Zurich American Insurance Company et al v. Acadia Insurance Company

Filing 94

ORDER 66 Plaintiff's Motion for Summary Judgment is DENIED; 67 Defendant's Motion for Summary Judgment is GRANTED; 73 Motion to Strike and 75 Motion to Strike are DENIED AS MOOT by Judge Christine M. Arguello on 03/20/2017. (swest)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Christine M. Arguello
Civil Action No. 14-cv-01273-CMA-CBS
ZURICH AMERICAN INSURANCE COMPANY, a New York corporation, and
AMERICAN GUARANTEE AND LIABILITY INSURANCE COMPANY, a New York
corporation,
Plaintiffs,
v.
ACADIA INSURANCE COMPANY, a New Hampshire corporation,
Defendant.

ORDER DENYING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT AND
GRANTING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT
This matter is before the Court on Plaintiffs’ Motion for Summary Judgment (Doc.
# 66) and Defendant’s Cross-Motion for Summary Judgment (Doc. # 67) regarding
Defendant’s duty to indemnify Intrawest Stratton Development Corporation (“ISDC”) and
DEW Construction Company (“DEW”) in the State Litigation. Because the Court
concludes that Defendant Acadia Insurance Company (“Acadia”) does not have a duty
to indemnify ISDC or DEW, Defendant’s Motion for Summary Judgment is granted.
I.

BACKGROUND

Zurich American Insurance Company (“ZAIC”) issued a commercial general
liability insurance policy, policy number GLO 3504442-00, to Intrawest Corporation—
under which ISDC was a named insured—for the period of April 5, 2001, to April 5,

2005 (the “ZAIC Policy”). (Doc. # 93 at 2.) The ZAIC Policy is a Project Construction
Insurance Program (“PCIP”) that provides coverage for various listed construction and
development projects around the country. (Doc # 93 at 2.) American Guarantee and
Liability Insurance Company (“AGLIC”) also issued an insurance policy, policy number
AUC 3504443-00, to Intrawest Corporation for the same time period—under which
ISDC was a named insured—that provided coverage above the limits of the ZAIC
Policy, often referred to as excess coverage. (Doc. # 93 at 2.) Marsh USA (“Marsh”)
was the administrator of the Zurich PCIP program, which included the ZAIC and the
AGLIC Policies. (Doc # 93 at 3.) As part of the application process to enroll in the PCIP
program, all general contractors for Intrawest, including DEW, were required to provide
a General Liability Bid Deduction. (Doc. # 93 at 3.) Marsh was not able to produce a
Liability Insurance Deduction Worksheet on the prescribed form from DEW. (Doc. # 93
at 3.) It therefore remains unclear whether DEW was properly enrolled in the PCIP.
(Doc. # 72 at 7.)
Acadia issued successive commercial general liability policies, under policy
number CPP 0030879 (“Acadia Primary Policies”), and commercial umbrella policies,
under policy number CUA-0030883 (“Acadia Umbrella Policies”), to DEW from January
1, 2001, to January 1, 2009. (Doc. # 93 at 5.)
This case arose out of an underlying construction defect suit (the “State
Litigation”). (Doc. # 57 at 2.) In the State Litigation, TreeTop Condominium Association
Inc. filed an action on March 17, 2009, against several defendants, including ISDC and
DEW. (Doc. # 57 at 2.) Both DEW and ISDC tendered the State Litigation to ZAIC for

coverage. (Doc. # 93 at 10.) DEW also tendered its defense to Acadia for coverage.
(Doc. # 93 at 9–10.) ZAIC agreed to defend and indemnify both corporations under the
ZAIC Policy, pursuant to a reservation of rights. (Doc. # 93 at 10.) Similarly, Acadia,
through a reservation of rights letter, along with a Nonwaiver Agreement, agreed to
defend DEW under the Acadia Policies. (Doc. # 93 at 10.) When the ZAIC Policy
exhausted in May of 2010 because of payment of unrelated claims against ISDC,
AGLIC began defending DEW and ISDC pursuant to a reservation of rights. (Doc. # 93
at 11.)
On May 17, 2012, AGLIC agreed to pay $3 million to the State Litigation plaintiff
to settle all claims against DEW and ISDC. (Doc. # 93 at 11.) On October 22, 2012,
ZAIC and AGLIC (collectively “Zurich”) demanded full reimbursement for the defense
and settlement costs for both DEW and ISDC from Acadia, but Acadia refused to
reimburse. (Docs. # 93 at 13.) Zurich now seeks a judgment that Acadia, pursuant to
the Acadia Policies, had the duty to indemnify DEW and ISDC. (Doc. # 66.) It also
seeks reimbursement and/or contribution of all monies expended in defending DEW, as
well as all amounts paid to settle the State Litigation, from Acadia. (Doc. # 66 at 2.)
On July 29, 2014, the Court entered a Scheduling Order separating this litigation
into two Phases: Phase I, Acadia’s duty to defend, and Phase II, Acadia’s duty to
indemnify. (Doc. # 19 at 11.) As to Phase I, both parties filed motions for summary
judgment in early 2015. (Docs. ## 43–46, 53–56.) On September 29, 2015, this Court
issued its Order denying in part Zurich’s motion for summary judgment and granting in
part Acadia’s motion for summary judgment on the duty to defend. (Doc. # 57.) The

