Bolt Factory Lofts Owners Association Inc. v. Auto-Owners Insurance Co.

          City and County of Denver District Court No. 16CV33608 Honorable J. Eric Elliff, Judge.

          Burg Simpson Eldredge Hersh & Jardine, P.C., Mari K. Perczak, Thomas W. Henderson, Joseph F. Smith, Nelson Boyle, Englewood, Colorado, for Plaintiff-Appellee

          The Hustead Law Firm, A Professional Corporation, Patrick Q. Hustead, Connor L. Cantrell, Denver, Colorado, for Intervenor-Appellant

          OPINION

          FOX JUDGE.

         ¶ 1 Insurer, Auto-Owners Insurance Company (AOIC), appeals the trial court's order denying its motion to intervene following a settlement agreement reached by its insured, Sierra Glass Co., Inc. (Sierra Glass), and plaintiff, Bolt Factory Loft Owners Association Inc. (the Association). We affirm the trial court's order.

         I. Background

         ¶ 2 This insurance dispute originated from a construction defects case in which the Association sued six contractors for alleged construction defects at one of its Denver condominium projects. Two of those contractors then asserted negligence and breach of contract third-party claims against several subcontractors, including Sierra Glass, on November 7, 2016. Following a series of settlement agreements, the only remaining claims were those the Association, as assignee of the two contractors, asserted against Sierra Glass.

         ¶ 3 AOIC had issued insurance policies to Sierra Glass and defended Sierra Glass under a reservation of rights. AOIC refused to pay a $1.9 million settlement demand the Association presented to Sierra Glass on or about May 2, 2018. As a result, Sierra Glass entered into an agreement with the Association under which, according to AOIC, Sierra Glass would refrain from offering a defense at trial (and the scheduled fifteen-day jury trial was reduced to a two-day bench trial) in exchange for the Association's promise that it would not pursue recovery against Sierra Glass. Sierra Glass also agreed to assign any bad faith claims it had against AOIC to the Association. AOIC learned of this agreement the day before the jury trial was scheduled to start on May 4, 2018.

         ¶ 4 On May 9, 2018, when the bench trial actually started, AOIC filed a motion to intervene, continue the trial, contest the settlement agreement, and protect its rights under the insurance policies. Following a hearing, ^[1] the trial court determined that the settlement agreement was valid under Nunn v. Mid-Century Insurance Co., 244 P.3d 116 (Colo. 2010).^[2] The court denied AOIC's motion to intervene, concluding that AOIC's claims were contingent on the outcome of trial and that AOIC could test coverage issues in a subsequent declaratory judgment action.

         ¶ 5 During the bench trial, the Association called four witnesses and delivered opening and closing statements. Sierra Glass did not present a defense. The trial court found in favor of the Association and entered a judgment for $2, 489, 021.91.

         ¶ 6 The Association then obtained a writ of garnishment against AOIC, and AOIC removed that action to federal district court. On June 11, 2019, the district court stayed the motion for garnishment pending the resolution of this appeal challenging the trial court's denial of its motion to intervene. AOIC also filed a declaratory judgment action in federal district court against Sierra Glass seeking a declaration that (1) it did not owe obligations or payments under the insurance policies; (2) Sierra Glass breached the policy by failing to cooperate with AOIC; and (3) the state court judgment is not enforceable. The Association and Sierra Glass asserted counterclaims for breach of contract and third-party statutory and common law bad faith claims. Because of this pending appeal, the federal district court dismissed the declaratory relief claim and the counterclaims without prejudice.

         II. Jurisdiction

         ¶ 7 We first conclude that our jurisdiction over this appeal is proper. While there was a question if the removal of the garnishment action to federal district court constituted a removal of the entire case, see 28 U.S.C. § 1446(d) (2018) (after filing a notice of removal of a civil action, the state court shall proceed no further), the garnishment action is a separate proceeding and the federal district court has stayed the proceeding. Therefore, we have jurisdiction over the appeal of this proceeding. See Mascarenas Enters., Inc. v. City of Albuquerque, 494 Fed.Appx. 846, 850 (10th Cir. 2012) ("Removal of a state ...