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Cont'l W. Ins. Co. v. Colony Ins. Co.

United States District Court, D. Colorado

September 19, 2014

CONTINENTAL WESTERN INSURANCE COMPANY, An Iowa corporation, Plaintiff,
v.
COLONY INSURANCE COMPANY, a Virginia corporation, Defendant

Page 1076

For Continental Western Insurance Company, An Iowa corporation, Plaintiff: Jennifer May Morris, LEAD ATTORNEY, Kevin F. Amatuzio, Montgomery, Kolodny, Amatuzio & Dusbabek, LLP-Denver, Denver, CO.

For Colony Insurance Company, a Virginia corporation, Defendant: William F. Stewart, Stewart Bernstiel Rebar & Smith, Blue Bell, PA.

Page 1077

ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT

WILEY Y. DANIEL, SENIOR UNITED STATES DISTRICT JUDGE.

I. INTRODUCTION AND BACKGROUND

THIS MATTER is before the Court on cross motions for summary judgment. Plaintiff Continental Western Insurance Co. (" Continental" ) filed its Motion for Summary Judgment (ECF No. 21) on January 27, 2014. Defendant Colony Insurance Co. (" Colony" ) filed its Cross Motion for Summary Judgment (ECF No. 23) on

Page 1078

February 18, 2014. A hearing was held on these motions on August 6, 2014.

By way of background, this suit stems from the multi-state listeria outbreak of September 2011, in which approximately 32 people died from ingesting contaminated cantaloupes that originated from Jensen Farms in Holly, Colorado. In the wake of numerous personal injury and wrongful death lawsuits, Jensen Farms filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the District of Colorado on May 25, 2012. The Bankruptcy Court created a process through which claimants and other responsible parties who were not parties to the bankruptcy proceedings could settle claims (" Claim Resolution Process" ). It is through this process that the current action arises.

Governmental investigations of the listeria outbreak revealed that Pepper Equipment Corporation (" Pepper" ) sold refurbished processing equipment to Jensen Farms to process cantaloupes. The equipment was originally used to process potatoes, but was manipulated by Pepper in a fashion that would make it suitable to process cantaloupe. The Food and Drug Administration issued a report stating that the processing equipment sold by Pepper " most likely contributed" to the spread of listeria on the Jensen Farm cantaloupes. Thus, Pepper became implicated in the listeria outbreak. Regarding Pepper's commercial general liability (" CGL" ) policies, Continental insured Pepper from September 14, 2010 to September 14, 2011, and Colony insured Pepper under a successive policy from September 14, 2011 to September 14, 2012.

Participation by potentially liable parties was conditioned on such parties' insurers disbursing funds into a " pool" called the Bodily Injury Non-Debtors Claims Fund. ECF No. 21-19, p. 11, § 1.5. These funds would be used to pay and settle claims asserted by the listeria claimants. The parties were also required to pay into an Administrative Fund which provided Jensen Farms money to handle administrative costs, e.g., notice, advertising, claims handling, and legal expenses. Continental chose to participate in the Claim Resolution Process, but Colony did not. In doing so, Continental agreed to completely defend Pepper even though only a portion of the claims for bodily injury and wrongful death asserted by the listeria claimants against Pepper fell under Continental's coverage period. The remaining portion of the claims that Continental defended fell under Colony's coverage period.

On February 28, 2012, William Marler, the listeria claimants' lawyer, mailed a letter to Pepper's defense counsel, John Grund, stating that its CGL policies with Continental and Colony were at issue regarding listeria claimants' injuries. ECF No. 21-7. On March 2, 2012, Pepper's defense counsel mailed a letter to both Continental and Colony requesting a statement regarding each insurer's position as to coverage regarding listeria claimants. ECF No. 21-3. The March 2, 2012 letter also advised the insurers that the parties were asked to participate in the Claim Resolution Process as a potential forum to settle claims and stated that Pepper had been named in two recent Colorado lawsuits involving listeria claimants. Id. On April 27, 2012, Continental sent a letter to Pepper concerning the proposed settlement of listeria related claims against Pepper in the impending bankruptcy action against Jensen Farms. ECF No. 21-13. The letter outlined the essential terms of the contemplated settlement framework as between Pepper and Continental. Id.

