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Zurich American Insurance Co. v. Acadia Insurance Co.

United States District Court, D. Colorado

March 20, 2017

ZURICH AMERICAN INSURANCE COMPANY, a New York corporation, and AMERICAN GUARANTEE AND LIABILITY INSURANCE COMPANY, a New York corporation, Plaintiffs,
v.
ACADIA INSURANCE COMPANY, a New Hampshire corporation, Defendant.

          ORDER DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

          CHRISTINE M. ARGUELLO United States District Judge.

         This matter is before the Court on Plaintiffs' Motion for Summary Judgment (Doc. # 66) and Defendant's Cross-Motion for Summary Judgment (Doc. # 67) regarding Defendant's duty to indemnify Intrawest Stratton Development Corporation (“ISDC”) and DEW Construction Company (“DEW”) in the State Litigation. Because the Court concludes that Defendant Acadia Insurance Company (“Acadia”) does not have a duty to indemnify ISDC or DEW, Defendant's Motion for Summary Judgment is granted.

         I. BACKGROUND

         Zurich American Insurance Company (“ZAIC”) issued a commercial general liability insurance policy, policy number GLO 3504442-00, to Intrawest Corporation- under which ISDC was a named insured-for the period of April 5, 2001, to April 5, 2005 (the “ZAIC Policy”). (Doc. # 93 at 2.) The ZAIC Policy is a Project Construction Insurance Program (“PCIP”) that provides coverage for various listed construction and development projects around the country. (Doc # 93 at 2.) American Guarantee and Liability Insurance Company (“AGLIC”) also issued an insurance policy, policy number AUC 3504443-00, to Intrawest Corporation for the same time period-under which ISDC was a named insured-that provided coverage above the limits of the ZAIC Policy, often referred to as excess coverage. (Doc. # 93 at 2.) Marsh USA (“Marsh”) was the administrator of the Zurich PCIP program, which included the ZAIC and the AGLIC Policies. (Doc # 93 at 3.) As part of the application process to enroll in the PCIP program, all general contractors for Intrawest, including DEW, were required to provide a General Liability Bid Deduction. (Doc. # 93 at 3.) Marsh was not able to produce a Liability Insurance Deduction Worksheet on the prescribed form from DEW. (Doc. # 93 at 3.) It therefore remains unclear whether DEW was properly enrolled in the PCIP. (Doc. # 72 at 7.)

         Acadia issued successive commercial general liability policies, under policy number CPP 0030879 (“Acadia Primary Policies”), and commercial umbrella policies, under policy number CUA-0030883 (“Acadia Umbrella Policies”), to DEW from January 1, 2001, to January 1, 2009. (Doc. # 93 at 5.)

         This case arose out of an underlying construction defect suit (the “State Litigation”). (Doc. # 57 at 2.) In the State Litigation, TreeTop Condominium Association Inc. filed an action on March 17, 2009, against several defendants, including ISDC and DEW. (Doc. # 57 at 2.) Both DEW and ISDC tendered the State Litigation to ZAIC for coverage. (Doc. # 93 at 10.) DEW also tendered its defense to Acadia for coverage. (Doc. # 93 at 9-10.) ZAIC agreed to defend and indemnify both corporations under the ZAIC Policy, pursuant to a reservation of rights. (Doc. # 93 at 10.) Similarly, Acadia, through a reservation of rights letter, along with a Nonwaiver Agreement, agreed to defend DEW under the Acadia Policies. (Doc. # 93 at 10.) When the ZAIC Policy exhausted in May of 2010 because of payment of unrelated claims against ISDC, AGLIC began defending DEW and ISDC pursuant to a reservation of rights. (Doc. # 93 at 11.)

         On May 17, 2012, AGLIC agreed to pay $3 million to the State Litigation plaintiff to settle all claims against DEW and ISDC. (Doc. # 93 at 11.) On October 22, 2012, ZAIC and AGLIC (collectively “Zurich”) demanded full reimbursement for the defense and settlement costs for both DEW and ISDC from Acadia, but Acadia refused to reimburse. (Docs. # 93 at 13.) Zurich now seeks a judgment that Acadia, pursuant to the Acadia Policies, had the duty to indemnify DEW and ISDC. (Doc. # 66.) It also seeks reimbursement and/or contribution of all monies expended in defending DEW, as well as all amounts paid to settle the State Litigation, from Acadia. (Doc. # 66 at 2.)

         On July 29, 2014, the Court entered a Scheduling Order separating this litigation into two Phases: Phase I, Acadia's duty to defend, and Phase II, Acadia's duty to indemnify. (Doc. # 19 at 11.) As to Phase I, both parties filed motions for summary judgment in early 2015. (Docs. ## 43-46, 53-56.) On September 29, 2015, this Court issued its Order denying in part Zurich's motion for summary judgment and granting in part Acadia's motion for summary judgment on the duty to defend. (Doc. # 57.) The Court concluded that Acadia was not required to defend ISDC under the Acadia Primary Policies because ISDC's status as an additional insured under the Acadia Primary Policies ended when DEW's work for ISDC completed and that Acadia had no obligation to defend ISDC after the property was put to its intended use. (Doc. # 57 at 11.) The Court made no ruling on the issue of whether Acadia had a duty to indemnify DEW. (Doc. # 57 at 8.)

         Pursuant to this Court's Order, on September 20, 2016, the parties submitted a stipulated statement of facts. (Doc. # 93.) The pertinent parts of the insurance language from the statement of facts are incorporated here. The Zurich Policy includes an “other insurance” clause, which states in part:

         4. Other Insurance

If other valid and collectible insurance is available to the insured for a loss we cover under Coverages A or B of this Coverage Part, our obligations are limited as follows:
a. Primary Insurance
This insurance is primary except when Paragraph b. below applies. If this insurance is primary, our obligations are not affected unless any of the other insurance is also primary. Then, we will share with all that other insurance by the method described in Paragraph c. below.
b. Excess Insurance
This insurance is excess over any of the other insurance, whether primary, excess, contingent or on any other basis:
(1) That is Fire, Extended Coverage, Builder's Risk, Installation Risk or similar coverage for "your work";
(2) That is Fire insurance for premises rented to you; or
(3) If the loss arises out of the maintenance or use of aircraft, "autos" or watercraft to the extent not subject to Exclusion g. of Coverage A (Section I). (Doc. # 93 at 4.)

         The AGLIC Policy, the excess layer of the PCIP, contains an “other ...


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