Avalon Condominium Association, Inc. v. SECURA Insurance

Filing 42

ORDER granting 16 Motion to Strike. By Magistrate Judge Kathleen M. Tafoya on 07/23/2014. (athom, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Magistrate Judge Kathleen M. Tafoya
Civil Action No. 14–cv–00200–CMA–KMT

AVALON CONDOMINIUM ASSOCATION, INC.,
Plaintiff,
v.
SECURA INSURANCE, A MUTUAL COMPANY,
Defendant.
____________________________________________________________________________
ORDER
______________________________________________________________________________
This matter is before the court on Plaintiff’s “Motion to Strike Defendant’s Designation
of Non-Parties at Fault.” (Mot., Doc. No. 16, filed April 11, 2014.) For the following reasons,
Plaintiff’s motion is GRANTED.
BACKGROUND
This case is brought by Plaintiff, Avalon Condominium Association, Inc. against its
former insurer, Defendant, SECURA Insurance, a Mutual Company, alleging three claims—
breach of contract for failure to pay a covered loss under a valid insurance policy, statutory bad
faith, and common law bad faith. (Compl., Doc. No. 4, ¶¶ 61-87.) Specifically, Plaintiff alleges
that on June 6, 2012, a wind and hail storm caused extensive damage to the roofs of the property
in question, that the damage was within the coverage of its policy with Defendant, and
Defendant was contractually obligated to pay for repairs. (Id. ¶¶ 9-12.) Further, Plaintiff alleges

that Defendant has, in bad faith, unreasonably denied payment for covered benefits. (Id. at ¶¶
34, 43, 52, and 53.)
Defendant denies that Plaintiff’s property was extensively damaged by the hail storm of
June 6, 2012. (Answer, Doc. No. 2 at ¶ 9.) Other than relatively minimal damage that might
have been caused by wind on June 6, 2012 (id. at ¶ 10), Defendant alleges that any additional
damage to Plaintiff’s property may have been caused by the negligence of other parties and, to
that end, filed a Designation of Non-Parties at Fault Pursuant to Colo. Rev. Stat. § 13–21–111.5.
(See Doc. No. 12.)
In response to Plaintiff’s Motion to Strike Defendant’s Designation of Non-Parties at
Fault, Defendant first filed a notice with the court on April 15, 2014, indicating Plaintiff had
failed to confer before filing its motion. (Doc. No. 17.) Plaintiff filed its response to the notice
on April 16, 2014. (Doc. No. 18.) Thereafter, Defendant filed its response to Plaintiff’s motion
on May 1, 2014 (Resp., Doc. No. 22), and Plaintiff filed its reply on May 15, 2014 (Reply, Doc.
No. 23). This matter is ripe for review and ruling.
ANALYSIS
Defendant designates four different nonparties whose actions Defendant believes may
have contributed to Plaintiff’s roof damage. (Doc. No. 12.) First, Defendant alleges that the
property owners may have failed to properly maintain or inspect the Plaintiff’s property. (Id. at
1.) Second, Defendant points to the property managers, suggesting that they may have failed to
properly maintain Plaintiff’s roofs and may have hired companies that might have made
defective repairs to Plaintiff’s property. (Id. at 2.) Third, Defendant claims that the third-party
adjuster Plaintiff hired to inspect the damaged roofs might have contributed to any damage by

