Hartford Casualty Insurance Company v. Samuel Engineering, Inc.

Filing 52

ORDER denying 20 Motion for Summary Judgment and granting 21 Motion for Summary Judgment. By Judge Robert E. Blackburn on 3/12/2014.(klyon, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Robert E. Blackburn
Civil Action No. 13-cv-00594-REB-KMT
HARTFORD CASUALTY INSURANCE COMPANY, an Indiana corporation,
Plaintiff,
v.
SAMUEL ENGINEERING, INC., a Colorado corporation,
Defendant.

ORDER CONCERNING MOTIONS FOR SUMMARY JUDGMENT
Blackburn, J.
This matter is before me on the following: (1) Plaintiff/Counterclaim Defendant
Hartford Casualty Insurance Company’s Motion for Summary Judgment [#20]1
filed July 22, 2013; and (2) Samuel Engineering Inc.’s Cross-Motion for
Determination of Law [#21] filed July 22, 2013. Both parties filed responses [#22], and
[#23] and the plaintiff filed a notice of supplemental authorities [#27]. I deny the motion
filed by Hartford and grant the motion filed by Samuel Engineering.2
I. JURISDICTION & CONTROLLING LAW
I have jurisdiction over this case under 28 U.S.C. § 1332 (diversity). The plaintiff

1

“[#20]” is an example of the convention I use to identify the docket number assigned to a
specific paper by the court’s case management and electronic case filing system (CM/ECF). I use this
convention throughout this order.
2

The issues raised by and inherent to the motions for summary judgment are fully briefed,
obviating the necessity for evidentiary hearing or oral argument. Thus, the motion stands submitted on the
briefs. Cf. FED. R. CIV. P. 56(c) and (d). Geear v. Boulder Cmty. Hosp., 844 F.2d 764, 766 (10th
Cir.1988) (holding that hearing requirement for summary judgment motions is satisfied by court's review of
documents submitted by parties).

asserts claims under the common law of the state of Colorado. Colorado law controls
the resolution of the substantive issues in this diversity case. Erie Railroad Co. v.
Tompkins, 304 U.S. 64, 78 (1938); Royal Maccabees Life Insurance Co. v. Choren,
393 F.3d 1175, 1180 (10th Cir. 2005). Federal law controls procedural issues. See,
e.g., Sims v. Great American Life Ins. Co., 469 F.3d 870, 877 (10th Cir. 2006).
II. SUMMARY JUDGMENT STANDARD OF REVIEW
Summary judgment is proper when there is no genuine issue as to any material
fact and the movant is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c);
Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265
(1986). A dispute is “genuine” if the issue could be resolved in favor of either party.
Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586,
106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986); Farthing v. City of Shawnee, 39 F.3d
1131, 1135 (10th Cir. 1994). A fact is “material” if it might reasonably affect the outcome
of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505,
2510, 91 L.Ed.2d 202 (1986); Farthing, 39 F.3d at 1134.
A party who does not have the burden of proof at trial must show the absence of
a genuine fact issue. Concrete Works, Inc. v. City & County of Denver, 36 F.3d
1513, 1517 (10th Cir. 1994), cert. denied, 115 S.Ct. 1315 (1995). Once the motion has
been properly supported, the burden shifts to the nonmovant to show, by tendering
depositions, affidavits, and other competent evidence, that summary judgment is not
proper. Concrete Works, 36 F.3d at 1518. All the evidence must be viewed in the light
most favorable to the party opposing the motion. Simms v. Oklahoma ex rel
Department of Mental Health and Substance Abuse Services, 165 F.3d 1321, 1326
2

