Continental Western Insurance v. Colony Insurance
69 F. Supp. 3d 1075
D. Colo.2014Background
- Multistate listeria outbreak stemmed from Jensen Farms cantaloupes; Pepper Equipment supplied refurbished processing equipment implicated in outbreak.
- Pepper had CGL policies with Continental (Sept 14, 2010–Sept 14, 2011) and Colony (Sept 14, 2011–Sept 14, 2012).
- Claim Resolution Process created in Jensen Farms bankruptcy to settle claims; Continental participated, Colony did not.
Continental funded portions of the pool and administrative fund; Pepper was a common insured, with overlapping defense obligations.
- Pepper’s defense costs and settlements were incurred through the Claim Resolution Process; Continental seeks equitable contribution from Colony for those costs.
- Colony contested reimbursement based on a Consent to Settle Clause and lack of participation; Continental sued for declaratory judgment and contribution in June 2013.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty to defend when parallel proceedings exist | Continental argues Colony had a duty to defend Pepper in the Claim Resolution Process. | Colony contends there was no duty to defend for claims outside Colony’s policy period and that it did not participate. | Colony had a duty to defend Pepper based on parallel-claims evidence and potential coverage; Colony breached by inaction. |
| Equitable contribution among insurers | Continental seeks pro rata equitable contribution from Colony for defense costs. | Colony argues no contribution or only its proportional share, and disputes how costs should be allocated. | Continental entitled to equitable contribution from Colony; allocation to be determined by further briefing. |
| Allocation method for reimbursement | Continental favors equal shares, including defense costs and John Grand’s fees. | Colony argues reimbursement should be proportional to its share of defense costs; exact split unresolved. | Partial grant; further briefing required to determine Colony’s exact proportionate share and prejudgment interest. |
Key Cases Cited
- Compass Ins. Co. v. City of Littleton, 984 P.2d 606 (Colo.1999) (duty to defend arises from allegations potentially within policy coverage)
- Hecla Mining Co. v. New Hampshire Ins. Co., 811 P.2d 1083 (Colo.1991) (duty to defend triggered by potential coverage; seek defense under reservation of rights)
- Constitution Assocs. v. New Hampshire Ins. Co., 930 P.2d 556 (Colo.1996) (duty to defend broader than indemnity; ambiguous pleadings may require defense)
- Apartment Inv. & Mgmt. Co. (AIMCO) v. Nutmeg Ins. Co., 593 F.3d 1188 (10th Cir.2010) (insurer may consider parallel proceedings; exception to complaint rule for defense duty)
- Signature Development Companies, Inc. v. Royal Ins. Co. of America, 230 F.3d 1215 (10th Cir.2000) (insured entitled to complete defense from each insurer with a duty to defend)
- Nat’l Cas. Co. v. Great Sw. Fire Ins. Co., 833 P.2d 741 (Colo.1992) (majority permits contribution where one insurer pays more than its share)