Ross v. Old Republic Ins. Co.

• Decision Date: 09 February 2006
• Docket Number: No. 04CA1985.,04CA1985.
• Citation: 134 P.3d 505
• Parties: Jamie L. ROSS, individually and as natural parent of minor children Jaylie B. Ross and Jaida S. Ross, and Crystal L. Ross, individually and as natural parent of minor children Jon Talon Ross, Tessa M. Ross, Starr L. Ross, and Cash D. Ross, Plaintiffs-Appellees, v. OLD REPUBLIC INSURANCE COMPANY, Garrishee-Appellant.
• Court: Colorado Court of Appeals

134 P.3d 505

Jamie L. ROSS, individually and as natural parent of minor children Jaylie B. Ross and Jaida S. Ross, and Crystal L. Ross, individually and as natural parent of minor children Jon Talon Ross, Tessa M. Ross, Starr L. Ross, and Cash D. Ross, Plaintiffs-Appellees, v. OLD REPUBLIC INSURANCE COMPANY, Garrishee-Appellant.

No. 04CA1985.

Colorado Court of Appeals, Division I.

February 9, 2006.

As Modified on Denial of Rehearing March 23, 2006.

COPYRIGHT MATERIAL OMITTED

Schaden Katzman Lampert & McClune, Bruce A. Lampert, Broomfield, Colorado, for Plaintiff-Appellee Jamie L. Ross.

Zarlengo Mott Zarlengo & Winbourn, Zane Moseley, Denver, Colorado, for Plaintiff-Appellee Crystal L. Ross.

Davis Graham & Stubbs, LLP, Andrew M. Low, Rudy E. Verner, Denver, Colorado; Grund & Nelson, PC, John W. Grund, Della S. Nelson, Denver, Colorado, for Garnishee-Appellant.

ROMAN, J.

In this garnishment proceeding, garnishee, Old Republic Insurance Company, appeals the judgment entered in favor of plaintiffs, Jamie L. Ross and Crystal L. Ross, individually and on behalf of their six minor children. We reverse and remand for further proceedings.

An airplane chartered through the Durango Air Service, Inc. (DAS) crashed, killing the pilot and both passengers. Plaintiffs, the passengers' surviving spouses and children, brought a wrongful death action against DAS, its president and half-owner, Watkins, and the pilot's estate.

DAS and Watkins (defendants) were insured under two policies issued by Old Republic. The aviation policy covered liability resulting from bodily injury and death from operation of an aircraft and had a coverage limit of $700,000 with a liability limit of $100,000 per passenger. Old Republic paid plaintiffs $200,000 under this policy.

However, Old Republic disputed coverage under a comprehensive general liability policy that had a policy limit of $1 million. Old Republic sought a declaratory judgment in the federal district court "that it had discharged the full extent of its obligation to indemnify the insureds." Ultimately, the Court of Appeals for the Tenth Circuit affirmed the district court's determination that Old Republic was liable under both policies. Old Republic Ins. Co. v. Durango Air Serv., Inc., 283 F.3d 1222 (10th Cir.2002). Old Republic then paid each plaintiff group $750,000 under the second policy.

During the federal court proceedings, plaintiffs and defendants entered into a settlement agreement in which (1) defendants confessed judgment of $2 million per plaintiff group plus interest; (2) Watkins agreed to sign a $50,000 promissory note to plaintiffs, for which he would be reimbursed if plaintiffs recovered more than the amount of the consent judgment against Old Republic; (3) defendants agreed to prosecute claims against Old Republic fully; (4) defendants agreed to be represented by plaintiffs' lawyers and waived any potential conflict of interest; (5) plaintiffs reserved the right to approve any settlement reached with Old Republic; and (6) plaintiffs and defendants agreed to share any compensatory or punitive damages recovered beyond the amount of the consent judgment. Defendants then confessed judgment on all claims contained in the amended complaint, and the trial court entered a consent judgment of $4 million.

Almost a year after Old Republic paid plaintiffs under the CGL policy, plaintiffs filed writs of garnishment for over $5.7 million against Old Republic for post-judgment interest on the consent judgment under the terms of the CGL policy and costs.

I.

Old Republic first contends the trial court erred in ruling that it agreed to the consent judgment and that res judicata barred its challenge to the judgment. Conversely, plaintiffs contend that Old Republic consented to the judgment and that the doctrines of res judicata, equitable estoppel, and waiver bar Old Republic's challenge to the consent judgment. We agree with Old Republic.

A.

We reject plaintiffs' argument that Old Republic consented to the judgment in a letter written by Old Republic's counsel to Watkins's counsel.

Interpretation of a written document presents a question of law which we review de novo. Bolser v. Bd. of Comm'rs, 100 P.3d 51 (Colo.App.2004).