(10th Cir.), cert. denied, 120 S.Ct. 53 (1999). However, conclusory statements and
testimony based merely on conjecture or subjective belief are not competent summary
judgment evidence. Rice v. United States, 166 F.3d 1088, 1092 (10th Cir.), cert.
denied, 120 S.Ct. 334 (1999); Nutting v. RAM Southwest, Inc., 106 F.Supp.2d 1121,
1123 (D. Colo. 2000).
III. INTERPRETATION OF INSURANCE CONTRACTS
This case hinges on an interpretation of two Hartford insurance policies to
determine if Hartford has a duty to defend the defendant in two other lawsuits. In this
diversity action, Colorado law provides the principles by which the policies must be
interpreted. Leprino Foods Co. v. Factory Mut. Ins. Co., 453 F.3d 1281, 1287 (10th
Cir. 2006).
Under Colorado law, insurance contracts are to be construed in accordance with
the general laws of contracts. Federal Deposit Ins. Corp. v. American Casualty Co.,
843 P.2d 1285, 1289 (Colo. 1992); Marez v. Dairyland Ins. Co., 638 P.2d 286, 288 289 (Colo. 1981), overruled on other grounds, Friedland v. Travelers Indem. Co.,
105 P.3d 639, 642-643 (Colo. 2005). An insurance contract must be interpreted
according to the plain and ordinary meaning of its language. Kellogg v. Metro. Life Ins.
Co., 549 F.3d 818, 829 (10th Cir. 2008); Chacon v. American Family Mut. Ins. Co.,
788 P.2d 748, 750 (Colo. 1990). When the language used in a contract is plain and its
meaning is clear, the agreement must be enforced as written. In re May, 756 P.2d 362,
368 (Colo. 1998); Fire Ins. Exch. v. Rael by Rael, 895 P.2d 1139, 1142 (Colo. App.
1995).
Courts should be wary of rewriting contract provisions and should give the words
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contained in the contract their plain and ordinary meaning, unless contrary intent is
evidenced within the contract itself. See, e.g., Lovell v. State Farm Mut. Auto. Ins.
Co., 466 F.3d 893, 902 (10th Cir. 2006) (noting that courts should not rewrite insurance
policy provisions that are clear and unambiguous) (citations omitted); Cyprus Amax
Materials Co. v. Lexington Ins. Co., 74 P.3d 294, 299 (Colo. 2003) (courts should give
the words contained in an insurance policy their plain and ordinary meaning). Courts
may neither add provisions to extend coverage beyond that contracted nor delete
provisions to limit coverage. Cyprus Amax, 74 P.3d at 299. When interpreting a
policy's provisions, a court's construction "must be fair, natural, and reasonable rather
than strained and strictly technical." Massingill v. State Farm Mut. Auto. Ins. Co., 176
P.3d 816, 825 (Colo.App. 2007) (citing Pub. Serv. Co. v. Wallis & Cos., 986 P.2d 924,
939 (Colo. 1999)).
When an insurance company seeks to limit or exclude coverage under the terms
of an insurance policy, the insurer bears the burden or proving that a particular loss falls
within an exclusion in the contract. Colorado Intergovernmental Risk Sharing
Agency v. Northfield Ins. Co., 207 P.3d 839, 842 (Colo. App. 2008). If a limitation or
exclusion in an insurance contract is unambiguous, then that limitation or exclusion
must be enforced. Id.
In a dispute concerning an insurer’s duty to defend against a claim
asserted against its insured in a civil suit, Colorado applies the “complaint rule.” This
rule provides that the allegations of the relevant complaint against the insured, together
with the language of the relevant insurance policy, provide the bases for evaluating
whether an insurer has a duty to defend. Lopez v. American Family Mut. Ins. Co.,
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148 P.2d 438, 439 (Colo. App. 2006); Cotter v. American Empire Sur. Lines, Ins. Co.,
90 P.3d 814 (Colo. 2004).
We have long held that to determine whether a duty to defend exists,
