United States District Court, D. Colorado
AUTO-OWNERS INSURANCE CO. Plaintiff,
BOLT FACTORY LOFTS OWNERS ASSOCIATION, INC., a Colorado nonprofit corporation, and SIERRA GLASS CO., INC., Defendants.
ORDER ON MOTION TO DISMISS
BROOKE JACKSON UNITED STATES DISTRICT JUDGE
matter is before the Court on plaintiff and counterclaim
defendant Auto-Owners Insurance Co.'s
(“AOIC”) motion to dismiss. ECF No. 23. For the
reasons stated below, the motion is GRANTED.
insurance dispute stems from a civil lawsuit filed in the
Denver District Court (the “underlying lawsuit”).
Complaint, ECF No. 1 at ¶8. In the underlying lawsuit,
defendant Bolt Factory Lofts Owners Association, Inc.
(“Association”) asserted construction defect
claims against six contractors for alleged defects at one of
its Denver condominium developments. Id. at
¶12. Two of those six contractors then asserted
third-party claims against subcontractors, including
defendant Sierra Glass Co., Inc. (“Sierra
Glass”). Id. at ¶13. Following a series
of settlements, the only claims that proceeded to trial were
the claims that the Association, as assignee of the two
contractors, asserted against Sierra Glass. Id. at
issued seven insurance policies (the “Policy”) to
Sierra Glass, and as part of the Policy, defended Sierra
Glass in the underlying lawsuit under a reservation of
rights. Id. at ¶¶17, 22. On or about May
4, 2018 the Association presented a settlement demand to
Sierra Glass for $1.9 million. Id. at ¶39.
Sierra Glass asked AOIC to settle the case for that amount,
but AOIC declined. Id. at ¶42. This prompted
Sierra Glass, in an effort to protect its own financial
interests, to strike a deal with the Association. As part of
the written “Agreement, ” Sierra Glass agreed to
refrain from offering a defense at trial in exchange for the
Association's express promise that it would not pursue
any recovery against Sierra Glass. Id. at ¶25;
see also the Agreement, ECF No. 1-4. Moreover,
Sierra Glass agreed to assign any bad faith claims it may
have against AOIC to the Association. ECF No. 1 at ¶26.
Because of the Agreement, the trial court reduced the 15-day
jury trial to a two-day bench trial set to commence on May 9,
2018. Id. at ¶24.
Glass signed the Agreement without AOIC's knowledge or
consent. Id. at ¶¶33- 34. In fact, the
first time AOIC learned of the Agreement was at the pretrial
conference held on May 4, the Friday before the 15-day trial
was originally set to begin. Id. at ¶24.
According to AOIC, the Policy afforded AOIC the right to
defend Sierra Glass, and it required Sierra Glass to
cooperate in the defense of the legal action. Id. at
¶¶30-31. And, AOIC alleges that it had been
providing a full defense under a reservation of rights with
the intent to defend until final judgment. Id. at
9, 2018, the first day of the bench trial, AOIC petitioned to
intervene in the lawsuit and to continue the trial in the
hopes of protecting its rights under the Policy. Id.
at ¶¶49-50. The district judge held a hearing on
the motion that same day, but ultimately held that the
Agreement was valid under Nunn v. Mid-Century Ins.
Co., 244 P.3d 116 (Colo. 2010). Id. at
¶¶51, 57. Therefore, the two-day trial commenced
without Sierra Glass mounting a defense. Id. at
¶¶59-62. Unsurprisingly, on May 30, 2018 the trial
court ruled in favor of the Association, and entered final
judgment in the amount of $2, 489, 021.91 (the
“Judgment”). Id. at ¶65;
see Trial Court Order, ECF No. 1-9. Then, on June
18, 2018 the Association obtained a writ of garnishment
against AOIC in the Denver District Court. ECF No. 1 at
¶66; see Writ of Garnishment Order, ECF No.
1-10. AOIC removed that action to this Court on July 9, 2018.
See Case Number 18-cv-1738, ECF No. 1.
6, 2018 AOIC filed this declaratory judgment action against
the Association and Sierra Glass. AOIC seeks a declaration
from this Court that it does not owe any obligations or
payments to defendants under the Policy, ECF No. 1 at
¶98, a declaration that Sierra Glass breached the Policy
by failing to cooperate with AOIC, id. at ¶99,
and a declaration that the state court Judgment obtained by
the Association in the Underlying Lawsuit is not enforceable
against AOIC, id. at 17.
after filing this action, on July 27, 2018, AOIC timely
appealed the trial court's Judgment. AOIC asked the
Colorado Court of Appeals to reverse the trial court's
denial of its motion to intervene and asked the appellate
court to vacate the Judgment. See AOIC's Opening
Brief, ECF No. 28-1. Meanwhile, the Association and Sierra
Glass, in concert, answered the complaint in the present case
and asserted counterclaims for breach of contract and
third-party statutory and common law bad faith claims.
See Answer and Counterclaims, ECF No. 20.
moves to dismiss the counterclaims under Fed.R.Civ.P.
12(b)(1) for want of subject matter jurisdiction, arguing
that the counterclaims are not ripe for review. ECF No. 23.
Sierra Glass and the Association responded in opposition, ECF
No. 28, and AOIC replied, ECF No. 32. The motion is ripe for
STANDARD OF REVIEW
question of whether a claim is ripe for review bears on a
court's subject matter jurisdiction under the case or
controversy clause of Article III of the United States
Constitution.” New Mexicans for Bill Richardson v.
Gonzales, 64 F.3d 1495, 1498-99 (10th Cir. 1995). Thus,
a ripeness challenge is properly analyzed under Fed.R.Civ.P.
12(b)(1), which empowers a court to dismiss a complaint for
“lack of subject-matter jurisdiction.” The party
asserting jurisdiction bears the burden of establishing
subject matter jurisdiction. Pueblo of Jemez v. United
States, 790 F.3d 1143, 1151 (10th Cir. 2015). As such,
defendants bear the burden to establish jurisdiction over the
counterclaims they asserted against AOIC.
is peculiarly a question of timing, ”
Gonzales, 64 F.3d at 1499 (quoting Regional Rail
Reorganization Act Cases, 419 U.S. 102, 140 (1975)),
intended “to prevent the courts, through avoidance of
premature adjudication, from entangling themselves in
abstract disagreements, ” id. (quoting
Abbott Labs. v. Gardner, 387 U.S. 136, 148 (1967)).
A court assessing the ripeness of a claim must
“evaluate both the fitness of the issues for judicial
decision and the hardship to the parties of withholding court
consideration.” Utah v. U.S. Dep't of the
Interior, 210 F.3d 1193, 1196 (10th Cir. 2000) (quoting
Abbott Labs., 387 U.S. at 149). The ripeness
doctrine is an important prudential limitation which prevents
courts from deciding untimely disputes until the controversy
is certain and not contingent on future events. See
Gonzales, 64 F.3d at 1499. “In short, ripeness
doctrine addresses a timing question: when in time is it
appropriate for a court to take up the asserted claim.”
Kansas Judicial Review v. Stout, 519 F.3d 1107, 1116
(10th Cir. 2008) (citation, quotation, and alternations
omitted). Lastly, the ripeness rules apply with equal force
to counterclaims. See Entek GRB, LLC v. Stull Ranches,
LLC, No. 11-CV-01557-PAB-KLM, 2012 WL 4478808, at *2 (D.
Colo. Sept. 28, 2012).