Colony Insurance Co. v. Human Ensemble, LLC
299 P.3d 1149
Utah Ct. App.2013Background
- Human Ensemble purchased Scottsdale general liability and Colony property damage policies in Oct 2005.
- Dec 2005: toilet overflow caused several inches of water in Human Ensemble’s building; tenants sued for damages.
- Early Jan 2006: Human Ensemble filed a claim for cleanup expenses with Scottsdale rather than Colony.
- Feb 21, 2006: Scottsdale advised it was the liability insurer and would not cover property damage; six-week claim-to-notice gap noted.
- June 2006: Colony filed declaratory judgment; Scottsdale intervened in 2008; Human Ensemble counterclaimed for breach of contract, bad faith, and negligence.
- July 2009: district court denied Scottsdale’s original summary judgment; five months later renewed motion for summary judgment granted; trial court addressed whether Scottsdale had a duty to investigate/notify and whether that duty was within the policy scope.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the district court properly reconsidered denial of summary judgment | Human Ensemble: reconsideration allowed due to new theories. | Scottsdale: Rule 54(b) permits reconsideration; proper in light of new theories. | Yes; reconsideration within court’s discretion. |
| Whether Scottsdale is liable on bad faith for not timely notifying non‑coverage | Human Ensemble: insurer must investigate and promptly inform if claim is outside coverage. | Scottsdale: duty to investigate does not extend to informing insured of policy type; not within contract scope. | Affirmed summary judgment; duty to investigate does not extend to notifying insured of separate coverage. |
| Whether the implied covenant of good faith requires timely investigation of coverage scope | Human Ensemble: duty to diligently investigate includes confirming coverage scope and timing of denial. | Scottsdale: implied duty limited to the terms of the contract and its benefits; not an obligation to disclose policy type. | Affirmed; duty to investigate does not impose an obligation to disclose coverage type. |
Key Cases Cited
- Beck v. Farmers Ins. Exch., 701 P.2d 795 (Utah 1985) (duty to diligently investigate in first-party insurance)
- Black v. Allstate Ins. Co., 100 P.3d 1163 (Utah 2004) (implied good faith duties in insurance claims; investigation focus)
- John Call Eng’g, Inc. v. Manti City Corp., 743 P.2d 1205 (Utah 1987) (contractual reading and duty to read terms; arm’s‑length understanding)
- United States Fid. & Guarantee Co. v. United States Sports Specialty Ass’n, 270 P.3d 464 (Utah 2012) (implied covenant scope in insurance context)
- Trembly v. Mrs. Fields Cookies, 884 P.2d 1306 (Utah Ct. App. 1994) (discretion to reconsider; factors for new theories)
- Mid-America Pipeline Co. v. Four-Four, Inc., 216 P.3d 352 (Utah 2009) (when to reconsider prior ruling; discretionary standard)
- KeyBank Nat’l Ass’n v. Systems W. Computer Res., Inc., 265 P.3d 107 (Utah App. 2011) (implied covenant; protects express covenants)