courts must look no further than the four corners of the underlying
complaint (the “four corners” or “complaint” rule). See Hecla Mining Co.
v. N.H. Ins. Co., 811 P.2d 1083, 1089 (Colo.1991). An insurer is not
excused from this duty “unless there is no factual or legal basis on which
the insurer might eventually be held liable to indemnify the insured.” Id. at
1090. Hence, if the alleged facts even potentially trigger coverage under
the policy, the insurer is bound to provide a defense. Constitution Assoc.
[v. N.H. Ins. Co., 930 P.2d [556, 563 (Colo 1986)]; Hecla, 811 P.2d at
1089.
Cyprus Amax Minerals Co. v. Lexington Ins. Co., 74 P.3d 294, 299 (Colo. 2003).
An insurer's duty to defend arises when the underlying complaint against
the [insured] alleges any facts that might fall within the coverage of the
policy. The actual liability of the insured to the claimant is not the criterion
which places upon the insurance company the obligation to defend.
Rather, the obligation to defend arises from allegations in the complaint,
which if sustained, would impose a liability covered by the policy. [W]here
the insurer's duty to defend is not apparent from the pleadings in the case
against the insured, but the allegations do state a claim which is
potentially or arguably within the policy coverage, or 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.
* * * *
The insurer has a duty to defend unless the insurer can establish that the
allegations in the complaint are solely and entirely within the exclusions in
the insurance policy. An insurer is not excused from its duty to defend
unless there is no factual or legal basis on which the insurer might
eventually be held liable to indemnify the insured.
Hecla Mining Co. v. New Hampshire Ins. Co., 811 P.2d 1083, 1089 - 1090 (Colo.
1991) (internal quotations, citations, and footnote omitted).
III. FACTS
In December 2009, the defendant, Samuel Engineering, Inc., was working on the
expansion of the Sifto salt mine in Ontario, Canada. Included in the project was the
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design and construction of a salt storage facility known as Dome #5. On December 10,
2009, during high winds, the partially constructed Dome #5 catastrophically failed and
collapsed. As a result of the collapse of Dome #5, Samuel is named as a defendant in
two lawsuits filed in December 2011 in the Ontario Superior Court of Justice, Toronto,
Ontario (the Canadian Litigation).
Samuel tendered the claims in the Canadian Litigation to CNA, its professional
liability insurer. CNA issued a reservation of rights letter and appointed defense
counsel for Samuel, but declined to pay for defense costs until Samuel meets its
250,000 dollar deductible.
Samuel then tendered the claims against Samuel in the Canadian Litigation to
plaintiff, Hartford Casualty Insurance Company. Hartford had issued commercial
general liability insurance policies to Samuel. Hartford is defending Samuel in the
Canadian cases under a reservation of rights. In the present case, Hartford seeks
declaratory judgments concerning coverages under the Hartford policies.
In its motion for summary judgment, Hartford seeks judgment on its third claim
for relief. In that claim, Hartford seeks a judgment declaring that Hartford does not have
a duty to defend or a duty to indemnify Samuel on the claims asserted against Samuel
in the Canadian Litigation.
A. Hartford Policies
Hartford issued two commercial general liability insurance policies to Samuel,
effective from January 5, 2009, through January 5, 2010. Both policies carried the
policy number 35 SBA PF4153. The policies are (1) a Business Liability Coverage
Form (Business Policy); and (2) an Umbrella Liability Provisions (Umbrella Policy).

