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Brookshire Downs at Heatherridge Condominium Association, Inc. v. Owners Insurance Co.

United States District Court, D. Colorado

February 21, 2019

OWNERS INSURANCE COMPANY, a foreign corporation, Defendant.


          William J. Martinez, United States District Judge.

         Plaintiff Brookshire Downs at Heatherridge Condominium Association, Inc. (“Plaintiff”) sues Defendant Owners Insurance Company (“Defendant”) for breach of insurance contract and unreasonable delay or denial of insurance benefits under Colorado Revised Statutes §§ 10-3-1115 and -1116. (See ECF No. 1.) By way of a summary judgment motion filed by Plaintiff, the parties previously presented to the Court a potentially dispositive legal issue. Specifically, the insurance policy in question states that lawsuits seeking coverage (i.e., breach of contract) must be brought within two years from the date of loss. See Brookshire Downs at Heatherridge Condo. Ass'n, Inc. v. Owners Ins. Co., 324 F.Supp.3d 1201, 1203 (D. Colo. 2018) (ECF No. 71). But the loss at issue here, hail damage, occurred on September 29, 2014, and Plaintiff did not file suit until April 7, 2017. Id. Given this, Defendant asserted in its second affirmative defense that the contractual statute of limitations had expired. (See ECF No.16 at 9, ¶ 2.) Plaintiff then moved for summary judgment that this affirmative defense fails as a matter of law in light of a Colorado statute that invalidates such contractual limitations periods in “homeowners” insurance policies. (See ECF No. 36.)

         The Court denied Plaintiff's motion, holding that Plaintiff's insurance policy was not a “homeowners” policy within the meaning of the statute. Brookshire Downs, 324 F.Supp.3d at 1203-06. Thus, it appeared that this lawsuit should be dismissed as untimely. But Defendant had not cross-moved for summary judgment. Pursuant to Federal Rule of Civil Procedure 56(f), the Court ordered Plaintiff to show cause why summary judgment should not enter in Defendant's favor. Id. at 1206-07.

         Plaintiff responded with what was, for the most part, a veiled summary judgment motion. (ECF No. 77.) Plaintiff asserted Colorado's “reasonable expectations doctrine” (discussed below) as an alternative basis for disregarding the contractual statute of limitations, and also argued that its statutory unreasonable delay/denial claim could go forward regardless. The Court then entered the following order (bracketed numerals refer to CM/ECF docket entries):

Before the Court is its Order to Show Cause [71] and Plaintiff's response [77]. The response is, in substance, a second motion for summary judgment, in violation of the undersigned's Revised Practice Standard III.E.2. The motion also raises new arguments that could have and should have been raised previously, and the Court could therefore deem these arguments forfeited. Cf. Muskrat v. Deer Creek Pub. Sch., 715 F.3d 775, 791 (10th Cir. 2013) (party forfeited counterargument that was not raised in a summary judgment response but naturally should have been, given that it would have mooted analysis of other arguments made in the summary judgment motion). Solely in the interest of substantial justice, however, the Court will not strike the response nor deem Plaintiff to have forfeited its new arguments. . . . Plaintiff's response [77] to the Court's Order to Show Cause is CONSTRUED as Plaintiff's Second Motion for Summary Judgment. Defendant shall respond and Plaintiff may reply according to the [Court's normal procedures]. Pursuant to Fed.R.Civ.P. 56(f), Plaintiff is hereby given notice that the Court may grant summary judgment in Defendant's favor, despite Defendant's failure to move, on the arguments raised in Plaintiff's original Motion for Summary Judgment [36] and in Plaintiff's construed Second Motion for Summary Judgment [77].

(ECF No. 79.)

         The matter being fully briefed, the Court is prepared to rule on Plaintiff's as-construed second summary judgment motion. For the reasons explained below, the Court rejects Plaintiff's reasonable expectations argument and grants summary judgment in Defendant's favor on its affirmative defense of untimeliness. However, Defendant does not appear to contest Plaintiff's position that the statutory unreasonable delay/denial claim may go forward regardless. Therefore, the Court does not grant summary judgment to either party on that claim. By separate order, the Court will call for further briefing to understand the scope and continued viability of a statutory unreasonable delay/denial claim when not anchored to a viable breach of contract claim.


         Summary judgment is warranted under Federal Rule of Civil Procedure 56 “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-50 (1986). A fact is “material” if, under the relevant substantive law, it is essential to proper disposition of the claim. Wright v. Abbott Labs., Inc., 259 F.3d 1226, 1231-32 (10th Cir. 2001). An issue is “genuine” if the evidence is such that it might lead a reasonable trier of fact to return a verdict for the nonmoving party. Allen v. Muskogee, 119 F.3d 837, 839 (10th Cir. 1997).

