AMCO Ins. Co. v. Carpet Direct Corp.

157 F.Supp.3d 1018

AMCO Insurance Company, an Iowa corporation, Plaintiff,

v.Carpet Direct Corporation, a Colorado Corporation, Gayle Crouch, Greg Jensen, James Rausch, and Charles Owens, Defendants.

Civil Action No. 1:15–cv–00247–REB–NYW

United States District Court, D. Colorado.

Signed January 22, 2016

Jeffrey Alexander Bollers, Jack David Robinson, Spies, Powers & Robinson, PC, Denver, CO, for Plaintiff.

Scott Allen Midgley, Scott A. Midgley & Associates, P.C., Pueblo, CO, Richard Alan Orona, Thomas Pollart & Miller, LLC, Greenwood Village, CO, for Defendants.

ORDER GRANTING MOTION FOR SUMMARY JUDGMENT

Blackburn, United States District Judge

The matter before is Plaintiff's Motion for Summary Judgment Pursuant to Fed. R. Civ.P. 56 [# 18],¹ filed August 14, 2015. I grant the motion.

I. JURISDICTION

I have jurisdiction over this matter pursuant to 28 U.S.C. § 1332 (diversity of citizenship).

II. STANDARD OF REVIEW

Summary judgment is proper when 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) ; Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). A dispute is “genuine” if the issue could be resolved in favor of either party. Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp. , 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986) ; Farthing v. City of Shawnee , 39 F.3d 1131, 1135 (10th Cir.1994). A fact is “material” if it might reasonably affect the outcome of the case. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986) ; Farthing , 39 F.3d at 1134.

A party who does not have the burden of proof at trial must show the absence of a genuine factual dispute.² Concrete Works, Inc. v. City & County of Denver , 36 F.3d 1513, 1517 (10th Cir.1994), cert. denied , 514 U.S. 1004, 115 S.Ct. 1315, 131 L.Ed.2d 196 (1995). Once the motion has been properly supported, the burden shifts to the nonmovant to show, by tendering depositions, affidavits, and other competent evidence, that summary judgment is not proper. Id at 1518. All the evidence must be viewed in the light most favorable to the party opposing the motion. Simms v. Oklahoma ex rel . Department of Mental Health and Substance Abuse Services , 165 F.3d 1321, 1326 (10th Cir.), cert. denied , 528 U.S. 815, 120 S.Ct. 53, 145 L.Ed.2d 46 (1999). In either case, once the motion has been properly supported, the burden shifts to the nonmovant to show, by tendering depositions, affidavits, and other competent evidence, that summary judgment is not proper. Concrete Works , 36 F.3d at 1518. All the evidence must be viewed in the light most favorable to the party opposing the motion. Simms v. Oklahoma ex rel . Department of Mental Health and Substance Abuse Services , 165 F.3d 1321, 1326 (10th Cir.), cert. denied , 528 U.S. 815, 120 S.Ct. 53, 145 L.Ed.2d 46 (1999). However, conclusory statements and testimony based merely on conjecture or subjective belief are not competent summary judgment evidence. Rice v. United States , 166 F.3d 1088, 1092 (10th Cir.), cert. denied , 528 U.S. 933, 120 S.Ct. 334, 145 L.Ed.2d 260 (1999) ; Nutting v. RAM Southwest, Inc. , 106 F.Supp.2d 1121, 1123 (D.Colo.2000).

III. ANALYSIS

Defendant Carpet Direct Corporation (“Carpet Direct”) is insured under two policies issued by plaintiff, a Business Owners Insurance Policy and a Commercial Umbrella Liability Policy, both effective from August 17, 2013, through August 17, 2014.³

Plaintiff is currently providing a defense under a reservation of rights to defendants in a lawsuit filed against them in federal district court in Michigan. In the lawsuit in this court, plaintiff seeks a declaration that it has no duty to defend under the terms of the policies. Comparing the language of the policies to the allegations of the underlying complaint, I concur, and thus grant plaintiff's motion for summary judgment.

Under Colorado law, “[a]n insurer's duty to defend arises when the underlying complaint against the insurer alleges any facts that might fall within the coverage of the policy.” Hecla Mining Co. v. New Hampshire Insurance Co. , 811 P.2d 1083, 1089 (Colo.1991). The duty to defend thus turns on the interpretation of the insurance policy, which in turn is governed by general principles of contract interpretation. See id. at 1090. The primary goal in interpreting the contract of insurance is to effectuate the intent of the parties. Union Insurance Co. v. Houtz , 883 P.2d 1057, 1061 (Colo.1994) ; Simon v. Shelter General Insurance Co. , 842 P.2d 236, 239 (Colo.1992). To accomplish this objective, the terms of the policy are given their plain and ordinary meanings unless the policy itself indicates that the parties intended otherwise. Bohrer v. Church Mutual Insurance Co. , 965 P.2d 1258, 1261–62 (Colo.1998) ; Chacon v. American Family Mutual Insurance Co. , 788 P.2d 748, 750 (Colo.1990). Policy provisions that are clear and unambiguous should be enforced as written. Chacon , 788 P.2d at 750 ; Kane v. Royal Insurance Co. of America , 768 P.2d 678, 680 (Colo.1989).

