Village Homes v. Travelers Cas. and Sur.

• Citation: 148 P.3d 293
• Decision Date: 16 October 2006
• Docket Number: No. 04CA1396.,04CA1396.
• Parties: VILLAGE HOMES OF COLORADO, INC., a Colorado corporation, Plaintiff-Appellee, v. TRAVELERS CASUALTY AND SURETY COMPANY and Travelers Casualty Co. of Connecticut, foreign corporations, Defendants-Appellants.
• Court: Court of Appeals of Colorado

148 P.3d 293

VILLAGE HOMES OF COLORADO, INC., a Colorado corporation, Plaintiff-Appellee, v. TRAVELERS CASUALTY AND SURETY COMPANY and Travelers Casualty Co. of Connecticut, foreign corporations, Defendants-Appellants.

No. 04CA1396.

Colorado Court of Appeals, Div. IV.

June 15, 2006.

Certiorari Granted October 16, 2006.

Roberts Levin & Patterson PC, Bradley A. Levin, Jeremy A. Sitcoff, Denver, Colorado, for Plaintiff-Appellee.

Ballard Spahr Andrews & Ingersoll LLP, Leslie A. Eaton, Denver, Colorado, for Defendants-Appellants.

CARPARELLI, J.

Defendants, Travelers Casualty and Surety Company and Travelers Casualty Co. of Connecticut (collectively Travelers), appeal the trial court's judgment in favor of plaintiff, Village Homes of Colorado, Inc. We affirm.

I. Background

Travelers issued a comprehensive general liability (CGL) and a comprehensive excess liability (umbrella) insurance policy to Village Homes, a home builder. Subject to certain conditions, each policy provided coverage for occurrences during the period of August 1, 1995, to August 1, 1996.

In April 2000, three homeowners sued Village Homes, alleging that Village Homes was liable for construction defects related to expansive soils. In July 2001, a fourth homeowner sued Village Homes on the same basis. Village Homes tendered the defense of the cases to Travelers, which denied coverage.

Village Homes sued Travelers, alleging that it had settled the two underlying suits for approximately $788,580, and that Travelers was obligated to indemnify it for a total amount of about $315,000.

After receiving the case on stipulated facts, the court concluded that Travelers was obligated to indemnify Village Homes in the amount of $200,000.

Travelers contends that the trial court erred when it concluded there was coverage under the policies. We disagree.

II. The Insuring Agreement

The CGL policy obligates Travelers to pay sums that Village Homes becomes legally obligated to pay as damages because of property damage that (1) is caused by an "occurrence" and (2) takes place during the policy period. The policy defines "occurrence" to mean "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."

Travelers concedes that because the parties stipulated that the property damage to the homes is $200,000, the umbrella policy is not implicated. Therefore, our analysis is limited to the terms of the CGL policy.

III. Stipulated Facts

The homeowners alleged that the property damage that was caused by Village Homes' negligent construction began on the date the homes were first sold and continued through the date of the complaints. They alleged that, as a result of this continuing property damage, Village Homes was liable to them for damages as measured by, among other things, the cost of repairing the damage to the homes.

The parties submitted two stipulations of fact. To the first stipulation, they attached copies of the CGL policy, the complaints the homeowners filed in the two lawsuits, and certified copies of the homeowners' deeds. They also stipulated that:

• Travelers issued the CGL policy to Village Homes;

• the policy period was August 1, 1995, to August 1, 1996; and

• three of the homeowners purchased the homes from prior owners in 1997, and the fourth homeowner purchased the home in 1999.

In the second stipulation, the parties stipulated that:

• there was property damage to the four homes;

• the property damage resulted from an "occurrence",

• the "occurrence" was during the policy period; and

• the property damage to the homes during the policy period was $200,000.

The parties did not stipulate to any other allegations made in Village Homes' complaint or amended complaint.

IV. Issue Presented

The parties presented this case to the trial court to determine whether the supreme court decision in Browder v. United States Fidelity & Guaranty Co., 893 P.2d 132 (Colo. 1995), compels the conclusion that the CGL policy here does not afford coverage to Village Homes.

In the trial court, Travelers did not contend that (1) the sums Village Homes was legally obligated to pay to the homeowners did not constitute damages as that term is used in the insuring agreement; (2) Village Homes' liability to the homeowners was not premised on the stipulated occurrence; or (3) Village Homes' liability did not include the stipulated $200,000 damage to the property.

On appeal, Travelers does not contend that there is insufficient evidence to show that Village Homes' liability to the homeowners was because of property damage caused by an occurrence that took place during the policy period.