6

Motion for summary judgment [#20], Exhibits 1 (Business Policy) and 2 (Umbrella
Policy). In its motion for summary judgment, Hartford cites certain exclusions in the
policies and argues that these exclusions bar coverage of Samuel in the Canadian
Litigation.
In its motion for summary judgment, Samuel contends that the claims and
allegations in the complaints in the Canadian litigation include claims that are covered
arguably by the Hartford policies. Because some claims arguably fall within the
coverage provided by the Hartford policies, Samuel contends, Hartford has a duty to
defend Samuel in the Canadian Litigation.
B. Claims in the Underlying Lawsuits
In determining whether Hartford has a duty to defend Samuel, the court must
review the allegations and claims made against Samuel in the two, underlying Canadian
lawsuits. In the first case filed by Process Group, Inc., Samuel faces claims asserted by
Process Group and cross-claims asserted by Sifto.
In its complaint, Process Group, Inc. alleges Samuel was retained to design and
provide engineering, procurement, construction management, and start-up /
commissioning for the project. Motion for summary judgment [#20], Exhibit 5 (Process
Group Complaint), ¶ 10.
The engineering services included the preparation of design drawings and
specifications. The construction management services included
supervision of construction and co-ordinating, scheduling and overall
responsibility for construction activity for the project. [Stanley] was also
retained as required under the provisions of the Ontario Building Code, to
carry out general field reviews which entail the engineer carrying out
sufficient observations and sampling to be satisfied that the structure as
constructed met the design intent, was substantially in accordance with
design drawings and complied with all codes and regulations in effect in
the Province of Ontario.
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Id.
Process Group asserts claims against Samuel for negligent design, negligence in
selection of materials, failure to specify construction sequence, failure to carry out
general review of construction, negligence in directing construction/developing
procedures for erection, failure to review documents (fabrication, erection, and shop
drawings), failure to alert, warn, or provide guidance, and negligence in allowing
management and decision making to be controlled from the head office in Colorado
rather than on-site in Ontario. Process Group Complaint, ¶ 30 a - o.
In its cross-claims, Sifto alleges that Samuel agreed to provide engineering,
procurement, and construction management services to Sifto. Motion for summary
judgment [#20], Exhibit 6 (Sifto Cross-claim), ¶ 11. Sifto describes the broad scope of
work assigned to Samuel. Id., ¶ 11. The claims of Sifto include breach of the
agreement between Sifto and Samuel and negligence claims alleging that the work of
Samuel was defective and incomplete in various ways. Id., ¶¶ 17 - 36. Some of these
claims concern mechanical devices that were part of the project, such as a claim that
Samuel allowed a drive to be exposed to water, causing damage, defects in the work of
Samuel related to site drainage, and defects and deficiencies in work related to
concrete and “civil works.” Id., ¶¶ 30 - 33,
In the second case, Samuel faced claims asserted by Flynn Canada, Ltd. and
one or more cross-claims asserted by Lassing Dibben Consulting Engineers Ltd. and
Harold Dibben.3 Flynn alleged that the failure of Dome #5 was caused by negligence,
breach of statutory duty, breach of bailment, beach of duty to warn, negligent

3

Hartford indicates that the Flynn litigation has been resolved by settlement.

8

misrepresentation, tort of trespass, and breach of agreement. Motion for summary
judgment [#20], Exhibit 3 (Flynn Complaint), ¶ 29. Flynn’s claims included allegations of
failure to construct and brace the dome property, failure to design the dome to withstand
site conditions, failure to provide adequate plans and specifications, failure to provide a
design compliant with applicable regulations and codes, failure to obtain necessary
permits, failure to erect the building in accordance with the plans, failure to properly
monitor, supervise, and inspect the design and construction of the building, failure to
provide construction management and project management services in accordance with
industry standards, failure to warn about the risks of structural failure, negligently
representing that the site was safe and secure, failure to employ competent employees,
and failure to ensure that Samuel’s professional engineers were properly licensed and
trained.
C. Relevant Policy Provisions
In its motion, Hartford cites four policy provisions which, in the view of Hartford,
exclude coverage of Samuel for all of the claims made in the Canadian Litigation. The
provisions cited by Hartford are (1) the professional services exclusion; (2) the
contemporaneous damage exclusions or damage to property exclusions; (3) the care,
custody, or control exclusion; and (4) the impaired property exclusions.4 Samuel
contends these exclusions do not exclude coverage for all claims asserted in the
Canadian Litigation.5

4

The specific language of each exclusion is provided infra.

5

In its motion, Samuel discusses additional exclusions. Ultimately, analysis of these additional
exclusions is not necessary.

9

IV. ANALYSIS
When interpreting the exclusions cited by Hartford, I have examined the policy
language in question and the complaints and cross-claims in the Canadian Litigation.
Applying the complaint rule, I have examined the pleadings in these two cases to
determine for each case whether there are allegations that state a claim which is
potentially or arguably within the coverage of the Business Policy or the Umbrella
Policy. In determining whether Hartford has a duty to defend in either of the Canadian
cases, I need not determine which specific claims ultimately are covered or not covered
by the policies. Each of the exclusions on which Hartford relies is introduced by a
clause in the policy such as “(t)his insurance does not apply to” or “(t)his policy does not
apply to.” Business Policy, ¶ B.1; Umbrella Policy, ¶ B.
A. The Professional Services Exclusion
Hartford cites the professional services exclusion of the Business Policy,
contending that this exclusion bars all coverage for the claims asserted in the Flynn and
Process Group cases. The professional services exclusion is stated in paragraph B.1.j
of the Business Policy. Specifically, Hartford relies on the language of the professional
services exclusion shown in the excerpt below:
j.

