Gerald H. Phipps, Inc. v. Travelers Property Casualty Company of America

Filing 91

ORDER granting 50 defendant Travelers Property Casualty Company of America's Motion for Summary Judgment. The first, second, and fourth claims for relief of plaintiff Gerald H. Phipps, Inc. are dismissed with prejudice. The trial in this mat ter scheduled to begin on January 19, 2016 is VACATED. Within 14 days of the entry of this Order, defendant may have its costs by filing a Bill of Costs with the Clerk of the Court. This case is closed. By Judge Philip A. Brimmer on 1/8/16.(pabsec)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Philip A. Brimmer
Civil Action No. 14-cv-01642-PAB-KLM
GERALD H. PHIPPS, INC. d/b/a GH Phipps Construction Company, a Colorado
corporation,
Plaintiff,
v.
TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, a Connecticut
corporation,
Defendant.

ORDER

This matter is before the Court on the Motion for Summary Judgment [Docket
No. 50] filed by defendant Travelers Property Casualty Company of America
(“Travelers”). The Court has jurisdiction pursuant to 28 U.S.C. § 1332.
I. BACKGROUND1
This case involves insurance coverage under a Builder’s Risk Policy (the “policy”)
that Travelers issued to plaintiff Gerald H. Phipps, Inc. (“GHP”), a construction
company, for the period from October 1, 2011 to October 1, 2012. Docket No. 50 at 3,
Statement of Undisputed Material Fact (“SUMF”) 1-2; Docket No. 50-1 at 2. In terms of
the scope of coverage, the policy provides, in relevant part, as follows:
A. COVERAGE
We will pay for direct physical loss of or damage to Covered Property from

1

The following facts are undisputed unless otherwise indicated.

any of the Covered Causes of Loss.
1. Covered Property
Covered Property, as used in this Coverage Part, means “Builders’
Risk.”
...
Docket No. 50-1 at 18. “Builders’ Risk,” in turn, is defined as:
Property described in the Declarations under “Builders’ Risk” owned by
[plaintiff] or for which [plaintiff is] legally liable consisting of:
a. Buildings or structures including temporary structures while
being constructed, erected or fabricated at the “job site”;
b. Property that will become a permanent part of the buildings or
structures at the “job site”:
(1) While in transit to the “job site” or temporary storage
location;
(2) While at the “job site” or at a temporary storage location.
“Builders’ Risk” does not include:
a. Contraband, or property in the course of illegal transit or trade;
b. Buildings or structures that existed at the “job site” prior to the
inception of this policy;
c. Land (including land on which the property is located) or water.
Id. at 34.
Sometime after October 2011, GHP entered into a contract with the University of
Denver (“DU”) to renovate and expand the DU library, Docket No. 50 at 4, SUMF 4;
Docket No. 50-2 at 5, p. 20:20-23, which was originally constructed in either 1971 or
1972. Docket No. 50 at 4, SUMF 5; Docket No. 50-2 at 11, p. 27:11-17. GHP’s w ork
involved renovating the existing 154,000 square foot library building and constructing a
2

16,000 square foot addition. Docket No. 50 at 4, SUMF 4. The existing building
contained asbestos. Id., SUMF 5. The initial intent of GHP and DU was to avoid
asbestos mitigation costs by not disturbing the asbestos located in two elevator shafts
and four stairwells at the library and, therefore, to limit work on those areas to minor
drywall patching and painting. Id. at 4-5, SUMF 6-7; Docket No. 50-3 at 6, p. 45:4-22;
Docket No. 50-2 at 13, p. 52:12-18. DU entered into separate contracts w ith Excel
Environmental and Herron Enterprises (“Herron”) to perform asbestos abatement work
and environmental testing. Docket No. 50 at 5, SUMF 8.
On April 4, 2012, rapidly melting snow migrated down portions of the four
stairwells and two elevator shafts of the existing library (the “water intrusion”).2 Docket
No. 50-4 at 3. GHP contacted an abatem ent consultant and had the water in the
stairwells mitigated “under asbestos removal criteria.” Id. In an email dated April 4,
2012, Herron’s president, Lennie Herron, stated that the stairw ells and elevator shafts
“will ultimately require abatement/demolition due to microflora (mold) as it will not be
possible to open the walls and dry these concealed areas with blowers due to the
concealed fireproofing.” Docket No. 50-6 at 2.
On April 5, 2012, GHP filed a claim with Travelers related to the damage caused
by the water intrusion. Docket No. 50-7 at 2. 3 At the time of the water intrusion, GHP

