Godin & Baity, LLC v. Markel Ins. Co.

GODIN & BAITY, LLC, and STEPHEN J. BAITY, Plaintiffs, v. MARKEL INSURANCE COMPANY, INC., Defendant.

Civil Action No. 19-cv-3607-WJM-STV

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

August 27, 2020

Judge William J. Martínez

ORDER DENYING AS MOOT PLAINTIFFS' OPPOSED MOTION TO STAY RULING ON DEFENDANT'S MOTION FOR SUMMARY JUDGMENT UNTIL DISCOVERY IS COMPLETED, AND GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

This breach of contract dispute regarding an insurer's duty to defend is before the Court on Plaintiffs Godin & Baity, LLC and Stephen J. Baity's (jointly, "Plaintiffs") Opposed Motion to Stay Ruling on Markel Insurance Company's Motion for Summary Judgment Until Discovery Is Completed ("Motion to Stay") (ECF No. 32), and Defendant Markel Insurance Company, Inc.'s Motion for Summary Judgment ("Motion") (ECF No. 13). For the reasons explained below, the Motion to Stay is denied as moot, and the Motion is granted.

I. LEGAL STANDARD

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. PROCEDURAL MATTERS

The undersigned's WJM Revised Practice Standards impose the following requirement on a summary judgment movant:

All motions for summary judgment . . . must contain a section entitled "Movant's Statement of Material Facts." This Statement shall set forth in simple, declarative sentences, all of which are separately numbered and paragraphed, each material fact the movant believes supports movant's claim that movant is entitled to judgment as a matter of law. Each statement of fact must be accompanied by a specific reference to supporting evidence in the record.

WJM Revised Practice Standards III.E.3. Accordingly, Defendant filed a Separate Statement of Facts as an exhibit to the Motion. (ECF No. 13-1.) The WJM Revised Practice Standards further clarify the following:

Any party opposing the motion for summary judgment . . . shall provide a "Response to Movant's Material Facts" in its brief, admitting or denying the asserted material facts set forth by the movant . . .

WJM Revised Practice Standards III.E.4. Plaintiffs did not include a Response to Movant's Material Facts in their response. (See ECF No. 24.) Given Plaintiffs' failure to comply with the WJM Revised Practice Standards, the facts in the Separate Statement of Facts (ECF No. 13-1) are deemed admitted.¹

III. BACKGROUND²

A. McFadden Lawsuit

In 2016, Plaintiffs represented the defendants in McFadden v. Meeker Housing Association, Civil Action No.16-cv-2304-WJM-GPG (D. Colo.), a lawsuit concerning violations of the Rehabilitation Act of 1973, 29 U.S.C. §§ 794 et seq., and the Fair Housing Act, 42 U.S.C. §§ 3601 et seq., in connection with the defendants' disability-assistance pets policy. (ECF No. 24 at 2.) In October 2017, the McFadden plaintiffs filed a Motion for Entry of Judgment and Dismissal Due to Defendants' Litigation Misconduct, accusing the defendants of failing to disclose pertinent documents and refusing to comply with their discovery obligations. (Id.) A forensic search of the defendants' computer revealed documents that had not been produced to the McFadden plaintiffs in discovery. (Id. at 3.) As a result, in the Order Denying Plaintiffs'Motion for Default Judgment as a Sanction, Sua Sponte Granting Alternative Sanctions, and Order to Show Cause Why Stephen J. Baity Should Not Be Ordered to Pay Attorneys' Fees and Costs ("Order to Show Cause"), the undersigned stated:

[T]he Court will consider whether Mr. Baity should be held personally responsible for Plaintiffs' attorneys' fees and costs related to the forensic imaging process, and incurred in connection with the Motion. Because Mr. Baity was not warned ahead of time that this might be a possible outcome, the Court will not decide whether to award those fees and costs without first giving him an opportunity to be heard. The Court will therefore order him to show cause why fees and costs should not be awarded against him as a sanction for his failure to take his discovery responsibilities seriously.

(ECF No. 13-3 at 13.)

