United States District Court, D. Colorado
OPINION AND ORDER GRANTING AND DENYING, IN PART, PENDING MOTIONS FOR SUMMARY JUDGMENT
MARCIA S. KRIEGER, CHIEF UNITED STATES DISTRICT JUDGE.
THIS MATTER comes before the Court pursuant to the Defendant’s (“Atain”) Motion for Summary Judgment (# 72), the Plaintiff’s (“Green Earth”) response (# 81), and Atain’s reply (# 88); Atain’s “Motion to Determine Question of Law Regarding Legal Interpretation of Police Provision” (# 74), Green Earth’s response (# 83), and Atain’s reply (# 86); Atain’s “Motion to Determine Question of Law Regarding Application of Federal Law and Public Policy” (# 75), Green Earth’s response (# 80), and Atain’s reply (# 87); and Green Earth’s Motion for Partial Summary Judgment (# 77), Atain’s response (# 84), and Green Earth’s reply (# 89).
The Court offers a brief factual recitation here, and elaborates as appropriate in its analysis.
Green Earth operates a retail medical marijuana business and an adjacent growing facility in Colorado Springs, Colorado. In April 2012, Green Earth sought commercial insurance for its business from Atain. Atain issued Green Earth a Commercial Property and General Liability Insurance Policy (hereinafter “the Policy”) that became effective June 29, 2012.
A few days earlier, on June 23, 2012, a wildfire started in Waldo Canyon outside of Colorado Springs. Over the course of several days, the fire advanced towards the city. The fire did not directly affect Green Earth’s business, but Green Earth contends that smoke and ash from the fire overwhelmed it’s ventilation system, eventually intruding into the growing operation and causing damage to Green Earth’s marijuana plants.
In November 2012, Green Earth made a claim under the Policy for the smoke and ash damage. Atain hired several agents, including an adjuster and an investigator, to assess the claim. The investigation extended over several months. Finally, in July 2013, Atain formally denied the claim, finding that: (i) although Green Earth claimed that the smoke and ash damage occurred beginning on July 1, 2012, smoke and ash from the fire would have been drawn into the business premises by June 23 or 24, 2012, prior to the effective date of the Policy; (ii) Green Earth’s misrepresentations about the date of the loss constituted material misrepresentations under the Policy voiding any coverage; (iii) Green Earth did not mitigate its losses because its personnel did not take any measures to protect Green Earth’s plants from incoming ash and soot between June 23 and July 1; and (iv) Green Earth failed to give Atain timely notice of its loss, waiting until November 25, 2012 to make a claim.
Separately, on June 7, 2013, thieves entered Green Earths grow facility through a vent on the roof and stole some of Green Earth’s marijuana plants. At some unspecified point in time, Green Earth made another claim on the Policy for damage to the roof and ventilation system. Atain investigated the claim. On September 13, 2013, Atain denied the claim, finding that the damage to the roof and ventilation system amounted to approximately $2, 400, less than the Policy’s $ 2, 500 deductible.
On December 20, 2013, Green Earth commenced this action, asserting three claims: (i) breach of contract by failure to pay the claims Green Earth made under the Policy; (ii) what appears to be a statutory claim for bad faith breach of insurance contract under C.R.S. § 10-3-1104(h)(VII); and (iii) a claim for unreasonable delay in payment under C.R.S. § 10-3-1115.
Having now concluded discovery, both parties have filed a variety of dispositive motions. Atain filed a Motion for Summary Judgment (# 72), arguing: (i) as to Green Earth’s bad faith claim, Green Earth cannot show that Atain acted unreasonably in investigating either the fire claim or the theft claim; (ii) if Atain acted unreasonably in handling either claim, Green Earth cannot show that it did so knowingly or recklessly; (iii) as to the delayed payment claim, Green Earth cannot show that its delay or denial in authorizing payment of the claim(s) was unreasonable, for essentially the same reasons as set forth regarding the bad faith claim; and (iv) as to the breach of contract claim, Green Earth’s claim for benefits relating to damage to potted marijuana plants is barred by the “growing crops” exclusion in the Policy and the damage to the roof and ventilation system is barred by the “theft” exclusion in the Policy.