2

The water intrusion appears to be related to GHP’s removal of the DU library’s
roof. See Docket No. 50 at 1 (“GHP had removed the roof of the building and water
entered four existing stairwells and two existing elevator shafts”).
3

Although the parties do not say so explicitly, it is clear that GHP anticipated at
the time it submitted the claim that it, rather than DU, might be liable for the damage
caused by the water intrusion. The primary expense GHP anticipated from the water
intrusion damage was asbestos containment and remediation and subsequent drywall
3

had not performed any patching or painting of the drywall in the stairwells or elevator
shafts, but had performed some “layout work” in those areas. Docket No. 50-2 at 1516, p. 68:10-69:1. The “layout work” consisted of determining locations for various
systems, including “mechanical, electrical, and communication systems, that were
routed through” the stairwells and elevator shafts as well as certain drywall
penetrations, which consisted of drilling through the drywall in the stairwells and
elevator shafts. Docket No. 54-1 at 2-3, pp. 43:11-44:22. 4 In responding to GHP’s
claim, Travelers representative Bradley DuPuis noted that, while “the initial scope of
work on the building was to repaint the stair tower interiors, due to the asbestos content
in the drywall,” after the water intrusion, “the asbestos . . . needs to be rem oved,
because it is wet inside.” Docket No. 50-7 at 4.
In a letter dated April 23, 2012, Travelers denied GHP’s claim on the ground that
the policy does not cover damage to the existing building. Docket No. 50-9 at 2-3.
After Travelers denied GHP’s claim, GHP sought reimbursement of asbestos
remediation costs from DU and requested that DU submit a claim to its property insurer.
Docket No. 50 at 7, SUMF 19. DU, however, refused to reimburse GHP for remediation
costs and declined to submit a claim to its insurer. Id.
On two occasions, GHP requested reconsideration of Travelers’ denial of

removal. See Docket No. 50-7 at 3 (“they are meeting with a remediation company to
get a price on the abatement, and then they need to get a price on the new drywall in
the stair towers”).
4

Regarding these “penetrations,” Kurt Klanderud, GHP’s president, testif ied that
it was his understanding that “in some cases penetrations” had been performed, Docket
No. 54-1 at 2, p. 43:15-16, but he later indicated that he w as not sure if the penetrations
had been performed at the time of the water intrusion. Id. at 3, p. 44:20-22.
4

coverage. See Docket Nos. 50-10, 50-12. Both requests were denied. See Docket
Nos. 50-11, 50-13. In GHP’s second request for reconsideration, GHP detailed several
pieces of work that had been performed on the stairwells and elevator shafts prior to
the water intrusion event, including coordinating with Herron concerning removal of
panels that may have been in contact with asbestos-containing materials, coordinating
the disposal of panels that had been removed from the stair towers, cutting into the
drywall in the basement elevator area, and removing fireproofing materials from the
cavity of the stairwell. Docket No. 50-12 at 3-4. 5 Travelers responded that GHP’s letter
did not identify any instances where “the water damaged GHP’s work in the stairwells or
elevator shafts.” Docket No. 50-13 at 2.
GHP filed this lawsuit on April 10, 2014 in the District Court for Douglas County,
Colorado. Docket No. 3. Travelers removed the case to this Court on June 11, 2014.
Docket No. 1. GHP brings claims for breach of contract, statutory and common law
insurance bad faith, and declaratory judgment. Docket No. 3 at 2-6. Among other
things, GHP seeks $804,661.76 in costs incurred after the water intrusion for asbestos
mitigation and remediation, spray-applied fireproofing, drywall, and insulation. Docket
No. 50 at 8, SUMF 26; Docket No. 50-14 at 2. On Aug ust 27, 2015, the Court granted

