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Mt. Hawley Insurance Co. v. Casson Duncan Construction, Inc.

Court of Appeals of Colorado, Second Division

November 3, 2016

Mt. Hawley Insurance Company, a Illinois corporation, Plaintiff-Appellant,
Casson Duncan Construction, Inc., a Colorado corporation, Defendant-Appellee.

         Arapahoe County District Court No. 14CV32329 Honorable Charles M. Pratt, Judge


          Moye White, LLP, David A. Laird, James Belgum, Denver, Colorado; Quilling, Selander, Lownds, Winslett & Moser, PC, Greg K. Winslett, Dallas, Texas, for Plaintiff-Appellant

          Markusson, Green & Jarvis, H. Keith Jarvis, Daniel R. Coombe, Denver, Colorado; BatesCarey, LLP, John E. Rodewald, Chicago, Illinois, for Defendant-Appellee

          DAILEY JUDGE

         ¶ 1 In this insurance dispute, plaintiff, Mt. Hawley Insurance Co. (Mt. Hawley), appeals the district court's entry of partial summary judgment in favor of defendant, Casson Duncan Construction, Inc. (Casson Duncan). We affirm.

         I. Background

         ¶ 2 A homeowners association (HOA) sued developer Mountain View Homes III (MVH III) and general contractor Casson Duncan on claims concerning defective construction of a condominium project. In ensuing arbitration proceedings, MVH III's insurer, Mt. Hawley, defended MVH III under a reservation of rights. The arbitration proceedings resulted in awards of damages and taxable costs to the HOA. Casson Duncan paid the $1.2 million costs award, for which it and MVH III were jointly liable, and thereafter sought contribution from MVH III and its insurer, Mt. Hawley.

         ¶ 3 Mt. Hawley initiated the present action against its insured, MVH III, the HOA, and Casson Duncan, requesting a declaration that there was no coverage under its commercial general liability policies with MVH III for either the damages or costs awarded in the arbitration proceedings. As pertinent here, Casson Duncan filed a counterclaim for declaratory and monetary relief against Mt. Hawley for payment of MVH III's portion of the costs award.

         ¶ 4 The parties filed cross-motions for summary judgment as to "coverage" issues. The district court denied summary judgment on all but one of those issues. Based on the language in the insurance policies, however, the district court determined that Mt. Hawley was, as a matter of law, responsible for paying MVH III's portion of the cost award, regardless of whether it was also responsible for paying MVH III's portion of the damages award. Consequently, the district court entered partial summary judgment for Casson Duncan on its counterclaim.

         ¶ 5 The district court certified its partial summary judgment ruling under C.R.C.P. 54(b) as "final" for purposes of permitting appellate review at this time.

         II. Analysis

         ¶ 6 Mt. Hawley contends that the district court erroneously granted Casson Duncan a partial summary judgment because, contrary to the court's ruling, Mt. Hawley's responsibility for payment of costs was, under the policies, inextricably linked to the question whether the policies provided MVH III with coverage for the HOA's claims. Because the "coverage" issues had not been determined, Mt. Hawley asserts, the "costs" issue could not be determined either. We are not persuaded.

         A. Mt. Hawley's Settlement with the HOA

         ¶ 7 Subsequent to the court's summary judgment rulings, Mt. Hawley agreed to pay the HOA an undisclosed amount to settle MVH III's liability in connection with the claims adjudicated in the arbitration proceeding. Initially, Casson Duncan asserted that the settlement removed the coverage issues from the case, and, consequently, "Mt. Hawley has not [established], and never will be able to establish" the premise upon which it refuses to pay MVH III's part of "taxable" costs. In other words, that Mt. Hawley had "no indemnity obligation in this case." We are not persuaded.

         ¶ 8 Following a settlement, coverage issues can still be determined between an insurer and its insured or a judgment creditor of the insured. See Nikolai v. Farmers All. Mut. Ins. Co., 830 P.2d 1070, 1073 (Colo.App. 1991) ("An insurer . . . does not ordinarily waive its policy defenses by payment of settlement proceeds to a claimant. . . . Here, Alliance did not waive its policy defenses when it settled the claims after issuing a reservation of rights letter."); seealso Bohrer v. Church Mut. Ins. Co., 965 P.2d 1258, 1261-67 & n.7 (Colo. 1998) (declaratory judgments and garnishment proceedings are appropriate contexts for resolving coverage issues in third-party victim insurance cases); Ho ...

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