United States District Court, D. Colorado
ORDER ON SUMMARY JUDGMENT
Kristen L Mix United States Magistrate Judge
matter is before the Court on Defendant QBE Insurance
Company's Motion for Summary Judgment
[#35] (“Defendant's Motion”) and
Plaintiff's Motion for Partial Summary Judgment
Re: the Duty to Defend [#40] (“Plaintiff's
Motion”). The Court has reviewed Defendant's
Motion [#35] and Plaintiff's Motion [#34], the Responses
[#41 and #46], the Replies [#45 and #49], the case file, and
the applicable law, and is sufficiently advised in the
premises. For the reasons set forth below, Defendant's
Motion [#35] is GRANTED IN PART AND DENIED IN
PART. Plaintiff's Motion [#40] is
issued David Bowser (“Bowser”) a Real Estate
Services Errors & Omissions Insurance Policy, policy
number QCR-3030501-01, for the policy period of January 1,
2016 to January 1, 2017 (the “Policy”). Def.
Motion [#35] at 4 ¶ 1 and Ex. A. Mr. Bowser is the
named insured. Pl. Motion [#40] at 2 ¶ 1. The
Policy contains a liability limit of $1 million per wrongful
act subject to an aggregate limit in this same amount.
Id. The portions of the Policy relevant to the
parties' motions are discussed in the Court's
Analysis in Section III, infra.
January 27, 2016, Plaintiff filed a lawsuit against Mr.
Bowser and others, in Adams County District Court, No.
16CV30137 (the “Underlying Case”). Pl.
Motion, [#40] at 3 ¶ 3; Def. Motion, [#35]
at 7 ¶ 10. The complaint asserted eleven claims:
negligence/construction defects, breach of implied warranty,
negligent misrepresentation, fraudulent inducement to
contract, fraud-false representation, fraud-concealment
and/or non-disclosure of material fact, breach of contract,
breach of the implied covenant of good faith and fair
dealing, violation of the Colorado Consumer Protection Act,
civil conspiracy, and unjust enrichment. Pl. Motion
[#40], Ex. C. The Underlying Case related to the sale to
Plaintiff of a residential property at 1601 Hanover Street,
Aurora, Colorado (the “Home”), and the alleged
lack of disclosure of construction defects in the Home.
Id.; Def. Motion [#35] at 7 ¶ 11.
Home was sold to Plaintiff by Bowser, LLC on or around May
13, 2014. Def. Motion [#35] at 7 ¶ 12. In May
of 2014, Bowser, LLC was owned by Mr. Bowser, who was the
only owner of Bowser, LLC during the entirety of its
existence and owned all shares of the company. Id.
at 7 ¶ 13.
Bowser was the listing agent for the sale of the Home to
Plaintiff. Def. Motion [#35] at 7 ¶ 14. Mr.
Bowser also filled out the Seller's Property Disclosure
relating to the Home in connection with the sale to
Plaintiff. Id. at 8 ¶ 15. Mr. Bowser did not
obtain a home warranty for the Home, and he has no knowledge
of anyone else purchasing a home warranty for the Home.
Id. ¶ 17.
2, 2015, more than six months before the filing of the
Underlying Case, Plaintiff, through his attorney, David Roth,
sent Mr. Bowser a written letter concerning the Home which
directed Mr. Bowser to “accept this Communication as a
Notice of a Claim.” The letter set forth “claims
of construction defects” at the Home that eventually
gave rise to the Underlying Case. Def. Motion [#35]
at 8 ¶ 19 and Exs. E, E-1, F. The June 2, 2015 letter
informed Mr. Bowser that he had “a right to
inspect” the Home, “to remedy the problems. . .
or otherwise provide a settlement offer.” Id.
at 9 ¶ 20 and Ex. E1. It also asked that Mr. Bowser
“inform any applicable insurance company of this
claim.” Id. Mr. Bowser testified in his
deposition that he understood the June 2, 2015 letter to be
an “attorney trying to get me to write a check.”
Id. at 9 ¶ 21 and Ex. C, Bowser Dep. at
certified mail receipt on the written notice of claim letter
states that it was delivered on June 5, 2015. Def.
