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Evanston Insurance Co. v. Bryan Construction Incorporated

United States District Court, D. Colorado

April 12, 2018

EVANSTON INSURANCE COMPANY, an Illinois corporation, as successor by merger to Essex Insurance Company, Plaintiff,
BRYAN CONSTRUCTION, INCORPORATED, a/k/a Federal Contracting, Inc., a Colorado corporation, Defendant.


          CHRISTINE M. ARGUELLO United States District Judge

         This matter is before the Court on Plaintiff Evanston Insurance Company's Motion for Summary Judgment, wherein Plaintiff argues that it is entitled to a declaratory judgment that its commercial property insurance policy for Defendant Bryant Construction, Inc. did not cover Defendant's claimed losses as a matter of law. (Doc. # 22.) For the reasons discussed below, the Court grants Plaintiff's Motion for Summary Judgment.

         I. BACKGROUND

         Defendant, a commercial general contractor, constructed the Cherry Hills Assisted Living Facility (“CHAL”) in Centennial, Colorado, in 2016. (Doc. # 1 at 3.) Defendant purchased a commercial property insurance policy (the “Policy”) for the project from Plaintiff in March 2016.[1] (Id. at 2.) The Policy, bearing number MKLX14PP006149, was in effect from January 15, 2016, through January 15, 2017. (Id.); see (Doc. # 22-1 at 12-29.)

         Plaintiff was bound by the Policy to “pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from a Covered Cause of Loss.” (Doc. # 22-1 at 17) (emphases added). The Policy specifically defined “Covered Property” at Section I.A. as including “Building, meaning the building or structure described in the Declarations.” (Id.) The Declarations in turn stated that “Covered Property” included “Building” and “Real Property in the Course of Construction.”[2] (Id. at 12.) The Policy also contained a coverage extension for debris removal, but the coverage extension explicitly did not apply to the “cost or expense of . . . removal of water, soil or any other uninsured substance on or under any Covered Property.” (Id. at 19-20.) Relevant here, the Policy covered “Flood” as a “Covered Cause of Loss, ” with a limit of $500, 000 per occurrence and $500, 000 in aggregate and subject to a $25, 000 deductible per occurrence. (Id. at 14-15, 29.)

         The Policy specifically did not include and eliminated from coverage “Property Not Covered, ” defined at Section I.B. (Id. at 18-19.) It excluded from coverage, among other things: “[b]ridges, tunnels, dams, trestles, culverts;” “[b]ulkheads, pilings that are not part of a building, piers, wharves, docks, seawall, dams or canals;” “[t]he cost of excavations, grading, backfilling or filling;” “[l]and (including land on which the Covered Property is located), air or water;” “[l]iving organisms of any kind . . . including plants, trees, lawns or shrubs;” “[r]etaining walls that are not part of a building;” and “[u]nderground pipes, flues or drains.” (Id.)

         Defendant's CHAL project was in a flood zone and adjacent to Big Dry Creek. (Doc. # 22 at 5.) The project therefore required Defendant to build a temporary dam, called a “cofferdam, ” with riprap material (large rocks) and a plastic membrane, and to re-route the creek channel. (Id. at 6; Doc. # 23 at 2.) Defendant also graded the creek channel, made erosion and sediment control improvements, and planted native willow bundles, cottonwoods, and native grasses in the course of re-routing Big Dry Creek. (Doc. # 22 at 6.)

         In March and April 2016, the location of CHAL experienced severe snowstorms and resultant snowmelt. (Id. at 7.) Snowmelt produced significant runoffs on March 23- 24, 2016, and on April 16-21, 2016. (Id.) The runoffs flooded the creek, destroyed Defendant's cofferdam, and eroded the creek channel and embankment. (Id.) According to Defendant, necessary repairs to the creek channel included clearing out sediment in the stream stabilization area; repairing the cofferdam; repairing the final stream stabilization area, including reseeding; and repairing the eroded area adjacent to the cofferdam. (Id. at 7-8.) The flooding did not damage the CHAL building or the building structure. (Id. at 8.)

         Defendant asserts that the cost to repair the flood damage was $147.579.00. (Doc. # 23 at 2.) It also states that it incurred “additional costs . . . during the time required to repair the flood damage” of $118, 545.00. (Id.) Defendant submitted a claim for these losses to Plaintiff on June 10, 2016. (Id.)

         Plaintiff disclaimed coverage for Defendant's losses in a letter dated December 6, 2016. (Doc. # 22-1 at 276-78.) Plaintiff summarized therein the factual findings of its retained inspector and adjustor: first, Defendant “had damage to the temporary dam as well as the retaining wall . . . This required rebuilding the damage, repairs to the wall as well as fixing the damage to the modified flood plain, ” and second, Defendant's claim for “additional costs” and delay costs “appear to be cost and schedule impacts from the additional repair work, apparently for the two-month delay in the project. This appears to be associated with business income.” (Id. at 276.) Plaintiff cited the “Property Not Covered” section of the Policy and explained to Defendant:

[A]ll of the property which you claimed as damaged is specifically excluded, and therefore, there is no coverage provided for this claim. You [sic] claim for Additional General Conditions & Delay Costs is also not covered because, per the above, this is not direct physical loss or damage to Covered Property. In addition, your policy does not provide Business Income Coverage.

(Id. at 277.) Accordingly, Plaintiff informed Defendant that “no payment [would] be made under the [P]olicy for this loss.” (Id. at 278.)

         Defendant disputed Plaintiff's denial of coverage in a letter dated January 25, 2017. (Doc. # 1-9.) Defendant characterized the Policy as “ambiguous” and stated that it therefore “must be interpreted and construed against [Plaintiff] and for a finding of coverage.” (Id. at 2.) According to Defendant, the Policy was ambiguous because it purported to cover “Real Property in the Course of Construction” but excluded “land, ” “dams, ” and other things from its definition of “Covered Property.” (Id.) Defendant asked rhetorically, “if coverage exists for flood damage to ‘Real Property in the Course of Construction, ' how can no coverage exist for flood damage to ‘Land' under [the Policy]? It cannot.” (Id.) Defendant also clarified that it was not seeking “‘general conditions and delay costs' which may be excluded from the Policy because they are not direct physical loss of or damage to Covered Property. [Defendant] is seeking the direct costs it incurred repairing the ‘Real Property in the Course of Construction' damaged due to the covered flood events.” (Id. at 3.)

         On March 21, 2017, Plaintiff filed its Complaint for Declaratory Judgment against Defendant. (Doc. # 1.) Plaintiff seeks a declaratory judgment in its favor “declaring and concluding that: (1) [Defendant's] claimed flood loss at [CHAL] construction project is not covered by the Policy, and (2) Defendant . . . is not entitled to any payment from [Plaintiff] ...

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