5

Much of GHP’s letter detailing the work performed on the stairwells before the
water intrusion describes activities conducted by Herron. E.g., Docket No. 50-12 at 2-3
(“Herron conducted an initial round of destructive investigations of the . . . stairwells”).
In addition, several of GHP’s examples of work performed on the stairwells and elevator
shafts do not specify whether GHP or Herron performed the work. E.g., id. at 3 (“On
March 12, 2012, asbestos contaminated materials were removed from the elevator pits
within the damaged area”); 3-4 (“Between March 26 and March 30, 2012 the wall cavity
of the NW basement stairwell was opened, and fireproofing materials were removed as
part of ongoing inspection of the stairs and elevator shafts”).
5

partial summary judgment in favor of Travelers and against GHP on GHP’s statutory
insurance bad faith claim. Docket No. 59.
II. STANDARD OF REVIEW
Summary judgment is warranted under Federal Rule of Civil Procedure 56 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); see Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 248-50 (1986). A disputed f act is “material” if
under the relevant substantive law it is essential to proper disposition of the claim.
Wright v. Abbott Labs., Inc., 259 F.3d 1226, 1231-32 (10th Cir. 2001). Only disputes
over material facts can create a genuine issue for trial and preclude summary
judgment. Faustin v. City & Cnty. of Denver, 423 F.3d 1192, 1198 (10th Cir. 2005). An
issue 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, 119 F.3d 837, 839 (10th Cir.
1997). Where “the moving party does not bear the ultimate burden of persuasion at
trial, it may satisfy its burden at the summary judgment stage by identifying a lack of
evidence for the nonmovant on an essential element of the nonmovant’s claim.”
Bausman v. Interstate Brands Corp., 252 F.3d 1111, 1115 (10th Cir. 2001) (quoting
Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 671 (10th Cir. 1998) (internal quotation
marks omitted)). “Once the moving party meets this burden, the burden shifts to the
nonmoving party to demonstrate a genuine issue for trial on a material matter.”
Concrete Works of Colo., Inc. v. City & Cnty. of Denver, 36 F.3d 1513, 1518 (10th Cir.
1994) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986)). The nonmoving party

6

may not rest solely on the allegations in the pleadings, but instead must designate
“specific facts showing that there is a genuine issue for trial.” Celotex, 477 U.S. at 324;
see Fed. R. Civ. P. 56(e). “To avoid summary judgment, the nonmovant must
establish, at a minimum, an inference of the presence of each element essential to the
case.” Bausman, 252 F.3d at 1115 (citation omitted). When reviewing a motion for
summary judgment, a court must view the evidence in the light most favorable to the
non-moving party. Id.; see McBeth v. Himes, 598 F.3d 708, 715 (10th Cir. 2010).
III. ANALYSIS
GHP’s breach of contract and declaratory judgment claims hinge on whether its
claimed loss is covered under the policy. An insurance policy is a contract and should
be interpreted consistently with the well-settled principles of contract interpretation.
Chacon v. Am. Family Mut. Ins. Co., 788 P.2d 748, 750 (Colo. 1990). The
interpretation of an insurance policy is a legal question. Allstate Ins. Co. v. Huizar, 52
P.3d 816, 819 (Colo. 2002). 6 The words of the contract should be given their plain
meaning according to common usage; strained constructions should be avoided.
Allstate Ins. Co. v. Starke, 797 P.2d 14, 18 (Colo. 1990).
Travelers argues that GPH did not suffer a loss to covered property because the
stairwells and elevator shafts were pre-existing structures that are specifically excluded
from the definition of “builders’ risk.” Docket No. 50 at 10-12; Docket No. 50-1 at 34.
Travelers further argues that, even if GHP’s work on the stairwells and elevator shafts
6

The parties agree that Colorado law applies to the claims in this case. The
Court concurs. Cf. Grynberg v. Total S.A., 538 F.3d 1336, 1346 (10th Cir. 2008)
(“Because the parties’ arguments assume that Colorado law applies, we will proceed
under the same assumption.”).
7

