Colorado Casualty Insurance Company v. Infinity Land Corporation et al

Filing 182

ORDER Granting 103 Plaintiff Colorado Casualty Insurance Companys Motion for Summary Judgment ; Denying 146 Infinity Defendants Cross- Motion for Partial Summary Judgment. The Clerk shall enter judgment dismissing this action and awarding costs, by Judge Wiley Y. Daniel on 8/26/2015.(evana, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Senior Judge Wiley Y. Daniel
Civil Action No. 12-cv-02748-WYD-NYW
COLORADO CASUALTY INSURANCE COMPANY, a New Hampshire corporation,
Plaintiff,
v.
INFINITY LAND CORPORATION, a dissolved Colorado corporation;
H2 LAND CO, LLC, a dissolved Colorado limited liability company;
HOWARD FAMILY INVESTMENTS, LLC, a dissolved Colorado limited liability
company;
JONATHAN HOWARD;
PAUL HOWARD;
KF 103 CV, LLC, a Colorado limited liability company;
WILLIAM MARCHANT;
MAUREEN M. MARCHANT;
MARILYN J. HOWELL, as Trustee of the MARILYN J. HOWELL TRUST;
C. ARLENE NANCE; and
WILLIAM PECK,
Defendants.

ORDER

THIS MATTER is before the court on Plaintiff Colorado Casualty Insurance
Company’s Motion for Summary Judgment (ECF No. 103) and the Infinity Defendants’
Cross-Motion for Partial Summary Judgment (ECF No. 146). On August 12, 2015, I
held a hearing on these motions. For reasons stated on the record at the August 12,
2015 hearing and set forth below, I grant Plaintiff’s motion and deny Defendants’
motion.

I.

BACKGROUND1
By way of background, Plaintiff Colorado Casualty Insurance Company (“Plaintiff”

or “Colorado Casualty”) filed this declaratory judgment action to determine whether it
has an obligation to defend certain parties involved in the development of the Cumbre
Vista subdivision in northern Colorado Springs in connection with an underlying lawsuit.
The underlying case involves a dispute between property owners and the developers of
the adjacent Cumbre Vista subdivision.
A.

The Policy

Beginning June 20, 2007, Plaintiff issued a business owners policy (BP 0571316
01) to Infinity Land Corporation (the “Policy”). The Policy provides as follows:
A. Coverages
1. Business Liability
a. We will pay those sums that the insured becomes legally obligated
to pay as damages because of “bodily injury”, “property damage”,
“personal injury” or “advertising injury” to which this insurance
applies. We will have the right and duty to defend the insured
against any “suit” seeking those damages. However, we will have
no duty to defend the insured against any “suit” seeking damages
for “bodily injury”, “property damage”, “personal injury”, or
“advertising injury” to which this insurance does not apply. We may
at our discretion, investigate any “occurrence” and settle any claim
or “suit” that may result.
***
b. This insurance applies:
(1) To “bodily injury” and “property damage” only if:
(a) The “bodily injury” or “property damage” is caused
by an “occurrence” that takes place in the
1

Based on my careful review of the record, I make the following findings of fact.
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“coverage territory”; and
(b) The “bodily injury” or “property damage” occurs
during the policy period.
(2) To:
(a) “Personal injury” caused by an offense arising out
of your business, excluding advertising,
publishing, broadcasting or telecasting done by or
for you; . . . .
***
(ECF No. 103, Ex. 1 at 1).
C. Who Is An Insured
1. If you are designated in the Declarations as:
***
d. An organization other than a partnership, joint venture or limited
liability company, you are an insured. Your “executive officers” and
directors are insureds, but only with respect to their duties as your
officers or directors. Your stockholders are also insureds, but only
with respect to their liability as stockholders.
***
No person or organization is an insured with respect to the conduct of any
current or past partnership, joint venture or limited liability company that is not
show as a Named Insured in the Declarations.
(ECF No. 103, Ex. 1 at 17).
B. Exclusions
1. Applicable To Business Liability Coverage
This insurance does not apply to:
a. Expected Or Intended Injury
“Bodily injury” or “property damage” expected or intended from the
standpoint of the insured. . . .
***
(ECF No. 103, Ex. 1 at 11).
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F. Liability And Medical Expenses Definitions
***
12. “Occurrence” means an accident, including continuous or repeated
exposure to substantially the same general harmful conditions.
***
15. “Property damage” means:
a. Physical injury to tangible property, including all resulting loss of
use of that property. All such loss of use shall be deemed to occur
at the time of the physical injury that caused it; or
b. Loss of use of tangible property that is not physically injured. All
such loss of use shall be deemed to occur at the time of the
“occurrence” that caused it.
***
(ECF No. 103, Ex. 1 at 19).
B.