Plaintiffs cite the following language to prove Old Republic's consent:

On behalf of Old Republic, we can assure you and your clients that, if your clients wish to resolve the litigation as you have suggested, Old Republic has no objection to that and will agree to indemnify your insureds, but only to the extent of the determined insurance coverage.

However, this language immediately follows a sentence in which Old Republic distinguished a previous request to "authorize" defendants to confess judgment and stated that the current request was for an answer whether "such a confession of judgment [is] a breach of the policy, affecting your clients' insurance coverage." Moreover, Old Republic reiterated that it "stands by the position it has previously communicated" that the coverage for the accident was limited to $200,000 under the aviation policy unless otherwise determined by the federal court.

The context of the letter, therefore, shows that Old Republic agreed to pay plaintiffs under the insurance policy if the parties entered into a settlement agreement. Furthermore, even if the language cited by plaintiffs could be read as consenting to the judgment, Old Republic agreed to indemnify "only to the extent of the determined insurance coverage," not the full amount of the consent judgment.

Accordingly, Old Republic only agreed to indemnify defendants to the extent of any liability under the insurance policies.

B.

Plaintiffs also argue that res judicata bars Old Republic's challenges to the consent judgment because Old Republic failed to raise those challenges in the federal court proceedings. We disagree.

The Colorado Supreme Court uses the terms "claim preclusion" and "issue preclusion," rather than "res judicata" and "collateral estoppel," because "res judicata" is commonly used as an overarching label for both claim and issue preclusion. Argus Real Estate, Inc. v. E-470 Pub. Highway Auth., 109 P.3d 604 (Colo.2005). Therefore, although the parties and the trial court discuss the preclusive effect of the federal court proceedings as "res judicata," we analyze the issue as "claim preclusion."

Claim preclusion prevents the relitigation of matters that have already been decided as well as matters that could have been raised in a prior proceeding but were not. For a claim in a second judicial proceeding to be precluded by a previous judgment, there must exist (1) finality of the first judgment; (2) identity of subject matter; (3) identity of claims for relief; and (4) identity or privity between parties to the actions. Argus Real Estate, Inc. v. E-470 Pub. Highway Auth., supra.

However, a declaratory judgment action is an exception to the claim preclusion doctrine. Argus Real Estate, Inc. v. E-470 Pub. Highway Auth., supra (recognizing exception for declaratory judgments because they are limited proceedings in which the court determines the rights of parties based on the interpretation of a written instrument); Atchison v. City of Englewood, 180 Colo. 407, 506 P.2d 140 (1973).

Here, in federal court Old Republic sought only a declaratory judgment of its liability under the insurance policies at issue. As such, the declaratory judgment was binding on the amount of coverage only. Therefore, the doctrine of claim preclusion does not bar Old Republic's challenge to the consent judgment.

C.

Plaintiffs next assert that Old Republic's challenge is barred by the doctrine of equitable estoppel. We are not persuaded.

Equitable estoppel requires that a person induce another detrimentally to change position in reasonable reliance on the person's actions through words, conduct, or silence. The party to be estopped must intend that its representation be acted on so that the other party is justified in relying upon the represented facts. Cont'l W. Ins. Co. v. Jim's Hardwood Floor Co., 12 P.3d 824 (Colo.App.2000).

Here, plaintiffs argue that they relied on the letter from Old Republic in entering into the consent judgment. However, the letter stated that settlement would not constitute a breach of the policy and clearly limited indemnity to the policy limits. Therefore, we cannot conclude that plaintiffs' reliance on the letter was reasonable. See Cont'l W. Ins. Co. v. Jim's Hardwood Floor Co., supra.

Nevertheless, plaintiffs argue that Old Republic paid them in partial satisfaction of the consent judgment and therefore waived any objection to the judgment. However, Old Republic was required to pay plaintiffs under the terms of its insurance policies, as determined by the court. Plaintiffs incorrectly conflate payment under one legal obligation with acknowledgement of another. Moreover, plaintiffs do not dispute that when Old Republic tendered payment under the general liability insurance policy, it included language that payment did not constitute such a waiver. Additionally, Old Republic's request that plaintiffs acknowledge receipt of payment in the trial record does not indicate a willingness to be bound by the consent judgment.

Plaintiffs further argue that Old Republic represented in federal court that the judgment was properly entered as one collective judgment. However, we find nothing in the record to support plaintiffs' claim that Old Republic conceded in the federal court proceedings that the consent judgment was valid or that it was binding on Old Republic. See People v. Dist. Court, 898 P.2d 1058 (Colo. 1995)(it is fundamental that a court does not settle legal questions on the naked factual assertions of counsel); Schempp v. Lucre Mgmt. Group, LLC, 75 P.3d 1157 (Colo.App. 2003)(we will not consider an issue when counsel alleges facts outside of the record and fails to supplement the record to support such allegations).

Accordingly, we...