Jaimes v. Liberty Insurance Corp.

          ORDER ON DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

          R. Brooke Jackson United States District Judge

         This matter is before the Court on defendant, Liberty Insurance Corporation (Liberty)'s motion for summary judgment. ECF No. 26. For the reasons stated herein, the defendant's motion is GRANTED.

         I. BACKGROUND

         Plaintiff, Leon K. Jaimes, is the owner of the real property and house located at 3027 Marion Street, Denver, CO 80205. ECF No. 4 at ¶6. He carried Liberty homeowner's insurance on that property. Id. at ¶7. Mr. Jaimes is a citizen and resident of Alaska, and he rented this property to tenants. Id. at ¶l, 10. This case arises out of Liberty's denial of coverage for Mr. Jaimes's two property insurance claims for cracking and bulging of an exterior wall of that property ("first claim") and the subsequent collapse of that wall ("second claim").

         On August 28, 2015 Mr. Jaimes learned of a crack in the south wall of his home when a local friend who assisted him in managing the property told him about the issue and sent pictures of the wall to him. ECF No. 26 at 4; ECF No. 27 at 2. On September 1, 2015 Mr. Jaimes hired Anchor Engineering, which sent Stephen McSpadden to the property to perform a site observation. ECF No. 26-4 (McSpadden letter). Mr. McSpadden "assess[ed] the foundation, interior floor of the main level and the south masonry bearing wall." Id. He observed "a major bulge in the south wall of the main level," noting that "[t]he bulge in the south wall is so severe that the wall is actually broken under the stairway and there is a major separation between the exterior wall and interior walls." Id. He also noted several problems with deterioration in different aspects of the basement. Id. The letter conveyed that the "structure of the house is regarded as unstable and dangerous" and made recommendations for repair.

         On September 22, 2015, Mr. Jaimes filed a claim with Liberty, seeking coverage under the policy. Liberty denied this claim, stating that the damage to the south brick wall was not covered under the policy because it "was a result of deterioration of the wall and possibly also a result of settling." Liberty stated that Mr. Jaimes's homeowner's policy does not cover "wear and tear or deterioration of materials; or settling of walls, floors or roofs." ECF No. 4 at ¶16.

         After this denial, Mr. Jaimes obtained bids to repair the house and investigated other options, including demolishing the house and building a new one. Id. at ¶18. On November 17, 2015, while Mr. Jaimes was in the process of finding a solution, the south wall of his home collapsed. Id. at ¶19. Mr. Jaimes submitted a second claim with Liberty seeking coverage under the policy. Id. at 20. The next day, the City and County of Denver ("the City") issued an emergency demolition order because the structure was unsafe, and because the gas meter had been damaged when the house collapsed. Id. at 21.

         After Mr. Jaimes filed the second claim, Liberty retained a professional engineer, Mark Orr with EFI Global, who inspected the property. ECF No. 26 at 6. EFI Global issued a report that, like the McSpadden letter, observed deterioration of floor joists, a wood bearing plate, and mortar. ECF No. 26-10. Liberty also denied this claim. Liberty asserted that the collapse was not covered because it "was the result of deterioration of the wall, settling of the home, failure to protect the property from further damage." ECF No. 4 at ¶24, ECF No. 26-10. Liberty stated that the policy does not cover "wear and tear, marring, deterioration, settling, shrinking, bulging or expansion, including resultant cracking, of pavements, patios, foundations, walls, floors, roofs or ceilings." Id. Between November 2015 and February 2016 the City demolished Mr. Jaimes's house and removed it from the property. Complaint at ¶27.

         Mr. Jaimes filed suit against Liberty raising three claims: (1) breach of contract; (2) bad faith breach of contract; and (3) violation of Colo. Rev. Stat. §§10-3-1115; 1116. Mr. Jaimes asserts that the collapse of the south wall of his home was due to "hidden decay" and is therefore covered under the following policy language:

Section I - Perils Insured Against.

We insure against risk of direct loss to property described in coverages A and B only if that loss is a physical loss to property. We do not insure, however, for loss:

1. Involving collapse, other than as provided in Additional Coverage 8.; 2. Caused by: . . .

e. Any of the following:

(1) Wear and tear, marring, ...