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Residences at Olde Town Square Association v. Travelers Casualty Insurance Company of America

United States District Court, D. Colorado

December 31, 2019



          William J. Martínez United States District Judge

         This is an insurance coverage dispute arising out of hail damage suffered by a condominium complex in Arvada, Colorado, on May 8, 2017. Plaintiff Residences at Olde Town Square Association (“Plaintiff”) is the homeowners' association that manages the complex. Defendant Travelers Casualty Insurance Company of America (“Defendant”) was Plaintiff's property and casualty insurer at the relevant time. Plaintiff's complaint pleads two causes of action: (1) breach of contract and (2) unreasonable delay or denial of insurance benefits in violation of Colorado Revised Statutes §§ 10-4-1115 and -1116. (ECF No. 1 at 12-15.)

         Currently before the Court is Defendant's Motion for Partial Summary Judgment (ECF No. 66) and Plaintiff's Motion for Summary Judgment (ECF No. 67). Although not evident from the caption, Plaintiff's motion, like Defendant's, seeks only partial summary judgment. Defendant asks that the Court enter summary judgment against Plaintiff's unreasonable delay/denial claim. (ECF No. 66 at 1-2.) Plaintiff's motion asks for summary judgment that one specific action by Defendant (among many other alleged wrongs) was both a breach of contract and an unreasonable denial of insurance benefits. (ECF No. 67 at 1-2.)

         For the reasons explained below, Defendant's motion is granted in full and Plaintiff's motion is denied in full. That leaves only the breach of contract claim for trial. But it appears to the Court that some of Plaintiff's contract theories would have failed as a matter of law if Defendant had moved against them. Per Federal Rule of Civil Procedure 56(f), the Court will order Plaintiff to address why summary judgment should not enter on certain contract theories raised in Plaintiff's motion but not moved against in Defendant's motion.

         This disposition also moots the parties' pending Rule 702 motions attacking each other's claims practices experts (ECF Nos. 95 & 96) because those experts are relevant only to the unreasonable delay/denial claims.


         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. 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.[1]

         A. The Inception of the Policy

         In 2015, Plaintiff went to Buckner and Company of Colorado, LLC (“Buckner”), to obtain a new property and casualty policy for the condominium complex. (ECF No. 67 at 5, ¶ 9; ECF No. 67-6 at 4; ECF No. 69 at 8, ¶ 2.)[2] The Buckner employee who assisted Plaintiff was Dustin Thome. (Id.)

         Mr. Thome applied to Defendant on Plaintiff's behalf for an insurance limit of $7 million, which he judged to be the appropriate insurable value according to various inputs he entered into a web-based calculation tool licensed by Defendant and made available to agencies such as Buckner. (ECF No. 67 at 5, ¶¶ 9-12; ECF No. 69 at 4, ¶ 11; id. at 8, ¶ 2.) The parties dispute just how much Mr. Thome was responsible for entering data into Defendant's tool. (ECF No. 84 at 11, row 2, col. 2.) Regardless, Defendant's underwriting system “automatically evaluated the requested $7 million limit against the information input by [Mr. Thome] concerning the property including the total square footage and type of construction.” (Id. ¶ 3.)

         The requested limit was a “blanket limit, ” meaning, in this context, that it covered all buildings under a single insurance limit. (Id. ¶¶ 4-5; ECF No. 66-1 at 4.) Defendant's underwriting guidelines require that “a blanket limit must be within 80 to 150 percent of the property's estimated value as determined by the information input by the agent.” (ECF No. 69 at 8, ¶ 4.) “Based upon the construction information input [by Thome] ¶ 2015, the requested blanket limit of $7 million was accepted as being between 80 and 150 [percent] of the property's value and no independent valuation was performed.” (Id. ¶ 5.) The policy therefore issued in 2015 with a $7 million blanket limit. (Id. ¶ 7.) This limit automatically increased by 3% in the 2016 renewal policy, and again by 3% in the 2017 renewal policy (id.), which is the policy at issue in this lawsuit (“Policy”) (ECF No. 66 at 2, ¶¶ 1, 3).

         B. The Policy

         The Policy's declarations page reads as follows concerning property and casualty coverage:

         (Image Omitted)

(ECF No. 67-1 at 4.) The $7, 426, 300 blanket limit is the result of adding 3% to the 2015 policy, and then again to the 2016 policy.

         As shown, the valuation column specifies “Replacement Cost.” For purposes of blanket insurance, the Policy defines Replacement Cost as “[t]he amount you actually spend to repair, rebuild or reconstruct the building, but not for more than the amount it would cost to restore the building on the same premises and to the same height, floor area, style and comparable quality of the original property insured.” (ECF No. 83-3 at 3.)

