BONBECK PARKER, LLC; BONBECK HL, LLC, Plaintiffs - Appellees, v. THE TRAVELERS INDEMNITY COMPANY OF AMERICA, Defendant - Appellant.
No. 20-1192
United States Court of Appeals for the Tenth Circuit
October 1, 2021
Before MATHESON, MORITZ, and CARSON, Circuit Judges.
PUBLISH
Larry E. Bache, Jr. (Jonathan Bukowski with him on the brief), of Merlin Law Group, P.A., Denver, Colorado, for Plaintiffs-Appellees.
MORITZ, Circuit Judge.
This summary-judgment appeal stems from an insurance claim filed by Bonbeck Parker, LLC and BonBeck HL, LC (collectively, BonBeck) for hail damage.
Applying Colorado law, we affirm. The disputed policy provision allows either party to request an appraisal on “the amount of loss,” a phrase with an ordinary meaning in the insurance context that unambiguously encompasses causation disputes like the one here. And contrary to Travelers’ view, giving effect to this meaning aligns both with other related policy language and with the appraisal provision‘s purpose of avoiding costly litigation. For these reasons, the district court appropriately allowed the appraisers to resolve the parties’ causation dispute and granted summary judgment for BonBeck on its breach of contract claim.
Background
In June 2012, a hailstorm damaged three buildings owned by BonBeck. BonBeck submitted a claim for the damage under its commercial insurance policy with Travelers (the Policy), which covers hail damage. For each building, BonBeck alleged that the hailstorm damaged the exterior siding, overhang, HVAC, and roof. Travelers acknowledged that some hail damage occurred to all the building components except for the roofs, and it covered this damage with two payments totaling about $ 34,200.1 But Travelers denied coverage for the roof damage, asserting that it resulted not from the hailstorm but from uncovered events like wear and tear, deterioration, and improper installation.
Faced with this impasse over the roof damage, BonBeck invoked the Policy provision at the heart of this appeal. This provision, which we later quote in full, allows either party to request an appraisal of certain issues on which they might disagree during the claims process, including “the amount of loss.” App. vol. 2, 294. Invoking the appraisal provision sends the parties’ dispute to a panel comprised of three appraisers (the Panel, for short). But it did not immediately have that effect when invoked by BonBeck.
That‘s because Travelers would only agree to BonBeck‘s appraisal request under certain conditions. In particular, Travelers insisted that the parties require the Panel to distinguish between disputed and undisputed damages. Travelers considered
When BonBeck rejected Travelers’ conditions, Travelers filed this lawsuit. Its complaint sought declarations that (1) the Policy precludes the Panel from determining causation issues and (2) Travelers owed BonBeck nothing more because the remaining damage (meaning the disputed roof damage) was caused by excluded causes of loss. As relevant here, BonBeck counterclaimed for breach of contract and for a declaration that the Policy does allow the Panel to decide the cause of loss.
Two rounds of summary-judgment motions followed. In the first round, the parties moved for summary judgment on their respective declaratory-judgment claims about whether the Panel could decide causation. The district court sided with BonBeck, concluding that the appraisal provision authorizes the Panel to make cause-of-loss determinations. It then stayed the case pending an appraisal and rejected Travelers’ request to require that the Panel separately assess disputed and undisputed
With the causation issue now resolved, the parties filed a second round of summary-judgment motions, this time on BonBeck‘s remaining counterclaim for breach of contract. The district court granted summary judgment for BonBeck on this counterclaim, finding no genuine dispute that Travelers breached the Policy by not agreeing to an appraisal when BonBeck requested one. For that claim, the district court awarded BonBeck nominal damages ($1) and statutory interest ($36,142.63). Travelers appeals.
Analysis
We review orders granting summary judgment de novo, affirming only if “there is no genuine dispute as to any material fact and the mov[ing party] is entitled to judgment as a matter of law.” Auto-Owners Ins. Co. v. Csaszar, 893 F.3d 729, 733–34 (10th Cir. 2018) (quoting
I. Preliminary Issues
A. Waiver
BonBeck argues that as a matter of federal procedure, Travelers waived its challenge to the scope of the appraisal provision. In support, BonBeck cites district-court filings after the appraisal in which Travelers noted that the causation issue—whether BonBeck‘s damages resulted from a covered cause of loss—was “now moot” given the district court‘s earlier summary-judgment order concluding that the Panel would decide that issue. App. vol. 7, 1369. According to BonBeck, these filings show that Travelers “expressly waived and abandoned” its argument that the Policy precludes the Panel from deciding the cause of loss. Aplee. Br. 15.
