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A. W. Interiors, Inc. v. The Travelers Indemnity Co.

United States District Court, D. Colorado

May 23, 2014

A. W. INTERIORS, INC., Plaintiff,


WILEY Y. DANIEL, Senior District Judge.

THIS MATTER is before the Court on defendant, The Travelers Indemnity Company's, Motion For Summary Judgment [ECF No. 25], and plaintiff, A. W. Interiors, Inc.'s, Motion For Summary Judgment On Breach Of Duty To Defend [ECF No. 26]. For the reasons stated below, The Travelers Indemnity Company's Motion For Summary Judgment [ECF No. 25] is GRANTED and A. W. Interiors, Inc.'s Motion For Summary Judgment On Breach Of Duty To Defend [ECF No. 26] is DENIED.


This suit arises from issues regarding the construction of a Four Seasons Hotel in Vail, Colorado ("the project" or "project").

Black Diamond Resorts-Vail Resorts LLC ("Black Diamond") was the original project owner and Layton Construction Company ("Layton") was the original general contractor. Black Diamond purchased a wrap-up commercial general liability policy from Interested Lloyd's Underwriters ("Lloyd's"), to protect against liability for the project. On February 9, 2009, plaintiff, A. W. Interiors, Inc. ("AWI"), entered into a subcontract agreement [ECF No. 13-1, pp. 107-123] with Layton to install pocket door tracks in the hotel. To protect against liability for its work, AWI purchased a commercial general liability policy ("the policy") from defendant, The Travelers Indemnity Company ("Travelers").

At some point subsequent to beginning the project, Black Diamond defaulted on its loan obligations and Barclays Capital Real Estate, Inc. ("BCRE") became the new project owner. Despite Black Diamond's default, the wrap-up policy from Lloyds remained in effect. On June 11, 2009, BCRE sent Layton a "Notice of Termination for Convenience" which ceased all project work by Layton and all subcontractors. BCRE then hired a different general contractor, Hyder Construction, Inc., to continue work on the project.

Layton alleged that it is owed a large sum of money for its project work, and on September 29, 2010, Layton filed a Second Amended Complaint [ECF No. 26-2] against BCRE, AWI, and numerous other defendants in Eagle County District Court, County of Eagle, Colorado, seeking inter alia, past due payments for its project work. In Layton's Sixth Claim For Relief, Layton alleged that AWI and numerous other parties' work on the project "suffered from alleged defects." ECF No. 26-2, p. 26, ¶¶ 198-203. As such, Layton stated that should it be found liable for damages associated with the defective work, AWI and others are required to indemnify Layton for such damages. Id. In Layton's Seventh Claim For Relief, Layton alleged that if judgment is entered against it for defective project work, Layton is entitled to contribution from AWI for such defective work. Id. at p. 27, ¶¶ 204-206.

AWI notified Travelers of the Layton suit and requested that Travelers defend AWI in the action pursuant to the policy. On July 14, 2011, Travelers sent AWI a Declination of Coverage Letter [ECF No. 26-11] in which it stated that "there is no coverage available for the referenced matter." ECF No. 26-11, p. 2. Thus, AWI retained counsel to defend itself in the Layton suit. Trial commenced in state court on April 16, 2012 and concluded on April 20, 2012. AWI alleges that it expended $93, 045.50 in defense of the Layton suit.

On September 14, 2012, AWI filed its original Complaint [ECF No. 1] against Travelers alleging that Travelers breached its duty to defend AWI in the Layton suit. On October 2, 2012, AWI filed an Amended Complaint [ECF No. 10] asserting the same claim. On May 15, 2013, AWI and Travelers filed cross motions for summary judgment [ECF Nos. 25 & 26] regarding Traveler's duty to defend. Specifically, the parties dispute whether the policy's wrap-up exclusion precludes coverage for the Layton suit. On April 9, 2014, I held a Motions Hearing and heard the parties' arguments on both motions. I took the motions under advisement.


