Wagner v. Am. Family Ins., Civil Action No. 12–cv–01420–MSK–MJW

• Decision Date: 01 January 2013
• Docket Number: Civil Action No. 12–cv–01420–MSK–MJW
• Parties: Shannon Wagner, Plaintiff, v. American Family Insurance, Defendant.
• Court: U.S. District Court — District of Colorado

968 F.Supp.2d 1100

Shannon Wagner, Plaintiff,

v.American Family Insurance, Defendant.

Civil Action No. 12–cv–01420–MSK–MJW

United States District Court, D. Colorado.

Filed 09/22/2013

John G. Taussig, III, Scott David Smith, Taussig & Taussig, P.C., Boulder, CO, Steven Robert Barrett, Irwin & Boesen, P.C., Denver, CO, for Plaintiff.

Elizabeth K. Potter, Lambdin & Chaney, LLP, Denver, CO, for Defendant.

OPINION AND ORDER GRANTING MOTION FOR SUMMARY JUDGMENT

MARCIA S. KRIEGER, Chief United States District Judge

THIS MATTER comes before the Court pursuant to the Defendant's (“American Family”) Motion for Summary Judgment (# 24), Ms. Wagner's response (# 32), and American Family's reply (# 37); Ms. Wagner's Motion for Leave to File a Supplemental Brief (# 42) in support of her summary judgment response, ¹ and American Family's response (# 47); American Family's Motion for Partial Summary Judgment (# 51), Ms. Wagner's response (# 56), and American Family's reply (# 63); and American Family's Objections (# 72) to an August 14, 2013 Minute Order (# 71) by the Magistrate Judge granting the Plaintiff's Motion to Compel (# 55), and the Plaintiff's response (# 75).

FACTS

Ms. Wagner owns a home in Aurora, Colorado. That home is insured by American Family under a homeowner's policy. In or about April 2011, Ms. Wagner had Aurora Water examine her property to ascertain whether there was any leakage occurring. The Aurora Water representative informed Ms. Wagner that there was a leak, and it was likely in the slab under the home. Ms. Wagner subsequently retained the services of American Leak Detection, and its inspection revealed that a water pipe located underneath the concrete slab of the property near the exterior wall of the house was the source of the leak.

On May 31, 2011, Ms. Wagner gave notice to American Family of a claim for damage to the home.² An American Family adjuster inspected the home on June 2, 2011, and observed cracks in the slab and damage to the home's foundation. The parties seem to agree that water from the broken pipe eroded the soil underneath the home, causing settlement and cracking of the slab. This, in turn, caused additional damages inside the home, including cracked drywall and separating flooring panels. On June 15, 2011, American Family denied Ms. Wagner's claim, citing several allegedly applicable policy exclusions. The parties had subsequent discussions about Ms. Wagner's claims and American Family's justifications for denying it, but American Family did not waver from its conclusion that the damage was not covered.

Ms. Wagner's commenced this action against American Family, asserting four causes of action: (i) a claim seeking a declaration of her rights under the policy; (ii) a claim for breach of the insurance contract; (iii) a statutory claim under C.R.S. § 10–3–1116, in that American Family unreasonably delayed or denied the payment of benefits under the policy; and (iv) a clam that American Family's denial of the claim constitutes a bad faith breach of the insurance contract.

American Family moves (# 24) for summary judgment on all claims by Ms. Wager arguing, essentially, that Ms. Wagner's policy excludes coverage for the loss in several respects. Inexplicably, American Family then filed a second motion for summary judgment (# 51) on Ms. Wagner's first two claims for relief—declaratory judgment and breach of contract—arguing that Ms. Wagner failed to give timely notice of her claim to American Family under the terms of the contract.³

Separately, American Family has filed Objections (# 72) under Fed.R.Civ.P. 72(a) to a ruling by the Magistrate Judge requiring American Family to produce certain discovery materials and to allow a Rule 30(b)(6) deposition to be taken of its representative on certain topics.

ANALYSIS

A. Summary judgment motion

1. Standard of review

Rule 56 of the Federal Rules of Civil Procedure facilitates the entry of a judgmentonly if no trial is necessary. SeeWhite v. York Intern. Corp., 45 F.3d 357, 360 (10th Cir.1995). Summary adjudication is authorized when there is no genuine dispute as to any material fact and a party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). Substantive law governs what facts are material and what issues must be determined. It also specifies the elements that must be proved for a given claim or defense, sets the standard of proof and identifies the party with the burden of proof. SeeAnderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Kaiser–Francis Oil Co. v. Producer's Gas Co., 870 F.2d 563, 565 (10th Cir.1989). A factual dispute is “genuine” and summary judgment is precluded if the evidence presented in support of and opposition to the motion is so contradictory that, if presented at trial, a judgment could enter for either party. SeeAnderson, 477 U.S. at 248, 106 S.Ct. 2505. When considering a summary judgment motion, a court views all evidence in the light most favorable to the non-moving party, thereby favoring the right to a trial. SeeGarrett v. Hewlett Packard Co., 305 F.3d 1210, 1213 (10th Cir.2002).