was covered under the policy, the damages that GHP claims are not covered because,
at the time of the water intrusion event, GHP had not performed any work in those
areas. Docket No. 50 at 12-13. GHP responds by arguing that the stairwells and
elevator shafts were not “buildings” or “structures” excluded from the policy, but rather
“components that were intended to become permanent parts of the newly renovated
and expanded library building.” Docket No. 54 at 13 (emphasis in original). GHP
further argues that, since it had performed work in the stairwells and elevator shafts
prior to the water intrusion, its losses were covered under the policy. Id. at 14-15.
Before considering the language of the policy, the Court takes up the factual
issue of what work GHP performed before the water intrusion. GHP concedes that,
under its contract with DU, the damaged elevator shafts and stairwells “were not initially
scheduled to be abated” and would have “no work in them” besides “minor patching and
paint.” Docket No. 50-3 at 6, p. 45:4-22. GHP also concedes that, as of the time of the
water intrusion event, it had not performed any of this patching or painting. Docket No.
50-2 at 15-16, pp. 68:24-69:1. The work that GHP had performed on the stairwells and
elevator shafts was limited to “layout,” which Mr. Klanderud described as determining
the locations for various systems that would run through those areas. Docket No. 54-1
at 2, p. 43:11-21. Although Mr. Klanderud testified that layout work may have included
certain “penetrations,” which he describes as drilling through the drywall to set layout
locations, see id. at 3, p. 44:5-11, 21-22, his testimony reveals that he was unsure
whether any of those “penetrations” had occurred at the time of the water intrusion.
See id. at 3, p. 44:20-21 (“If some of the penetrations had been put in place . . .”).
GHP’s only other proffered evidence that any drilling actually took place in the stairwells
8

or elevator shafts is in its second letter to Travelers requesting reconsideration, where
GHP represented that, on March 2, 2012, it “cut into the dry wall surrounding the fire
damper so that further conditions could be observed in the basement elevator area. A
location for a new fire damper was also indicated on the wall.” Docket No. 50-12 at 3.
Although GHP has introduced some evidence that it performed drilling on at least one
existing elevator shaft and testimony that it performed other “layout work” on the
damaged stairwells and elevator shafts, GHP has introduced no evidence that the water
intrusion from the roof damaged the work that it performed in the basement elevator
area or caused GHP to have to redo any work. This is unsurprising, as the damages
that GHP seeks are the costs of asbestos mitigation and remediation, not the costs of
its own labor to replace or redo any of its previously-performed renovation work.
Docket No. 54 at 8 (admitting that GHP seeks compensation for asbestos mitigation
costs).
The Court now considers the policy language. The policy defines property
covered by the policy as “Builders’ Risk.” Docket No. 50-1 at 18. The policy both
provides a definition of the term “Builders’ Risk” and an explanation of what “Builders’
Risk” does not include. “Builders’ Risk” is defined as property owned by plaintiff, or for
which plaintiff is legally responsible, consisting of two different categories of property.
The first category consists of “Buildings or structures including temporary structures
while being constructed, erected or fabricated at the ‘job site.’” Docket No. 50-1 at 34
(¶ 7). Travelers claims, in its reply brief, that none of the layout work or any drywall
penetrations performed by GHP “involved ‘constructing, erecting, or fabricating’ the
water-damaged stairwells and elevator shafts,” and as a result, such work falls outside
9

of the policy scope. Docket No. 58 at 9. However, it also concedes that “‘Builders’
Risk’ covers only work that GHP performs on an existing structure, not the existing
structure itself that GHP did not construct.” Id. at 10. Travelers’ Rule 30(b)(6) witness
took this analysis one step further. When asked at his deposition whether layout work
was covered under the policy, he responded that it would only be covered if it needed to
be “replaced or redone.” Docket No. 54-2 at 2, p. 74:21-25. T hus, on one hand
Travelers takes the position that layout work and drywall penetrations to existing
structures do not fall within the definition of “Builders’ Risk” because such work was not
done to a structure “being constructed, erected, or fabricated,” and on the other hand,
Travelers concedes that layout work and drywall drilling performed on an existing
structure are covered to the extent that, after the remediation, such work would need to
be redone. The Court need not resolve these contrary interpretations of the policy for
two reasons. First, GHP has failed to raise any dispute of material fact (or even to
argue) that the layout work needs to be redone after the asbestos remediation. It
makes sense that it would not have to be redone if, by virtue of removing the drywall
during remediation, the location of the pipes, wire, and conduits became apparent.
Thus, even if the Court interpreted the policy to cover layout work and drilling, GHP
nevertheless does not show any loss covered by the policy. Second, for reasons
explained below, the exclusion clause regarding “Builders’ Risk” controls the disposition
of the motion.
The second category of property under the definition of “Builders’ Risk” consists
of “[p]roperty that will become a permanent part of the buildings or structures at the ‘job
site’: (1) While in transit to the ‘job site’ or temporary storage location; (2) While at the
10