The Underlying Lawsuit

The underlying lawsuit began in September 2008 as a state court quiet title and
declaratory judgment action filed by developer parties Woodmen Heights and KF 103.
Woodmen Heights and KF 103 were involved in the construction of a residential
subdivision location in northern Colorado Springs. Woodmen Heights and KF 103
named the Neighbors as defendants in the Quiet Title Complaint. The Neighbors were
various property owners with interests in certain easements that were the subject of the
Quiet Title Complaint.
The Quiet Title Complaint alleged that Woodmen Heights was the owner of an
Express Easement “which is the thirty (30) foot strip of land. . . .” (ECF No. 103, Ex. 2
at ¶ 2). “The Express Easement is a dirt road, portions of which are rarely used.” (ECF
No. 103, Ex. 2 at ¶ 24). KF 103 owns certain property adjoining the Express Easement,
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known as the Cumbre Vista subdivision. (ECF No. 103, Ex. 2 at ¶ 3). The Neighbors
own certain real property adjoining the Express Easement. (ECF No. 103, Ex. 2 at ¶¶
7-12). In the Quiet Title Complaint, Woodmen Heights and KF 103 sought judicial
approval to relocate the Express Easement and the Possible Prescriptive Use
Easement to facilitate the construction of paved roadways, effectively destroying the
Neighbors’ easements. (ECF No. 103, Ex. 2 at ¶¶ 39-43).
In September 2010, the case was ultimately tried to the El Paso County District
Court. The primary issue at trial was whether the Easements could be relocated. The
district court found that Woodmen Heights and KF 103 had already altered the
roadways, effectively destroying the Neighbors’ Easements. The district court
concluded that Woodmen Heights and KF 103 significantly impacted and trespassed
upon the Easement and ordered that Woodmen Heights and KF 103 restore the
roadways to the position they were in before the alteration unless some other
accommodation could be reached with the Neighbors. (ECF No. 103, Ex. 3).
Following the El Paso County District Court’s Order, on September 15, 2011, KF
103 filed a third party complaint against the RS Holding Company, LLC f/k/a Infinity
Holding Company, LLC; H2 Land Co, LLC; Howard Family Investments, LLC; Paul
Howard; Jonathan Howard, Scott Hente; and Robert Ormston (collectively referred to as
the “KF 103 Defendants”), alleging breach of contract, contribution, negligence, and
negligent misrepresentation. The third party complaint alleged that KF 103 purchased
the property that became the Cumbre Vista subdivision from the KF 103 Defendants.
KF 103 also alleged that on January 5, 2009, the KF 103 Defendants entered into an
agreement with KF 103 whereby they agreed to indemnify KF 103 for all costs and fees
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incurred in connection with the litigation and any judgment entered against KF 103. KF
103 also alleged that the KF 103 Defendants acted negligently by suggesting that KF
103 should be involved in the original action against the Homeowners as an adjoining
landowner. (ECF No. 103, Ex. 4).
Infinity Land Corporation, the named insured under the operative insurance
policy issued by Plaintiff, was not named as a party in KF 103's third party complaint.
However, Infinity Land Corporation was later named as a party by the Neighbors in their
pleadings, filed in 2012. One group of Neighbors (the Marchants, Howell, and Nance)
filed a “Second Amended Counterclaim and Third Party Complaint,” naming various
parties, including Infinity Land Corporation. (ECF No. 103, Ex. 6). Neighbor Peck, who
proceeded pro se in the underlying case, filed a separate pleading captioned “Peck’s
Third Amended Counterclaim and Third Party Complaint.” (ECF No. 103, Ex. 7). Peck
incorporated the factual allegations set forth in the Marchant/Howell/Nance pleading,
and based on those allegations, asserted claims of his own. Neighbors Oliver and
Hanson, also proceeding pro se, did not file their own pleadings, but instead simply
joined in the relief requested by Neighbors Marchant, Howell, Nance, and Peck in their
respective pleadings.
The Neighbors asserted the following claims: (I) trespass and continuing
trespass; (ii) negligence; (iii) restoration of the easements; (iv) negligent
misrepresentation; (v) prescriptive easement; (vi) civil conspiracy; and (vii) breach of
contract. The primary relief sought by the Neighbors was the restoration of the
Easement back to the form and location in which it existed prior to its alteration or
destruction. Alternatively, the Neighbors sought damages in the amount it would cost to
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restore the Easements. They also sought damages for the alleged diminution in value
and loss of use of their property as a result of the alteration and destruction of the
Easements. Finally, they alleged emotional distress and mental anguish.
On August 21, 2012, after the Neighbors filed their various pleadings naming
Infinity Land Corporation as a defendant, Infinity Land Corporation’s counsel again
tendered the claims to Colorado Casualty. On September 26, 2012, Colorado Casualty
accepted the defense under a reservation of rights, specifically reserving the right to
“decline coverage and/or withdraw from any defense of this case on behalf of Infinity
Land Corporation and Messrs. Paul and Jonathan Howard as the principals of Infinity
Land Corporation, and seek reimbursement for defense costs and fees from Infinity
Land Corporation and Messrs. Paul and Jonathan Howard in defending this matter, in
the event it is determined there is no coverage for this loss, under the referenced
insurance policy.” (ECF No. 103, Ex. 11). On October 10, 2012, Colorado Casualty
issued an amended reservation of rights letter. (ECF No. 103, Ex. 12).
C.

