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Hansen Construction Inc. v. Everest National Insurance Co.

United States District Court, D. Colorado

June 1, 2018




         This matter is before the Court on Defendant Everest National Insurance Company's Motion for Summary Judgment. (Doc. # 68.) Because genuine issues of material fact govern this dispute, the Court denies Defendant's motion.

         I. BACKGROUND


         This lawsuit stems from an underlying construction defect lawsuit (the “Underlying Litigation”) involving twenty single-family homes constructed between 2005 and 2007 in the Ironbridge Homes project in Glenwood Springs, Colorado. (Doc. ## 4 at 2; 72 at 5.) Plaintiffs Hansen Construction, Inc. and Steven Hansen (collectively, “Plaintiffs”) were among the defendants in the Underlying Litigation, wherein homeowners sought to recover for property damage allegedly caused by construction defects and soil movement. (Doc. ## 68 at 2; 72 at 5, 9-10.) The Underlying Litigation culminated in an arbitration hearing in January and February 2015 (Doc. # 4 at 4), following which the arbiter found all defendants jointly and severally liable for property damage to the homes and entered an award against them in excess of $9 million. (Id. at 4.) Plaintiff Steve Hansen satisfied the judgment on behalf of all arbitration defendants by paying $9, 218, 911.60 in October 2015. (Id.)


         As pertinent here, Plaintiffs were issued two primary commercial general liability insurance policies by Maxum Indemnity Company during the relevant time period: a 2006-2007 policy (the “2006 Maxum Policy”) and a 2007-2008 policy (the “2007 Maxum Policy”). (Doc. # 68 at 2.) Each policy had a $1 million per “occurrence” limit and a $2 million aggregate limit. (Id.) Defendant Everest National Insurance Company (“Everest”) issued Plaintiffs a single excess liability insurance policy, which provided excess coverage to the 2007 Maxum Policy; Plaintiffs did not have an excess coverage policy with Everest under the 2006 Maxum Policy. (Id. at 2-3.)

         With respect to the Underlying Litigation, Maxum initially denied Plaintiffs coverage under the 2007 Maxum Policy but agreed to defend under the 2006 Maxum Policy. (Doc. # 72 at 3.) Everest likewise denied excess coverage for the 2007 term because a threshold requirement to Everest's excess coverage obligations was the exhaustion of the 2007 Maxum Policy. (Doc. # 68 at 2-3.) In April 2014, however, Maxum revoked its denial under the 2007 Maxum Policy. (Doc. ## 72-30 at 1-15; 72-29 at 157.) Maxum then informed Everest that it was no longer denying coverage; Everest nonetheless maintained its denial. (Doc. ## 72-30 at 61; 72-29 at 131.)

         Maxum essentially represented Plaintiffs throughout the Underlying Litigation, subject to a full and complete reservation of rights, and incurred over $600, 000 in defense costs and attorney's fees. (Doc. ## 72 at 3; 72-31 at 132, ¶ 57; 72-30 at 1.) Following arbitration, Maxum sued Plaintiffs to avoid coverage for the Underlying Litigation, arguing that Maxum did not owe a duty to defend or indemnify Plaintiffs under either Maxum Policy. (Doc. # 72-31 at 125-37.) Plaintiffs asserted counterclaims for breach of contract, declaratory judgment, and bad faith. (Doc. # 68 at 10.) Maxum and Plaintiffs settled that litigation in March 2016. (Doc. # 70-29 at 157-63.) Pursuant to that settlement, Maxum paid Plaintiffs $500, 000 and the parties stipulated that “payment of the [$500, 000] sum, combined with payments made and/or to be made by Maxum in connection with the . . . Underlying [Litigation] . . . has exhausted [the] single per-occurrence limit under the [2007] Maxim Policy.” (Id. at 158.) To effectuate the exhaustion of $1 million single occurrence limit, Maxum reallocated costs between the 2006 and 2007 Maxum Policies. (Doc. ## 72 at 3; 72-29 at 176-77.)

         Following the settlement, Plaintiffs informed Everest that the 2007 Maxum Policy had been exhausted. (Doc. # 72-29 at 174-75.) Plaintiffs requested that Everest reconsider of its previous denial of coverage and issue excess coverage to Plaintiffs to cover the $9, 218, 911.60 judgment against them. (Id.) This request followed two of Plaintiffs' previous requests for reconsideration: one in November 2015 and another in April 2016. (Id. at 174.) In all instances, Everest effectively refused to defend or indemnify Plaintiffs in the Underlying Litigation. (Doc. # 4 at 5.)

         C. THIS LAWSUIT

         Plaintiff thereafter initiated this lawsuit against Everest in October 2016, bringing claims for breach of contract, common law bad faith, and statutory bad faith. (Doc. # 4 at 5-6.) Plaintiffs also seek a declaratory judgment clarifying the rights and obligations of the parties. (Id. at 5, 8.) On December 21, 2017, Everest filed the instant Motion for Summary Judgment, arguing for the dismissal of all Plaintiffs' claims. (Doc. # 68.)


         A. SUMMARY ...

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