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Phoenix Insurance Co. v. Cantex, Inc.

United States District Court, D. Colorado

November 9, 2015

THE PHOENIX INSURANCE COMPANY, THE TRAVELERS INDEMNITY COMPANY, and THE TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, Plaintiffs,
v.
CANTEX, INC., CONCRETE MANAGEMENT CORP., LANDMARK AMERICAN INSURANCE COMPANY, CONTINENTAL INSURANCE COMPANY, and AMERISURE INSURANCE COMPANY, Defendants, and CANTEX, INC., Third-Party Plaintiff,
v.
SCOTTSDALE INSURANCE COMPANY, and CONTINENTAL CASUALTY COMPANY, Third-Party Defendants,

ORDER GRANTING MOTION FOR SUMMARY JUDGMENT OF THIRD-PARTY DEFENDANT SCOTTSDALE INSURANCE COMPANY

Robert E. Blackburn United States District Judge

The matter before me is Third-Party Defendant Scottsdale Insurance Company’s Motion for Summary Judgment [#278], [1] filed September 17, 2015. I grant the motion and dismiss the corresponding apposite third-party breach of contract claim.

I. JURISDICTION

I have jurisdiction over this matter pursuant to 28 U.S.C. § 1332 (diversity of citizenship).

II. STANDARD OF REVIEW

Summary judgment is proper when 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); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). A dispute is “genuine” if the issue could be resolved in favor of either party. Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986); Farthing v. City of Shawnee, 39 F.3d 1131, 1135 (10th Cir. 1994). A fact is “material” if it might reasonably affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Farthing, 39 F.3d at 1134.

A party who does not have the burden of proof at trial must show the absence of a genuine factual dispute. Concrete Works, Inc. v. City & County of Denver, 36 F.3d 1513, 1517 (10th Cir. 1994), cert. denied, 115 S.Ct. 1315 (1995). Once the motion has been properly supported, the burden shifts to the nonmovant to show, by tendering depositions, affidavits, and other competent evidence, that summary judgment is not proper. Id. at 1518. All the evidence must be viewed in the light most favorable to the party opposing the motion. Simms v. Oklahoma ex rel Department of Mental Health and Substance Abuse Services, 165 F.3d 1321, 1326 (10th Cir.), cert. denied, 120 S.Ct. 53 (1999). In either case, once the motion has been properly supported, the burden shifts to the nonmovant to show, by tendering depositions, affidavits, and other competent evidence, that summary judgment is not proper. Concrete Works, 36 F.3d at 1518. All the evidence must be viewed in the light most favorable to the party opposing the motion. Simms v. Oklahoma ex rel Department of Mental Health and Substance Abuse Services, 165 F.3d 1321, 1326 (10th Cir.), cert. denied, 120 S.Ct. 53 (1999). However, conclusory statements and testimony based merely on conjecture or subjective belief are not competent summary judgment evidence. Rice v. United States, 166 F.3d 1088, 1092 (10th Cir.), cert. denied, 120 S.Ct. 334 (1999); Nutting v. RAM Southwest, Inc., 106 F.Supp.2d 1121, 1123 (D. Colo. 2000).

III. ANALYSIS

This lawsuit arises from defects in concrete work that occurred in connection with the construction of a manufacturing and distribution facility in Kingman, Arizona, for third-party plaintiff Cantex, Inc. (“Cantex”). RBR Construction, Inc. (“RBR”) served as construction manager and general contractor for the property. The project ultimately involved the installation of some 480, 000 square feet of exterior concrete.

However, beginning in mid-2007, the concrete began to “crack excessively, spall, and otherwise deteriorate.” (Third-Party Complaint Against Scottsdale ¶ 3 at 1-2 [#174], filed October 21, 2014.) Alleging that these damages were due to defective workmanship to the exterior concrete and supporting structures, Cantex sued RBR in Arizona state court in January 2011. Following a bench trial in September 2013, the court found in favor of Cantex on its claims against RBR for breach of contract, breach of warranty, and breach of the implied covenant of good faith and fair dealing, and entered judgment in favor of Cantex in excess of 5.7 million dollars, including some two million dollars in attorney fees.

As a result of post-judgment negotiations, RBR assigned its indemnity rights under its applicable insurance policies to Cantex. Pursuant to that assignment, Cantex has asserted a third-party claim for breach of contract against Scottsdale Insurance Company (“Scottsdale”) under a second level excess insurance policy issued to RBR covering the period from November 1, 2007, to November 1, 2008.[2] Scottsdale, as a third-party defendant, now seeks summary judgment as to this claim.

However, before considering the substantive issues, I must address the choice of law question implicated by the motion. A federal court sitting in diversity applies the substantive law, including the choice of law rules, of the state in which it sits. Klaxon Co. v. Stenter Electrical Manufacturing Co., 313 U.S. 487, 495-97, 61 S.Ct. 1020, 1021-22, 85 L.Ed.2d 1477 (1941); Pepsi-Cola Bottling Co. of Pittsburg, Inc. v. Pepsico, Inc., 431 F.3d 1241, 1255 (10th Cir. 2005). In breach of contract cases, Colorado courts employ the “most significant relationship” test enunciated in section 188 of the Restatement (Second) of Conflict of Laws. Berry & Murphy, P.C. v. Carolina Casualty Insurance Co., 586 F.3d 803, 808 (10th Cir. 2009). That standard requires the court to consider a number of factors in making this determination, including, “(a) the place of contracting; (b) the place of negotiation of the contract; (c) the place of performance; (d) the location of the subject matter of the contract; and (e) the domicile, residence, nationality, place of incorporation and place of business of the parties.” Restatement (Second) of Conflict of Laws § 188(2) (1969). “These contracts are to be evaluated according to their relative importance with respect to the particular issue.” Id.

Cantex maintains that its third-party claim for breach of contract should be interpreted in accordance with Arizona law, as the insured facility was located there. In this regard, it points to section 193 of the Restatement, which provides:

The validity of a contract of fire, surety or casualty insurance and the rights created thereby are determined by the local law of the state which the parties understood was to be the principal location of the insured risk during the term of the policy, unless with respect to the particular issue, some other state has a more significant relationship under the principles stated in ยง 6 ...

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