         The Policy has a “Windstorm or Hail Percentage Deductible” endorsement (“Deductible Endorsement”) that, as its name suggests, governs the deductible for a wind or hail damage claim. (See ECF No. 66-1 at 4.) The Endorsement establishes the deductible as 2% of the value(s) of

the property that has sustained loss or damage. The value(s) to be used are those shown in the Statement of Values on file with us. If there is no Statement of Values on file with us, then the value(s) to be used will be the value of the property at the time of loss.

(Id. at 4-5.)

         The Policy term was one year, commencing on February 16, 2017. (ECF No. 67-1 at 2.)

         C. The Claim

         On May 8, 2017-not quite three months from the commencement of the Policy term-Plaintiff's properties suffered damage in a hail storm. (ECF No. 66 at 3, ¶ 8.) Plaintiff made a claim on the Policy on July 19, 2017. (Id. at 4, ¶ 12.) On August 8, 2017, Defendant retained Andrew Condie, to assist Defendant in assessing damage to the property and needed repairs. (Id. ¶ 14.) Mr. Condie and certain of Plaintiff's representatives inspected the property on August 10, 2017, and “determined that repairs were necessary to the buildings' roofs, gutters, stucco and windows.” (Id. ¶ 15.)

         1. The Property Valuation, Repair Estimate & First Payment

         Before Defendant could issue any payment, it needed to calculate the deductible for wind/hail damage. No Statement of Values was on file with Defendant. (Id. at 6, ¶ 24.) The Deductible Endorsement thus specified that the deductible would be calculated against “the value of the property at the time of loss.” (ECF No. 66-1 at 5.) Defendant calculated this value through a software tool known as “Commercial Express.” (ECF No. 71 at 18, ¶ 19.)

         Commercial Express produces a value known as “reconstruction cost.” (Id. at 19, ¶ 20.) According to Defendant's expert, Guy Kopperud of CoreLogic (the company that develops Commercial Express), “reconstruction cost” is a term used within CoreLogic to denote the true cost of rebuilding an existing structure after a covered loss, when time frames are compressed, economies of scale are usually unavailable, the contractor must work around existing structures, and so forth. (ECF No. 71-16 at 5, 7; ECF No. 69-9 at 7.) Reconstruction cost is distinct from “replacement cost, new” (also a term internal to CoreLogic), which is “typically used for appraisal and assessor purposes to establish a value on a property where those precautions [e.g., working around existing structures] aren't necessary.” (ECF No. 71-16 at 5; see also id. at 7; ECF No. 69-9 at 6-7.)

         An employee of Defendant made a reconstruction cost calculation for Plaintiff's property on August 11, 2017, the day after Mr. Condie's inspection. (ECF No. 67 at 6, ¶ 22.) The calculation came out to $9, 569, 132. (Id.) However, the employee's supervisor discovered an error in the inputs. (Id. ¶ 23; ECF No. 68-2 at 4.) After correcting the error, the calculation came out to $10, 353, 567. (ECF No. 67 at 7, ¶ 24; ECF No. 69 at 6, ¶ 24.) On August 14, 2017, Defendant communicated this property valuation and the resulting 2% deductible to Plaintiff. (ECF No. 66 at 6, ¶¶ 27-28.)[3] On August 17, 2017, Defendant issued to Plaintiff a payment of $478, 086.09, which was Defendant's estimate of the repair cost minus the deductible. (Id. at 4, ¶ 16.)

         2. Plaintiff's Uncommunicated Concerns Regarding the Property Valuation

         Around this same time, Plaintiff consulted with its attorney about Defendant's overall valuation of the property at $10, 353, 567, given the effect that value had on the deductible. (Id. at 6-7, ¶¶ 29-32.) Plaintiff's attorney advised Plaintiff on September 18, 2017 that “[g]ood legal arguments can be made that the amount of the value should be the amount in the declarations page.” (Id. ¶ 33; ECF No. 66-13 at 4-5.) In other words, the attorney opined that the Policy's $7, 426, 300 blanket limit should be deemed the property value as well, leading to a lower 2% deductible.

         At some point-Plaintiff does not specify when-a representative of Plaintiff asked Mr. Thome (of Buckner) about Defendant's property valuation. (ECF No. 67 at 7, ¶ 30.) Mr. Thome expressed surprise when he learned that Defendant had valued the property higher than the blanket limit. (Id. ¶ 29.)

         Prior to filing this lawsuit in February 2018 (see Part II.C.5, below), Plaintiff did not express any concerns about Defendant's valuation directly to Defendant. (ECF No. 66 at 7, ¶ 34.)[4]

         3. The Revised Repair Estimate & Second Payment

         On September 13, 2017, Plaintiff's contractor gave Defendant a higher overall repair-cost estimate, seeking $735, 467.88. (Id. at 5, ¶ 17.) For approximately the next month, Defendant and its consultant, Mr. Condie, worked with Plaintiff's contractor to attempt to resolve their differences. (Id. ¶ 18.)

