Colony Insurance Company v. Expert Group International Inc. et al
ORDERS ON PLAINTIFF'S MOTION FOR FINAL SUMMARY JUDGMENT 28 , Plaintiff's motion 39 to strike Defendants' supplemental briefing is denied, by Judge Richard P. Matsch on 5/17/17. (ktera)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Senior District Judge Richard P. Matsch
Civil Case No.1:15-cv-02499-RPM
COLONY INSURANCE COMPANY,
EXPERT GROUP INTERNATIONAL INC., dba EXPERT AU PAIR;
AU PAIR INTERNATIONAL, INC.;
GO AU PAIR OPERATIONS LLC dba AMERICAN CULTURAL EXCHANGE;
JOHANA PAOLA BELTRAN;
DAYANNA PAOLA CARDENAS CAICEDO;
ALEXANDRA IVETTE GONZALEZ, and those similarly situated,
ORDERS ON PLAINTIFF’S MOTION FOR FINAL SUMMARY JUDGMENT
Jurisdiction for this insurance coverage dispute is provided by 28 U.S.C. § 1332. Colony
Insurance Company (“Colony”) is a Virginia corporation with its principal place of business in
Richmond, Virginia. Defendant Expert Group International d/b/a Expert Au Pair (“Expert Au
Pair”) is a Florida corporation with its principal place of business in St. Petersburg, Florida.
Defendant Go Au Pair Operations LLC d/b/a American Cultural Exchange (“Go Au Pair”) is a
Utah limited liability company that is wholly owned by American Cultural Exchange, LLC.
Defendant Au Pair International, Inc. (“Au Pair Int’l ”) is a Colorado corporation with its
principal place of business in Boulder, Colorado. The individual defendants included in the
caption are named plaintiffs in the civil action entitled Johana Paola Beltran, et al. v.
Interexchange, Inc., et al., 14-cv-03074-CMA-CBS, in the United States District Court for the
District of Colorado (the “underlying action” or “the Beltran action”). The court has determined
that they are not necessary parties to this civil action between Colony and its insureds. See
Order, May 5, 2016 (doc. 19).
Expert Au Pair, Go Au Pair, and Au Pair Int’l are au pair placement agencies. They
assist foreign nationals seeking to work in the United States as au pairs and prospective host
families looking for au pairs to find one another. Colony issued separate professional liability
policies to Expert Au Pair, Go Au Pair, and Au Pair Int’l (collectively “the Insureds”).
The Insureds are three of the named defendants in the Beltran action. The Insureds
tendered the defense to Colony, and Colony agreed to defend the Insureds under a reservation of
rights. The underlying action is ongoing, and Colony has been funding the Insureds’ defense.
Colony filed this action on November 13, 2015, seeking a declaration that the subject
policies provide no coverage for any of the claims asserted against the Insureds in the Beltran
action. Colony also seeks reimbursement of the attorneys’ fees and costs it has incurred in
defending the Insureds.
On September 15, 2016, Colony moved pursuant to Fed. R. Civ. P. 56 for final summary
judgment in its favor, arguing that the express terms of the policies demonstrate that Colony has
no duty to defend and, consequently, no duty of indemnification.
The duty to defend and the duty to indemnify are distinct duties. Because an insurer’s
duty to defend is broader than the duty to indemnify, the initial question is whether Colony owes
a duty of defense.
Colorado law applies with respect to the Au Pair Int’l policy. Utah law applies with
respect to the Go Au Pair policy, and Florida law applies with respect to the Expert Au Pair
policy. All three states follow the “four corners” (also known as the “eight corners”) rule.
Under that rule, the duty to defend is to be determined by comparing the complaint in the
underlying action and the language of the subject policy. Compass Ins. Co. v. City of Littleton,
984 P.2d 606, 613 (Colo. 1999); Cyprus Amax Minerals Co. v. Lexington Ins. Co., 74 P.3d 294,
299-300 (Colo. 2003); Colony Ins. Co. v. Barnes, 410 F. Supp. 2d 1137, 1139 (M.D. Fla. 2005);
Jones v. Florida Ins. Guar. Ass’n, Inc., 908 So. 2d 435, 443 (Fla. 2005); Basic Research, LLC v.
Admiral Ins. Co., 297 P.3d 578, 580 (Utah 2013).
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. Hecla Mining Co. v. N.H.
Ins. Co., 811 P.2d 1083, 1089 (Colo. 1991) (citation, footnote, brackets, and internal quotation
marks omitted). “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.” Id.; see also Constitution Assocs. v. N.H. Ins. Co., 930 P.2d 556, 563 (Colo. 1996).