The Instant Declaratory Judgment Action

On October 16, 2012, Plaintiff Colorado Casualty filed the instant declaratory
judgment action prior to the commencement of the October trial in the underlying action.
On December 19, 2012, Colorado Casualty filed an amended declaratory judgment
complaint against Defendants Infinity, the Howards and the Infinity Affiliates, KF 103,
and the Neighbors. In the Amended Complaint, Colorado Casualty sought a
determination that there is no duty to defend or indemnify Infinity, the Howards, H2 and
HFI under the terms of the business owners insurance policies.
Due to ongoing issues related to the underlying litigation, on November 21, 2013,
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Magistrate Judge Boland recommended that this matter be administratively closed for a
period of time, which I affirmed and adopted. On April 25, 2014, this matter was
reopened for further proceedings. Plaintiff Colorado Casualty now files this motion
seeking a determination of its defense obligations under the Policy. On April 15, 2015,
Defendants’ filed their cross motion for summary judgment.
II.

STANDARD OF REVIEW
Pursuant to rule 56(c) of the Federal Rules of Civil Procedure, the court may

grant summary judgment where "the pleadings, depositions, answers to interrogatories,
and admissions on file, together with the affidavits, if any, show that there is no genuine
issue as to any material fact and the ... moving party is entitled to judgment as a matter
of law." Fed. R. Civ. P. 56(c); see Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250
(1986); Equal Employment Opportunity Comm. v. Horizon/CMS Healthcare Corp., 220
F.3d 1184, 1190 (10th Cir. 2000). “When applying this standard, the court must ‘view
the evidence and draw all reasonable inferences therefrom in the light most favorable to
the party opposing summary judgment.’” Atlantic Richfield Co. v. Farm Credit Bank of
Wichita, 226 F.3d 1138, 1148 (10th Cir. 2000) (quotation omitted). “‘Only disputes over
facts that might affect the outcome of the suit under the governing law will properly
preclude the entry of summary judgment.’” Id. (quotation omitted). Summary judgment
may be granted only where there is no doubt from the evidence, with all inferences
drawn in favor of the nonmoving party, that no genuine issue of material fact remains for
trial and that the moving party is entitled to judgment as a matter of law. Bee v.
Greaves, 744 F.2d 1387 (10th Cir. 1984). The court's function is not to weigh the
evidence, but merely to determine whether there is sufficient evidence favoring the
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nonmovant for a finder of fact to return a verdict in that party's favor. Anderson, 477
U.S. at 251–52.
III.

ANALYSIS
A.