Court concluded that Acadia was not required to defend ISDC under the Acadia Primary
Policies because ISDC’s status as an additional insured under the Acadia Primary
Policies ended when DEW’s work for ISDC completed and that Acadia had no
obligation to defend ISDC after the property was put to its intended use. (Doc. # 57 at
11.) The Court made no ruling on the issue of whether Acadia had a duty to indemnify
DEW. (Doc. # 57 at 8.)
Pursuant to this Court’s Order, on September 20, 2016, the parties submitted a
stipulated statement of facts. (Doc. # 93.) The pertinent parts of the insurance
language from the statement of facts are incorporated here. The Zurich Policy includes
an “other insurance” clause, which states in part:
4. Other Insurance
If other valid and collectible insurance is available to the insured for a
loss we cover under Coverages A or B of this Coverage Part, our
obligations are limited as follows:
a. Primary Insurance
This insurance is primary except when Paragraph b. below applies. If
this insurance is primary, our obligations are not affected unless any of
the other insurance is also primary. Then, we will share with all that
other insurance by the method described in Paragraph c. below.
b. Excess Insurance
This insurance is excess over any of the other insurance, whether
primary, excess, contingent or on any other basis:
(1) That is Fire, Extended Coverage, Builder's Risk, Installation
Risk or similar coverage for "your work";
(2) That is Fire insurance for premises rented to you; or
(3) If the loss arises out of the maintenance or use of aircraft,
"autos" or watercraft to the extent not subject to Exclusion g. of
Coverage A (Section I). (Doc. # 93 at 4.)

The AGLIC Policy, the excess layer of the PCIP, contains an “other insurance”
clause, which states in part:
… Other Insurance
If other insurance applies to damages that are also covered by this
policy, this policy will apply excess of the other insurance. . . . However,
this provision will not apply if the other insurance is written to be excess
of this policy. (Doc. # 93 at 4.)
The Intrawest Stratton Treetop Overview of Insurance Program states that the
PCIP general liability insurance coverage is “primary insurance for both Intrawest and
the General Contractor.” (Doc. # 93 at 4.)
Similarly, the accompanying Stratton Treetop Insurance Program Manual
(Intrawest) states:
This program is unique in that it provides primary coverage on behalf
of Intrawest Corporation, their Subsidiaries and General Contractors
for the perils of General Liability, Excess Liability, . . . and Builders’ All
Risk/Course of Construction Case Insurance. (Doc. # 93 at 4–5.)
The Acadia Primary Policy also contains an “other insurance” provision, which
provides in part:
4. Other Insurance
If other valid and collectible insurance is available to the insured for a
loss we cover under Coverages A or B of this Coverage Part, our
obligations are limited as follows:
a. Primary Insurance
This insurance is primary except when b. below applies. If this
insurance is primary, our obligations are not affected unless any of the
other insurance is also primary. Then, we will share with all that other
insurance by the method described in c. below.
b. Excess Insurance

This insurance is excess over:
. . . (2) Any other primary insurance available to you covering
liability for damages arising out of the premises or operations for
which you have been added as an additional insured by attachment
of an endorsement.
When this insurance is excess, we will have no duty under
Coverages A or B to defend the insured against any "suit" if any
other insurer has a duty to defend the insured against that "suit". If
no other insurer defends, we will undertake to do so, but we will be
entitled to the insured's rights against all those other insurers.
(Doc. # 93 at 6.)
II.

