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Lochwood Chateau Master Home Owners Association, Inc. v. American Family Mutual Insurance Co.

United States District Court, D. Colorado

October 26, 2017

LOCHWOOD CHATEAU MASTER HOME OWNERS ASSOCIATION, INC., a Colorado corporation, Plaintiff,
v.
AMERICAN FAMILY MUTUAL INSURANCE COMPANY, a corporation, Defendant.

          ORDER TO SHOW CAUSE

          Marcia S. Krieger Chief United States District Judge

         THIS MATTER comes before the Court on Plaintiff Lochwood Chateau Master Home Owners Association, Inc.'s (“Lochwood”) Motion for Partial Summary Judgment - Breach of Contract for Nonpayment of Appraisal Award (the “Partial Summary Judgment Motion”) (#56). The Court has begun its review of the parties' briefing on that motion. As it always does, the Court commenced its inquiry by examining whether it properly has jurisdiction over the lawsuit. It became apparent to the Court that there are significant concerns in that regard. Therefore, for the reasons set forth below, the Court ORDERS the parties to SHOW CAUSE as to why the lawsuit should not be dismissed or remanded for a lack of subject-matter jurisdiction.

         I. BACKGROUND

         This is a hail damage case. Lochwood is the owner of residential property located in Lakewood, Colorado. At all times relevant to this lawsuit, it was insured by a business owner's insurance policy (the “Policy”) issued by Defendant American Family Mutual Insurance Company (“American Family”). The Policy included a provision allowing for independent appraisal of the insured property or amount of loss in the case that such loss amount was in dispute by the parties. That appraisal provision states in relevant part:

If we and you disagree on 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 selection be made by a judge of a court having jurisdiction. The appraisers will state separately the 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.

(#14-2, at 1.) This appraisal was a mandatory condition precedent if invoked by either of the parties (though, of course, both parties were free not to invoke it if they so elected). Id. The Policy further specifies that “[n]o one may bring a legal action against us under this insurance unless: (a) [t]here has been full compliance with all of the terms of this insurance….” Id. at 16.

         On September 9, 2013, Lochwood's property apparently suffered damage from a hail storm, and Lochwood timely submitted a claim to American Family for that damage under the Policy. The parties apparently do not dispute that hail damage is a covered loss; instead, the crux of the dispute concerns the amount of that loss. Lochwood apparently believes that the covered loss amount is significantly higher than does American Family.

         Lochwood originally filed its initial complaint in Colorado state court on September 8, 2015. American Family removed the matter to this Court, asserting diversity jurisdiction.

         Lochwood' Complaint asserts four claims: declaratory relief (i.e., to declare the parties' rights and obligations under the Policy, specifically including the scope of the appraisal provision set forth therein); a petition to compel American Family to participate in the appraisal process, specifically compelling it to appoint its appraiser; breach of contract for failure to adjust the loss and failure to pay the benefits due under the Policy; and an unreasonable delay in paying Lochwood' claim (in violation of C.R.S. § 10-3-1115).

         Magistrate Judge Tafoya held a scheduling conference with the parties on February 9, 2016 and ordered the parties to complete an appraisal, as outlined pursuant to the policy. The parties' respective appraisers were to select an umpire, but if the appraisers could not agree as to an umpire, each party could file a motion to appoint one. The appraisers failed to agree, and after receiving the parties' cross motions to appoint an umpire, Magistrate Judge Tafoya appointed John A. Voelpel III and stayed discovery while the appraisal was pending. The appraisal process was completed on June 6, 2016, and on October 31, 2016, the parties requested that the stay be lifted.

         On April 7, 2017, Lochwood filed a Partial Summary Judgment Motion. It sought summary judgment on its breach of contract claim, asserting that because the appraisal process had been completed, under the terms of the Policy, American Family was obligated to pay the appraised amount as a matter of law. American Family opposed entry of partial summary judgment by attacking the fairness and impartiality of the appraisal process. It noted that the purportedly “impartial” appraiser appointed by Lochwood had a long and detailed history with Lochwood's counsel, and he had been rejected as impermissibly partial due to that relationship by a number of courts in a number of jurisdictions (including the District of Colorado on multiple occasions).

         II. DISCUSSION

         As noted above, the Court has significant doubt that it had jurisdiction resolve the claims pending before the Court.

         A. ...


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