Travelers Prop. Cas. Co. of Am. v. Stresscon Corp.
| Decision Date | 25 April 2016 |
| Docket Number | Supreme Court Case No. 13SC815 |
| Citation | 370 P.3d 140 |
| Parties | TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, a Connecticut company, Petitioner v. STRESSCON CORPORATION, a Colorado corporation, Respondent. |
| Court | Colorado Supreme Court |
Attorneys for Petitioner: Wheeler Trigg O'Donnell LLP, Malcolm E. Wheeler, Evan Stephenson, Denver, Colorado.
Attorneys for Respondent: Zonies Law LLC, Sean Connelly, Denver, Colorado, Sherman & Howard L.L.C., Bret R. Gunnell, Katherine D. Varholak, Brooke Yates, Denver, Colorado.
Attorneys for Amici Curiae American Insurance Association & The Property Casualty Insurers Association of America: Hall & Evans, L.L.C., Alan Epstein, Denver, Colorado.
Attorneys for Amicus Curiae The Colorado Trial Lawyers Association: Roberts Levin Rosenberg PC, Bradly A. Levin, Michael J. Rosenberg, Denver, Colorado.
Attorneys for Amicus Curiae Complex Insurance Claims Litigation Association: White and Steele, P.C., Frederick W. Klann, Denver, Colorado.
¶ 1 Travelers petitioned for review of the court of appeals' judgment affirming the district court's denial of its motion for directed verdict in a lawsuit brought by its insured, Stresscon. Much as the district court had done, the appellate court rejected Travelers' contention that the no-voluntary-payments clause of their insurance contract relieved it of any obligation to indemnify Stresscon for payments Stresscon had made without its consent. Instead, the court of appeals found that this court's opinion in Friedland v. Travelers Indemnity Co., 105 P.3d 639 (Colo.2005), permitting the insured in that case an opportunity to demonstrate a lack of prejudice from its failure to comply with a notice requirement of its insurance contract, had effectively overruled our prior "no voluntary payments" jurisprudence to the contrary and given Stresscon a similar opportunity.
¶ 2 Because our adoption of a notice-prejudice rule in Friedland did not overrule any existing "no voluntary payments" jurisprudence in this jurisdiction, and because we decline to extend our notice-prejudice reasoning in Friedland to Stresscon's voluntary payments, made in the face of the no-voluntary-payments clause of its insurance contract with Travelers, the judgment of the court of appeals is reversed.
¶ 3 Stresscon Corporation, a subcontracting concrete company, filed suit against Travelers Property Casualty Company of America, alleging, among other things, that Travelers acted in bad faith, unreasonably delaying or denying its claim for covered insurance benefits; and Stresscon sought awards of two times the covered benefits along with fees and costs, as prescribed by statute. Stresscon's claims for relief arose from a serious construction accident in July 2007, which was caused by a crane operator employed by a company that was itself a subcontractor of Stresscon. Stresscon's general contractor, Mortenson, sought damages from Stresscon, asserting Stresscon's contractual liability for the resulting construction delays, and Stresscon in turn sought indemnification from Travelers.
¶ 4 Although there was much dispute over the factual and legal import of Travelers' reservation of rights and other of its communications with both Stresscon and Mortenson concerning Mortenson's claim, there was no dispute that by December 31, 2008, Travelers had not paid the damages asserted by Mortenson. There was also no dispute that on December 31, 2008, despite Mortenson's failure to bring a lawsuit or seek arbitration against Stresscon, Mortenson and Stresscon entered into a settlement agreement without consulting Travelers. The agreement settled, without differentiation as to amount, this accident-related claim, along with other unrelated and concededly uncovered Mortenson claims against Stresscon. In March 2009, also without prior notice of the settlement agreement, Stresscon filed suit against several entities, including Travelers, the subcontracting crane company, and various other insurers; and with regard to Travelers, it ultimately prevailed, winning a verdict for bad faith breach of the insurance contract and an award of the statutory amount, costs, and attorney fees.