As is relevant here, Part A of the business owners policy provides coverage as follows:

We will pay those sums up to the applicable Limit of Insurance that the insured becomes legally obligated to pay as damages because of ... “property damage” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages for which there is coverage under this policy.

(Def. Resp.App., Exh. A–2 at 129.)⁴ As defined by the policy, “property damage” means either “[p]hysical injury to tangible property, including all resulting loss of use of that property” or “[l]oss of use of tangible property that is not physically injured.” (Id. Exh. A–2 at 149.) Moreover, the insurance applies only if the “ ‘property damage’ is caused by an ‘occurrence’ that takes the place in the ‘coverage territory.’ ” (Id. Exh. A–2 at 129.) “ ‘Occurrence’ means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” (Id. Exh. A–2 at 148.) Defendant has no duty to defend as to any suit seeking damages to which the insurance does not apply. (Id. Exh. A–2 at 129.)

Part B of the business owners policy also provides coverage for damages due to “personal and advertising injury.” Among the types of matters and injuries which come within the definition of “personal or advertising injury” are injuries arising out of “[t]he wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor.” (Id. Exh. A–2 at 148.)

An umbrella policy “is a distinct type of excess liability policy,” which “in addition to providing excess liability coverage ... typically also provides primary coverage for certain risks that an underlying liability policy does not cover.” Apodaca v. Allstate Insurance Co. , 255 P.3d 1099, 1103 (Colo.2011). Such is the nature of the umbrella policy here. Part A provides excess insurance as to claims for damages because of, inter alia, property damage, if such claims exceed the applicable limits of the underlying insurance (i.e., the business owners policy). (Def. Resp.App., Exh. B at 8.) Part A thus is a “follow form” policy, and does not provide coverage for any loss other than by reason of exhaustion of the limits of the underlying policy. (Id. Exh. B at 8.) Therefore, a loss related to damages not covered by the underlying policy is not recoverable under the excess policy, either.

Part B of the umbrella policy, by contrast, provides primary coverage for “damages the ‘insured’ becomes legally obligated to pay by reason of liability imposed by law because of ... ‘property damage,’ or ‘personal and advertising injury’ covered by this insurance which takes place during the Policy Period and is caused by an ‘occurrence.’ (Id. Exh. B at 8.) The definitions of “property damage,” “personal and advertising injury,” and “occurrence” in this part of the umbrella policy are identical to those set forth in the business owners policy. (See id . Exh. B at 18, 22.) With the relevant coverages of the policies thus delineated, I turn to consider whether plaintiff has a duty to provide a defense against the claims pleaded in the underlying lawsuit.

In determining whether plaintiff has a duty to defend, the factual allegations of the complaint are determinative, not the legal theories pleaded. See Bertagnolli v. Association of Trial Lawyers Assurance , 934 P.2d 916, 918 (Colo.App.1997) ; Colorado Farm Bureau Mutual Insurance Co. v. Snowbarger , 934 P.2d 909, 911 (Colo.App.1997). The plaintiffs in the underlying lawsuit, styled VanPortfliet v. Carpet Direct Corp. , are current and former Carpet Direct “brokers” (essentially, franchisees), who paid for the right to operate businesses under the Carpet Direct name. The VanPortfliet plaintiffs allegedly were told they would “become independent business owners, with rights of ownership” in the businesses in which they were investing. (Def. Resp.App., Exh. C ¶ 38 at 10; see also id. Exh. C ¶ 37 at 10 (brokers told they would “end up the owners of their own business within Carpet Direct's system” and that they were “forming a business they own, that can be sold as an asset or left to their heirs”).)

Contrary to these representations, the plaintiffs allege they learned subsequently that they “possess none of the rights of a business owner” and in fact “are nothing more [than] improperly compensated employees of the organization.” (Id. Exh. C ¶¶ 40–41 at 11.) They thus claim they have lost, or stand to lose, the significant capital contributions they have made to the businesses they believed, based on defendants' alleged misrepresentations, they were creating for themselves. (Id. Exh. C ¶ 40 at 11.) They seek “compensation for the monies so...