Gerald H. Phipps, Inc. v. Travelers Property Casualty Co. of America
679 F. App'x 705
10th Cir.2017Background
- GHP contracted to renovate the University of Denver library; some stairwells and elevator shafts were to be preserved (limited scope) because of asbestos.
- While installing a new roof, melting snow leaked into the building and damaged drywall, insulation, and asbestos-containing materials in those preserved areas.
- GHP hired environmental contractors, incurred ~$804,662 to abate asbestos, replace drywall and insulation, and then claimed under its builders’ risk policy with Travelers.
- Travelers initially indicated coverage but later denied the claim, citing the policy’s definition of “Builders’ Risk,” which excludes buildings or structures that existed at the job site before the policy began.
- GHP sued for declaratory relief, breach of contract, common-law bad faith, and statutory bad faith; the district court granted summary judgment to Travelers finding GHP sought recovery for damage to excluded existing property (not covered work) and the statutory bad faith claim time-barred.
- The Tenth Circuit affirmed, holding GHP sought restoration of preexisting building components (excluded) rather than damage to insured “work” or covered property; therefore coverage was properly denied and bad-faith claims failed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the loss is to “Covered Property” under the policy’s Builders’ Risk definition | GHP: the policy covers the building while being renovated (section a) and implicitly covers GHP’s work; thus loss to damaged areas is covered | Travelers: damaged areas existed pre-policy and are excluded; coverage only for GHP’s installed materials/items | Held: Exclusion applies — damaged areas existed before policy inception, so not covered property |
| Whether GHP seeks damages for loss to its own work (covered) or to existing structure (excluded) | GHP: preliminary work was done and coverage should extend to any damage to that work | Travelers: GHP seeks restoration/abatement costs for existing building components, not costs to redo insured work | Held: GHP seeks costs to remove/replace existing asbestos, drywall, insulation — restoration of excluded property, not loss to covered work |
| Applicability of section (b) (property that will become part of the building) | GHP: damaged areas could be treated as “property” that will become part of the building, avoiding the exclusion | Travelers: section (b) covers personal property/materials to be incorporated; GHP did not claim loss to such personal property | Held: Section (b) inapplicable — GHP asserted no damage to personal property/materials it installed |
| Viability of statutory bad-faith claim given the denial of coverage and timeliness issues | GHP: district court erred in barring statutory bad-faith on statute-of-limitations grounds | Travelers: independent defense — coverage was properly denied so bad-faith fails; also statute of limitations argued | Held: Court affirmed dismissal of statutory bad-faith because coverage denial was proper (failure to show loss to covered property); no need to resolve timeliness |
Key Cases Cited
- Forney Indus., Inc. v. Daco of Mo., Inc., 835 F.3d 1238 (10th Cir. 2016) (summary judgment standard and de novo review cited)
- Rodriguez ex rel. Rodriguez v. Safeco Ins. Co. of Am., 821 P.2d 849 (Colo. App. 1991) (insured bears initial burden to establish coverage)
- Leprino Foods Co. v. Factory Mut. Ins. Co., 453 F.3d 1281 (10th Cir. 2006) (insurer must establish applicability of exclusions)
- Fire Ins. Exch. v. Bentley, 953 P.2d 1297 (Colo. App. 1998) (shift of burdens where insurer asserts exclusions)
- State Farm Mut. Auto. Ins. v. Stein, 940 P.2d 384 (Colo. 1997) (insurance policies enforced as written absent ambiguity)
- MarkWest Hydrocarbon, Inc. v. Liberty Mut. Ins. Co., 558 F.3d 1184 (10th Cir. 2009) (bad-faith claim fails when coverage was properly denied)
- Richison v. Ernest Grp., Inc., 634 F.3d 1123 (10th Cir. 2011) (appellate courts may affirm on any basis supported by the record)
- Houston Gen. Ins. Co. v. Am. Fence Co., 115 F.3d 805 (10th Cir. 1997) (choice of law: insurance contract interpretation governed by state law)