Atain filed two separate “Motion[s] for Determination of Question[s] of Law.” The first (#74) is fairly abbreviated, apparently requesting that the Court construe the Policy’s term “commencing” consonantly with the construction given that term in Cher-D, Inc. v. Great American Alliance Ins. Co., 2009 WL 943539 (E.D.Pa. Apr. 7, 2009). The other (# 75) is considerably more elaborate, requesting that the Court resolve two questions: (i) “Whether, in light of [Colorado’s Medical Marijuana Act], federal law, and federal public Policy, it is legal for Atain to pay for damages to marijuana plants and products, and if so, whether the Court can order Atain to pay for these damages”; and (ii) “Whether, in light of [those same authorities], the Policy’s Contraband Exclusion removes Green Earth’s marijuana plants and marijuana material from the Policy’s coverage” (and arguing that the answer to the first is “no” and the answer to the second is “yes”).
Green Earth filed its own Motion for Partial Summary Judgment (# 77), arguing that: (i) as a matter of law, it is entitled to coverage for the loss of or damage to marijuana plants because they constitute “Stock” under the terms of the Policy; and (ii) Green Earth is entitled to summary judgment on Atain’s affirmative defense of “Policy limitations, ” because neither the “growing crops” or “contraband” exclusions prevent coverage of the damaged plants.
A. Standard of review
Rule 56 of the Federal Rules of Civil Procedure facilitates the entry of a judgment only if no trial is necessary. See White v. York Intern. Corp., 45 F.3d 357, 360 (10th Cir. 1995). Summary adjudication is authorized when there is no genuine dispute as to any material fact and a party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). Substantive law governs what facts are material and what issues must be determined. It also specifies the elements that must be proved for a given claim or defense, sets the standard of proof and identifies the party with the burden of proof. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Kaiser-Francis Oil Co. v. Producer's Gas Co., 870 F.2d 563, 565 (10th Cir. 1989). A factual dispute is “genuine" and summary judgment is precluded if the evidence presented in support of and opposition to the motion is so contradictory that, if presented at trial, a judgment could enter for either party. See Anderson, 477 U.S. at 248. When considering a summary judgment motion, a court views all evidence in the light most favorable to the non-moving party, thereby favoring the right to a trial. See Garrett v. Hewlett Packard Co., 305 F.3d 1210, 1213 (10th Cir. 2002).
If the movant has the burden of proof on a claim or defense, the movant must establish every element of its claim or defense by sufficient, competent evidence. See Fed. R. Civ. P. 56(c)(1)(A). Once the moving party has met its burden, to avoid summary judgment the responding party must present sufficient, competent, contradictory evidence to establish a genuine factual dispute. See Bacchus Indus., Inc. v. Arvin Indus., Inc., 939 F.2d 887, 891 (10th Cir. 1991); Perry v. Woodward, 199 F.3d 1126, 1131 (10th Cir. 1999). If there is a genuine dispute as to a material fact, a trial is required. If there is no genuine dispute as to any material fact, no trial is required. The court then applies the law to the undisputed facts and enters judgment.
If the moving party does not have the burden of proof at trial, it must point to an absence of sufficient evidence to establish the claim or defense that the non-movant is obligated to prove. If the respondent comes forward with sufficient competent evidence to establish a prima facie claim or defense, a trial is required. If the respondent fails to produce sufficient competent evidence to establish its claim or defense, then the movant is entitled to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).
This case involves cross-motions for summary judgment. "Because the determination of whether there is a genuine dispute as to a material factual issue turns upon who has the burden of proof, the standard of proof and whether adequate evidence has been submitted to support a prima facie case or to establish a genuine dispute as to material fact, cross motions must be evaluated independently." In re Ribozyme Pharmaceuticals, Inc., Securities Litig., 209 F.Supp.2d 1106, 1112 (D. Colo. 2002); see also Atlantic Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138, 1148 (10th Cir. 2000); Buell Cabinet Co. v. Sudduth, 608 F.2d 431, 433 (10th Cir. 1979) ("Cross-motions for summary judgment are to be treated separately; the denial of one does not require the grant of another.").
Rather than address the motions seriatim, the Court finds it more appropriate to sort the issues raised by the parties based on the two insurance claims Green Earth made on Atain, and then to address the various issues raised by the parties’ motions that are pertinent to each claim.
B. The Waldo Canyon fire claim
To understand the context in which this dispute arises, the Court detours briefly into an examination of Green Earth’s growing operation. The parties entered into a joint stipulation of facts (# 71), designed to facilitate the Court’s consideration of the summary judgment motions. The stipulation provides that Green Earth’s claim relating to the Waldo Canyon fire seeks coverage for losses relating to several different classifications of plants: “mother plants, ” “flower plants, ” “veg plants, ” “clones, ” and “finished product, ” all of which were allegedly damaged by smoke and ash. The parties’ stipulation does not elaborate on the particular function that each of ...