         In analyzing a motion for summary judgment, a court must view the evidence and all reasonable inferences therefrom in the light most favorable to the nonmoving party. Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998) (citing Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). In addition, the Court must resolve factual ambiguities against the moving party, thus favoring the right to a trial. See Houston v. Nat'l Gen. Ins. Co., 817 F.2d 83, 85 (10th Cir. 1987).

         II. FACTS

         The following facts are undisputed unless attributed to a party or otherwise noted.

         A. Plaintiff's Policy

         Plaintiff represents itself to be a condominium association comprising individual unit owners. (ECF No. 36 at 2, ¶ 1.)[1] A September 29, 2014 hailstorm damaged Plaintiff's property. (ECF No. 77 at 3, ¶ 1; see also ECF No. 1 ¶ 7.) Plaintiff was, at that time, insured against such losses through a policy issued by Defendant. (ECF No. 36 at 3, ¶ 5.) That policy contains the previously-mentioned requirement that a lawsuit seeking coverage must be “brought within 2 years after the date on which the direct physical loss or damage occurred.” (Id. ¶ 6.) So, absent some exception, Plaintiff had until September 29, 2016 to file a lawsuit seeking coverage. (ECF No. 77 at 3, ¶ 3.)

         B. Events Before September 29, 2016

         It is not clear when Plaintiff first raised the possibility of a claim with Defendant. A third-party adjuster hired by Defendant, John Epperson, inspected Plaintiff's property on May 27, 2015, and reported seeing no damage. (Id. ¶ 4; ECF No. 77-2.) His report specifies September 29, 2014, as the potential date of loss, meaning Plaintiff must have said something to Defendant before May 27, 2015, about the previous September's storm. But Plaintiff itself alleges that it “filed its claim for benefits with Defendant” “[o]n or about June, 2015.” (ECF No. 20 at 3, ¶ 4.) Regardless, on June 9, 2015, Defendant denied the claim, relying on Epperson's report. (ECF No. 77-3.)

         Sometime before July 13, 2015, a third-party adjuster hired by Plaintiff, Scott Benglen, sent a letter to Defendant dated June 19, 2015, reporting the results of his inspection from the previous day. (ECF No. 77 at 3, ¶ 6; ECF No. 77-4.) The letter contains photographs of what Benglen represented to be hail damage on Plaintiff's property. (Id.)

         On July 13, 2015, Defendant's field claims representative, Jayme Larson, requested a re-inspection of the property, and she hired a third-party named Mark Burns to conduct the re-inspection. (ECF No. 77 at 3, ¶ 7.) On July 29, 2015, Larson reported to Epperson (Defendant's original third-party inspector) that Burns had found hail damage. (Id. at 4, ¶ 8.) She directed Epperson to contact Burns. (ECF No. 77-6.)

         On August 25, 2015, Larson e-mailed Epperson's employer about the status of a repair estimate: “Can someone please find out if the estimate is in progress and give us a status update?” (ECF No. 77-7.) On September 16, 2015, Epperson's employer assigned another of its employees, Adam Monaco, to the claim. (ECF No. 77 at 4, ¶ 10.)

         From Monaco's assignment in September 2015 until February 2016, nothing of substance happened because Monaco “was waiting for material and/or information from the Plaintiff's public adjuster, Scott Benglen, in order to continue investigating the claim.” (ECF No. 86 at 6, ¶ 4.) Finally, on February 26, 2016, Monaco gave Defendant his “reserve recommendation” of $140, 000, exclusive of overhead and profit. (ECF No.77 at 4, ¶ 11.) He further stated that he was “willing to negotiate” the overhead and profit percentage with “the PA [i.e., Benglen].” (ECF No. 77-9.)

         On April 5, 2016, Monaco provided to Defendant a comprehensive report recommending, among other things, partial roof replacement on some buildings of the condominium complex, and full replacement on other buildings. (ECF No. 77-10 at 2.) He further recommended that Defendant settle the claim for a replacement cost value of $209, 644.90 ($5, 000 lower than the actual replacement cost, to account for the deductible), with an initial disbursement of $141, 586.60 (the actual cash value) and a final disbursement of $68, 058.30 “once the full cost has been incurred.” (Id.) Defendant then advanced $141, 586.60 to Plaintiff, although under the condition that

[i]t is understood our investigation is not complete and it may be later established that there is no legal obligation for payment under your policy. . . .
. . . payment of the advance is not intended to change or modify any of the conditions, terms, provisions or requirements contained in the policy. Any obligations or other legal rights which may now or hereafter be available to you or the company are reserved.

(ECF No. 86-15.)

         On May 13, 2016, Benglen reported to Monaco that Plaintiff's contractor found new damage while performing preliminary work on the claim. (ECF No. 77 at 4, ¶ 14.) On June 9, 2016, Benglen provided a supplemental repair estimate based on the newly ...

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