Based on Browder, Travelers argues that (1) coverage was not triggered because the homeowners acquired the homes after the expiration of the insurance policy, and (2) there is no coverage because the homeowners did not suffer any actual harm during the policy period.

V. Policy Interpretation and Standard of Review

When determining the rights and obligations that exist under an insurance policy, we apply principles of contract interpretation and attempt to carry out the parties' reasonable expectations when the policy was issued. We enforce insurance contracts as written, giving the words and phrases their plain and ordinary meaning. Cotter Corp. v. Am. Empire Surplus Lines Ins. Co., 90 P.3d 814 (Colo.2004); Thompson v. Md. Cas. Co., 84 P.3d 496 (Colo.2004). "Our construction of the policy provisions must be `fair, natural and reasonable' rather than strained or strictly technical." Pub. Serv. Co. v. Wallis & Cos., 986 P.2d 924, 939 (Colo.1999)(quoting Johnson v. Am. Family Life Assurance Co., 583 F.Supp. 1450, 1453 (D.Colo.1984)). "Courts should not rewrite insurance policy provisions that are clear and unambiguous." Compass Ins. Co. v. City of Littleton, 984 P.2d 606, 613 (Colo.1999). However, when the terms of an insurance policy are ambiguous, they must be strictly construed against the insurer and in favor of the policyholder. Allstate Ins. Co. v. Avis Rent-A-Car Sys., Inc., 947 P.2d 341 (Colo.1997); U.S. Fid. & Guar. Co. v. Budget Rent-A-Car Sys., Inc., 842 P.2d 208, 211 (Colo.1992); Am. Family Mut. Ins. Co. v. Johnson, 816 P.2d 952, 953 (Colo.1991).

We review the trial court's interpretation of an insurance contract de novo. Globe Indem. Co. v. Travelers Indem. Co., 98 P.3d 971, 973 (Colo.App.2004).

VI. Coverage Triggered

Travelers argues that coverage was not triggered. We disagree.

A. Trigger of Coverage

"Trigger of coverage" refers to circumstances that activate coverage under a CGL policy and is determined based on the language of the policy. So-called claims made policies provide coverage "for claims made during the policy period", in contrast, "an occurrence policy provides coverage for all `occurrences' which take place during a policy period." Ballow v. PHICO Ins. Co., 875 P.2d 1354, 1357 (Colo.1993) (emphasis added).

Triggering occurs when a threshold event implicates an insurance policy's coverage. The fact that a policy has been triggered means that there may be liability coverage under that policy, subject to the policy's terms, the application of any exclusions in the policy, and any other defenses the insurer may raise. Thus, a policy that has not been triggered does not provide any coverage, while a policy that has been triggered may or may not provide coverage, depending on the circumstances of the case.

Pub. Serv. Co. v. Wallis & Cos., supra, 986 P.2d at 937 n. 11.

In occurrence policies, the trigger of coverage is usually bodily injury or property damage during the policy period. Consequently, an occurrence policy that was in effect when injury or damage happened may provide coverage even when a claim alleging that the policyholder is liable for the injury or damage is not filed until many years later. In this way, an occurrence policy does not expire, but, rather, continues in effect after the policy period ends.

B. Conclusion Regarding Trigger

Travelers stipulated that there was property damage to the purchasers' homes, the property damage resulted from an occurrence, the occurrence was during the policy period, and the property damage to the homes during the policy period was $200,000. It thus stipulated to all conditions necessary to trigger coverage.

Nonetheless, Travelers contends that there is "no operative effect" to its stipulation that there was property damage resulting from an occurrence during the policy period because coverage was not triggered. However, the determination of whether coverage is triggered is based on the application of the policy terms to the facts. Under the plain and ordinary meaning of the policy terms here, the triggering event is an occurrence during the policy period, and Travelers stipulated to that event.

Therefore, we conclude that coverage was triggered.

C. Travelers' Contentions

We reject Travelers' contention that Browder, supra, requires us to conclude that coverage was not triggered.

In Browder, a general contractor built and sold a motel. For five months during construction and nine months after construction was completed, the seller was insured under a special multi-peril policy. On the day the policy period ended, the seller sold the motel and transferred ownership of the insurance policy to the same purchasers.

The policy obligated the insurer to pay all sums the seller became legally obligated to pay as damages because of bodily injury or property damage caused by an occurrence and "arising out of the ownership, maintenance or use of the insured premises and all operations necessary or incidental to the business of the seller conducted at or from the insured premises." Browder, supra, 893 P.2d at 134. The policy indicated that it applied to liability the seller assumed under a warranty that work performed by or on behalf of the seller would be done in a workmanlike manner.

More than eight years later, the purchasers discovered cracking...