We disagree. To be sure, we generally decline to consider on appeal issues that a party initially raised but later abandoned in the district court. See Lyons v. Jefferson Bank & Tr., 994 F.2d 716, 722 (10th Cir. 1993). But that‘s not what happened here. Instead, as Travelers argues, the statements BonBeck pulls from Travelers’ district-court filings “simply reflect what the remaining issues appeared to be at that time, at the district[-]court level, in light of the prior [summary-judgment order].” Rep. Br. 3–4. By stating that the causation issue was “now moot,” Travelers simply acknowledged that the district court had resolved the issue. Travelers neither agreed with the district court‘s resolution of the issue nor suggested that it would not appeal that resolution. App. vol. 7, 1369. Indeed, Travelers had no opportunity to appeal until after the district court resolved BonBeck‘s counterclaims and entered a final judgment. See 10A Charles Alan Wright & Arthur R. Miller, Federal Practice and
B. Payment of Appraisal Award
Even if Travelers’ challenge is procedurally sound, BonBeck maintains that Colorado insurance law independently bars Travelers from challenging the scope of the appraisal provision. That is the case, BonBeck argues, because Travelers “paid the [appraisal award] without protest, reservation, or any other limitation.” Aplee. Br. 19. And in Colorado (says BonBeck), such payment constitutes “acceptance of the appraisal award and waive[r of] any future right to challenge the award.” Id.; see also, e.g., Pueblo Country Club v. AXA Corp. Sols. Ins. Co., No. 05-cv-01296, 2007 WL 951790, *4 (D. Colo. Mar. 28, 2007) (finding that insurer “waived its right to assert a counter[]claim for reimbursement” when it paid insured‘s litigation
Travelers’ response to this argument makes it unnecessary to decide whether Travelers waived a challenge to the appraisal award by paying it. In its reply brief, Travelers represents that it does not “seek[] reimbursement of the payment of the appraisal award.” Rep. Br. 4. Instead, Travelers seeks to recover the “nominal damages ($1) and statutory interest [awarded] to BonBeck ($36,142.63)” on the breach-of-contract claim. Id. at 5. And the district court awarded those amounts based on its prior resolution of the scope of the appraisal provision. Specifically, it reasoned that when Travelers “refus[ed] to engage in the appraisal requested by Bon[B]eck,” Travelers “failed to perform in accordance with the [a]ppraisal [c]lause” because “Bon[B]eck was correct” that the Policy allows “the appraisers [to] determine the issue of causation.” App. vol. 11, 2092. BonBeck does not explain how Travelers’ unconditional payment of the appraisal award—which under Colorado law may preclude Travelers from recouping the payment itself—affects Travelers’ attempt to recover the nominal damages and statutory interest on the breach-of-contract claim. And we do not see how that could be. Accordingly, we reject BonBeck‘s argument that we should decline to consider the scope of the appraisal clause because Travelers paid the appraisal award.
C. Mootness
Importantly, though, Travelers’ response to BonBeck‘s argument about the effect of its payment of the appraisal amount effectively moots its argument for
II. Merits
As discussed, Travelers argues that the district court granted summary judgment on BonBeck‘s breach-of-contract claim based on an erroneous view that the Policy allows the Panel to decide the cause of loss. Assessing that argument requires us to interpret the Policy. Given the nature of our jurisdiction in this case, Colorado law governs our interpretation. See Rocky Mountain Prestress, LLC v. Liberty Mut. Fire Ins. Co., 960 F.3d 1255, 1259 (10th Cir. 2020). And because the Colorado Supreme Court has not addressed the issue Travelers raises, we must predict how that court would decide the issue.3 Id. Analogous decisions from the Colorado Supreme Court inform our prediction and provide a framework for interpreting the disputed Policy language. See id. at 1259–60 (discussing general principles for interpreting insurance policies in Colorado when predicting how Colorado Supreme Court would interpret policy at issue); Phillips v. State Farm Mut. Auto. Ins. Co., 73 F.3d 1535, 1537 (10th Cir. 1996) (noting our ability to consider, among other sources, “analogous decisions by the [state] [s]upreme [c]ourt” in predicting how that court would rule). In doing so, we may also rely on decisions from other state and federal courts, as well as on “the general weight and trend of authority.” Phillips, 73 F.3d at 1537 (quoting Farmers All. Mut. Ins. Co. v. Bakke, 619 F.2d 885, 888 (10th Cir. 1980)).