A. Legal Standard for a Motion for Summary Judgment

Summary judgment is proper when "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); see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986); Equal Employment Opportunity Comm. v. Horizon/CMS Healthcare Corp., 220 F.3d 1184, 1190 (10th Cir. 2000). "When applying this standard, [the court must] view the evidence and draw all reasonable inferences therefrom in the light most favorable to the party opposing summary judgment.'" Atl. Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138, 1148 (10th Cir. 2000) (citation omitted). "A fact is material' if, under the governing law, it could have an effect on the outcome of the lawsuit." Horizon/CMS Healthcare, 220 F.3d at 1190. "A dispute over a material fact is genuine' if a rational jury could find in favor of the nonmoving party on the evidence presented." Id.

"The burden of showing that no genuine issue of material fact exists is borne by the moving party." Horizon/CMS Healthcare, 220 F.3d at 1190. "Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.'" Atl. Richfield Co., 226 F.3d at 1148 (quotation omitted). All doubts must be resolved in favor of the existence of triable issues of fact. Boren v. Sw. Bell Tel. Co., 933 F.2d 891, 892 (10th Cir. 1991).

B. Insurance Contract Interpretation and an Insurer's Duty to Defend

Where, as here, federal jurisdiction is predicated upon diversity, the court applies the substantive law of the forum state. Barrett v. Tallon, 30 F.3d 1296, 1300 (10th Cir. 1994). Pursuant to 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) (citations 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." Id. (citing Chacon v. Am. Family Mut. Ins. Co., 788 P.2d 748, 750 (Colo. 1990)). "Courts should read the provisions of the policy as a whole, rather than reading them in isolation." Id. (citing Simon v. Shelter Gen. Ins. Co., 842 P.2d 236, 239 (Colo. 1992)). The Colorado Supreme Court has cautioned that:

Courts may neither add provisions to extend coverage beyond that contracted for, nor delete them to limit coverage. 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. "A court's interpretation of an insurance contract is a matter of law subject to de novo review." Id. (citing Compass Ins. Co. v. City of Littleton, 984 P.2d 606, 613 (Colo. 1993)).

In determining whether an insurer breached its duty to defend an insured, Colorado courts apply the "complaint rule." Cyprus, 74 P.3d at 299. The Supreme Court of Colorado has stated that:

The duty to defend concerns an insurance company's duty to affirmatively defend its insured against pending claims. We have long held that to determine whether a duty to defend exists, courts must look no further than the four corners of the underlying complaint (the "four corners" or "complaint" rule). An insurer is not excused from this duty unless there is no factual or legal basis on which the insurer might eventually be held liable to indemnify the insured. Hence, if the alleged facts even potentially trigger coverage under the policy, the insurer is bound to provide a defense.

Id. (internal quotation marks and citations omitted). The Supreme Court of Colorado has also stated that:

An insurer seeking to avoid its duty to defend an insured bears a heavy burden. An insurer's duty to defend arises when the underlying complaint against the insurer alleges any facts that might fall within the coverage of the policy. The actual liability of the insured to the claimant is not the criterion which places upon the insurance company the obligation to defend. Rather, the obligation to defend arises from allegations in the complaint, which if sustained, would impose a liability covered by the policy. Where the insurer's duty to defend is not apparent from the pleadings in the case against the insured, but the allegations do state a claim which is potentially or arguably within the policy coverage, or there is some doubt as to whether a theory of recovery within the policy coverage has been pleaded, the insurer must accept the defense of the claim.
* * * *
The insurer has a duty to defend unless the insurer can establish that the allegations in the complaint are solely and entirely within the exclusions in the insurance policy. An insurer is not excused from its duty to defend unless there is no factual or legal basis on which the insurer might eventually be held liable to indemnify the insured.

Hecla Mining Co. v. New Hampshire Ins. Co., 811 P.2d 1083, 1089-90 (Colo. 1991) (internal quotation marks and citations omitted).

Pursuant to these mandates by the Supreme Court of Colorado, I must identify the relevant portion of the policy then determine whether allegations in the ...

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