MarkWest Energy Partners, L.P., a Delaware master limited partnership, Plaintiff-Appellant,
Zurich American Insurance Company, a New York corporation, Defendant-Appellee,
and County of Denver District Court No. 14CV31489 Honorable
Karen L. Brody, Judge.
& Wilmer, L.L.P., Michael E. Lindsay, James D. Kilroy,
Jessica E. Yates, Luke W. Mecklenburg, Denver, Colorado, for
McElroy, Deutsch, Mulvaney & Carpenter, L.L.P., Jane E.
Young, Greenwood Village, Colorado, for Defendant-Appellee
Smith, L.L.P., James M. Davis, Chicago, Illinois; John N.
Ellison, Anthony B. Crawford, Philadelphia, Pennsylvania, for
Amicus Curiae United Policyholders.
1 In this insurance coverage dispute, plaintiff, MarkWest
Energy Partners, L.P. (MarkWest), appeals the district
court's entry of summary judgment in favor of defendant,
Zurich American Insurance Company (Zurich).
2 The district court concluded that, because MarkWest failed
to comply with a condition precedent in a liability policy
requiring it to timely report an "incident" to
Zurich, it was barred from recovering anything from Zurich.
Contrary to the district court, we conclude that
Colorado's "notice-prejudice" rule applies, and
that, consequently, MarkWest is only barred from recovering
if Zurich was prejudiced by the late report of the incident.
Thus, we reverse and remand for further proceedings.
3 MarkWest, a natural gas company, procured from Zurich a
commercial general liability policy (the Policy) with a
limited pollution liability endorsement (the Endorsement),
covering "incidents" occurring between November 1,
2012, and November 1, 2013.
4 On November 4, 2012, MarkWest was constructing a pipeline
in Ohio when a chemical used in the drilling process escaped
the drilling area, thereby contaminating the surrounding
area. MarkWest immediately reported the incident to local
environmental officials, who approved a chemical cleanup
protocol weeks later and confirmed that cleanup had been
successfully completed in February 2013.
5 On March 28, 2013, MarkWest notified Zurich of the
contamination and filed an associated claim for over $3
million. Although the incident had occurred and Zurich had
been notified well within the Policy's coverage dates,
Zurich denied the claim because MarkWest had failed to
provide notice within sixty days of the "incident,
" as required by the Endorsement.
6 MarkWest filed the present action to recover from Zurich $3
million-plus in damages with respect to the original
insurance claim, as well as additional damages for bad-faith
(common law and statutory) denial of coverage.
7 Zurich filed a motion for summary judgment under C.R.C.P.
56(b), and MarkWest responded with a motion for determination
of a question of law under C.R.C.P. 56(h). As pertinent here,
both cross-motions addressed the same issue - that is,
whether MarkWest was barred from pursuing the lawsuit because
of its noncompliance with the Endorsement's notice
provision, or whether MarkWest could proceed with its claim
in the absence of prejudice to Zurich as a result of the
8 The district court ruled in favor of Zurich, concluding
â¢ by failing to report the pollution
incident to Zurich within the sixty day notice period,
"MarkWest did not comply with an express condition
precedent in the insurance contract";
â¢ therefore, "MarkWest's right to
coverage under the Policy was never triggered"; and
â¢ "the question of whether Zurich was
prejudiced by MarkWest's untimely notice is, therefore,
9 Consequently, the district court denied MarkWest's
motion for determination of a question of law and granted
Zurich's motion for summary judgment.
10 MarkWest contends that the district court erred because
"unless [Zurich] can show its ability to investigate the
occurrence or defend against a claim was prejudiced by late
notice, [the court] cannot deny a claim based solely on a