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Owners Insurance Co. v. Dakota Station II Condominium Association, Inc.

Court of Appeals of Colorado, Seventh Division

July 27, 2017

Owners Insurance Company, a Michigan corporation, Petitioner-Appellant,
Dakota Station II Condominium Association, Inc., a Colorado corporation, Respondent-Appellee.

Jefferson County District Court No. 15CV31037 Honorable Christopher J. Munch, Judge

          Levy Wheeler Waters, PC, Karen H. Wheeler, Matthew W. Hall, Englewood, Colorado, for Petitioner-Appellant

          Orten Cavanagh & Holmes, LLC, Jonah G. Hunt, Denver, Colorado, for Respondent-Appellee


          RICHMAN JUDGE.

         ¶ 1 Plaintiff, Owners Insurance Company (Owners), appeals the trial court's judgment denying its petition to vacate an appraisal award. We affirm.

         I. Background

         ¶ 2 Owners issued a property damage insurance policy to Dakota Station II Condominium Association, Inc. (Dakota). Wind and hail storms damaged buildings in the residential community owned by Dakota. The parties combined the losses into a single insurance claim but disagreed about the total amount of damages.

         ¶ 3 The parties then invoked the insurance policy's appraisal provision. Each party selected an appraiser. When the appraisers submitted proposed awards of differing amounts, they nominated a neutral umpire as provided in the insurance policy.

         ¶ 4 In calculating a final award of approximately $3 million, the umpire adopted four damage estimates from Owners' appraiser, Mark Burns, and two estimates from Dakota's appraiser, Laura Haber. Burns disagreed with the final award and declined to sign the final determination of costs. However, the umpire and Haber agreed and signed the award, and Owners paid Dakota.

          ¶ 5 Dakota later sued Owners in federal court, Dakota Station II Condo. Ass'n, Inc. v. Auto-Owners Ins. Co., No. 14-CV-2839-RM-NYW, 2015 WL 6591888 (D. Colo. Oct. 30, 2015) (unpublished opinion), for breach of contract and unreasonable delay in paying insurance benefits. During discovery in the federal suit, Owners learned several facts about Haber that it alleges demonstrate she was not an impartial appraiser as required by statute and by the insurance policy.

         ¶ 6 Owners then filed a petition to vacate the appraisal award under section 13-22-223, C.R.S. 2016, of the Colorado Uniform Arbitration Act (CUAA). Following a hearing, the trial court denied the petition in an oral ruling on March 11, 2016.[1]

         II. Timeliness of Motion to Vacate

         ¶ 7 Dakota initially contends Owners failed to timely file a "motion" to vacate within ninety-one days of learning of its basis for vacating the award as required by section 13-22-223(2) because Owners' filing was captioned a "petition" rather than a "motion." We disagree. While the CUAA refers to a "motion" to vacate, rather than a "petition, " the substance of the pleading, and not its title, governs. Hawkins v. State Comp. Ins. Auth., 790 P.2d 893, 894 (Colo.App. 1990). We conclude that Owners' petition satisfied the statutory requirement for a timely motion to vacate the award.

         III. Appraiser Impartiality Under the CUAA

         ¶ 8 Owners contends the trial court erred when it did not analyze the insurance policy's appraisal dispute provision, as well as the hiring and conduct of Haber, under the CUAA's standards for a neutral arbitrator in section 13-22-211(2), C.R.S. 2016. We find no error because the policy does not incorporate, and the parties' stipulation was not sufficiently specific to require application of, the CUAA's standards, in particular section 13-22-211(2).

         ¶ 9 The appraisal provision of the policy states:

If we and you disagree on the value of the property or the amount of loss, either may make written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser. The two appraisers will select an umpire. If they cannot agree, either may request that the selection be made by a judge of a court having jurisdiction. The appraisers will state separately the value of the property and amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding.

(Emphasis added.)

         ¶ 10 At the hearing, the parties initially stipulated orally that the CUAA applies to their appraisal dispute. The trial court's order did not state whether it was applying any of the CUAA provisions. The UAA provides the parties with choices to be made regarding whether to have party arbitrators or impartial arbitrators. Because the parties' stipulation here did not specify whether the appraisers were to be treated as arbitrators, and if so, whether they were to be held to the statutory standard for impartial arbitrators, the UAA sections regarding disclosures to be made by impartial arbitrators did not apply. See sections 13-22-211 and 13-22-212, C.R.S. 2016.

