348 F. Supp. 3d 1093
D. Colo.2018Background
- RMHB Construction (and Nathaniel Peterson) contracted to prepare a lot, construct and deliver a modular home for the Niccores; work was delayed, incomplete, and the contract was later terminated.
- The Niccores sued RMHB in Colorado state court alleging fraud, breach of contract and warranty, negligent misrepresentation, and related claims seeking economic and other damages.
- RMHB tendered the underlying suit to its commercial general liability insurer, Builders Insurance, which denied a defense and coverage.
- RMHB settled the underlying claims and sued Builders in federal court for breach of contract, bad faith and declaratory relief; both parties moved for summary judgment.
- The central dispute: whether Builders owed a duty to defend and, if so, indemnify RMHB under the CGL policy given the allegations in the underlying complaint and applicable policy exclusions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty to defend — whether Builders had to defend RMHB | Niccore's complaint alleged facts that arguably fall within policy coverage; duty to defend should be triggered as a matter of law | No covered "property damage" or occurrence alleged; even if alleged, claims fall squarely within policy exclusions | No duty to defend; RMHB's summary judgment denied and Builders' granted |
| Existence of covered "property damage"/"occurrence" | Allegations about unusable work and loss of use can be read to allege property damage or accidental impairment | Claims are economic/contractual (poor workmanship, breach), not accidental property damage or occurrence | Court: no alleged accidental property damage; allegations amount to breach/poor workmanship, not an "occurrence" |
| Applicability of policy exclusions (Damage-to-Property, Impaired Property, Poor Workmanship) | RMHB urged liberal reading and suggested possible damage to "other property" | Exclusions bar coverage for damage to insured's work, impaired property from failure to perform, and faulty workmanship for residential structures | Builders met heavy burden; allegations fall solely within the exclusions, eliminating coverage |
| Duty to indemnify | RMHB said indemnity issue premature | If no duty to defend, no duty to indemnify under Colorado law | No duty to indemnify because no duty to defend; summary judgment for insurer on all claims |
Key Cases Cited
- United Fire & Cas. Co. v. Boulder Plaza Residential, LLC, 633 F.3d 951 (10th Cir.) (duty to defend judged by four corners of complaint vs. policy)
- Cotter Corp. v. Am. Empire Surplus Lines Ins. Co., 90 P.3d 814 (Colo.) (insurer bears burden to show exclusions alone bar duty to defend)
- Compass Ins. Co. v. City of Littleton, 984 P.2d 606 (Colo.) (insured need only show underlying claim may fall within coverage to trigger defense)
- Hecla Mining Co. v. New Hampshire Ins. Co., 811 P.2d 1083 (Colo.) (insurer bears heavy burden to defeat duty to defend)
- Adair Group, Inc. v. St. Paul Fire & Marine Ins. Co., 477 F.3d 1186 (10th Cir.) (poor workmanship / breach of contract not a covered occurrence)
- Constitution Assocs. v. New Hampshire Ins. Co., 930 P.2d 556 (Colo.) (if no duty to defend, no duty to indemnify)