         One of the main disputes was whether replacement windows should be “finned” or not. (ECF No. 71 at 13, ¶ 1.) Plaintiff believes that un-finned windows are inferior from a waterproofing perspective. (Id.) Another dispute was underlayment, more specifically, a membrane beneath the roof shingles to protect against water and ice. (Id. at 20, ¶ 34.) No party asserts whether the roofs to be replaced had an underlayment. However, Plaintiff maintained to Mr. Condie that Jefferson County (which encompasses Arvada) requires such underlayment (id. ¶ 35), while Mr. Condie told Plaintiff that he “double checked and verified that the city of Arvada does not require the use of Ice and Water Shield, surprisingly” (ECF No. 71-17).[5] Plaintiff has placed into the record a City of Arvada document stating that underlayment is “not required” but then referring the reader to an “attached letter” stating that “if the manufacturer [of the roofing material] requires additional measures [including underlayment] then the City of Arvada will require it.” (ECF No. 71-18 at 1, 3.) Plaintiff has put nothing in the record showing that Defendant understood this nuance at the time, or that underlayment was a manufacturer requirement for the roofing material in question.[6]

         On October 24, 2017, Mr. Condie sent an e-mail to Defendant describing “the number of issues that remain” with Plaintiff's contractor's estimate and opining that “it seems more effective to get a second opinion rather than continue to go back and forth on [those] issues.” (ECF No. 66-7 at 2.) Defendant soon informed Plaintiff that it was seeking an estimate from an another contractor, and Defendant in fact reinspected the property on November 2, 2017 with that contractor, Dynamic Roofing and Construction (“Dynamic”). (ECF No. 66 at 5, ¶¶ 20-21.)

         Dynamic transmitted its repair-cost estimate to Mr. Condie on November 7, 2017. (Id. ¶ 22; ECF No. 66-9 at 2.) Dynamic's estimate was $542, 184.86. (Id. at 30.) The next day, Dynamic solicited Plaintiff to perform the repairs. (ECF No. 71 at 15, ¶ 5(h)- (i).) Plaintiff says it did not want to use Dynamic because Plaintiff was already comfortable with the contractor it had selected and Plaintiff did not trust any contractor that Defendant was “promoting.” (ECF No. 71-9 ¶ 5.) Plaintiff alleges that Defendant uses Dynamic “to come in with low estimates in an attempt to force the policyholder to accept a lesser amount on the claim.” (ECF No. 71 at 16, ¶ 6.)

         On November 27, 2017, Mr. Condie sent Defendant a revised repair-cost estimate of $538, 747.04. (ECF No. 66 at 5, ¶ 23.) This revised estimate included, among other things, a “substantially” increased payout for finned windows. (ECF No. 71 at 13, ¶ 1(c).)

         Mr. Condie's revised estimate relied on a “price list” (apparently a list of what various materials cost) that was current as of May 2017. (ECF No. 71-2 at 6.) This was at Defendant's direction, specifically, Defendant asked Mr. Condie to estimate the cost of repairs as of the date of loss. (ECF No. 71 at 19, ¶ 27.) Prices had actually risen by about 2.6% by November (id. at 20, ¶ 30), although nothing in the record shows whether Defendant or Mr. Condie knew that.

         The next day (November 28, 2017), Defendant sent to Plaintiff a letter with Mr. Condie's new estimate. (ECF No. 66-10 at 2.) The day after that, Defendant sent a check to Plaintiff for an additional $92, 276.59, due to the revised estimate. (ECF No. 66 at 5, ¶ 23.)

         4. The Third Repair Estimate

         In December 2017, Dynamic generated an even higher estimate: $571, 243.22. (ECF No. 83-2 at 21.) Mr. Jed Sybrowsky (Dynamic's owner, who handled this claim) stated at his deposition in this lawsuit, taken on September 7, 2018, that his “recollection” was that Defendant verbally agreed to pay Dynamic up to this new amount if Dynamic performed the repairs for Plaintiff. (ECF No. 71-11 at 8.) But he also stated in an e-mail to Plaintiff's counsel three days later, “I show no record that this [higher estimate] was actually sent to [Defendant] or [Mr. Condie], so my guess is we verbally agreed to this price. This was a long time ago and I have worked on hundreds of projects since so things aren't 100% clear on this.” (ECF No. 83-2 at 2.) Defendant's internal claim notes show two phone calls between Defendant and Dynamic in December 2017. (ECF No. 71 at 16, ¶ 8.)

         5. Final Interactions Before ...

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