Professional Services

“[P]roperty damage” or “personal and advertising injury” . . . arising out of
the rendering of or failure to render any professional service. This includes
but is not limited to:
*****
(2)
Preparing, approving, or failing to prepare or approve maps, shop
drawings, opinions, reports, surveys, field orders, change orders, designs
or drawings and specifications;
(3)

Supervisory, inspection, architectural or engineering activities.
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Business Policy, ¶ B.1.j.
According to Hartford, all of the claims in the Canadian Litigation fall within one of
these two definitions of professional services because all of the claims and losses
alleged in the Canadian Litigation arise from Samuel’s professional engineering or
supervisory services. In the view of Hartford, the language “arising out of the rendering
of or failure to render professional services” creates a but for causation test, meaning
that but for the professional services, the alleged injury would not have occurred.
According to Hartford, when all of the conduct alleged in the underlying complaints, both
professional and non-professional, would not have occurred in the absence of the
professional or supervisory services of the insured, the professional services exclusion
excludes coverage for all such conduct.
In response, Samuel contends that the professional services exclusion does not
apply to all of the actions or failures to act alleged against Samuel in the Canadian
Litigation. Samuel contends that some of the allegations in the underlying litigation
“may arise from engineering design, opinions, reports, surveys, field orders, change
orders, designs or drawings and specifications. Other allegations may arise from
Samuel’s administrative role or merely its coincidental involvement in the project.”
Motion [#21], p. 10. In the view of Samuel, administrative tasks or Samuel’s
coincidental involvement in the project do not constitute professional services and,
therefore, do not fall within the professional services exclusion.
I reject the contention of Hartford that the phrase “arising out of,” as used in the
exclusion, causes the exclusion to cover non-professional activities that are tied in some
way to professional services. The phrase “arising out of” means “originating from,

11

growing out of, or flowing from” a certain cause. See, e.g., Mgmt. Specialists, Inc. v.
Northfield Ins. Co., 117 P.3d 32, 37 (Colo. Ct. App. 2004). The professional services
exclusion uses the phrase “arising out of” to describe damage or injury. The phrase
does not describe the incipient cause of the damage or injury – in this case professional
services. The use of the phrase “arising out of” in the professional services exclusion
does not broaden the meaning of the key term “professional services” to include all nonprofessional services related in any way to the excluded professional services.
I reject also the contention of Samuel that the terms “supervisory” and
“inspection” are ambiguous as used in the professional services exclusion. A contract is
ambiguous only if it is reasonably susceptible of more than one meaning. Home
Engineering, 72 P.3d at 453. “In ascertaining whether certain provisions of a
document are 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.” Kane v. Royal Ins.
Co. of America, 768 P.2d 678, 680 (Colo.1989). Having examined the relevant
language of the professional services exclusion, I conclude that the terms supervisory
and inspection are not ambiguous. Rather, those two terms have generally accepted
meanings which are readily applicable in the context of the exception.
Many of the claims in the Canadian Litigation fall easily within the professional
services exclusion. For example, the claim for failure to design the dome to withstand
site conditions and the claim for failure to provide adequate plans and specifications fall
readily within the policy definition of professional services. On the other hand, claims
such as the claim for failure to erect the building in accordance with the plans and the
12

claim for defects and deficiencies in the work performed by Samuel related to site
drainage issues do not necessarily fall within the scope of professional services, as
defined in the professional services exception. Negligence in erecting the building and
deficient work related to site drainage do not necessarily involve the approval of plans
or drawings and do not necessarily involve supervisory, inspection, architectural or
engineering activities by Samuel. Based on the allegations in the complaints in the
Canadian Litigation, these claims and others may or may not fall within the professional
services exclusion, depending on the evidence presented in the Canadian Litigation and
the ultimate findings of the Canadian courts. However, in both the Process Group case
and the Flynn case, some claims potentially or arguably fall outside of the professional
services exclusion.
B. The Damage to Property Exclusions
Hartford cites exclusions it labels as the contemporaneous damage exclusions in
the Business Policy and contends these exclusions bar all coverage for the claims
asserted in the Flynn and Process Group cases. The contemporaneous damage
exclusion is stated in paragraph B.1.k of the Business Policy. Hartford relies on the
language of the contemporaneous damage exclusion shown in the excerpt below:
k.

