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KB Home Colorado, Inc. v. Peerless Indemnity Insurance Co.

United States District Court, D. Colorado

March 7, 2019

KB HOME COLORADO INC., Plaintiff,
v.
PEERLESS INDEMNITY INSURANCE CO., Defendant.

          OPINION AND ORDER ON JOINT MOTION FOR SUMMARY JUDGMENT

          Marcia S. Krieger, Senior United States District Judge

         THIS MATTER comes before the Court upon the parties' Joint Motion for Summary Judgment (## 25, 26), the Stipulated Facts (# 24), the parties' Responses (## 27, 28), and the parties' Replies (## 29, 31). For the reasons that follow, the Plaintiff's Motion is granted.

         I. JURISDICTION

         The Court exercises jurisdiction under 28 U.S.C. § 1332.

         II. BACKGROUND[1]

         This is a case in which the Plaintiff, KB Home Colorado Inc., seeks to recover insurance benefits from Defendant Peerless Indemnity Insurance Co. KB Home is a general contractor that built and sold condominium units at the First Creek Condominium development in Denver, Colorado. Beginning in 2002 for the First Creek project, KB Home subcontracted with Metco Landscape Inc. for landscaping work.

         At the beginning of their contractual relationship, the subcontracts required Metco to maintain commercial general liability (CGL) insurance and to name KB Home as additional insured. Beginning in 2007, the subcontracts created a “Wrap-Up Insurance Program” that “relieved” Metco's obligation to maintain CGL insurance in favor of KB Home for the duration of the Wrap-Up. Participation in the Wrap-Up applied only to CGL insurance and did not affect Metco's obligation to maintain other types of insurance. The 2007 subcontract lasted for a year and a half, the 2008 subcontract lasted for a year, and the 2009 subcontract was executed on December 1, 2009. Though the 2009 subcontract does not specify the end of its term, the Wrap-Up ended on November 30, 2010.

         Peerless issued Metco a CGL policy (the Policy) from 2012 to 2015. KB Home was not listed as an insured. In October 26, 2014, during the term of the Policy, the First Creek Owners Association sued KB Home in state court for construction defects. KB Home, in turn, filed third-party claims against its subcontractors, including Metco. KB Home requested that Peerless defend it. Peerless denied the request in August 2015, stating:

The Commercial General Liability policy is not a substitute for a Performance Bond. It does not guarantee that the insured's products or services will perform in a workmanlike manner, or whether they will perform in any particular manner, or, indeed, that they will perform at all. Accidents involving “bodily injury” or “property damage” to third persons are covered, but not reimbursement for the failure of the insured's own products or services. It is the insured that bears the risk of repairing or replacing allegedly defective products or faulty workmanship, while the insurer bears the risk of damage to the property of others. Damages predicated or premised on the insured's product or its work are not covered by the Policy. . . .
While [the Peerless Policy] included a Blanket Additional Insured Contractors endorsement that provided a basis to extend additional insured status with respect to all persons with whom you have entered into a requirement to provide additional insured status, the contract that KB Home drafted and that Metco executed simply did not contain a requirement for Metco to maintain insurance coverage beyond the period in which Metco was performing work on the project.

(# 24-13 at 8, Ex. M at 518.) Peerless again denied coverage upon reconsideration for the same reasons.

         In this action, KB Home seeks: (1) a declaratory judgment stating that Peerless is obligated to defend KB Home (2) damages for Peerless' breach of the implied covenant of good faith and fair dealing, (3) damages for Peerless' breach of contract based on KB Home's status as a third-party beneficiary of the Policy, (4) damages for a violation of C.R.S. §§ 10-3-1115, 1116 based on unreasonable delay of the claim, and various equitable remedies.

         The parties jointly move for summary judgment on a discrete issue - whether Peerless had a duty to defend KB Home in the state court action. They have submitted stipulated facts and exhibits (# 24), which the Court considers as the complete record on the issue.

         III. ...


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