Under Colorado law, an insurance policy is a contract subject to the same interpretive principles as any other contract. Owners Ins. Co. v. Dakota Station II Condo. Ass‘n, Inc., 443 P.3d 47, 51 (Colo. 2019). Chief among those principles is that courts should enforce the intent and reasonable expectations of the parties as
Travelers contends that, contrary to the district court‘s view, the Policy unambiguously precludes the Panel from deciding the cause of loss. The key language underlying this argument appears in the Policy‘s appraisal provision, which is worth quoting in full before we dissect its individual parts:
Appraisal
If we and you disagree on the value of the property, the amount of Net Income and operating expense[,] or the amount of loss, either may make written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser. The two appraisers will select an umpire. If they cannot agree, either may request that selection be made by a judge of a court having jurisdiction. The appraisers will state separately the value of the property, the amount of Net Income and operating expense[,] or the amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding. Each party will:
a. Pay its chosen appraiser; and
b. Bear the other expenses of the appraisal and umpire equally.If there is an appraisal, we will still retain our right to deny the claim.
App. vol. 2, 294.
The district court based its interpretation on the first sentence, which lists three items on which either party may request an appraisal: the value of the property, the amount of income and expense, or the amount of loss. It determined that the third item, “the amount of loss,” encompasses causation disputes. Id. On appeal, Travelers
We first consider the language on which the district court based its conclusion that the Panel could decide what caused the roof damage: “the amount of loss.” Because the Policy does not define that phrase, we must look elsewhere to discern its plain meaning. See Renfandt v. N.Y. Life Ins. Co., 419 P.3d 576, 580 (Colo. 2018). Dictionary definitions are a good place to start. See id. (“When determining the plain and ordinary meaning of words, we may consider definitions in a recognized dictionary.“).
Although neither party cites a dictionary that defines the full phrase “amount of loss,” several dictionaries define the word “loss.”5 Black‘s Law Dictionary, for
The district court was by no means the first court to recognize that causation is an ingredient of loss. Indeed, several state courts have reached the same conclusion after citing the same definitions quoted above. See Quade v. Secura Ins., 814 N.W.2d 703, 706 (Minn. 2012) (concluding, based on Black‘s Law Dictionary and Merriam-Webster‘s Collegiate Dictionary, that “amount of loss” unambiguously “includes a determination of the cause of the loss” and that “dictionary definitions of ‘loss’ for purposes of insurance expressly contemplate an element of causation“); N. Glenn Homeowners Ass‘n v. State Farm Fire & Cas. Co., 854 N.W.2d 67, 71 (Iowa Ct. App. 2014) (citing Black‘s Law Dictionary to support view that “[c]ausation is an integral part of the definition of loss, without consideration of which the appraisers cannot perform their assigned function“); Walnut Creek Townhome Ass‘n v. Depositors Ins. Co., 913 N.W.2d 80, 92 (Iowa 2018) (agreeing with North Glenn and holding that “appraisers may decide the factual cause of damage to property in determining the amount of loss from a storm“). Federal courts applying state law have done the same. See CIGNA, 110 F. Supp. 2d at 264–65 (citing Black‘s Law Dictionary and Merriam-Webster‘s Collegiate Dictionary to hold that phrase “amount of loss” “necessarily includes a determination of the cause of loss“). We therefore conclude that the Colorado Supreme Court, if faced with the issue, would join these courts in recognizing that in the insurance context, the ordinary meaning of the phrase “amount of loss” encompasses causation.6 See Phillips, 73 F.3d at 1537 (explaining that “decisions . . . of other state courts” inform our prediction of how state supreme court would rule).
As alluded to earlier, Travelers has little to say about the phrase “the amount of loss.” It acknowledges that courts adopting the district court‘s (and BonBeck‘s) interpretation do so by finding that “the plain meaning of the term ‘amount of loss‘” necessarily includes causation. Aplt. Br. 37. Yet it offers almost no support for its contrary view that, “[i]n common, ordinary parlance, ‘amount of loss’ means the monetary value of property damage, irrespective of insurance coverage or source of damage.” Aplt. Br. 38 (quoting Caribbean I Owners’ Ass‘n v. Great Am. Ins. Co. of N.Y., 619 F. Supp. 2d 1178, 1187 (S.D. Ala. 2008)). Travelers solely relies on Caribbean, which does not cite any dictionary definitions of “loss” or provide any examples of how that word might be used in the insurance setting to reference property damage apart from causation. See Rankin v. USAA Cas. Ins. Co., 271 F. Supp. 3d 1218, 1227 (D. Colo. 2017) (adopting “insurance-specific definition[s] of ‘loss‘” from two dictionaries; noting that insured “offered no argument why a nonspecific definition should control over the insurance-specific definitions from Black‘s and Merriam-Webster” (italics omitted)); Quade, 814 N.W.2d at 706 (concluding that “dictionary definitions of ‘loss’ for purposes of insurance expressly contemplate an element of causation” (emphasis added)). Rather, Travelers primarily relies on its argument that other language in the appraisal provision precludes the Panel from resolving causation issues.