Duty to Defend

Plaintiff argues that it does not owe a duty to defend Infinity Land Corporation
(“Infinity”), Paul Howard and Jonathan Howard (“The Howards”), H2 and HFI under the
terms of the operative insurance policy. I note that at the August 12, 2105 hearing,
counsel for the Defendants conceded that both H2 and HFI were not owed a defense by
Colorado Casualty in connection with the underlying action. Thus, I grant summary
judgment on Plaintiff’s Third Claim for Relief.
“As a general rule under Colorado law, an insurer's duty to defend an insured is
triggered solely on the basis of the allegations made within the four corners of the
complaint, read against the insurance policy.” United Fire & Cas. Co. v. Boulder Plaza
Residential, LLC, 633 F.3d 951, 960 (10th Cir. 2011); see also Cotter Corp. v. Am.
Empire Surplus Lines Ins. Co., 90 P.3d 814, 829 (Colo. 2004). To show that the insurer
owed a duty to defend, “the insured need only show that the underlying claim may fall
within policy coverage.” Compass Ins. Co. v. City of Littleton, 984 P.2d 606, 614 (Colo.
1999) (internal citations and quotations omitted). To establish no duty to defend, an
insurer bears a “heavy burden.” Hecla Mining, 811 P.2d at 1089. The insurer must
show that “there is no factual or legal basis on which the insurer might eventually be
held liable to indemnify the insured.” Id. at 1090. Where policy exclusions are at issue,
“the insurer bears the burden of establishing that ‘the allegations in the complaint are
solely and entirely within the exclusions in the insurance policy.’ ” Cotter Corp., 90 P.3d
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at 829 (citation omitted). Accordingly, where “there is some doubt as to whether a
theory of recovery within the policy coverage has been pleaded, the insurer must accept
the defense of the claim.” City of Littleton, 984 P.2d at 613–14. The existence of a duty
to defend is a question of law. See Bumpers v. Guar. Trust Life Ins. Co., 826 P.2d 358,
360 (Colo. App.1991); see also Carl's Italian Rest. v. Truck Ins. Exch., 183 P.3d 636,
639 (Colo. App. 2007).
The interpretation of an insurance policy is also a legal question. Allstate Ins.
Co. v. Huizar, 52 P.3d 816, 819 (Colo. 2002). An insurance policy is a contract, which
should be interpreted consistently with the well-settled principles of contractual
interpretation. Chacon v. Am. Family Mut. Ins. Co., 788 P.2d 748, 750 (Colo. 1990).
The words of the contract should be given their plain meaning according to common
usage, and strained constructions should be avoided. Allstate Ins. Co. v. Starke, 797
P.2d 14, 18 (Colo. 1990). Clauses or phrases should not be viewed in isolation; rather,
a policy's meaning must be determined by examining the entire instrument. Huizar, 52
P.3d at 819. Policy provisions that are clear and unambiguous should be enforced as
written. Chacon, 788 P.2d at 750. Where a term in an insurance policy is ambiguous or
susceptible to more than one reasonable interpretation, the Court will construe the term
against the drafter and in favor of providing coverage to the insured. Sachs v. Am.
Family Mut. Ins. Co., 251 P.3d 543, 546 (Colo. App. 2010).

1.

The Howards

I first consider the parties’ arguments concerning whether Paul Howard and
Jonathan Howard (“The Howards”) are covered under the Policy issued to Infinity Land
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Corporation (“Infinity”). It is undisputed that The Howards are not named insureds
under the Policy issued to Infinity. Thus, they seek coverage under the following Policy
provision:
C. Who Is An Insured
1. If you are designated in the Declarations as:
***
d. An organization other than a partnership, joint venture or
limited liability company, you are an insured. Your “executive
officers” and directors are insureds, but only with respect to
their duties as your officers or directors. Your stockholders
are also insureds, but only with respect to their liability as
stockholders.
***
No person or organization is an insured with respect to the conduct of any
current or past partnership, joint venture or limited liability company that is
not show as a Named Insured in the Declarations.
(ECF No. 103, Ex. 1 at 19).
The Howards argue that the KF 103 Complaint triggered Plaintiff’s duty to defend
them because the claims asserted by KF103 are based on The Howards’ duties as
officers and directors of Infinity. While The Howards acknowledge that the KF 103
Complaint “did not expressly state that the Howards were being sued in their capacities
as officers and directors of Infinity Land,” they ask me to look beyond the KF 103
Complaint’s four corners arguing that Plaintiff’s duty to defend was triggered by
information in additional documents. (ECF No. 146 at 10). First, the Howards point to
counterclaims filed by the Neighbors in 20082 (“2008 Neighbor Counterclaims”) that

