United States District Court, D. Colorado
WILEY Y. DANIEL, Senior District Judge.
THIS MATTER is before the court on Plaintiff's Motion for Summary Judgment as to Counts I and II of its Complaint for Declaratory Judgment (ECF No. 46). On September 17, 2014, I held a hearing on this motion. For reasons stated on the record at the September 17, 2014 hearing and set forth below, I deny the motion for summary judgment, finding genuine issues of material fact.
By way of background, Plaintiff Bituminous filed this declaratory judgment action to determine whether it has an obligation to defend or indemnify Plaintiff's named insured, Front Range, in connection with two underlying lawsuits in which Front Range is a defendant. The underlying lawsuits arise out of claims of negligent construction of a condominium project in Highlands Ranch, Colorado. In the underlying lawsuits, Front Range is alleged to have been a grading subcontractor on the project.
Plaintiff issued Front Range seven general liability policies and seven umbrella policies, effective for consecutive annual policy periods beginning August 3, 2004 and ending August 3, 2011. Here, the only policies in dispute are the primary and umbrella policies issued for the 2004-2005 policy period ("the Bituminous Policies"). The Bituminous Policies both contain endorsements that exclude coverage for "property damage" at any location or project for which a consolidated insurance program ("wrap-up policy") has been obtained. A wrap-up policy was obtained for the project.
Plaintiff contends that the "wrap exclusions" were added to the Bituminous policies after Front Range informed Bituminous that Front Range was covered by the wrap-up policy in place for the Project. Plaintiff also claims that Front Range was aware that if it participated in a wrap-up program with respect to a construction project, it could request a premium reduction for payroll associated with that project, and in exchange, the Bituminous policies would be endorsed to exclude coverage for that project. Pursuant to the terms of the Bituminous Policies, Front Range was indeed credited with a premium reimbursement based on Front Range's participation in the wrap-up policy for the Project, and the Bituminous Policies were endorsed to exclude coverage for projects for which a wrap-up policy had been obtained (including the Project in question). Plaintiff further asserts that Front Range never told Bituminous that it disagreed with the premium reimbursement Front Range received or the wrap exclusion endorsements excluding coverage for Front Range at the Project. On the other hand, Front Range contends that the "wrap-up exclusions" were not valid and enforceable endorsements to the 2004-2005 Bituminous Policies because they constituted a unilateral modification of the 2004-2005 policies.
The underlying lawsuits allege that the damage at the Project was caused by Front Range's grading work. There is a dispute as to whether Front Range's grading subcontract was entered on November 12, 2004 or April 15, 2005. Plaintiff asserts that the wrap exclusions in the Bituminous Policies were effective January 31, 2005, over two months before Front Range's grading work began or on June 1, 2005. Thus, Plaintiff argues that all claims for any alleged "property damage" at the Project are excluded from coverage under the Bituminous Policies. Therefore, Bituminous has no duty to defend or indemnify Front Range with respect to the underlying lawsuits. In response, Front Range states that even if the exclusions were a part of the policies, which it disputes, Plaintiff nonetheless had a duty to defend Front Range in the underlying lawsuits because Plaintiff cannot demonstrate that the defective work occurred only after the dates the wrap exclusions became effective. Front Range further argues that there are disputed issues of fact as to whether the wrap exclusions became effective on January 31, 2005 or June 1, 2005.
In 2010, the Gold Peak Homeowners Association ("Association") sued Tri-Star Construction West, LLC ("Tri-Star") and Gold Peak at Palomino Park, LLC ("Gold Peak") for alleged defects in the construction of the Project. Front Range was not part of the Association's lawsuit. (ECF No. 46, Ex. A). In its lawsuit against Tri-Star and Gold Peak, the Association alleged that the Project was defectively constructed resulting in defects in, among other things, the grading work at the Project, including an inadequate slope of grading adjacent to the foundation around the buildings. (ECF No. 46, Ex. A ¶ 47).