Travelers first directs our attention to the appraisal provision‘s last sentence: “If there is an appraisal, [Travelers] will still retain [its] right to deny the claim.” App. vol. 2, 294. Travelers reads this sentence as preserving its ability, after an appraisal occurs, to deny coverage on “any ground available under the Policy.” Aplt. Br. 20. Because one such ground is that the claimed damage “resulted from an excluded cause of loss,” Travelers argues, we cannot “give effect to the plain meaning of” this sentence if the Panel determines causation; allowing the Panel to do so would necessarily deprive Travelers of one ground on which it could otherwise deny coverage. Id. at 20–21. Put another way, Travelers contends that allowing the Panel to determine what caused BonBeck‘s damage prevents Travelers from later denying coverage based on its view that something other than the hailstorm caused the damage.
The flaw in Travelers’ argument about the meaning of the appraisal provision‘s last sentence is that it can‘t be reconciled with the plain language of the first sentence. When interpreting the appraisal provision, we must give effect to both sentences “so that n[either] will be rendered meaningless.” Cyprus Amax Mins. Co. v. Lexington Ins. Co., 74 P.3d 294, 307 (Colo. 2003) (quoting Pub. Serv. Co. v. Wallis & Co., 986 P.2d 924, 933 (Colo. 1999)). We must also follow the “basic principle of contract interpretation that a more specific provision controls the effect of more general provisions.” Massingill v. State Farm Mut. Auto. Ins. Co., 176 P.3d 816, 825 (Colo. App. 2007); see also Green Shoe Mfg. Co. v. Farber, 712 P.2d 1014, 1016 (Colo. 1986) (“[S]pecific provisions in contract express more exactly what parties intend than broad or general clauses.“). And here, the first sentence more specifically addresses the issue we face: the subjects on which the parties may request an appraisal. The last sentence, on the other hand, covers Travelers’ right to deny a claim after an appraisal on one of those subjects occurs. So to the extent that the two sentences conflict, the first sentence—which we have already explained allows the Panel to decide causation based on the ordinary meaning of “amount of loss“—must prevail.
But in any event, our interpretation avoids any conflict between the first and last sentences. Under this interpretation, the Panel makes a factual finding on how much hail damage occurred. After the appraisal, Travelers can‘t rehash that finding, but it can deny the claim for a host of other reasons having nothing to do with the cause of the damage. For instance, Travelers could argue that BonBeck failed to provide “prompt notice of the loss or damage,” failed to “[c]ooperate with [Travelers] in the investigation and settlement of the claim,” or “intentionally conceal[ed] or mis represent[ed] a material facts” when filing the claim. App. vol. 2, 295, 299. Granted, Travelers ultimately did not raise these defenses after the Panel issued its decision in this case. But the point is that they remained available to Travelers, even after the Panel determined how much hail damage occurred. And because they did, Travelers “retain[ed] [its] right to deny the claim.” App. vol. 2, 294; see also State Farm Fire & Cas. Co. v. Licea, 685 So. 2d 1285, 1288 (Fla. 1996) (construing “retained[-]rights clause . . . as retaining only the right to dispute the issues of coverage as to the whole loss” and to assert “that there has been a violation of the usual policy conditions such as fraud, lack of notice, and failure to cooperate“). For these reasons, we reject Travelers’ fixation on the appraisal provision‘s last sentence. Instead, we endorse the district court‘s harmonious interpretation, which gives effect both to the plain meaning of the phrase “amount of loss” in the first sentence and Travelers’ retained defenses in the last sentence. See Cyprus, 74 P.3d at 307.
Next, Travelers focuses on the word “appraiser,” which appears several times throughout the appraisal provision. See, e.g., App. vol. 2, 294 (“[E]ach party will select a competent and impartial appraiser.” (emphasis added)). Travelers argues that the “plain meaning of [this term] and the Policy‘s requirements for appraisers reflect an intent to limit the scope of appraisals to monetary determinations, thus precluding causation determinations.” Aplt. Br. 23.
