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MJA, Inc. v. Western World Insurance Co.

United States District Court, D. Colorado

February 18, 2016

MJA, Inc., d/b/a PRIMETIME SPORTS BAR, Plaintiff,
v.
WESTERN WORLD INSURANCE COMPANY, Defendant.

CERTIFICATION OF QUESTION OF LAW TO THE COLORADO SUPREME COURT PURSUANT TO C.A.R. 21.1

Richard P. Matsch, Senior Judge.

Upon the Plaintiffs motion, the following question is certified to the Colorado Supreme Court pursuant to CA.R. 21.1:

It is settled law in Colorado that every contract requires the parties to act in good faith and to deal fairly with each other in performing the express terms of the contract.[1] Does that principle of law restrict an insurance company from canceling a surplus commercial lines insurance policy by issuing a notice of cancellation under the express language of the policy?[2]

A negative answer to that question would require dismissal of this civil action.

STATEMENT OF RELEVANT FACTS

The following statement of facts is taken from the pleadings and the arguments of the parties on the pending motion to dismiss.

MJA, Inc. d/b/a/ Primetime Sports Bar ("MJA" or "the Plaintiff') operated the Primetime Sports Bar at 8101 North Washington Street, Denver, Colorado, serving alcoholic drinks pursuant to a valid liquor license.

Western World Insurance Company ("Western World" or "the Defendant") is an insurance company with its principal place of business in Franklin Lakes, New Jersey. Western World is authorized to write surplus line insurance in the State of Colorado.[3]

Western World issued a surplus lines commercial policy to MJA for the policy period from October 13, 2012, through October 13, 2013 ("the Policy"). The Policy included coverage for liquor liability with combined limits of $300, 000.

Before Western World issued the Policy, MJA completed an insurance application form. The application form required MJA to disclose the number of assault or battery claims in the past three years and past employee practice claims or any known situations that would give rise to a claim. MJA answered all those questions truthfully. The application form did not inform MJA that it should advise Western World of any subsequent changes that would make those answers incorrect.

The Plaintiff's application for insurance showed that the Plaintiff was a new business.

On July 18, 2013, Western World mailed to MJA a "Notice of Cancellation" which stated that the Policy would be cancelled on August 19, 2013, due to "substantial increase in the risk, unknown at issuance."

The Notice of Cancellation included the following statement: "Upon written request BY THE NAMED INSURED, THE INSURER WILL PROVIDE THE FACTS UPON WHICH THIS CANCELLATION IS BASED." An attorney for MJA requested an explanation of Western World's decision to cancel the Policy. An email response from Ed Yevak of Prince Insurance Group, stated:

The sequence of events that I am aware of are as follows: The adjustor was responding to a claim filed concerning Julie Romero and subsequently learned of a shooting outside the bar. A file was set up as a precautionary measure and the account was re-evaluated by the insurance carrier and they decided to cancel ...

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