‘job site’ or at a temporary storage location.” Docket No. 50-1 at 34 (¶ 7). GHP argues
that the existing stairwells and elevator shafts “should be considered mere building
components that were intended to become permanent parts of the newly renovated and
expanded library building.” Docket No. 54 at 13. GHP’s argument rests on its definition
of “structure,” which, as explained below, is untenable. Moreover, even if the layout
work did fall within the definition of “Builders’ Risk,” it would be excluded under the
definition of what “Builders’ Risk” does not include and therefore would not be covered.
In addition to the policy defining what “Builders’ Risk” includes, the policy also
defines what “Builders’ Risk” does not include. The policy states, in relevant part, that
“Builders’ Risk” does not include “[b]uildings or structures that existed at the ‘job site’
prior to the inception of this policy.” Docket No. 50-1 at 34 (¶ 7). Travelers argues that
the stairwells and elevator shafts are excluded from the policy because they are
“[b]uildings or structures that existed at the ‘job site’” prior to the policy’s inception.
Docket No. 50 at 10-13. It is undisputed that the stairw ells and elevator shafts existed
before the policy went into effect on October 1, 2011.
GHP points out that the policy does not define “structures” and argues that the
stairwells and elevator shafts are not excluded “buildings” or “structures,” but rather
“building components.” Docket No. 54 at 13. GHP relies on Merriam-Webster’s
Dictionary Online, which defines “structure” as “(1) something (such as a house, tower,
bridge, etc.) that is built by putting parts together and that usually stands on its own, or
(2) something (as a building) that is constructed.” Id. (citing Structure, MerriamWebster’s Dictionary Online, http://www.merriam-webster.com/dictionary/structure).
GHP’s argument is confusing at best. Whether the stairwells and elevator shafts were
11

structures or components of a structure or building, the fact remains that they were
components of a building or structure that existed before the inception of the policy. As
such, they fall within the exclusionary language. Damage to components constitutes
damage to the structure or building itself. Thus, GHP’s layout work to the stairwells and
elevator shafts involved “[b]uildings or structures that existed at the ‘job site’ prior to the
inception of this policy,” and is therefore outside the scope of coverage.
Finally, GHP argues that the “Expediting Costs and Additional Cost of
Construction Materials and Labor” language of the policy provides coverage. Docket
No. 54 at 14. That provision entitles GHP to costs “made necessary by a Covered
Cause of Loss to Covered Property at the ‘job site.’” Docket No. 50-1 at 23. Because
the stairwells and elevator shafts are excluded from the definition of “Builders’ Risk” and
GHP has not introduced evidence that the water intrusion damaged its own work, GHP
has not shown any loss to covered property. Travelers, therefore, did not breach this
portion of the policy. Moreover, as Travelers argues, GHP does not identify any
additional costs that it incurred that are covered by this provision.
In sum, the Court finds that GHP has not demonstrated a genuine dispute of
material fact that it suffered damage to “covered property” under the policy. Summary
judgment is therefore appropriate as to GHP’s breach of contract and declaratory
judgment claims. Because the Court concludes that Travelers correctly denied
coverage, summary judgment is appropriate on GHP’s common law bad faith claim as
well. “It is settled law in Colorado that a bad faith claim must fail if, as is the case here,
coverage was properly denied and the plaintiff’s only claimed damages flowed from the
denial of coverage.” MarkWest Hydrocarbon, Inc. v. Liberty Mut. Ins. Co., 558 F.3d
12

1184, 1193 (10th Cir. 2009) (citations omitted).
IV. CONCLUSION
For the foregoing reasons, it is
ORDERED that defendant Travelers Property Casualty Company of America’s
Motion for Summary Judgment [Docket No. 50] is GRANTED. It is further
ORDERED that the first, second, and fourth claims for relief of plaintiff Gerald H.
Phipps, Inc. are dismissed with prejudice. It is further
ORDERED that the trial in this matter scheduled to begin on January 19, 2016 is
VACATED. It is further
ORDERED that, within 14 days of the entry of this Order, defendant may have its
costs by filing a Bill of Costs with the Clerk of the Court. It is further
ORDERED that this case is closed.
DATED January 8, 2016.
BY THE COURT:

s/Philip A. Brimmer
PHILIP A. BRIMMER
United States District Judge

13