Motion [#35] at 9 ¶ 22 and Ex. E. Mr. Bowser
testified that he received a copy of the June 2, 2015 notice
of claim letter in June of 2015. Id. at 9 ¶ 23
and Ex. C, Bowser Dep. at 32:4-25, 33:1-19.
18, 2015, Mr. Bowser had consulted with an attorney, Avi
Sicker, regarding the allegations of defects in the Home.
Def. Motion [#35] at 9 ¶ 24 and Ex. C, Bowser
Dep. 41:9-18, 43:21-:44:18. Avi Sicker engaged in email
correspondence with Plaintiff's attorney, David Roth, on
June 18, 2015, regarding the allegations of defects.
Id. at 9 ¶ 25. Mr. Sicker forwarded his emails
with Mr. Roth to Mr. Bowser on June 18, 2015. Id.
The emails Mr. Sicker forwarded to Mr. Bowser included
pictures of the defects and a March 18, 2015 report from
Stone Creek Engineering discussing problems with the
Home's foundation. Id. at 10 ¶ 26, Ex. C,
Bowser Dep. at 42:1-25, 43:1-17, Ex. G.
Bowser did not send the June 2, 2015 letter to Defendant.
Def. Motion [#35] at 10 ¶ 27. Rather, Mr.
Bowser first reported and tendered defense of the Underlying
Case to Defendant more than nine months later, on or about
March 24, 2016, when he was served with the original
complaint in the Underlying Case. Id. at 10 ¶
28 and Ex. C, Bowser Dep. at 36:15-20; Pl. Motion
[#40], at 3 ¶ 4.
investigating and evaluating the allegations and claims of
the Underlying Case, Defendant, through Greg Johnson of
Specialty Claims Management, denied the tender by letter
dated April 19, 2016. Def. Motion [#35] at 10 ¶
29; Pl. Motion [#40] at 3 ¶ 5, Ex.
Plaintiff and Mr. Bowser entered into a pair of settlement
agreements which resulted in Mr. Bowser admitting liability
to Plaintiff in the Underlying Case, paying him $10, 000, and
agreeing to have the amount of Plaintiff's damages
determined by a stipulated judgment or some other appropriate
method. Pl. Motion [#40] at 3 ¶ 6. Ultimately,
as reflected in an Arbitration and Assignment Agreement,
Plaintiff opted to have the amount of damages determined
through binding arbitration before former Judge James Miller
at JAMS in Denver, Colorado. Id. at 3 ¶ 7;
Def. Motion [#35] at 10 ¶ 30.
Bowser admitted liability on various grounds in the
Arbitration and Assignment Agreement, and the Agreement
indicated that the total cost to repair and replace the
damage to Plaintiff's home was estimated by Demand
Construction Services at $577, 678.55. Pl. Motion
[#40] at 3-4 ¶ 8. Mr. Bowser also assigned to Plaintiff
his rights and claims under the Policy so that Plaintiff
could pursue recovery of the arbitration award “and
other damages, penalties, and other remedies from the insurer
directly.” Def. Motion [#35] at 10 ¶ 31;
Pl. Motion [#40] at 2; First Am.
Compl. [#28] ¶ 12.
Miller issued an arbitration award on July 21, 2017, awarding
Plaintiff $577, 678.85 in damages and $16, 454 in costs, for
a total award of $594, 132.85. Def. Motion [#35] at
10 ¶ 32 and Ex. D. This was the full amount of the
estimate by Demand Construction Services. Pl. Motion
[#40] at 4 ¶ 10. Judge Miller awarded the damages on the
claim for intentional misrepresentation. Def. Motion
[#35] at 10-11 ¶ 33 and Ex. D. He stated that the
“negligent misrepresentation and other claims are
subsumed by my determination of the intentional
misrepresentation claim.” Id.
Miller also found that “David Bowser, with what I find
to be full knowledge of those defects, failed to disclose any
of th[e] defects to the Lua's [sic]. Mr. Bowser, in
completing the Disclosures upon which the Lua's relied,
denied any of the material and serious defects . . . .”