Tri-Star and Gold Peak, in turn, sued Front Range in two separate underlying lawsuits: (1) Tri-Star Construction West, LLC v. A-1 Firestopping, Inc., et al., Case No. 2012CV5863, pending in the District Court for the City and County of Denver, Colorado ("Tri-Star Lawsuit"); and (2) Gold Peak at Palomino Park, LLC v. Harrington Architectural Partnership, LLC., Case No. 2012CV295, pending in the District Court of Douglas County, Colorado ("Gold Peak Lawsuit") (collectively "the Underlying Lawsuits"). (ECF No. 46, Ex. B and Ex. C).
A. The Tri-Star Lawsuit
The Tri-Star lawsuit commenced on or about September 20, 2012 with the filing of Tri-Star's Complaint in the Denver County District Court, Colorado. A First Amended Complaint was filed September 28, 2012. (ECF No. 46, Ex. B). Tri-Star alleged that it was the general contractor of the Project and that Front Range was a subcontractor that performed "overlot and rough grading work pursuant to contract" with Tri-Star. (ECF No. 46, Ex. B, ¶ 7). Tri-Star further alleged that a judgment was eventually entered against Tri-Star and in favor of the Association. (ECF No. 46, Ex. B, ¶ 29). Tri-Star also alleged that Front Range was one of the subcontractors on the Project and that Front Range's allegedly faulty work, at least in part, resulted in the judgment against Tri-Star. (ECF No. 46, Ex. B, ¶ 7, 33). Tri-Star further alleged that "there are insufficient funds available under the OCIP' or WRAP' policy number GLW786580 issued by ACE/Westchester Surplus Lines Insurance Company ("ACE") to satisfy the judgments against Tri-Star and the Developer." (ECF No. 46, Ex. B ¶ 31).
B. The Gold Peak Lawsuit
The Gold Peak Lawsuit was filed on February 8, 2012. Gold Peak subsequently filed a Second Amended Complaint on or about December 7, 2012. (ECF No. 46, Ex. C). In its Second Amended Complaint, Gold Peak alleged that it was the developer of the Project, and that Front Range was a subcontractor that performed "overlot and rough grading work." (ECF No. 46, Ex. C, ¶ 9). Gold Peak further alleged that a verdict was entered in favor of the Association and against Gold Peak. (ECF No. 46, Ex. C ¶ 39). Gold Peak also alleged that Front Range was one of the subcontractors and that Front Range performed its work negligently, resulting, at least in part, in the verdict against Gold Peak. (ECF No. 46, Ex. C ¶¶ 9, 39). Moreover, Gold Peak alleged that an Owner Controlled Insurance Policy for the Project was obtained by Gold Peak. (ECF No. 46, Ex. C ¶ 57).
C. The Bituminous Policies
Bituminous issued seven general liability policies and seven umbrella policies to Front Range, effective for consecutive annual policy periods beginning August 3, 2004 and ending August 3, 2011.
1. The Primary Policies
Front Range has conceded that Bituminous has no duty to defend or indemnify Front Range with respect to the claims asserted against Front Range in the Underlying Lawsuits under the 2005-06, 2006-07, 2007-08, 2008-09, 2009-10, or 2010-11 Primary Policies because of the wrap policy exclusions contained in those policies. (ECF No. 46, Ex. D, pp. 7-18). As to the 2004-05 Primary Policy, Bituminous issued a wrap policy exclusion to Front Range titled "Exclusion-Designated Operations Covered By A Consolidated (Wrap-Up) Insurance Program, " which reads as follows:
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
EXCLUSION-DESIGNATED OPERATIONS COVERED BY A CONSOLIDATED (WRAP-UP) INSURANCE PROGRAM
* * *
The following exclusion is added to paragraph 2., Exclusions of COVERAGE A - BODILY INJURY AND PROPERTY DAMAGE LIABILITY and COVERAGE B - PERSONAL AND ADVERTISING INJURY LIABILITY (Section I - Coverages):
This insurance does not apply to "bodily injury", "property damage", or "personal and advertising injury" arising out of either your ongoing operations or operations included within the "products-completed operations hazard" at the location described in the Schedule of this endorsement, as a consolidated (wrap-up) insurance program has been provided by the prime contractor/project manager or owner of the construction project in which you are involved.
This exclusion applies whether or not the consolidated ...