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using improper and destructive inspection methods. (Id. at 3.) Lastly, Defendant suggests that
the roof installer may have failed to install the roof properly, leaving it susceptible to undue
deterioration. (Id. at 3-4.) The alleged actions or omissions of each designated nonparty bear on
the source of Plaintiff’s property damage and relate to Defendant’s argument regarding its
contractual obligation to pay for any repairs to Plaintiff’s property.
Plaintiff offers five separate arguments in support of its motion to strike. (See Mot.)
First, Plaintiff argues it did not need to confer with Defendant because its motion was brought
under Fed. R. Civ. P. 12. D.C.COLO.LCivR 7.1(b)(2). (Resp. at 1.) Second, Plaintiff
characterizes Colo. Rev. Stat. § 13-21-111.5 as procedural in nature and argues that, under Erie, 1
it is inapplicable in a federal diversity case. (Mot. at 2-4.) Third, Plaintiff argues that Defendant
violated the tenets of Erie by removing this action to federal court in order to avoid the Civil
Access Pilot Project Rules adopted by the Supreme Court of Colorado’s Chief Justice Directive
11-02. (Mot. at 2-3.) 2 Fourth, Plaintiff alleges that Colo. Rev. Stat. § 13-21-111.5 is
inapplicable to its contract claim. (Mot. at 4.) Finally, Plaintiff asserts that no other party can be
liable for its alleged tort claims of bad faith, rendering Defendant’s nonparty designations
inapposite. (Reply at 2-4.)
Preliminarily, the court disagrees with Plaintiff’s assertion that conferral was not
necessary because the motion was brought under Fed. R. Civ. P. 12(f) and 12(b)(6). (Resp. at 1.)
Plaintiff’s motion does not arise under Fed. R. Civ. P. 12, and as such, conferral with Defendant
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Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938).
The court does not address this argument as it has been waived by Plaintiff’s failure to file a
timely objection to the removal on this basis. Additionally, the court is not persuaded that
Defendant removed the case to federal court specifically to avoid Colorado’s Civil Access Pilot
Project Rules, or, even if Defendant had, how such action would render an otherwise substantive
state statute procedural.
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was required. D.C.COLO.LCivR 7.1(a). Judicial time is valuable, though, and as the motion has
now been fully briefed it will not be denied on the grounds that Plaintiff did not confer with
Defendant. However, further violation of Local Rules will not be tolerated.
A. Applicability of Colo. Rev. Stat. § 13–21–111 in Federal Proceedings
Erie holds that Federal courts sitting in diversity are bound by state statutes when
deciding questions of substantive law. 304 U.S. at 78. Numerous decisions from this District
have found that Colo. Rev. Stat. § 13–21–111.5 is substantive in nature and have applied it as
such. Resolution Trust Corp. v. Deloitte & Touche, 818 F. Supp. 1406, 1408 (D. Colo. 1993);
Jenkins v FMC Tech., No. 07–cv–02110–LTB–KMT, 2009 WL 1526022, at *1 (D. Colo. May
28, 2009); Bunting v. Preferred Homecare, No. 12–cv–03327–WJM–KMT, 2013 WL 951182, at
*1 (D. Colo. Mar. 12, 2013); Phoenix Ins. Co. v. Trinity Universal Ins. Co. of Kan., No. 12–cv–
01553–REB–KLM, 2013 WL 4510304, at *2 (D. Colo. Aug. 26, 2013). Consequently, Plaintiff’s
argument that the statute is inapplicable in this federal case is not persuasive.
B. Applicability of Colo. Rev. Stat. § 13–21–111 to Contract Claims
Plaintiff correctly notes that nonparty designation has consistently been limited to actions
arising in tort or in the context of tort-like duties. See Trustees of Colo. Laborers’ Health &
Welfare Trust Fund v. American Benefit Plan Adm’rs, Inc., No. 04–CV–02630–EWN–OES,
2005 WL 1661079, at *2 (D. Colo. July 14, 2005). Nonparty designation is not allowed when
the cause of action sounds strictly in contract. Id. Therefore, Defendant’s nonparty designation
cannot apply to Plaintiff’s breach of contract claim.
Some actions, however, that facially depend on contractual obligations will turn on the
application of tort-like duties, thereby warranting application of Colo. Rev. Stat. § 13–21–111.5.

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See FDIC v. Clark, 978 F.2d 1541, 1552 (10th Cir. 1992). In the particular context of insurance
contracts, the Colorado Supreme Court has noted, because of the “special nature of the insurance
contract and the relationship which exists between the insurer and the insured,” an insurer’s
breach of the duty of good faith gives rise to a separate cause of action sounding in tort. Cary v.
United of Omaha Life Ins. Co., 68 P.3d 462, 466 (Colo. 2003). Because Plaintiff’s statutory and
common law bad faith claims sound in tort, Colo. Rev. Stat. § 13–21–111.5 may apply to these
claims.
C. Applicability of Colo. Rev. Stat. § 13–21–111 to Bad Faith Claims
Plaintiff argues that Defendant’s nonparty designation is improper with respect to its bad
faith claims because Defendant has not designated nonparties that could be liable for
Defendant’s alleged bad faith. (Reply at 2-4.) The court agrees.
Plaintiff alleges that Defendant violated its duty of good faith by unreasonably denying
payment for Plaintiff’s covered benefits. (See Compl. ¶¶ 71-87.) As noted above, Defendant has
not designated parties whose actions or omissions would have contributed in any way to
Defendant’s alleged bad faith. See Fried v. Long, 946 P.2d 487, 489 (Colo. App. 1997) (While it
is not necessary for the alleged acts of the designated party to be the same tortious acts as those
of Defendant, it is necessary that the alleged conduct of the designated party be a cause of the
same claimed injury). Instead, Defendant asserts that negligence on the part of the property
owner, property manager, roof installer, or Plaintiff’s adjuster may have contributed to the
damage to Plaintiff’s roof. (Doc. No. 12 at 1-4.) These activities relate to causation and
damages pursuant to the breach of contract claim. None of the designated parties allegedly
participated in or contributed to Defendant’s alleged failure to deal with Plaintiff in good faith.

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(See id.) As a result, the court finds that Defendant’s designation of nonparties at fault is not
proper under Colo. Rev. Stat. § 13–21–111.5 and should be stricken.
WHEREFORE it is
ORDERED Plaintiff’s “Motion to Strike Defendant’s Designation of Non-Parties at
Fault” (Doc. No. 16) is GRANTED. Defendant’s “Designation of Non-Party at Fault” (Doc.
No. 12) is STRICKEN.
Dated this 23rd day of July, 2014.

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