2

The 2008 Neighbor Counterclaims are different than the Neighbors’ Complaints
filed in 2012, which are the subject of this dispute.
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refer to Paul Howard as President of Infinity Land Corp. (ECF No. 146, Ex. B at 12, ¶
15). Second, The Howards cite statements made by their counsel to Plaintiff’s adjuster
that The Howards were being sued in their capacities as officers or directors of Infinity
Land Corp. (ECF No. 146, Ex. O at 2).
The Tenth Circuit has made it clear that “under Colorado law, an insurer's duty to
defend an insured is triggered solely on the basis of the allegations made within the four
corners of the complaint, read against the insurance policy.” United Fire, 633 F.3d at
960. “The Colorado Supreme Court has ‘consistently held that an insurer's duty to
defend arises solely from the complaint in the underlying action.’ ” Id. (citing Cotter
Corp., 90 P.3d at 827). “A court ‘determining whether a duty to defend exists . . . must
restrict its examination to the four corners of the complaint.’ ” Id. (citing Miller v. Hartford
Cas. Ins. Co., 160 P.3d 408, 410 (Colo. App. 2007)). However, the Tenth Circuit has
recognized certain, narrow exceptions to this general rule. See AIMCO v. Nutmeg Ins.
Co., 593 F.3d 1188 (10th Cir. 2010); Pompa v. Am. Fam. Mut. Ins. Co., 520 F.3d 1139
(10th Cir. 2008). Relevant to this case, in AIMCO, the Tenth Circuit carved out an
exception, “considering extrinsic evidence in the form of an ‘allegation contained in
several separate but factually related complaints.’ ” United Fire, 663 F.3d (citing AIMCO,
593 F.3d at 1190). “The AIMCO court predicted that the Colorado Supreme Court
would recognize a narrow exception to the four-corners rule ‘requiring an insurer to
consider facts which it is aware of in parallel complaints that tend to show a duty to
defend’ as this would not undercut an insured's legitimate expectation of a defense.” Id.
(citing AIMCO, 593 F.3d at 1194).
Based on my careful review of the relevant record, I find that the AIMCO
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exception does not apply in this case. First, in AIMCO, the complaints at issue were
filed within a year of one another and were active. Second, the Tenth Circuit found that
the insurer was aware the complaints were related through its denial of coverage letters
that made reference to the other complaints. AIMCO, 593 F.3d at 1196. Here, the
2008 Neighbor Counterclaims were filed in 2008 and then dismissed in 2010, well
before the KF 103 Complaint was filed in October 2011 and subsequently tendered to
Plaintiff. Further, Plaintiff states that neither Infinity Land nor The Howards ever
tendered to it the 2008 Neighbor Counterclaims or made it aware of these matters. I am
also unpersuaded by The Howards’ argument that the KF 103 Complaint put Plaintiff on
notice as to the 2008 Neighbor Counterclaims. In fact, in carefully reviewing the KF 103
Complaint, I note that under the heading “The Current Posture of the Lawsuit,”
paragraph 30 states that “The Neighbors have asserted counterclaims in this case
against KF 103 ranging from negligence to trespass arising as a result of the Infinity
Group’s construction of the Intersection.” (ECF No. 103, Ex. 4, ¶ 30). The 2008
Neighbor Counterclaims were dismissed from the case in March 2010, and the KF 103
Complaint was filed in late 2011. Thus, I cannot find that this vague reference provided
Plaintiff with reasonable notice of parallel complaints triggering the AIMCO exception.
Finally, since The Howards offer no legal support for their assertion that Plaintiff
should have relied on self-serving statements made by their counsel that The Howards
were being sued in their capacities as officers or directors of Infinity Land Corp, this
argument is rejected. Accordingly, I find Plaintiff had no duty to defend The Howards in
the underlying lawsuit under the Policy issued to Infinity.
2.

Property Damage
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I next consider the parties' arguments concerning property damage coverage
under the policy. The Policy covers property damage of an insured if there was
property damage and that property damage was the result of an occurrence.
The Policy contains the following grant of coverage:
A. Coverages
1. Business Liability
a. We will pay those sums that the insured becomes legally obligated
to pay as damages because of "bodily injury", "property damage",
"personal injury" or "advertising injury" to which this insurance
applies. We will have the right and duty to defend the insured
against any "suit" seeking those damages. However, we will have
no duty to defend the insured against any "suit" seeking damages
for "bodily injury", "property damage", "personal injury", or
"advertising injury" to which this insurance does not apply. We may
at our discretion, investigate any "occurrence" and settle any claim
or "suit" that may result.
***
b. This insurance applies:
(1) To "bodily injury" and "property damage" only if:
(a) The "bodily injury" or "property damage" is caused
by an "occurrence" that takes place in the
"coverage territory"; (emphasis added) and
(b) The "bodily injury" or "property damage" occurs
during the policy period.
(2) To:
(a) "Personal injury" caused by an offense arising out
of your business, excluding advertising,
publishing, broadcasting or telecasting done by or
for you; . . . .
***
(ECF No. 103, Ex. 1 at 9).
F. Liability And Medical Expenses Definitions
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***
12. "Occurrence" means an accident, including continuous or repeated
exposure to substantially the same general harmful conditions (emphasis added).
***
(ECF No. 103, Ex. 1 at 21).
The term "property damage" is defined in the Policy as:
a. Physical Injury to tangible property, including all resulting loss of use of
that property. All such loss of use shall be deemed to occur at the time of
the physical injury that caused it; or
b. Loss of use of tangible property that is not physically injured. All such
loss of use shall be deemed to occur at the time of the "occurrence" that
caused it.
(ECF No. 103, Ex. 1 at 22). “Occurrence" is defined under the Policy as, "an accident,
including continuous or repeated exposure to substantially the same general harmful
conditions." Id.
Under Colorado law, an accident is considered to be "an unanticipated or
unusual result flowing from a commonplace cause." Union Ins. Co. v. Hottenstein, 83
P.3d 1196, 1201 (Colo. App. 2003) (citing Carroll v. CUNA Mut. Ins. Soc'y, 894 P.2d
746, 753 (Colo. 1995)). "[I]t is the ‘knowledge and intent of the insured' that make
injuries or damages expected or intended rather than accidental." Hoang v. Monterra
Homes LLC, 129 P.3d 1028, 1034 (Colo. App. 2005) (quoting Hecla, 811 P.2d at 1088)
(rev'd on other grounds, 149 P.3d 798 (Colo. 2007)).
Applying Colorado law, I review the underlying complaints to determine whether
they contain a factual or legal basis to conclude that the claimed property damage
resulted from an occurrence. I first consider allegations that may be related to physical
injury to the property at issue.

