EMC Insurance Companies v. Mid-Continent Casualty Co.
884 F. Supp. 2d 1147
D. Colo.2012Background
- EMC insured HNI under a general liability policy; policy period Nov 28, 2002–Nov 28, 2003 with no additional insured endorsements.
- BVPC was formed in 2001 to develop the Project; Smith served as BVPC’s manager.
- Orr Construction was the Project’s general contractor; BVPC and HNI were named insureds under Mid-Con’s policy via endorsements.
- The Association formed in 2003; BVPC was its initial declarant; Project substantial completion occurred Feb 2004.
- Underlying litigation (Jan 2008) asserted design/construction defects; EMC defended HNI/Smith; Mid-Con defended HNI/BVPC under reservation of rights; Smith allegedly not defended.
- The case seeks declaratory judgments, equitable subrogation/contribution, unjust enrichment, estoppel, and indemnity for defense/settlement costs; settlement occurred in underlying action.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty to defend Smith | Smith was an Insured under Mid-Con | Smith not an Insured under policy terms | No duty to defend Smith |
| Duty to defend HNI as additional insured | HNI was an additional insured; duty to defend exists | Exclusions and AIEs preclude coverage | Duty to defend HNI exists (subject to exclusions) |
| Whether Mid-Con had primary vs. excess coverage | Policy should be primary for HNI/Smith | Coverage not established for insureds | Ruling moot given no coverage for Smith/HNI under Mid-Con |
| Indemnity/reimbursement for defense costs | Mid-Con breached duty to defend; must reimburse EMC | If no duty to defend/indemnify, no reimbursement | Partial: obligation to reimburse depends on whether duty to defend discharged; not all claims decided |
| Estoppel/subrogation posture | Estoppel/waiver considerations may bind Mid-Con | Estoppel not available to create coverage | Estoppel claim rejected; rights to defense indemnity remain proceeding-based |
Key Cases Cited
- Signature Development Companies, Inc. v. Royal Insurance Co. of America, 230 F.3d 1215 (10th Cir. 2000) (duty to defend, defense costs recoverable if breach despite noncoverage)
- Cotter Corp. v. American Empire Surplus Lines Ins. Co., 90 P.3d 814 (Colo. 2004) (duty to defend determined from complaint; extrinsic evidence limited)
- Hecla Mining Co. v. New Hampshire Insurance Co., 811 P.2d 1083 (Colo. 1991) (duty to defend hinges on allegations; exclusions narrow coverage)
- Cyprus American Insurance Co. v. Lexington Insurance Co., 74 P.3d 294 (Colo. 2003) (duty to indemnify depends on actual coverage after underlying facts)
- Thompson v. Maryland Casualty Co., 84 P.3d 496 (Colo. 2004) (duty to defend triggered by potential coverage in pleadings)
- United Fire & Casualty Co. v. Boulder Plaza Residential, 633 F.3d 951 (10th Cir. 2011) (treats insurer duties and four-corners analysis under Colorado law)
- Weitz Co., LLC v. Mid-Century Insurance Co., 181 P.3d 309 (Colo. App. 2007) (additional insured endorsement interpretation similar to named insured status)