On July 9, 2018, Plaintiffs tendered the Order to Show Cause to Defendant, seeking a defense under the Lawyers Professional Liability Insurance Policy, Policy No. LA306323 ("Policy"), which Defendant issued to Godin & Baity, LLC for the policy period April 26, 2018 to April 26, 2019. (ECF No. 13-1 at 2; ECF No. 13-2.) Defendant declined to provide a defense. (ECF No. 13-1 at 2.) Plaintiffs asked Defendant to reconsider, but Defendant again declined. (Id.) On November 19, 2018, Plaintiffs received a declination letter from Defendant explaining that "no duty to defend arises under the Policy under these circumstances." (ECF No. 13-4.) The undersigned discharged the Order to Show Cause on May 21, 2019 on grounds not material to the dispute in this action. (ECF No. 24-1.)

B. Relevant Policy Language

Section I.A of the Policy provides coverage

on behalf of the Insured [for] all sums which the Insured shall become legally obligated to pay as Damages for Claims which are first made against the Insured during the Policy Period . . . , and which are reported to the Company in accordance with SECTION V - When to Report a Claim, arising out of any act, error, omission or Personal Injury in the rendering of or failure to render Professional Services by an Insured or any entity or individual for whom the Named Insured is legally liable. . . .

(ECF No. 13-2 at 19). The Policy's Named Insured is Godin & Baity, LLC. (Id. at 1.) The Policy contains an Enhancement Endorsement, which provides the amended definition of "Damages":

E. Damages means compensatory judgments, settlements, or awards, but does not include fines or penalties, sanctions, the return of fees or other consideration paid to the Insured . . .

However, if a Suit is brought against an Insured with respect to a Claim falling within the scope of coverage afforded by this policy, and such Suit seeks both compensatory and multiplied damages, then the Company will afford a defense to such action without liability for payment of such multiplied damages.

Damages includes punitive or exemplary damages . . . .

(Id. at 11 ¶ 3.)

Section VI of the Policy also contains certain exclusions. Section VI.A provides:

This insurance does not apply to Claims:

A. Arising out of an . . . error or omission . . . ; however, for such Claims otherwise covered by this policy, the Company will provide a defense until such time as the act, error, or omission is found to be illegal, dishonest, fraudulent, criminal, malicious, or was an intentional or knowing violation of the law by trial, court ruling, regulatory ruling or admission[.]

("Exclusion A") (Id. at 22.) In addition, Section VI.G provides that the Policy does not apply to "Claims . . . seeking . . . payment of any form of legal fees, related fees, or any other costs, expenses, or charges[.]" ("Exclusion G") (Id. at 22-23.)

C. This Lawsuit

On November 25, 2019, Plaintiffs sued Defendant in the District Court of Arapahoe County, Colorado, alleging that the Policy required Defendant to provide a defense against the Order to Show Cause, and Defendant breached the insurance contract by refusing to do so. (ECF No. 4.) Plaintiffs brought claims for breach of contract; violation of the Insurance Fair Conduct Act, Colo. Rev. Stat. §§ 10-3-1115-1116; and bad faith breach of insurance contract. (Id.) Defendant removed the case on December 20, 2019 pursuant to this Court's diversity jurisdiction, 28 U.S.C. § 1332, and answered the complaint. (ECF No. 1; ECF No. 8.)

IV. ANALYSIS

A. Motion to Stay

On April 3, 2020, Plaintiffs filed the Motion to Stay, requesting that the Court stay its ruling on the Motion until discovery is completed so they might "fully respond to the Defendant's [motion for summary judgment]." (ECF No. 32.) On April 8, 2020, Defendant responded in opposition, arguing that under Colorado and Tenth Circuit law, "an insured cannot rely on extrinsic evidence to show that a duty to defend exists." (ECF No. 35 at 3.) On April 13, 2020, the Court reserved ruling on the Motion to Stay and stated it would address it when considering the Motion. (ECF No. 37.)

The Scheduling Order provides that the discovery period ended on August 7,2020.³ (ECF No. 23 at 6.) Although the discovery period has ended, Plaintiffs have not moved to supplement their response to the Motion with information obtained during discovery. Regardless, the Court needs no additional briefing to rule on the Motion and finds the Motion to Stay moot.

B. Motion for Summary Judgment

On February 6, 2020, Defendant moved for summary judgment (ECF No. 13), positing that the key issue for the Court is whether the Order to Show Cause constitutes a "Suit against the Insured seeking Damages to which this insurance applies." (ECF No. 13 at 10; ECF No. 28 at 3.) Defendant contends it does not. Specifically, Defendant asserts it had no duty...