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The Marchant/Howell/Nance pleading alleges the following in part:
1.

“By deeds dated June 2, 1956 and recorded June 6, 1956 in Book 1573 at Page
596 of the records of El Paso County and August 20, 1956 and recorded on
August 24, 1956 in Book 1587 at Page 149, Thomas and Joan Cantrell granted
to [the Neighbors] a thirty foot (30’) right of way to and over the real property
therein described (the ‘Express Easement’).” (ECF No. 103, Ex. 6 ¶ 18).

2.

“Commencing in the late 1950’s and/or early 1960’s, [the Neighbors] and/or their
predecessors began to use that portion of Ski Lane between El Glen and
Cowpoke Road. (the “Prescriptive Easement”). The Express Easement and the
Prescriptive Easement are collectively referred to as the ‘Easements’ . . . .” (ECF
No. 103, Ex. 6 ¶ 19).

3.

“Defendants use of the Easements was uninterrupted until approximately June,
2006, when [the Developer Parties] blocked access to all of [the Neighbors’]
Easements, both prescriptive and express.” (ECF No. 103, Ex. 6 ¶ 21).

4.

“Shortly prior to the destruction of [the Neighbors’] Easements, [the Neighbors]
were mailed and/or given notice by agents of [the Developer Parties] notifying
[the Neighbors] that their access would be ‘temporarily’ interrupted.” (ECF No.
103, Ex. 6 ¶ 23).

5.

“The notice of a temporary interruption was false in that [the Developer Parties]
deliberately or recklessly failed to disclose to [the Neighbors] that the interruption
of [the Neighbors’] Easements was intended to be permanent with the result that
[the Neighbors] would not have use of their easements in the future.” (ECF No.
103, Ex. 6 ¶ 24).

6.

“After blocking [the Neighbors] from using the Easements, [the Developer
Parties] threatened [the Neighbors] with litigation if [the Neighbors] refused to
cooperate with the relocation of the easements.” (ECF No. 103, Ex. 6 ¶ 25).

7.

“Subsequently, in September, 2008, after [the Neighbors] refused to agree to the
relocation of the Easements, [Woodmen Heights and KF 103] initiated this
action.” (ECF No. 103, Ex. 6 ¶ 26).

8.

“By the time [Woodmen Heights and KF 103] filed and served this lawsuit, [the
Neighbors’] Easements had already been altered and/or destroyed.” (ECF No.
103, Ex. 6 ¶ 27).

9.

“In filing their Complaint, [Woodmen Heights and KF 103] acknowledged that
under Colorado law, [they] are required to either obtain court approval before
relocating the easement or provide evidence to the court that any relocation of
the easement complied with appropriate legal standards . . . .” (ECF No. 103,
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Ex. 6 ¶ 29).
10.

“[Woodmen Heights and KF 103] also represented to the Court in their complaint
that only a portion of ‘New Sorpresa Lane” had been constructed and that ‘all
conditions precedent to the bringing of this action have been performed or have
occurred.’” (ECF No. 103, Ex. 6 ¶ 30).

11.