STANDARD OF REVIEW

Summary judgment is warranted when “the movant shows that 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). A fact is “material” if it is essential to the proper
disposition of the claim under the relevant substantive law. Wright v. Abbott Labs., Inc.,
259 F.3d 1226, 1231–32 (10th Cir. 2001). A dispute is “genuine” if the evidence is such
that it might lead a reasonable jury to return a verdict for the nonmoving party. Allen v.
Muskogee, Okl., 119 F.3d 837, 839 (10th Cir. 1997). When reviewing motions for
summary judgment, a court must view the evidence in the light most favorable to the
non-moving party. Id. However, conclusory statements based merely on conjecture,
speculation, or subjective beliefs do not constitute competent summary judgment
evidence. Bones v. Honeywell Int’l, Inc., 366 F.3d 869, 875 (10th Cir. 2004).
The moving party bears the initial burden of demonstrating the absence of a
genuine dispute of material fact and entitlement to judgment as a matter of law. Id. In
attempting to meet this standard, a movant who does not bear the ultimate burden of

persuasion at trial does not need to disprove the other party’s claim; rather, the movant
need simply point out to the Court a lack of evidence for the other party on an essential
element of that party’s claim. Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 671 (10th
Cir. 1998) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986)).
Once the movant has met its initial burden, the burden then shifts to the
nonmoving party to “set forth specific facts showing that there is a genuine issue for
trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). The nonmoving party
may not simply rest upon its pleadings to satisfy its burden. Id. Rather, the nonmoving
party must “set forth specific facts that would be admissible in evidence in the event of
trial from which a rational trier of fact could find for the nonmovant.” Adler, 144 F.3d at
671. “To accomplish this, the facts must be identified by reference to affidavits,
deposition transcripts, or specific exhibits incorporated therein.” Id.
Where, as here, the parties file cross-motions for summary judgment, each
motion is considered separately and “the denial of one does not require the grant of
another.” Buell Cabinet Co., Inc. v. Sudduth, 608 F.2d 431, 433 (10th Cir. 1979).
However, when faced with cross summary judgment motions, the court is “entitled to
assume that no evidence needs to be considered other than that filed by the parties.”
James Barlow Family Ltd. P’ship v. David Munson, Inc., 132 F.3d 1316, 1319 (10th Cir.
1997).
III.

DISCUSSION

Both parties acknowledge that genuine issues of material fact exist as to whether
DEW was properly enrolled in the PCIP. (Docs. ## 71 at 5, 72 at 9.) When the State

Litigation settled on May 17, 2012, DEW’s enrollment in the PCIP was uncertain. (Doc.
# 72 at 9.) Regardless of whether DEW was enrolled in the PCIP, however, the ultimate
outcome of this case would not change: Assuming that DEW was enrolled in the PCIP,
Acadia’s coverage would be excess to ZAIC’s and Acadia need not indemnify DEW.
Section (A) infra discusses this issue. On the other hand, assuming that DEW was not
enrolled in the PCIP, Zurich is then a “volunteer” with no rights of recovery against
Acadia. Section (B) infra discusses this issue. Because neither outcome would
obligate Acadia to reimburse ZAIC for the expenses it incurred in defending DEW and
ISDC, the Court finds that Acadia is entitled to summary judgment.
A. Assuming DEW was enrolled in the PCIP, Acadia’s coverage is excess to
AGLIC Policy
Zurich’s claims turn on the question of whether Acadia had any duty to indemnify
DEW in the underlying settlement. If Acadia can show that policy exclusions apply to
exclude indemnity, then Zurich cannot pursue Acadia for the reimbursement of
expenses it incurred in indemnifying DEW and ISDC.
Acadia argues that ZAIC’s coverage was intended to be primary and therefore
Acadia, as an excess insurance provider, need not reimburse ZAIC. (Doc. # 67 at 17.)
Zurich however argues the ZAIC and the Acadia Policies have substantively identical
“other insurance” clauses that render the excess provisions mutually repugnant and that
both insurers must provide coverage on a pro rata basis. (Doc. # 69 at 19.) It also
claims that Acadia Primary Policies were not “written to be excess” of the AGLIC Policy
because the two policies were drafted independently of each other. (Doc. # 69 at 19.)