Def. Motion [#35], at 8 ¶ 16 and Ex. D. He
further stated, “[b]ased on all of the evidence, I find
that Mr. Bowser individually and on behalf of Bowser, LLC
intentionally and fraudulently misrepresented the condition
of the home sold to the Lua's [sic]. I find that the
Lua's [sic] reasonably relied on Mr. Bowser's
misrepresentations and sustained damages.” Id.
at 11 ¶ 34 and Ex. D.
instant case, Plaintiff, as the assignee of Mr. Bowser, sues
Defendant for its handling of its defense obligations under
the Policy and its claims handling generally, and alleges
that Defendant breached its duty to defend. First Am.
Compl. [#28] at 2-5. Plaintiff asserts claims against
Defendant for breach of contract, common law bad faith, and
statutory bad faith under Colo. Rev. Stat. §§
10-3-1115 and 1116. Id. at 6-8. Plaintiff seeks
“compensatory damages caused by Defendant's breach
of contract and bad faith breach of insurance contract,
including but not limited to the full amount of the
arbitration award (with post-award interest)”.
Id. at 9. Thus, Plaintiff asserts that he does not
seek indemnity coverage for the arbitration award. Pl.
Motion [#40] at 2; Pl. Resp. Def. Motion [#41]
part, Defendant seeks summary judgment because
Plaintiff's claims are barred by the date-certain notice
requirement and by other policy exclusions. Defendant does
not separately address Plaintiff's claim for breach of
the duty to defend.
Standard of Review
purpose of a motion for summary judgment pursuant to
Fed.R.Civ.P. 56 is to assess whether trial is necessary.
See Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986). Pursuant to Fed.R.Civ.P. 56(a), summary judgment
should be entered if the pleadings, the discovery, any
affidavits, and disclosures on file show “that there is
no genuine issue as to any material fact and that the movant
is entitled to judgment as a matter of law.” An issue
is genuine if the evidence is such that a reasonable jury
could resolve the issue in favor of the nonmoving party.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
is material if it might affect the outcome of the case under
the governing substantive law. Id.
burden is on the movant to show the absence of a genuine
issue of material fact. Adler v. Wal-Mart Stores,
Inc., 144 F.3d 664, 670-71 (10th Cir. 1998) (citing
Celotex, 477 U.S. at 323). When the movant does not
bear the ultimate burden of persuasion at trial, the
“movant may make its prima facie demonstration [of the
absence of a genuine issue of material fact] simply by
pointing out to the [C]ourt a lack of evidence for the
nonmovant on an essential element of the nonmovant's
claim.” Id. at 671. If the movant carries the
initial burden of making a prima facie showing of a lack of
evidence, the burden shifts to the nonmovant to put forth
sufficient evidence for each essential element of his claim
such that a reasonable jury could find in his favor. See
Anderson, 477 U.S. at 248. The nonmovant must go beyond
the allegations and denials of his pleadings and provide
admissible evidence, which the Court views in the light most
favorable to him. Adickes v. S.H. Kress & Co.,
398 U.S. 144, 157 (1970); Panis v. Mission Hills Bank,
N.A., 60 F.3d 1486, 1490 (10th Cir. 1995) (citing
Celotex, 477 U.S. at 324).
statements based merely on conjecture, speculation, or
subjective belief are not competent summary judgment
evidence. Bones v. Honeywell Int'l, Inc., 366
F.3d 869, 875 (10th Cir. 2004). The nonmoving party's
evidence must be more than “mere reargument of [his]
case or a denial of an opponent's allegation” or it
will be disregarded. See 10B Charles Alan Wright et
al., Federal Practice and Procedure § 2738 (4th
Motion [#40] seeks an order from the Court finding, as a
matter of law, that Defendant owed and breached a duty to
defend Mr. Bowser in the underlying proceedings.
asserts that if Defendant owed Mr. Bowser a duty to defend,
it may be held responsible for all damages proximately caused
by its breach and has no right to the summary relief
requested in Defendant's Motion. Id. at 2.