“[Woodmen Heights’ and KF 103’s] statements were false in that when the
complaint was filed and served all of [the Neighbors] Easements had already
been altered and destroyed and Sorpresa Lane had been lowered and extended
through and past the Ski Land intersection and [the Neighbors’] properties.” (ECF
No. 103, Ex. 6 ¶ 31).

12.

[The Developer Parties] intentionally entered upon or caused others to enter
upon [the Neighbors’] easements and to unilaterally alter the historic roadway
and topography of the land within the Easements without permission of [the
Neighbors] and the other easement owners as the dominant estate owners, and
without first obtaining judicial determination granting permission to alter the
easement and as such trespassed on and are continuing to trespass on [the
Neighbors’] Easements and the easement rights of [the Neighbors] as dominant
estate owners. (ECF No. 103, Ex. 6 ¶ 62).

13.

Commencing at the time [the Developer Parties] blocked off [the Neighbors’]
Easements and continuing to the present time, [the Developer Parties] ... have
unreasonably interfered with and obstructed the Easements thus preventing [the
Neighbors] from using the Easements for the purpose of ingress and egress to
[the Neighbors’] properties. (ECF No. 103, Ex. 6 ¶ 63).

14.

Unless and until enjoined and restrained by order of this court, [the Developer
Parties’] interference and obstruction of the Easements will cause great and
irreparable injury to [the Neighbors] because their access to their properties has
been diminished. (ECF No. 103, Ex. 6 ¶ 64).

15.

[The Developer Parties] wrongfully, unreasonably and without authorization
entered onto and destroyed the easement in such a manner as to cause [the
Neighbors] discomfort and annoyance and to suffer emotional distress and
mental anguish in an amount which will be determined with particularity at trial.
(ECF No. 103, Ex. 6 ¶ 66).

16.

Despite this knowledge, the Infinity Parties . . . unilaterally closed portions of [the
Neighbors’] Easements an altered other portions of the Easement so that they
were unusable. (ECF No. 103, Ex. 6 ¶ 69).

17.

As a result of the negligence of [the Developer Parties] and the closure and
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destruction of [the Neighbors’] Easements, these [Neighbors] have ben damaged
by the temporary loss of use of these easements for the period when the
easements were first barricaded to the time the easements are fully restored and
open for use by the public. (ECF No. 103, Ex. 6 ¶ 86).
18.

In addition to the cost of restoring [the Neighbors’] Easements as a direct and
proximate result of Infinity’s . . . actions these [Neighbors’] property values have
also been greatly diminished and reduced, and these [Neighbors] have been
greatly inconvenienced in their ability to access their properties. (ECF No. 103,
Ex. 6 ¶ 87).

19.

During the summer of 2007, one or more of the [Developer Parties] entered onto
[Neighbor] Nance’s property and regarded a portion of [Neighbor] Nance’s
property, removing large quantities of soil. (ECF No. 103, Ex. 6 ¶ 109).
The Peck pleading alleges the following in part:

20.

Trespass and Continuing Trespass: The [Developer Parties] intentionally
entered upon or caused others to enter upon Defendants’ Easements and to
unilaterally altered [sic] the historic roadway and topography of the land within
the Deeded Right of Way without permission of Peck and [Neighbors] Marchant,
Oliver, Howell, Nance, and Hanson . . . as the dominant estate owners, and
without first obtaining judicial determination granting permission to alter the
Deeded Right-of-Way and as such trespassed on the easement and the
easement rights of the Peck and other . . . Neighbors as dominant estate owners.
(ECF No. 103, Ex. 7 ¶ 34).
After considering the above allegations coupled with my careful review of all of

the relevant allegations in the underlying complaints, I find that the Neighbors
collectively alleged that Infinity destroyed their access to the Easement that provided
them access to their homes. However, damage to an easement is not “property
damage” under the Policy. The term “tangible property” means “that which is capable of
being handled, touched, or physically possessed.” Lamar Truck Plaza, Inc. v. Sentry
Ins., 757 P.2d 1143, 1144 (Colo. App. 1988) (observing that purely economic damages
are not included within the term “property damage” in a comprehensive general liability
policy); Coregis v. DeCaro, Nos. 99-1200, 99-1208, 2000 WL 1369845, *4 (10th Cir.
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Sept. 22, 2000). I find that an easement is an interest in land owned by another that
entitles its holder to a specific limited use or enjoyment. It is not a tangible property
right. Thus, I find that the allegations of damage to easement rights do not constitute
“property damage,” nor do their allegations of damages stem from interference with
access to the Neighbors’ residences. Even if there was an allegation of property
damage, I believe the underlying complaints fail to contain any allegation that such
damage was the result of an occurrence under the Policy. I find that the allegations that
Infinity intentionally acted to construct roads and intersections cannot be read as
including allegations of an accident or unanticipated consequences. The allegations
assert intentional conduct and cannot trigger coverage for an “occurrence” under the
Policy. Accordingly, I find that insurance coverage was not triggered because the
underlying complaints did not allege property damage resulting from an "occurrence."
3.