To resolve these dueling arguments, this Court must now interpret the language
of the insurance contracts and apply the legal standards that undergird an insurer’s
duties to indemnify its insureds.
In Colorado, an insurer’s duty to indemnify is distinct from its duty to defend.
Hecla Mining Co. v. N.H. Ins. Co., 811 P.2d 1083, 1086 n.5 (Colo. 1991). The duty to
indemnify relates to the insurer’s duty to satisfy a judgment entered against the insured.
Cyprus Amax Minerals Co. v. Lexington Ins. Co., 74 P.3d 294, 299 (Colo. 2003)
(quotation omitted). Because the duty to defend encompasses any potential claims
raised by the facts and the duty to indemnify relates to the actual liability imposed,
the duty to defend is triggered more easily than is the duty to indemnify, and [w]here
there is no duty to defend, it follows that there can be no duty to indemnify 1.
Constitution Assocs. v. N.H. Ins. Co., 930 P.2d 556, 563 (Colo. 1996). However, where
there is a duty to defend, there is not necessarily a duty to indemnify. Id.
Colorado courts interpret insurance policies de novo, employing the fundamental
principles of contract-interpretation. Allstate Ins. Co. v. Huizar, 52 P.3d 816, 819 (Colo.
2002). The objective when construing and interpreting insurance policies is to
effectuate the parties’ intent. Union Ins. Co. v. Houtz, 883 P.2d 1057, 1060 (Colo.
1994) (en banc). In general, to determine whether an insurer has a duty to defend the
insured, Colorado courts follow the “four corners rule” or “complaint rule,” under which
1

In its Phase I summary judgment motion entered on September 29, 2015 (Doc # 57),
this Court decided that Acadia did not have a duty to defend ISDC in Treetop. The
Court’s reasons are fully incorporated herein by reference. Because there cannot be a
duty to indemnify without a duty to defend, it follows that Acadia does not have a duty to
indemnify ISDC either. See Constitution, 930 P.2d at 563.

the courts compare the allegations of the underlying complaint with the applicable policy
terms. DISH Network Corp. v. Arch Specialty Ins. Co., 659 F. 3d 1010, 1015 (10th Cir.
2011).
The Colorado Supreme Court has explained that the four corners or complaint
rule's purpose is to protect the insured's legitimate expectation of a defense. Cotter
Corp. v. Am. Empire Surplus Lines Ins. Co., 90 P.3d 814, 828 (Colo. 2004) (quotations
omitted). While the “four corners” or “complaint” rule generally bars the admissibility of
evidence extrinsic to the underlying complaint and the relevant insuring agreements in
coverage determinations, a “widely recognized exception” to this rule allows a court to
consider such evidence where it is unrelated to the merits of the underlying litigation
and “plainly take[s] the case outside the policy coverage.” Pompa v. Am. Family Mut.
Ins. Co., 520 F.3d 1139, 1147 (10th Cir. 2008). In fact, the Tenth Circuit has
determined that, in light of the “authoritative support” for this rule and supporting dicta,
the Colorado Supreme Court would likely adopt the exception. Id.
An insurer's duty to indemnify arises when “the policy actually covers the
harm.” Cyprus, 74 P.3d at 301. “The determination of whether a duty to indemnify
exists requires factual development, as it is largely a question of fact.” EMC Ins. Cos. v.
Mid-Continent Cas. Co., 884 F. Supp. 2d 1147, 1171-72 (D. Colo. 2012). Extrinsic
evidence may therefore assist the trial court in determining whether an existing policy
covers actual liability. Id. It is appropriate to look at facts and evidence outside the four
corners of the complaint to determine an insurer’s ultimate objection to indemnify. See,
e.g., Cyprus, 74 P.3d at 301. In fact, as Zurich itself concedes, “any and all evidence

developed in the [u]nderlying [a]ction may be examined in determining Acadia’s
indemnity obligations to DEW and ISDC.” (Doc. # 66 at 9.)
The ZAIC Policy and the Acadia Policies have substantively identical “other
insurance” clauses. Zurich claims these substantively identical “other insurance”
clauses render these provisions mutually repugnant and both insurers must provide
coverage on a pro rata basis. However, this matter is not legally significant because
ZAIC Policy exhausted its limits of liability as of May of 2010 in relation to the payment
of other unrelated claims against ISDC. (Doc. # 93 at 11.) After that point, AGLIC
began defending DEW and ISDC pursuant to a reservation of rights. (Doc. # 93 at 11.)
Since the defense or indemnity of DEW did not implicate the ZAIC Primary Policy, the
issue that remains is whether Acadia Policies were excess to the AGLIC Policy.
Although the Acadia Policies’ “excess” clauses facially conflict with the excess
clause in the AGLIC Policy (Doc. # 93 at 4–7), the law permitting the consideration of
extrinsic evidence, permits the Court to consider contemporaneous documents in
resolving the conflict between the provisions. See, e.g., EMC, 884 F. Supp. 2d at 1171;
Cyprus, 74 P.3d at 301. Both (1) the construction contract that established ISDC’s
PCIP requirement and (2) the Insurance Overview and Insurance Program Manual
governing the PCIP policies (Doc. # 93 at 4–5) confirm that Acadia Policies were
intended to be excess over the AGLIC Policy.
The construction contract, which set ISDC’s requirement to establish PCIP,
states that “PCIP will provide primary insurance coverage for Owner and Contractor and
contingent/secondary insurance coverage for Subcontractors.” (Doc. # 93 at 8.)

