Colorado Casualty Insurance Company v. Infinity Land Corporation et al

Filing 86

ORDER denying 65 Motion to Bifurcate, by Judge Wiley Y. Daniel on 9/27/2013.(trlee, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No.: 1:12-cv-02748-WYD-BNB
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 MARCHANT;
WILLIAM E. HOWELL, as Successor Trustee of the MARILYN J. HOWELL TRUST;
C. ARLENE NANCE;
WILLIAM PECK;
DARRELL H. OLIVER;
KELLY ANN OLIVER; and
SUSAN HANSON.
Defendants.
_____________________________________________________________________
ORDER
_____________________________________________________________________
I.

INTRODUCTION AND BACKGROUND
THIS MATTER is before the Court on Plaintiff Colorado Casualty Insurance

Company’s (“Colorado Casualty”) Motion to Bifurcate Trial, filed March 25, 2013 [ECF
No. 65].
On October 16, 2012, Colorado Casualty initiated this declaratory judgment
action to determine the rights and obligations of various parties under insurance policies

issued to Defendant Infinity Land Corporation in a related, underlying lawsuit filed in the
El Paso County District Court (“Underlying Litigation”). Defendants Infinity Land
Corporation (“Infinity”); H2 Land Co., LLC; Howard Family Investments, LLC; Jonathan
Howard and Paul J. Howard (the “Howard Defendants”) asserted counterclaims against
Colorado Casualty for breach of contract, bad faith breach of insurance contract, and
violation of Colo. Rev. Stat. §§ 10-3-1115, 1116.
The Underlying Litigation giving rise to this matter began in September of 2008
as a quiet title and declaratory judgment action involving the development of a
residential subdivision located in Colorado Springs, Colorado. Colorado Casualty
provided a defense to Infinity during the “remedies” portion of the Underlying Litigation.
The El Paso County District Court found that Infinity and all other defendants were
jointly, severally and individually liable to the plaintiffs.
Relevant to this case, Infinity and the Howard Defendants contend that the
insurance policies afford coverage for the claims asserted against them in the
Underlying Litigation. However, Colorado Casualty contends that these claims are not
covered. Based on the claims asserted in the Underlying Litigation and the trial court’s
ultimate findings and conclusions, Colorado Casualty argues that it owes neither a duty
to defend nor a duty to indemnify, under the policies’ relevant terms, conditions,
limitations, and exclusions,
In the pending motion, Colorado Casualty seeks to bifurcate the issues of
insurance coverage from the Defendants’ bad faith counterclaims. According to

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Colorado Casualty, bifurcating this case into two phases1 will be conducive to expedition
and economy because the bad faith counterclaim, a fact-sensitive claim requiring the
expenditure of time and resources, will be rendered moot if Colorado Casualty prevails
on its declaratory judgment claims.
The Defendants oppose bifurcation, arguing that they will be prejudiced because
(1) a determination on the duty to defend issue “would not be dispositive of the bad faith
claim” and (2) the breach of contract claim “overlaps” with both the bad faith claim and
statutory claim because they all “derive from the same occurrence: the obligation of
Colorado Casualty to defend its insureds.” (Resp. at 4) (internal quotations omitted).
II.

DISCUSSION
Rule 42(b) of the Fed. R. Civ. P. allows a court to order separate trials for

separate claims “[f]or convenience, to avoid prejudice, or to expedite and economize.”
Fed. R. Civ. P 42(b); accord King v. McKillop, 112 F. Supp. 2d 1214, 1221 (D.Colo.
2000). I have wide discretion in deciding whether to bifurcate or sever issues for trial.
Easton v. City of Boulder, Colo., 776 F.2d 1441, 1447 (10th Cir. 1985); accord Gaede v.
Dist. Ct. In and For Eighth Judicial. Dist., 676 P.2d 1186, 1188 (Colo. 1984) (“A trial
court enjoys broad discretion under C.R.C.P. 42(b) to order separate trials on specific
issues in appropriate civil cases.”). And while I have discretion to order separate trials,
“that does not mean that severance is the norm or even a common occurrence.” The
Marianist Province of the United States, Inc. v. Ace USA, 2010 WL 2681760, * 1

1

The first phase would resolve Colorado Casualty’s duty to defend and
indemnify. The second phase would address Defendants’ breach of contract and bad
faith counterclaims.
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(D.Colo. July 2, 2010) (citing Fed. R. Civ. P 42(b) advis. comm. notes (noting that
bifurcation should not “routinely be ordered”)); see also Gaede, 767 P.2d at 1188
(explaining that the reasons listed in C.R.C.P. 42(b) for bifurcating are “conditions” such
that, in their absence, bifurcation is “inapplicable”).
Based on my review, I conclude that Colorado Casualty does not show a need
for bifurcation. Colorado Casualty’s declaratory judgment claims and Defendants’
counterclaims all derive from the same occurrence, the Underlying Litigation, and
whether there exists a duty to defend and indemnify. I agree with Defendants that the
“existence of those duties and whether Colorado Casualty acted unreasonably in
refusing to carry them out” in connection with the Underlying Litigation are the common
foundation of all three counterclaims. (Resp. at 4).
Moreover, Colorado Casualty fails to offer a compelling argument that bifurcation
of trials under Rule 42(b) would be more convenient or would expedite and economize
the instant case. Defendants cite Dunn v. American Family Ins., 251 P.3d 1232, 1235
(Colo. App. 2010) for the proposition that their bad faith claims do not depend on the
existence of coverage. Defendants further argue that since a resolution of the duty to
defend issue would not be dispositive of the bad faith counterclaims, no savings in time,
effort or resources would be archived by bifurcation. “All aspects of payment, including
the adjustment of a claim, that is, the [determination] of the amount that an insurer will
pay an insured to cover a loss, . . . fall within an insurer’s good faith duty to its insured.”
Id. (internal quotations omitted). “Colorado recognizes the viability of a claim of bad
faith even if the express terms of the contract have been honored by the insurer.” Id.
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Exercising my discretion on this issue, I conclude that bifurcation of the bad faith
claims from the declaratory judgment claims would not necessarily be more convenient,
expeditious, or economical. It is likely that discovery will concern much of the same
related evidence and will involve deposing many of the same individuals about events
that occurred in the same or reasonably close time period. Additionally, Colorado
Casualty has failed to show that there would be any meaningful savings of time, money
or effort by bifurcation. Further, I find that there is a risk of prejudice to the Defendants
in having their claims “sit dormant” while the declaratory judgment claims are resolved.2
On balance, I conclude that the potential costs from bifurcation outweigh any
speculative or marginal benefit.
III.

CONCLUSION
For the reasons set forth herein, it is hereby
ORDERED that Plaintiff Colorado Casualty Insurance Company’s (“Colorado

Casualty”) Motion to Bifurcate Trial, filed March 25, 2013 [ECF No. 65] is DENIED.
Dated: September 27, 2013
BY THE COURT:

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

2

This is especially true given the fact that the Underlying Litigation remains
active, which has “created difficulties for the parties in terms of moving this case
forward.” (ECF No. 80). Thus, any further delay caused by bifurcation is not warranted
at this time.
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