of the unique nature of insurance contracts and the relationship between the insurer and insured, courts do construe ambiguous provisions against the insurer and in favor of providing coverage to the insured." Id . "Terms used in a contract are ambiguous when they are susceptible to more than one reasonable interpretation." Hecla Mining Co. v. N.H. Ins. Co. , 811 P.2d 1083, 1091 (Colo. 1991). Although an ambiguous term must be construed broadly in favor of the insured, this "does not mean that we must adopt [the insured’s] views wholesale." Colo. Pool Sys., Inc. v. Scottsdale Ins. Co. , 317 P.3d 1262, 1270 (Colo. App. 2012). "On the contrary, we must ensure that any interpretation of [the ambiguous term] comports with the policy’s remaining provisions." Id.

The insured bears the initial burden of demonstrating coverage under the policy. See Rodriguez ex rel....