Damage to Property

“Property damage” to:
*****
(5)
That particular part of real property on which you or any contractors
or subcontractors working directly or indirectly on your behalf are
performing operations, if the “property damage” arises out of those
operations; or
(6) That particular part of any property that must be restored, repaired or
replaced because “your work” was incorrectly preformed on it.
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*****
Paragraph (6) of this exclusion does not apply to “property damage”
included in the “products-completed operations hazard”.
Business Policy, ¶ B.1.k. The policy defines “property damage” to include “(p)hysical
injury to tangible property, including the resulting loss of use of that property,” and
“(l)oss of use of tangible property that is not physically injured.” Business Policy, ¶
G.20.
The Flynn Complaint alleges damages in the form of loss of equipment and
equipment rental fees. Flynn Complaint, ¶¶ 34 - 35. These alleged damages are not
damages to real property as specified in paragraph k.(5); nor are they damages to
property that was damaged because the work of Samuel was not performed correctly
on that property as specified in paragraph k.(6). The Sifto cross-claims in the Process
Group case include claims alleging exposure of machinery to water and defective work
related to maintenance access to machinery. Comparing these Sifto claims to this
policy exclusion, the damages alleged potentially or arguably fall outside of the
contemporaneous damage exclusions. Some of the claims for damages in both the
Process Group case and the Flynn case potentially or arguably fall outside of the
contemporaneous damage exclusions.
C. The Care, Custody, or Control Exclusion
Hartford contends that the care, custody, or control exclusion in the Umbrella
Policy bars coverage for property damage to real property in the circumstances present
in this case. The Umbrella Policy provides coverage for any damages the insured is
legally obligated to pay in excess of the underlying insurance, here the Business Policy.
Umbrella Policy, ¶ A.1. The care, custody, or control exclusion is stated in an
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endorsement to the Umbrella Policy and provides:
This policy does not apply to “property damage” to real property:
****
4. In the care, custody or control;
Of any “insured” or as to which any “insured” is for any purpose exercising
physical control.
Umbrella Policy [#20-2], CM/ECF page 18 of 20.
In response, Samuel notes that the complaints in the Canadian Litigation do not
allege directly or clearly that Samuel was in physical control of the real property in
question. I concur. In addition, as Samuel notes, this exclusion concerns only the
Umbrella Policy. To the extent this exclusion is applicable, it does not exclude coverage
under the Business Policy, including Hartford’s duty to defend. Further, some of the
claims for damages in both the Process Group case and the Flynn case potentially or
arguably fall outside of the care, custody, or control exclusion, in part because
ostensibly they do appear to involve real property. Hartford has not demonstrated that
this exclusion bars all coverage for all property damage to any real property at issue in
the Flynn Case or the Process Group Case.
D. The Impaired Property Exclusions
Hartford cites the impaired property exclusions in both policies and contends
these exclusions bar coverage for the loss of use of property or loss of production
resulting from the work of a contractor. The impaired property exclusions are stated in
paragraph B.1.n of the Business Policy and paragraph B.12 of the Umbrella Policy.
Hartford relies on the language of the impaired property exclusions shown in the excerpt
below:
15

n.

