Summit Bank & Trust et al v. American Modern Home Insurance Company
ORDER Granting AMHIC's Motion for Partial Summary Judgment and Denying Summit's Motion for Partial Summary Judgment by Judge John L. Kane on 07/15/14.(jhawk, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge John L. Kane
Civil Action No. 12-cv-02395-JLK
SUMMIT BANK & TRUST, a Colorado Corporation,
AMERICAN MODERN HOME INSURANCE COMPANY, an Ohio Corporation,
ORDER GRANTING AMHIC’S MOTION FOR PARTIAL SUMMARY JUDGMENT
AND DENYING SUMMIT’S MOTION FOR PARTIAL SUMMARY JUDGMENT
This case involves a disputed insurance claim for losses incurred by the burglary
of a large vacant building in Greeley, Colorado. Defendant American Modern Home
Insurance Company (“AMHIC”) and Plaintiff Summit Bank & Trust (“Summit”) have
cross moved for Partial Summary Judgment, Docs. 38 & 41. Based on the following,
AMHIC’s Motion, Doc. 41, is GRANTED and Summit’s Motion, Doc. 38, is DENIED.
JURISDICTION AND VENUE
I have personal jurisdiction over AMHIC as: (a) it did business in the State of
Colorado at times material to this action; (b) it purposefully availed itself of the rights
and privileges of the State of Colorado at times material to this action; and (c) it
committed the acts described below with resulting consequences in the State of Colorado.
I have subject matter jurisdiction over this matter per 28 U.S.C. § 1332 as the
amount in controversy exceeds the sum of $75,000, and Summit and AMHIC are citizens
of different states. I have supplemental jurisdiction over all other claims per 28 U.S.C. §
1367 as they form part of the same case or controversy. Per 28 U.S.C. § 1391, venue is
proper in the District of Colorado as: (a) AMHIC transacted business in the State of
Colorado, and (b) the events and omissions giving rise to Summit’s claims occurred in
the State of Colorado.
SUMMARY JUDGMENT STANDARD AND RULES OF INSURANCE
I repeat the catechism that summary judgment is appropriate where “there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a matter
of law.” Fed. R. Civ. P. 56(a); Adamson v. Multi. Cmty. Diversified Servs., Inc., 514 F.3d
1136, 1145 (10th Cir.2008). A fact is material if it could affect the outcome of the suit
under governing law; a dispute of fact is genuine if a rational jury could find for the
nonmoving party on the evidence presented. Adamson, 514 F.3d at 1145. In weighing
these standards, I draw all reasonable inferences in favor of the non-moving party.
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).
Because the parties have filed cross motions for summary judgment, I am entitled
“to assume that no evidence needs to be considered other than that filed by the parties....”
Atlantic Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138, 1148 (10th
Cir.2000) (quoting James Barlow Family Ltd. P'ship v. David M. Munson, Inc., 132 F.3d
1316, 1319 (10th Cir.1997). This does not, however, mean that summary judgment is
necessarily proper. The motions are to be treated separately, and denial of one does not
require the grant of the other. Id. (quoting Buell–Cabinet Co. v. Sudduth, 608 F.2d 431,
433 (10th Cir.1979)).
In the instant case, the facts material to the issue presented are not in dispute;
instead, the parties’ quarrel focuses upon the interpretation of terms in an insurance
contract. Accordingly, there are no genuine disputes of material fact, and summary
judgment is appropriate. Fed.R.Civ.P. 56(c)(2); Adamson, 514 F.3d at 1145.
The meaning of each term in an insurance contract is to be determined as a matter
of Colorado law, with any ambiguity resolved in favor of Summit, as the insured. See
Pompa v. Am. Family Mut. Ins. Co., 520 F.3d 1139, 1141 (10th Cir.2008). Mere
disagreement between the parties about the meaning of a term, however, does not create
ambiguity. Union Rural Elec. Ass'n v. Public Utils. Comm'n, 661 P.2d 247,251
(Colo.1983). One may not read an ambiguity into a term where none exists in order then
to resolve the resulting ambiguity against the insurer. Martinez v. Hawkeye–Sec. Ins. Co.,
195 Colo. 184, 576 P.2d 1017,1019 (1978) (“[C]ourts will not force an ambiguity in
order to resolve it against an insurer.”). Also, the mere fact that a term may be
susceptible to multiple interpretations, or that it may have different dictionary definitions
in different contexts, does not alone create an ambiguity. See id.; see also Allstate Ins.