If the movant has the burden of proof on a claim or defense, the movant must establish every element of its claim or defense by sufficient, competent evidence. SeeFed.R.Civ.P. 56(c)(1)(A). Once the moving party has met its burden, to avoid summary judgment the responding party must present sufficient, competent, contradictory evidence to establish a genuine factual dispute. SeeBacchus Indus., Inc. v. Arvin Indus., Inc., 939 F.2d 887, 891 (10th Cir.1991); Perry v. Woodward, 199 F.3d 1126, 1131 (10th Cir.1999). If there is a genuine dispute as to a material fact, a trial is required. If there is no genuine dispute as to any material fact, no trial is required. The court then applies the law to the undisputed facts and enters judgment.

If the moving party does not have the burden of proof at trial, it must point to an absence of sufficient evidence to establish the claim or defense that the non-movant is obligated to prove. If the respondent comes forward with sufficient competent evidence to establish a prima facie claim or defense, a trial is required. If the respondent fails to produce sufficient competent evidence to establish its claim or defense, then the movant is entitled to judgment as a matter of law. SeeCelotex Corp. v. Catrett, 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

2. Standards governing interpretation of insurance policies

When attempting to construe language in an insurance policy, the Court's ultimate goal is to ascertain and give effect to the reasonable expectations of the parties to the policy. Pompa v. American Family Mut. Ins. Co., 520 F.3d 1139, 1143 (10th Cir.2008). The strongest indication of the parties' reasonable expectations is the policy language itself, and thus, the Court's first step is to give effect to the plain and ordinary meaning of its terms, as those terms would be understood by a person of ordinary intelligence. MarkWest Hydrocarbon, Inc. v. Liberty Mut. Ins. Co., 558 F.3d 1184, 1190 (10th Cir.2009), citingFarmers Ins. Exch. v. Dotson, 913 P.2d 27, 30 (Colo.1996); Pompa, 520 F.3d at 1143.

Colorado applies the “reasonable expectations doctrine,” requiring that the Court read the policy consistent with the understanding of “ordinary insured” would have of it. Bailey v. Lincoln General Ins. Co., 255 P.3d 1039, 1048–51 (Colo.2011). In other words, the Court construes the policy language not as the insurer intended it to mean, but according to what the ordinary reader and purchaser would have understood it to mean. Regional Bank of Colorado, N.A. v. St. Paul Fire & Marine Ins. Co., 35 F.3d 494, 496 (10th Cir.1994). The same rules apply to provisions in insurance policies that exclude certain situations from otherwise available coverage; exclusionary terms must also be construed according to their plain and apparent meaning. Worsham Contr. Co. v. Reliance Ins. Co., 687 P.2d 988, 990 (Colo.App.1984). The Court must not construe terms of a policy in isolation; it must consider the policy as a whole. Simon v. Shelter General Ins. Co., 842 P.2d 236, 239 (Colo.1992).

When terms in a policy are susceptible to more than one reasonable interpretation, the Court must construe the ambiguous term against the drafter—the insurer—and in a manner that would promote, rather than deny, coverage. Blackhawk–Central City Sanitation Dist. v. American Guarantee & Liab. Ins. Co., 214 F.3d 1183, 1191 (10th Cir.2000). However, a term is not ambiguous simply because the parties disagree as to its meaning, or where hypothetical or abstract sets of facts create the potential of ambiguity. Allstate Ins. Co. v. Juniel, 931 P.2d 511, 513 (Colo.App.1996).

3. Merits

Here, it is Ms. Wagner's burden to establish a breach of the insurance contract by American Family's denial of her claim. Essentially, she must establish that her loss was covered by the insurance contract.

American Family contends that the contract does not provide coverage for Ms. Wagner's loss due to the application of four coverage exclusions: (i) the “earth movement” exclusion, (ii) the “water below the surface” exclusion, (iii) the “seepage” exclusion, (iv) the “settling” exclusion. Ms. Wagner concedes that at least two of these exclusions—the “earth movement” and “water below the surface” exceptions—are properly invoked by American Family (she disputes that the “seepage” and “settling” exclusions apply, however), but she contends that the “resulting loss” exception in the policy restores coverage that otherwise would be excluded.

The Court begins with the grant of coverage, found in a section of the policy entitled “Property Coverages—Section I.” Coverage of the home itself is set forth in “Coverage A—Dwelling” of this section. (Other subsections in the “Property Coverages” section include “Coverage B—Personal Property,” and “Coverage C—Loss of Use”). There is no dispute between...