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Hiland Hills Townhouse Owners Association, Inc. v. Owners Insurance Co.

United States District Court, D. Colorado

April 27, 2018



          Marcia S. Krieger, Chief United States District Judge

         THIS MATTER comes before the Court upon the Plaintiff's (“Hiland Hills”) Motion for Partial Summary Judgment (# 22), and the Defendant's response (# 24); the Defendant's Motion for Summary Judgment (# 23); and the Court's Order to Show Cause (# 25) as to why this case should not be dismissed to lack of subject-matter jurisdiction and responses thereto (## 30, 31). For the reasons that follow, the Court concludes that the Plaintiff has standing to bring some, but not all, of its claims. As a result the Plaintiff's Motion for Partial Summary Judgment is denied, as moot, and the stay of briefing on the Defendant's Motion for Summary Judgment is lifted.

         I. BACKGROUND

         Hiland Hills owns real property that is the subject of a casualty insurance policy (“the Policy”) issued by Defendant Owners Insurance Co. (“Owners”). As discussed more fully below, the Policy has several unusual provisions, most significantly, one requiring the parties to submit disputes about the value of a claimed loss to an appraisal process before Owners is obligated to pay any claim.

         In 2015, a hail storm that damaged Hiland Hills' property. Hiland Hills filed a claim with Owners more than a year later. Each party then retained an adjuster to inspect the property. Hiland Hills submitted its sworn proof-of-loss statement in May 2017. It filed this suit one month later in a Colorado state court. The case was removed by Owners to this court and the Court exercises jurisdiction based on 28 U.S.C. §1332.

         When this suit was filed and removed, Hiland Hills' public adjuster had completed its review of the claim, but Owners' adjuster had not. Owners rejected the proof of loss during the course of this litigation in a September 1, 2017 letter stating that Hiland Hills' delay in submitting its claim made it too difficult to determine what damage was attributable to the June 2015 storm as opposed to subsequent storms.

         In its Amended Complaint (# 9), Hiland Hills asserts three causes of action: (1) a claim for breach of contract, apparently under Colorado law, in that Owners failed to pay the full amount of benefits called for under the Policy and failed to timely adjust the loss; (2) bad faith breach of insurance contract, apparently under Colorado common law, in that Owners failed to reasonably investigate Hiland Hills' claim, failed to promptly offer and pay the full amount of the claim, and compelled Hiland Hills to initiate litigation; and (3) unreasonable delay and denial of benefits in violation of C.R.S. §§ 10-3-1115 and -1116. The Amended Complaint also seeks declaratory relief “preserving the appraisal remedy”, requesting that the Court compel Owners to submit to and proceed with the appraisal process.

         Both sides have moved for summary judgment on various matters. Upon initial consideration of those motions, the Court sua sponte raised concerns (# 25) as to its subject matter jurisdiction, particularly the standing of Hiland Hills to bring a claim for breach of payment obligations under the Policy, given that the appraisal process was a condition precedent to Owners' obligation to pay and that process had not yet been completed (or even initiated). Hiland Hills responded to the Court's Order by identifying to a number of alleged breaches of the Policy that it contended gave it standing: (1) Owners' refusal to take a position on the claim; (2) Owners' denial of Policy benefits; (3) Owners taking more than 30 days to render a decision on the claim; and (4) Owners' delay as being an intentional attempt to prevent Hiland Hills' compliance with the terms of the Policy.


         A. Standing in Federal Courts

         As the Court explained in its Order to Show Cause, federal courts are courts of limited jurisdiction, [1] possessing only the authority given to them by the United States Constitution and federal statutes. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). Article III of the Constitution restricts the authority of federal courts to the adjudication of actual “cases” and “controversies.” U.S. Const. art. III, § 2, cl. 1; Sprint Commc'ns Co. v. APCC Servs. Inc., 554 U.S. 269 (2008). For each claim asserted, a plaintiff must show that there was a “case or controversy” at the time of filing of the lawsuit. DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 352 (2006). Agreements between the parties as to standing or a court's jurisdiction do not create it. Wilson v. Glenwood Intermountain Props. Inc., 96F.3d 590, 593 (10th Cir. 1996).

         To have a “case or controversy”, the party who seeks relief must have standing. See Flast v. Cohen, 392 U.S. 83, 95 (1968). In this case, Hiland Hills must demonstrate, for each claim, that as of the commencement of the suit in June 2017: (1) it had suffered (or would imminently suffer) an “injury in fact” that is concrete and particularized (not merely conjectural or hypothetical); (2) that the injury is fairly traceable to the challenged action of Owners; and (3) it is likely, as opposed to merely speculative, that the injury will be redressed by the relief requested. Friends of the Earth Inc. v. Laidlaw Envtl. Servs. Inc., 528 U.S. 167, 180-81 (2000); Tandy v. City of Wichita, 380 F.3d 1277, 1283 (10th Cir.2004); Nova Health Sys. v. Gandy, 416 F.3d 1149, 1154 (10th Cir. 2005). The Court addresses each claim brought by Hiland Hills, but for purposes of analysis, does not address them in the order alleged in the Amended Complaint.

         B. Breach of Contract

         The second claim for relief alleged in the Amended Complaint is for breach of contract, based on Owners' failure to comply with the terms of the Policy. Under Colorado law, a claim for breach of contract requires proof of the following elements: (1) that an enforceable contract existed between the parties; (2) that the plaintiff fully performed its obligations under the contract or that its performance was excused; (3) that the defendant breached its obligations under the contract; (4) that the plaintiff suffered an injury caused by the defendant's breach. Western Distributing Co. v. Diodosio, 841 P.3d 1053, 1058 (Colo. 1992). It is undisputed that the Policy is a contract between the parties.

         Three provisions in the Policy are pertinent to this claim. First, the Policy's “Commercial Property Conditions” section states:

         LEGAL ...

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