Assuming ISDC was properly enrolled in the PCIP, ISDC would be the owner and DEW
a contractor. The plain language of the construction contract therefore establishes that
PCIP was intended to be the primary provider for both ISDC and DEW.
Similarly, the Intrawest Stratton Treetop Overview of Insurance Program Manual
that governs the PCIP policies states that the PCIP general liability insurance coverage
is “primary insurance for both Intrawest and the General Contractor.” (Doc. # 93 at 4.)
It confirms that the PCIP is primary for contractors at both the primary and excess
levels.
Moreover, as Acadia points out, the expressed purpose of OCIP or PCIP-type
policies also suggest Acadia Policies to be excess to the PCIP:
Owner-Controlled Insurance Programs (OCIPs) were developed to
make the insurance programs used primarily for construction projects
more equitable, uniform and efficient. OCIPs eliminate the costs of
overlapping coverage and delays caused by coverage or other disputes
between the parties involved in a project and, at the same time, protect all
the contracting parties by bringing the risk of loss from the project within
the insurance coverage of the OCIP. (Doc. # 70 at 18.)
John J. Loveless, “Construction Insurance: Do You Only Get What You Pay
For?” 78-APR N.Y. St. B.J. 10 (March-April 2006), cited in Pride v. Liberty Mutual
Insurance Co., No. 04–C–703, slip op. at 2, 2007 WL 1655111 (E.D. Wis. 2007).
Assuming DEW was properly enrolled in the PCIP, the provisions referenced
above support the claim that the PCIP intended to provide primary coverage to both
DEW and ISDC. Because an excess carrier need not indemnify until the primary
coverage is exhausted, AGLIC cannot recover indemnity expenses from Acadia. See
Phoenix Insurance Company v.Cantex, Inc., 2015 WL 6859530 *3-4 (D. Colo. 2015);

Travelers Home and Marine Ins. Co. v. Central Mut. Ins. Co., 2014 WL 4947319 *4 (D.
Colo. 2014).
B.

Assuming DEW was not enrolled in the PCIP, AGLIC is a “volunteer.”

As stated supra, it is factually unclear whether DEW was properly enrolled in the
PCIP. If we assume that DEW was not enrolled in the PCIP, Zurich could not be legally
liable to DEW for the claims it settled. Indeed, Zurich would be a “volunteer” in settling
for DEW, which precludes its recovery from Acadia. See Hocker v. New Hampshire Ins.
Co., 922 F.2d 1476, 1485 (10th Cir. 1991) (citing Reese v. AMF–Whitely, 420 F. Supp.
985, 989 (D. Neb. 1976) (“subrogation is applied to avoid unjust enrichment when one
party, other than a volunteer, has discharged an obligation which should have been
satisfied by another”)).
Regardless of how the material fact in dispute is resolved, Zurich cannot show
facts “admissible in evidence in the event of trial from which a rational trier of fact could
find for [Zurich].” Adler, 144 F.3d at 671. Assuming that DEW was enrolled in the
PCIP, Acadia’s Coverage would be excess to AGLIC Policy and Acadia need not
indemnify DEW. Conversely, if DEW was not enrolled in the PCIP, then Zurich is a
“volunteer” with no rights of recovery. Either resolution does not obligate Acadia to
reimburse Zurich.
IV. CONCLUSION
Based on the evidence in record, it is ORDERED that Zurich’s Motion for
Summary Judgment (Doc. # 66) is DENIED and Acadia’s Motion for Summary
Judgment (Doc. # 67) is GRANTED. Specifically, Acadia has no duty to indemnify

ISDC or DEW, and Plaintiff’s remaining claims therefore fail as a matter of law.
Accordingly, the suit is DISMISSED WITH PREJUDICE. It is
FURTHER ORDERED that the pending Daubert Motions (Doc. ## 73, 75) are
DENIED AS MOOT.
DATED: March20, 2017
BY THE COURT:

_______________________________
CHRISTINE M. ARGUELLO
United States District Judge