United States District Court, D. Colorado
ORDER ON MOTIONS TO DISMISS
WILEY Y. DANIEL, SENIOR UNITED STATES DISTRICT JUDGE.
I. INTRODUCTION AND BACKGROUND
THIS MATTER is before the Court on The Insurance Company of the State of Pennsylvania’s Fed.R.Civ.P. 12(b)(6) Motion to Dismiss Count III of Plaintiff’s Complaint (ECF No. 22), filed on March 9, 2015, and Old Republic General Insurance Corporation’s Fed.R.Civ.P. 12(b)(6) Motion to Dismiss the Third Claim for Relief in Plaintiff’s Complaint (ECF No. 48), filed on June 15, 2015. Plaintiff filed responses to both motions, and Defendants filed replies. In its motion to dismiss and its reply, Defendant Old Republic General Insurance Company incorporated all arguments, authorities, and exhibits from both the motion to dismiss and the reply filed by Defendant Insurance Company of the State of Pennsylvania, and offered no additional argument or authority. Accordingly, the matter is fully briefed.
By way of background, this case arises out of a project-specific insurance coverage dispute. Plaintiff was the general contractor for a construction project at a condominium development in Breckenridge, Colorado, known as One Ski Hill Place (“OSHP”). Plaintiff was insured under a commercial general liability policy issued by Defendant Old Republic General Insurance Company (“Old Republic”), and a commercial general liability insurance policy issued by Defendant Insurance Company of the State of Pennsylvania (“ICSP”). The ICSP policy was allegedly triggered by claims that exceed the underlying limit of $2 million per occurrence. Plaintiff’s work at the condominium project resulted in defects and property damage related to the shower units installed by Plaintiff. Upon learning of the construction defects, Plaintiff alleges that it notified both Old Republic and ICSP about claims asserted against Plaintiff by OSHP, and demanded a defense and indemnity from Defendants. Compl., p. 3. Plaintiff alleges that it did not receive responses from Defendants, despite various demands for defense and indemnity. Id. Ultimately, Plaintiff contends that it intended to enter into a settlement agreement with OSHP, and proposed a repair plan to mitigate costs and liability. Id. Plaintiff claims it notified Defendants of the intended settlement agreement and proposed repair plan. Id. Plaintiff claims that more than one year after it tendered its demand for defense and indemnity to Defendants, it had not yet received a coverage decision, nor any payment towards the coverage obligations. Id. at 4. Plaintiff alleges that, due to Defendants’ delay and denial of covered benefits of indemnification, Plaintiff “was forced to undertake repairs at the Project, which it has self-funded in an amount that exceeds $2, 000, 000.” Id.
Plaintiff asserts four claims for relief in this matter: 1) breach of contract; 2) common law bad faith; 3) violation of C.R.S. §§ 10-3-1115 and 1116 (the “Bad Faith Act”); and 4) declaratory judgment against Defendants. Defendants argue that Plaintiff’s third claim for relief, the statutory bad faith claim under Colorado statute, must be dismissed for failure to state a claim. Defendants argue that Plaintiff does not meet the statutory definition of a “first party claimant” and therefore, the provisions and protections of the statute do not apply to Plaintiff. Plaintiff argues that the plain language of the statute and controlling case law indicate that Plaintiff falls under the statutory definition of “first party claimant.”
A. Standard of Review
In reviewing a motion to dismiss, the court must “accept all well-pleaded facts as true and view them in the light most favorable” to the party asserting the claim. Jordan-Arapahoe, LLP v. Bd. of Cnty. Comm’rs., 633 F.3d 1022, 1025 (10th Cir. 2011). To survive a motion to dismiss under Rule 12(b)(6), the party asserting the claim “must allege that ‘enough factual matter, taken as true, [makes] his claim for relief . . . plausible on its face.’” Id. “A claim has facial plausibility when the [pleaded] factual content [ ] allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.’” Id.
Thus, a party asserting a claim “must include enough facts to ‘nudge his claims across the line from conceivable to plausible.’” Dennis v. Watco Cos., Inc., 631 F.3d 1303, 1305 (10th Cir. 2011). Conclusory allegations are not sufficient to survive a motion to dismiss. Gallagher v. Shelton, 587 F.3d 1063, 1068 (10th Cir. 2009).
B. Third Claim for Relief - Violation of Colorado’s Bad Faith Act
Defendants claim that Plaintiff’s third claim for relief must be dismissed because Plaintiff is not a first party claimant under the Bad Faith Act. Section 10-3-1115 of the Act concerns the improper denial of claims by insurance companies, and provides in pertinent part as follows:
(1)(a) A person engaged in the business of insurance shall not unreasonably delay or deny payment of a claim for benefits owed to or on behalf of any first-party claimant.
(b) For the purposes of this section and section 10-3-1116:
(I) “First-party claimant” means an individual, corporation, association, partnership, or other legal entity asserting an entitlement to benefits owed directly to or on behalf of an insured under an insurance policy. “First-party claimant” includes a public entity that has paid a ...