         ¶ 11 Because of these ambiguities, Owners has not established that, even if Dakota's appraiser violated the CUAA, reversal would be required. Also, at least one other court has concluded an identical appraisal provision was not subject to the CUAA. Auto- Owners Ins. Co. v. Summit Park, 129 F.Supp.3d 1150, 1152-55 (D. Colo. 2015) (applying Colorado law).

         IV. Appraiser Impartiality Under Insurance Policy

         ¶ 12 Whether Haber was an "impartial appraiser" under the insurance policy turns on the meaning of that term, which we must construe.

         A. Standard of Review

         ¶ 13 We review the interpretation of contracts de novo. Fibreglas Fabricators, Inc. v. Kylberg, 799 P.2d 371, 374 (Colo. 1990).

         ¶ 14 The primary goal of contract interpretation is to give effect to the intent of the parties. Ad Two, Inc. v. City & Cty. of Denver, 9 P.3d 373, 376 (Colo. 2000). We determine the parties' intent by looking to the plain and generally accepted meaning of the contractual language. Copper Mountain, Inc. v. Indus. Sys., Inc., 208 P.3d 692, 697 (Colo. 2009).

         ¶ 15 "The meaning and effect of a contract are to be determined from a review of the entire instrument, not merely from isolated clauses or phrases. A contract should be interpreted to harmonize and, if possible, to give effect to all its provisions." First Christian Assembly of God, Montbello v. City & Cty. of Denver, 122 P.3d 1089, 1092 (Colo.App. 2005) (alteration omitted) (citation omitted).

         ¶ 16 "The overriding rules of contract interpretation require a court to apply the plain meaning of the words used subject to interpretation from the context and circumstances of the transaction." Id. (citations omitted).

         ¶ 17 Written contracts that are complete and free from ambiguity will be found to express the intention of the parties and will be enforced according to their plain language. Ad Two, 9 P.3d at 376. A contract provision is ambiguous if it is reasonably susceptible of more than one meaning. Cheyenne Mountain Sch. Dist. No. 12 v. Thompson, 861 P.2d 711, 715 (Colo. 1993).

B. Impartiality Under This Policy

         ¶ 18 The only policy requirement clearly applicable to Haber's conduct is the policy provision providing that in the event the insured and the insurer disagree on the amount of the loss, either may demand an "appraisal" and each "will select a competent and impartial appraiser." The phrase "impartial appraiser" is not further defined in the policy. Thus it was the trial court's task to determine the meaning of the provision and whether Haber met the criteria of an impartial appraiser.

         ¶ 19 Although the phrase appears in many insurance policies, apparently no Colorado appellate court has construed it. See Auto-Owners Ins. Co. v. Summit Park Townhome Ass'n, No. 14-CV-03417-LTB, 2016 WL 1321507, at *4-7 (D. Colo. Apr. 5, 2016) (unpublished mem. opinion and order).[2]

         ¶ 20 The trial court determined the appraisers provided for in this policy need not be impartial in the same manner as a judge, umpire, or arbitrator. Rather, they needed to be impartial in the sense that experts at a trial, such as a forensic chemist, need to be: rendering their opinions based on their experiences and not allowing themselves to be influenced by the litigants. We understand this to mean that an impartial appraiser in rendering his or her valuation opinion applies appraisal principles with fairness, good faith, and lack of bias. We conclude this is the correct reading of the policy provision and its intent.

         ¶ 21 We first note that because the policy does not define "impartial, " any ambiguity in the term is construed against Owners, who drafted the policy. Union Ins. Co. v. Houtz, 883 P.2d 1057, 1061 (Colo. 1994) ("Once an ambiguity in the policy language is found, it is construed against the drafter of the document and in favor of the insured.").

         ¶ 22 We then consider the context in which the term is used. Owners contends the word "impartial" has a common and usual meaning. Citing to Black's Law Dictionary, Owners asserts that "impartial" means "not favoring one side more than another; unbiased and disinterested; unswayed by personal interest." While we agree that an impartial appraiser should be unbiased and unswayed by personal financial interest, like an expert witness at trial, we do not agree that the impartial appraiser called for in this policy may not favor one side more than the other. We reach this conclusion from the context of the policy provision taken as a whole.

         ¶ 23 The relevant paragraph of the policy goes on to provide that the two appraisers will select an "umpire, " and if the two appraisers fail to agree on the amount of loss, they will submit their differences to the umpire. Therefore, this language distinguishes the "impartial" appraisers from the umpire. Under this method, no one appraiser determines the final outcome; rather it is left to the umpire to resolve the differences between the appraisers.[3] The policy plainly contemplates that the appraisers will put forth a ...

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