Personal Injury

The Policy defines “personal injury” as “injury . . . arising out of . . . [t]he wrongful
eviction from, wrongful entry into, or invasion of the right of private occupancy of a
room, dwelling, or premises that a person occupies, by or on behalf of its owner,
landlord, or lessor . . . .” (ECF No. 146-1, Ex. A at 21.7).
The Defendants argue that the developers’ conduct in constructing the
intersection without the Neighbors’ or the Court’s prior permission was either a wrongful
entry onto or wrongful eviction from the Easement. By altering the intersection’s grade,
elevation, and location without the requisite authorization, the Infinity Defendants
deprived the Neighbors of their right to use the Intersection as it had been deeded to
them. See Blackhawk-Central City Sanitation Dist. v. American Guarantee and Liability
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Ins. Co., 856 F. Supp. 584 (D. Colo. 1994). On the other hand, Plaintiff argues that
Infinity is not entitled to coverage under the personal injury provision of its Policy
because there are no allegations that it is the owner, landlord, or lessor of the
easement, nor did it act on behalf of that owner, landlord, or lessor.
Considering all of the relevant allegations and Policy language in this case, I
agree with the reasoning of the Colorado Court of Appeals in the TerraMatrix case and
other courts and find that the Policy’s personal injury provision is unambiguous and
applicable only to entries, evictions, and invasions committed by or on behalf of the
owner, landlord, or lessor. See TerraMatrix, Inc. v. U.S. Fire Ins. Co., 939 P.2d 483,
489 (Colo. App. 1997) (disagreeing with the Blackhawk case and holding that the
personal injury provision was unambiguous and applicable only to entries, evictions, and
invasions committed by or on behalf of the owner, landlord, or lessor); United States
Fidelity & Guaranty Co. v. Goodwin, 950 F. Supp. 24 (D. Maine 1996). Thus, because
Infinity was not the owner of the land on which the alleged wrongful entry occurred, I
find no personal injury, and therefore, no duty to defend.

4.

Bodily Injury

The Defendants also argue that the allegations potentially fell under the Policy’s
bodily injury coverage. In National Casualty Co. v. Great Southwest Fire Insurance Co.,
833 P.2d 741, 746 (Colo. 1992), the Colorado Supreme Court concluded that the term
“bodily injury,” which was defined in the subject insurance policy as “bodily injury,
sickness, or disease,” covers only physical injury and does not include claims for purely
nonphysical or emotional harm. The Colorado Supreme Court held that without
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allegations of physical injury, physical contact, or pain, the underlying plaintiff’s claim of
emotional distress did not fall within the general liability policy’s coverage for bodily
injury. Id.
Here, the Neighbors allege emotional distress, mental anguish, and physical
discomfort. I find that these allegations fail to bring the claims within the Policy’s
definition of “bodily injury” because there are no allegations of any physical injury,
physical contact, or pain.
5.

Defendants’ Counterclaims

Finally, Plaintiff argues that because it has no duty to defend under the Policy,
the Defendants’ counterclaims for breach of contract and bad faith based on the alleged
breach of that duty must also be dismissed. I agree. Colorado law expressly
recognizes the tort of bad faith breach of an insurance contract. “The basis of the tort
liability is the insurer's conduct in unreasonably refusing to pay a claim and failing to act
in good faith.” Goodson v. Am. Standard Ins. Co. of Wisc., 89 P.3d 409, 414 (Colo.
2004). Since I find that Plaintiff had no duty to defend the Defendants in the underlying
lawsuit, the counterclaims for breach of contract and bad faith are dismissed.
IV.

CONCLUSION
Based upon the foregoing, it is
ORDERED that Plaintiff Colorado Casualty Insurance Company’s Motion for

Summary Judgment (ECF No. 103) is GRANTED and the Infinity Defendants’ CrossMotion for Partial Summary Judgment (ECF No. 146) is DENIED. The Clerk shall enter
judgment dismissing this action and awarding costs.

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Dated: August 26, 2015

BY THE COURT:

s/ Wiley Y. Daniel
Wiley Y. Daniel
Senior United States District Judge

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