Again, Travelers’ argument can‘t be reconciled with the first phrase permitting appraisal regarding “the amount of loss.” In its opening brief, Travelers points to a definition of an appraiser as “[a]n impartial person who estimates the value of something.” Appraiser, Black‘s Law Dictionary (11th ed. 2019). But nothing in that definition excludes causation as an appropriate consideration for appraisers in estimating value. Far from it: Here, the “something” to be valued is “the amount of loss,” a phrase with an ordinary meaning that, in the insurance context, encompasses causation. App. vol. 2, 294. Travelers’ point about the purportedly minimal qualifications required to receive an appointment as an appraiser under the Policy—specifically, that a person need only be “competent and impartial“—fails for the same reason. Id. This observation cannot overcome the Policy‘s plain language authorizing the Panel to determine the cause of loss. Neither the word “appraiser” nor the qualifications for appraisers render the unambiguous phrase “amount of loss” ambiguous.
Travelers’ final textual argument involves what Travelers views as a shared characteristic of the three items on which either party may request an appraisal: Each item “involve[s] ‘dollar’ controversies.” Aplt. Br. 30. Recall that those three items, listed in the appraisal provision‘s first sentence, are “the value of the property, the amount of Net Income and operating expense[, and] the amount of loss.” App. vol. 2, 294. Travelers argues that, unlike those three items, “the ‘cause’ of damages is not a dollar controversy,” and so the last item (“the amount of loss“) necessarily does not include causation. Aplt. Br. 31. But this argument improperly shifts the focus onto the numerical nouns that introduce each item and away from the corresponding objects that follow those nouns. See Merriam-Webster‘s Collegiate Dictionary 42 (11th ed. 2003) (defining the noun “amount” as “the total number or quantity“). That the Policy expresses each appraisal-appropriate topic as a dollar amount says nothing about what each amount represents. And here, the relevant dollar amount reflects the amount of “loss,” which, again, includes a causation component. As a result, Travelers’ final textual argument fares no better than its others.
Besides the text, Travelers also relies on the appraisal provision‘s purpose. We need not consider this argument, however, because the disputed language is unambiguous. See Pompa v. Am. Fam. Mut. Ins. Co., 520 F.3d 1139, 1143 (10th Cir. 2008) (noting Colorado authority that “construction of a potentially ambiguous term in an insurance-policy provision requires consideration of the purpose of the provision“); Cary, 108 P.3d at 290 (“We must enforce an insurance policy as written unless the policy language contains an ambiguity.“). And were that not the case, Colorado law would require us to construe any ambiguity against Travelers as the drafter of the Policy. See Union Ins. Co. v. Houtz, 883 P.2d 1057, 1061 (Colo. 1994).
Even so, if considered, the purpose of the appraisal provision only confirms what the text compels. As the district court persuasively reasoned, and as Travelers seems to agree, the appraisal provision‘s aim “is to avoid litigation and encourage settlement of the parties’ dispute.” App. vol. 7, 1296; see also Aplt. Br. 32 (“The purpose of the appraisal provision is to afford a simple, speedy, inexpensive[,] and fair method determining the amount of loss.“). Removing causation from the appraisal process frustrates that purpose by “reserving a plethora of detailed damage assessments for judicial review.” CIGNA, 110 F. Supp. 2d at 269. Doing so is especially unwise when, as here, “the causation question involves separating loss due to a covered event from a property‘s pre-existing condition.” State Farm Lloyds v. Johnson, 290 S.W.3d 886, 892 (Tex. 2009). As the Texas Supreme Court observed, that kind of causation issue arises “in every case,” and if “appraisers can never allocate damages between covered and excluded perils, then [they] can never assess hail damage unless a roof is brand new.” Id. at 892–93. Such a result “would render appraisal clauses largely inoperative, a construction we must avoid.” Id. at 893. Other district-court decisions have recognized as much, and we find their reasoning persuasive. See, e.g., Auto-Owners Ins. Co. v. Summit Park Townhome Ass‘n, 100 F. Supp. 3d 1099, 1103 (D. Colo. 2015). Accordingly, even if the appraisal provision were ambiguous and even if that ambiguity were not to be construed against Travelers, its purpose only bolsters the district court‘s conclusion that the Panel can decide the cause of loss.
Conclusion
The Policy‘s plain language identifies disputes like this one, over “the amount of loss,” as one of the issues on which the parties may request an appraisal. App. vol. 2, 294. And because we conclude that the Colorado Supreme Court, if faced with the issue, would recognize that the ordinary meaning of the phrase “amount of loss” encompasses causation issues, the district court properly interpreted the Policy to conclude that the Panel could determine the cause of BonBeck‘s roof damage. The district court therefore properly granted summary judgment for BonBeck on its claim that Travelers breached the Policy when it refused to allow such an appraisal to proceed, and we affirm that ruling.7 Finally, given Travelers’ concession that it does not seek reimbursement of the appraisal award itself, we dismiss as moot Travelers’ appeal from the order denying summary judgment on the declaratory-judgment claim.