Co. v. Juniel, 931 P.2d 511, 513 (Colo.App.1996). To the contrary, and as a matter of
basic semantics, a term is only ambiguous when it is reasonably susceptible to multiple
interpretations in the context in which it is used. Juniel, 931 P.2d at 513; Terranova v.
State Farm Mut. Auto. Ins. Co., 800 P.2d 58, 60 (Colo. 1990).
To ascertain whether a certain provision is ambiguous, “the instrument's language
must be examined and construed in harmony with the plain and generally accepted
meaning of the words employed, and reference must be made to all the provisions of the
agreement.” Radiology Professional Corp. v. Trinidad Area Health Ass'n, 195 Colo. 253,
256, 577 P.2d 748, 750 (1978)(citing Christmas v. Cooley, 158 Colo. 297, 406 P.2d 333
(1965)). While exclusionary clauses exempting the insurer from providing coverage in
certain circumstances must be written in clear and specific language and construed in
favor of coverage, a court may not add, delete, or rewrite terms to extend coverage.
McGowan v. State Farm Fire & Cas. Co., 100 P.3d 521, 523 (Colo. App. 2004). The
review of the contract must strive to give effect to all provisions so that none is rendered
meaningless. Chandler-McPhail v. Duffey, 194 P.3d 434, 437 (Colo.App.2008).
City Center West LP is the owner of a former Hewlett-Packard scanner
manufacturing facility located at 700 71st Avenue, Greeley, CO 80634 (the “Property”).
Summit is the mortgagee and holds a first deed of trust on the Property. Summit obtained
a Blanket Mortgage Security Insurance Policy, No. BM- 14-6835-0836 (the “Policy”),
from AMHIC for the Property. The premium for the Policy has been paid and the Policy
period extends from April 27, 2009 to until it is cancelled.
The Policy provides coverage for damage caused by vandalism or malicious
mischief, which was defined is “the willful and malicious damage to or destruction of the
property covered.” The provision providing coverage for vandalism or malicious
mischief is not, however, without limitation. The pertinent text excluded coverage for
loss “by pilferage, theft, burglary or larceny, except this Company shall be liable for
willful damage to the building(s) covered caused by burglars in gaining entrance to or
exit from the building(s) or any part of the building(s).”
Between July 8, 2011 and September 23, 2011, the Property was broken into and
burglarized. Copper piping and conduit, among other things, were stolen from the
Property. The burglars damaged the Property to extract the copper piping and conduit.
At least some portion of the damages to the Property was caused by theft and burglary.
After receiving a Policy Loss Notice and Building Assessment, AMHIC issued
payment to Summit in the amount of $321,069.00. This sum represented AMCHIC’s
reckoning of the losses due to vandalism and malicious mischief, as well as losses due to
the burglars’ breaking in and exiting of the building, which is covered under the
exception to the exclusion of the vandalism provision. Because the Policy excludes
coverage for loss by theft, AMHIC denied coverage for amounts requested by Summit
which appeared to its investigators to be the result of theft or directly caused by attempts
to steal and remove items from the Property. The investigation also revealed that there
had been an earlier event in December 2010 where juveniles had vandalized the building.
AMHIC believed and communicated to Summit that at least some portion of the damages
included in the $321,069.00 payment was caused in that event. AMHIC paid this amount
without assessing a separate deductible for this separate event.