¶ 5 With regard to the issue upon which review was granted in this court, Travelers moved for summary judgment in the trial court on the grounds that it owed Stresscon no duty of indemnification for the amount of Stresscon's settlement, according to the terms of the no-voluntary-payments provision of the policy, which stated, "No insured will, except at that insured's own cost, voluntarily make a payment, assume any obligation, or incur any expense, other than for first aid, without our consent." The district court denied Travelers' motion, finding by analogy to the so-called "notice-prejudice" rule previously adopted by this court with regard to an insured's failure to give timely notice of a claim concerning an occurrence-based liability policy, that the policy's no-voluntary-payments provision could relieve Travelers of indemnification only if Travelers suffered prejudice from Stresscon's settlement, and that the question of prejudice involved disputed matters of fact, which could not be resolved by summary judgment. Travelers renewed essentially the same challenge—that it owed Stresscon no duty of indemnification as the result of Stresscon's settlement with Mortenson, either because no proof of prejudice was required for enforcement of the no-voluntary-payments provision or, alternatively, because Travelers was necessarily prejudiced by being deprived of the opportunity to litigate Mortenson's claim—by motion for directed verdict at the close of Stresscon's case, again after the jury returned a verdict for Stresscon, by motion for judgment notwithstanding the verdict, and finally on direct appeal.
¶ 6 The court of appeals affirmed these rulings of the district court, characterizing the question before it on appeal as whether an insured's breach of a no-voluntary-payments clause will always bar the insured from receiving benefits, and answering that question in the negative, in express reliance on the notice-prejudice rule adopted by this court in Friedland v. Travelers Indemnity Co., 105 P.3d 639 (Colo.2005). The intermediate appellate court reasoned that although our notice-prejudice rule was announced with regard to the failure of an insured to give timely notice of a third-party claim to its insurer, this court's express tailoring of the prejudice determination for cases in which notice was not given until after settlement, like Friedland itself, demonstrated that we contemplated application of the same notice-prejudice rule to no-settlement or no-voluntary-payments provisions. In addition, the court of appeals panel below found persuasive the reasoning of another panel of that court in reaching the same conclusion in the uninsured motorist context, see Lauric v. USAA Cas. Ins. Co., 209 P.3d 190 (Colo.App.2009), the reasoning of other jurisdictions limiting in various ways the enforceability of particular no-settlement or no-voluntary-payments provisions, and policy considerations it considered to be substantially similar to those upon which we relied in adopting a notice-prejudice rule in Friedland.
¶ 7 By writ of certiorari, we agreed to review the court of appeals' extension of our notice-prejudice rule to the enforcement of the no-voluntary-payments provision in this case.
¶ 8 In Friedland v. Travelers Indemnity Co., 105 P.3d 639 (Colo.2005), this court extended the notice-prejudice rule it had formulated and first applied in the uninsured motorist context in Clementi v. Nationwide Mutual Fire Insurance Co., 16 P.3d 223 (Colo.2001). In Friedland, we applied it to an occurrence-based insurance policy, under the terms of which the plaintiff sought indemnification after settling an environmental clean-up action brought against him by the federal and state governments. 105 P.3d at 642. For various policy-related reasons, we held that the insurer could not be absolved of its coverage obligations by a failure of the insured to comply with a notice provision of the policy alone, but only upon a showing of prejudice resulting from such a failure. Id. at 648–49. In Friedland we also expressly rejected the argument of the insurer that notice after settlement amounted to no notice at all, id. at 647, but because of the greater likelihood that prejudice would result in that kind of situation, we tailored the determination of prejudice specifically to the situation in which notice has not been given until after the insured has already settled the case, id. at 648.
¶ 9 We did not, however, also implicitly extend our newly minted notice-prejudice rule to no-voluntary-payments or consent-to-settle provisions, as the court of appeals believed. Quite the contrary, we took pains to note that in the insurer's motion for summary judgment in Friedland, it had expressly raised the no-voluntary-payments provision of the insurance policy at issue in that case as a bar to recovery, id. at 642, and we expressly declined to address that issue, for the reason that the trial court had not yet done so. Id. at 649 n. 6. In the absence of any ruling concerning the meaning of that provision and possible factual disputes or defenses by Friedland, rather than opining on the effect of payments voluntarily made or settlements voluntarily entered into by an insured in the face of a contract provision barring such payments or obligations or expressly excluding them from coverage, we limited ourselves to extending the notice-prejudice rule announced in Clementi to liability policies, id. at 646, and tailoring the prejudice determination to the situation in which notice of a claim was given only after settlement, id. at 648.
¶ 10 In Friedland, we therefore merely reversed the trial court's order of summary judgment, which was granted on the sole ground that the...
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