Defendant's Motion [#35] seeks an order from the Court
finding, as a matter of law, that Plaintiff's breach of
contract claim fails because there is no coverage under the
Policy. It argues that Plaintiff's common law and
statutory bad faith claims fail in the absence of coverage.
Breach of Contract Claim
Whether the Allegations of the Complaint in the Underlying
Case Invoked the Duty to Defend
Court first addresses Plaintiff's argument that the
complaint in the Underlying Case alleged facts that required
Defendant to defend the lawsuit. “Whether there is a
duty to defend is a question of law.” Carl's
Italian Rest. v. Truck Ins. Exchange, 183 P.3d 636, 639
duty to defend pertains to the insurance company's duty
to affirmatively defend against pending claims.”
Constitution Assocs. v. New Hampshire Ins. Co., 930
P.2d 556, 563 (Colo. 1996). “Generally, the duty to
defend arises where the alleged facts even
potentially fall within the scope of coverage .....
” Id. (emphasis in original); see
also Hecla Mining Co. v. New Hampshire Ins.
Co., 811 P.2d 1083, 1089-90 (Colo. 1991). The duty to
indemnify, on the other hand, “relates to the
company's duty to satisfy a judgment entered against the
insured”, and arises only if “the policy
actually covers the alleged harm.”
Id. In some instances, an insurer will be found to
have a duty to defend even though it may have no duty to
indemnify. Compass Ins. Co. V. City of Littleton,
984 P.2d 606, 613 (Colo. 1999). This is because “[t]he
duty to defend is triggered more easily than is the duty to
indemnify.” Constitution Assocs., 930 P.2d at
Colorado Supreme Court “has set a high standard for an
insurance company seeking to avoid its duty to defend that
focuses on an examination of the allegations in the
underlying complaint against the insured[.]”
Compass Ins. Co., 984 P.2d at 613. “‘An
insurer's duty to defend arises when the underlying
complaint . . . alleges any facts that might fall within the
coverage of the policy.'” Id. (quoting
Hecla Mining Co., 811 P.2d at 1089). This has been
referred to as the complaint rule. Id. at 615. Thus,
“‘[t]he actual liability of the insured to the
claimant is not the criterion which places upon the insurance
company the obligation to defend.'” Hecla
Mining Co., 811 P.2d at 1089 (citation omitted).
“Rather, the obligation to defend arises from
allegations in the complaint, which if sustained, would
impose a liability covered by the policy.” Id.
explained in Hecla Mining Company,
“‘where the insurer's duty to defend is not
apparent from the pleadings in the case against the insured,
but the allegations do state a claim which is potentially or
arguably within the policy coverage, or there is some doubt
as to whether a theory of recovery within the policy coverage
has been pleaded, the insurer must accept the defense of the
claim.'” 811 P.2d at 1089 (citation omitted). The
court further stated in that case that “[d]etermining
the duty to defend based on the allegations contained within
the complaint comports with the insured's legitimate
expectation of a defense, and prevents the insurer from
evading coverage by filing a declaratory judgment action when
the complaint against the insured is framed in terms of
liability coverage contemplated by the insurance
policy.” Id. at 1090.
insured need only show that the underlying claim may fall
within policy coverage; the insurer must prove that it
cannot.” Cyprus Amax Minerals Co. v. Lexington Ins.
Co., 74 P.3d 294, 301 (Colo. 2003). The Colorado Supreme
Court indicated that “[t]he appropriate course of
action for an insurer who believes that it is under no
obligation to defend, is to provide a defense to the insured
under a reservation of its rights to seek reimbursement
should the facts at trial prove that the incident resulting
in liability was not covered by the policy, or to file a
declaratory judgment action after the underlying case has
been adjudicated.” Hecla Mining Co., 811 P.2d
to the Policy in the instant case, the insuring agreement
states in PART 5. INSURING AGREEMENTS AND
What We Insure
We will pay on Your behalf
those sums in excess of the Retention and up to the
applicable Limit of Liability stated in Item
5. of the Declarations Page that
You become legally obligated to pay as
Damages or Defense Costs
because of Claims as a result of a