As set forth above, the Policy provides coverage for losses caused by:
8. Vandalism or Malicious Mischief, meaning only the willful and
malicious damage to or destruction of the property covered. This
company shall not be liable for loss:
b) by pilferage, theft, burglary or larceny, except his Company
shall be liable for willful damage to the building(s) covered caused
by burglars in gaining entrance to or exit from the building(s) or
any part of the
The parties agree that this provision includes coverage for vandalism and excludes
coverage for damage caused by “theft” or “burglary”. The parties clash over whether the
theft/burglary exclusion applies only to the value of the property stolen or if it also
extends to damage incurred to effectuate the theft. Summit urges that ambiguity forces
the former position and accordingly contends that the damage the burglars did to the
Property in the process of removing and taking copper wiring and conduit is loss by
vandalism and therefore excluded from coverage. Imagine for a moment that an office
inside the Property had a wall-safe where a former Hewlett Packard executive stored his
luxury watches. Metaphorically, Summit’s argument would conclude that if thieves
ripped open and damaged the safe to steal the watches, the watches would be excluded
from coverage but damage to the safe would be covered because it is “ambiguous”
regarding whether such damage is a “loss due to theft.” AMHIC argues that because the
damage was done to further the theft, it was loss by theft and therefore excluded. No
ambiguity, no problem. Here, because the safe would never have been damaged but to
steal the watches and it was not damaged for the thieves merely to have their jollies, the
damage to the safe was not vandalism.1 Because I find find Summit’s contention strained,
unreasonable, and anything but “plain and ordinary,” I concur with AMHIC.
As indicated, Summit asserts that the theft exclusion is ambiguous and must
therefore be resolved in favor of coverage2. This assertion, however, is fatally flawed
under standard principles of Colorado contract interpretation. The disputed provision has
an exception to the exclusion for “willful damage to the building(s) covered caused by
burglars in gaining entrance to or exit from the building(s) or any part of the building(s).”
That is, the exception to the exclusion states that damage caused by burglars entering or
exiting the property will be covered. This phrase resolves any ambiguity as to whether
“loss caused by theft” includes collateral damage caused by theft.
Specifically, if the exclusion included all coverage for collateral damage caused
by burglars during the course of their theft, then there would be no need for this
exception to the exclusion; it would be superfluous. 11 Williston on Contracts § 32.5 (4th
To be clear, if the safe would have been damaged absent the purpose of thieving, such would
constitute “vandalism”. See Smith v. Shelby Ins. Co. of Shelby Ins. Group, 936 S.W.2d 261, 265
(Tenn.Ct.App.1996) (defining “vandalism,” as “ordinarily understood” as “damaging something
simply for the sake of damaging it”). The court in Shelby considered a vandalism provision
identical to the one at issue here and held that a portion of damage done during a theft for which
there could have been no purpose other than destruction was vandalism. The remainder of the
damage, committed in furtherance of the theft, was not vandalism.
Summit also asserts in its Opening Brief the theory that the theft exclusion is in any event
inapplicable because copper wiring and piping are fixtures incapable of being stolen as “theft.”
Summit’s Reply, however, does not address AMHIC’s excellent counter argument as to why this
is an incorrect theory and Summit does not renew the argument anywhere in its Response to
AMHIC’s Cross-Motion for Summary Judgment. Therefore, I consider Summit’s argument on
this point abandoned.
ed.) May 2013; Livtak Packing Co. v. Amalgamated Butcher Workmen, Local No. 641,
AFL-CIO, 455 F.Supp. 1180, 1182 (D. Colo. 1978). Accordingly, if I accepted Summit’s
interpretation of the meaning of “by theft”, then the exception for damage caused by
burglars gaining entry would be rendered meaningless in violation of Colorado law.
Giving the exception its plain meaning, the only reasonable interpretation of the
exclusion is that collateral damage caused by burglars during the course of their theft is
not covered, except for any collateral damage caused by entering or exiting the property.
Interestingly, while Summit appears to give no meaning to the exception when it
comes to deciding whether the exclusion is ambiguous, it puts great stock into the
exception when further arguing that the exception actually covers the Property damage
because it was, according to Summit, “caused by burglars in gaining entrance to or exit
from the building(s).” Returning to the safe metaphor, Summit’s argument here is that if
thieves rip open and damage a safe to steal watches, the safe damage is covered because
it constitutes “gaining entrance” and/or “exiting.” This position is also not supported by
plain and ordinary contract interpretation.
In a case with similar facts and policy language, a court found that holes in a meter
box created when thieves were trying to steal copper wiring were excluded from
coverage based on a nearly identical policy provision. General Star Indemnity Co. v.