On March 5, 2013, Continental's counsel sent a letter to Colony stating that Continental would participate in the Claim Resolution

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Process. ECF No. 21-16. The letter included a statement acknowledging that Colony declined to participate " even though [Colony] also provided CGL coverage for Pepper and that coverage is implicated by at least some of the listeria claims that are or will be resolved in the course of [the] global settlement process." Id. Continental further stated that it had already incurred defense costs and indemnity payments and expected future costs to accrue and " reserve[d] all rights to pursue Colony under any theory, legal or equitable, including by way of assignment of rights and claims from Pepper Equipment, in order to recover what Colony owes for defense and settlement but has refused to pay in whole or in part." Id. On March 27, 2013, Colony responded by letter and explained that it was under no obligation to reimburse Continental. ECF No. 21-17. In pertinent part, the letter reads:

This so called global settlement only involves the plaintiff firms that have agreed to participate. The defense costs inclusive of administrative costs incurred and the indemnity commitments made by [Continental] have been made by [Continental] as a volunteer. Colony . . . has no obligation to reimburse [Continental] for any of its costs.

Id.

As a participant in the Claim Resolution Process, Continental agreed to pay $1.3 million into the Bodily Injury Non-Debtors Claims Fund and $50,000 into the Administrative Fund. ECF No. 21, p. 12, ¶ 51. The Claim Resolution Process enabled Pepper to settle over 60 claims, 31 of which involved wrongful death. ECF No. 21-27, p. 9, ¶ 40. Moreover, Pepper and its insurers were tendered releases from each listeria claimant upon settlement. Id.

On June 3, 2013, Continental filed this lawsuit against Colony requesting a declaratory judgment regarding the parties' rights and duties as they relate to defending Pepper and equitable contribution from Colony for costs incurred in the Claim Resolution Process. ECF No. 1. On January 27, 2014, Continental filed a Motion for Summary Judgment arguing that Colony breached its duty to defend Pepper by not participating in the Claim Resolution Process, and that Continental is entitled to equitable contribution for paying out claims that were covered under the successive policies. ECF No. 21. On February 18, 2014, Colony filed a Cross Motion for Summary Judgment arguing that Continental has no right to settle claims covered only by the Colony policy and then seek reimbursement, and that Continental's claims are barred by provisions in the Colony policy, including the Consent to Settle Clause. ECF No. 23. For the reasons stated below, Continental's Motion for Summary Judgment is granted and Colony's Cross Motion for Summary Judgment is denied.

II. ANALYSIS

A. Standard of Review

Summary judgment may be granted where " the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and the ... moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). " A fact is 'material' if, under the governing law, it could have an effect on the outcome of the lawsuit." E.E.O.C. v. Horizon/ CMS Healthcare Corp., 220 F.3d 1184, 1190 (10th Cir. 2000). " 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

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moving party. Horizon/CMS Healthcare Corp., 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. v. Farm Credit Bank of Wichita, 226 F.3d 1138, 1148 (10th Cir. 2000) (quotation omitted). When applying the summary judgment standard, the court must " 'view the evidence and draw all reasonable inferences therefrom in the light most favorable to the party opposing summary judgment.'" Id. (quotation omitted). All doubts must be resolved in favor of the existence of triable issues of fact. Boren v. Southwestern Bell Tel. Co., 933 F.2d 891, 892 (10th Cir. 1991).

B. Cross Motions for Summary Judgment

Continental's Complaint for Declaratory Judgment, Contribution and/or Reimbursement, and Other Relief, filed June 6, 2013, designates two claims for relief: (1) a declaratory judgment determining the rights and obligations of the parties under the policies; namely, whether Colony had an obligation to defend, and (2) contribution and/or reimbursement for the costs incurred through Continental's participation in the Claim Resolution Process.

On January 27, 2014, Continental filed a motion for summary judgment arguing that Colony breached its obligation to defend and that Continental is entitled to equitable contribution. On February 18, 2014, Colony filed a cross motion for summary judgment arguing that Continental has no right to settle claims covered only by the Colony policy and then seek reimbursement, and that ...


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