Damage to Impaired Property Or Property Not Physically
Injured

“Property damage" to "impaired property" or property that has not been
physically injured, arising out of:
(1)
A defect, deficiency, inadequacy or dangerous condition in "your
product" or "your work";
or
(2) A delay or failure by you or anyone acting on your behalf to perform
a contract or agreement in accordance with its terms.
This exclusion does not apply to the loss of use of other property arising
out of sudden or accidental physical injury to "your product” or "your work"
after it has been put to its intended use.
Business Policy, ¶ B.1.n; Umbrella Policy, ¶ B.12.
Nothing in the complaints in the Canadian Litigation indicates that Dome #5 had
been put to its intended use at the time of the collapse. Therefore, there is no basis to
conclude that the limitation on this exclusion, as stated in the final paragraph, is
applicable to the claims against Samuel.
The Business Policy defines impaired property as follows:
11. "Impaired property" means tangible property, other than "your product"
or "your work," that cannot be used or is less useful because:
a. It incorporates "your product" or "your work" that is known or thought to
be defective, deficient, inadequate or dangerous; or
b. You have failed to fulfill the terms of a contract or agreement;
if such property can be restored to use by:
a. The repair, replacement, adjustment or removal of "your product" or
"your work";
or

16

b. Your fulfilling the terms of the contract or agreement.
Hartford contends that a large portion of the claims asserted by Sifto are based
on the loss of production due to the collapse of Dome #5. According to Hartford,
“(a)ssuming Sifto’s loss-of-use damages are truly ‘property damage,’ they are so only
because they arise out of the loss of use of otherwise undamaged property that has
been rendered less useful as a result of the Samuel’s [sic] allegedly faulty work.”
Motion for summary judgment [#20], pp. 19 - 20.
Some of the claims in the Process Group case and the Flynn case likely are
excluded from coverage by the impaired property exclusions. That possibility, however,
does not support the conclusion that all of the claims in each of those two cases are
excluded from coverage by the impaired property exclusions. Some damages alleged
in both the Flynn case and the Process Group case do not involve impaired property
damages that fall within these exclusions.
V. CONCLUSION & ORDERS
Viewing the undisputed facts in the record in the light most favorable to Samuel, I
conclude that Hartford has not shown that the claims asserted against Samuel in the
Process Group case are not potentially or arguably within the coverages provided by
either the Business Policy or the Umbrella Policy. At minimum, when comparing the
claims in the Process Group case and the terms of the relevant policies, there remains
a genuine dispute involving material facts about whether a theory of recovery within the
policy coverage has been asserted in the Process Group case. The same analysis and
conclusions are applicable to the Flynn case.
Hartford has asserted two policy exclusions as covering all claims in both the

17

Process Group and Flynn cases. Those policy exclusions are not so broad as to cover
all of these claims. Further, the care, custody, and control exclusion is part of the
Umbrella Policy, but not the Business Policy. This exclusion does not preclude
coverage under the Business Policy, and some of the claims in both the Process Group
case and the Flynn case potentially fall outside of this exclusion. Finally, although the
impaired property exclusion may exclude coverage for some types of damages claimed
in the Canadian Litigation, it does not cover all types of damages claimed in that
litigation. Hartford has not shown in its motion for summary judgment that a policy
exclusion covers every claim asserted in the Process Group case and every claim
asserted in the Flynn case. Thus, under Colorado law, Hartford has a duty to defend
Samuel in both the Process Group case and the Flynn case.
In its motion for summary judgment, Samuel contends Hartford cannot establish
that, as a matter of law, the claims in both the Process Group case and the Flynn case
are solely and entirely within the exclusions in the insurance policy. Hartford bears the
burden of establishing that the exclusions in the policy apply to each of the claims in the
Process Group case and each of the claims in the Flynn case. However, Hartford has
not met that burden. Viewing the undisputed facts in the record in the light most
favorable to Hartford, I conclude that Samuel is entitled to summary judgment
concerning Hartford’s duty to defend. This is so because one or more of the claims in
the Process Group case and one or more of the claims in the Flynn case potentially or
arguably fall within the coverages provided by either the Business Policy or the
Umbrella Policy.

18

THEREFORE, IT IS ORDERED as follows:
1. That the Plaintiff/Counterclaim Defendant Hartford Casualty Insurance
Company’s Motion for Summary Judgment [#20] filed July 22, 2013, is DENIED; and
2. That Samuel Engineering Inc.’s Cross-Motion for Determination of Law
[#21] filed July 22, 2013, is GRANTED.
Dated March 12, 2014, at Denver, Colorado.
BY THE COURT:

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