Zelonker, 769 So.2d 1093, 1094 (Dist Ct. App. Fl. 2000). In General Star, the relevant
insurance policy stated “We will not pay for loss or damage: b. Caused by or resulting
from theft, except for building damage caused by the breaking in or exiting of burglars.”
Id. at 1094. Thieves broke into the insured’s property and stole copper wiring, doing
damage to other items, such as meter boxes and electrical conduit. Id.
The General Star court first found that holes created in meter boxes and electrical
conduit were created in order for the thieves to steal copper wiring. Id. Therefore, on a
“plain reading” of the relevant insurance policy, such damage was caused by or resulting
from theft. Id. (citing Smith, 936 S.W.2d at 265 (“The concept of theft is entirely different
[from vandalism]. A thief enters a building in order to steal something; certainly a thief's
primary focus is not the malicious defacing, destroying, or damaging of property. If the
motivation and end result is that of theft and the claimed loss is ‘[c]aused by or result[s]
from [that] theft,’ there is no coverage.”)) The court continued to address the exception
and found that it was inapplicable. Id. “We think the plain meaning of [building damage
caused by the breaking in or exiting of burglars] is that the policy provides coverage
where thieves bodily enter or exit the building, as by breaking a door or window. It does
not apply to the breakage of the meter box or electric conduit.” Id. Accord Certain
Underwriters at Lloyds London v. Law, 570 F.3d 574 (5th Cir. 2009) (damage to property
inflicted solely in furtherance of theft fell within the policy’s theft exclusion, not within
the coverage provided against vandalism); Essex Ins. Co. v.Eldridge Land, L.L.C., 2010
WL 1992833 (Tex. App. 2010) (unpublished decision)(denying coverage under identical
theft exclusion where damage to sheetrock, electrical conduit boxes, and wall coverings
was caused by theft of copper wiring and piping and holding that “causing “building
damage” by ‘breaking in’ contemplates the gaining of bodily entry into the interior space
of a building, not knocking holes in walls once inside”).
Summit’s citations to cases in which courts have found theft exclusions to be
ambiguous are unpersuasive. The authority marshalled by Summit variously declines to
apply Colorado law with regard to interpreting provisions so that none are rendered
superfluous, are contradicted within their district, and/or are off point by either using
policy language different from that at issue in this action or by not indicating what
relevant policy language they were interpreting at all. Accordingly, Summit's contention
that there is a split of authority among the courts which is evidence of an ambiguity that
must then in turn be resolved in favor of the insured is disingenuous and fails. Moreover,
well-reasoned case law is in accord with AMHIC’s position on a plain reading even
without resort to the exception to the exclusion. See e.g., Pacific Indem. Co. v. N.A., Inc.,
172 S.E. 2d 192, 194 (Ga. App. 1969)(holding that because the purpose of theft exclusion
was to exclude loss by destruction to the insured premises by theft or occurring in
connection with theft, there was no recovery for property damage from the removal of
copper flashing). Giving the instant Policy its plain and ordinary meaning, as I must
under Colorado law, I hold that there is no question that the theft exclusion in the instant
Policy unambiguously excludes coverage for any damage directly caused by and for the
purpose of theft or burglary at the Property and that its gaining entrance/exiting
exception contemplates more than “knocking holes in walls once inside.”
The Policy at issue in this case contains a clear and unambiguous exclusion
for any losses to the Property caused by “theft” and/or “burglary.” Under Colorado
law, this exclusion precludes coverage not only for any and all items actually
removed from the Property during the course of a theft, but also for any collateral
damage caused in furtherance or as a result of the theft, with the exception of
damage caused by the burglars breaking into or exiting the Property or parts of the
Property. What will always constitute “breaking into or exiting,” I cannot say, but
what does not constitute “breaking into or exiting” is damaging switchboards,
transformers, substations, etc. to obtain the circuitry and piping within. AMHIC’s
Motion, Doc. 41, is GRANTED and Summit’s Motion, Doc. 38, is DENIED.
July 15, 2014
BY THE COURT:
s/John L. Kane
John L. Kane, U.S. Senior District Judge
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