The operative complaint in the Beltran action is the second amended complaint, filed
October 18, 2016. Pl.’s Ex. A. That complaint (the “underlying complaint” or “Beltran
complaint”) alleges that the underlying plaintiffs are each individuals who obtained a J-1 visa
and came to the United States to work as an au pair for a host family. As stated in the Beltran
complaint, the J-1 visa au pair program is overseen and administered by the United States
Department of State (“State Department”) under the authority of the Mutual Educational and
Cultural Exchange Act of 1961, as amended,1 and “allows foreign nationals between the ages of
18 and 26, with secondary school educations and English proficiency, to work for ‘host families’
as child care workers for no more than 45 hours a week in exchange for room and board and a
legal wage.” Underlying Compl. ¶¶ 46-47.2 Any foreign national seeking a position as an au
pair in the United States must be sponsored by an organization designated by the State
Department. The underlying defendants (“Sponsors”) are the exclusive entities so authorized to
recruit and place au pairs with host families in the United States. ¶ 49.
Federal regulations address the responsibilities of Sponsors. ¶¶ 61-67; see also 22 C.F.R.
§§ 62.10 & 62.31. Those responsibilities include requiring that “au pair participants are
compensated at a weekly rate based upon 45 hours of child care services per week and paid in
conformance with the requirements of the Fair Labor Standards Act as interpreted and
implemented by the United States Department of Labor.” 22 C.F.R § 63.31(j)(1) (cited in ¶ 67).
The Beltran Plaintiffs allege that the Sponsors operate as a cartel and colluded to fix
standard au pair wages at the programmatic wage floor announced by the State Department.
They allege that the Sponsors effected that goal by wrongfully informing au pairs that au pair
wages are set by law and cannot be increased, and by failing to advise au pairs that they could be
22 U.S.C. § 2451 et seq.
Unless otherwise stated, paragraph symbols (¶¶) refer to paragraphs of the underlying
paid more than the amounts identified by the Sponsors. The Beltran Plaintiffs claim that the
Sponsors – by maintaining au pair wages at that artificially low rate – are able to increase the
fees paid by host families to Sponsors, while maintaining the affordability of the au pair
arrangements for potential host families, thereby enhancing the Sponsors’ profits at the expense
of the au pairs. ¶¶ 2, 5, 73, 80, 84, 87-89, 135, 143-44, 151, 170, 236, 239, 241, 255, 289, 312.
The Beltran complaint includes ten claims for relief against various sets of the Sponsor
defendants. The first claim is for restraint of trade in violation of Section 1 of the Sherman Act,
15 U.S.C. § 1, and is alleged against all Sponsors. The second claim alleges violations of civil
RICO, 18 U.S.C. § 1964(c), by six Sponsors. The remaining claims allege breach of fiduciary
duty; negligent misrepresentation; constructive fraud or fraudulent concealment; violations of
consumer protection laws; violations of the Fair Labor Standards Act, 29 U.S.C. § 201
(“FLSA”), and violations of various state wage-hour laws.
The only claim alleged against Au Pair Int’l is the antitrust claim. Go Au Pair and Expert
Au Pair are named as defendants for the antitrust claim and the claims of negligent
misrepresentation, breach of fiduciary duty, fraud, consumer protection violations, and certain of
the wage and hour claims.
Colony argues that none of the Insureds can show that its policy’s Professional Liability
Insuring Agreement provides coverage for the Beltran action.
The professional liability policies that Colony issued to the Insureds were designed
primarily for health care companies and health care professionals. In each policy, the title of the
professional liability coverage part includes the following subtitle: “ Long Term Care
Facilities/Miscellaneous Health Care Facilities/Social Services.” It is unclear from the record
why Colony issued coverage of that type to insureds whose business is au pair placement and
who do not perform health care services.
The Professional Liability coverage part of each policy insures (subject to the policy’s
other terms, conditions, exclusions, or limitations) those sums the Insureds are legally obligated
to pay as “damages” that arise out of a “wrongful act” that occurred in the conduct of the
Insured’s “professional services.” See Pl.’s Ex. B (Go Au Pair Policy, Professional Liability
Coverage Part, Section I, Insuring Agreement at p. 1 of 3); Pl.’s Ex. C (Au Pair Int’l Policy,
Professional Liability Coverage Part, Section I, Insuring Agreement at p. 1 of 4); Pl.’s Ex. D (Au
Pair Int’l Policy at Professional Liability Coverage Part, Section I, Insuring Agreement at p. 1 of
In all three policies, the term “professional services” is defined to mean the providing of:
medical, surgical, dental, x-ray, mental health or nursing service or
treatment, or the furnishing of food or beverage in connection with such
service or treatment;
medications, medical supplies or medical appliances;
health or therapeutic service, treatment or advice;
counseling or social service;
postmortem handling of human bodies including organ or tissue recovery;
services undertaken for your formal accreditation standards review or
equivalent professional board or committee for any insured . . . .
See Pl.’s Ex. B (Go Au Pair Policy, Common Policy Provisions at p. 13 of 14); Pl.’s Ex. C (Au
Pair Int’l Policy, Common Policy Provisions at p. 14 of 14); Pl.’s Ex. D (Expert Au Pair Policy,
Common Policy Provisions at p. 13 of 14).
Of those listed professional services, the Insureds perform only “counseling.” There is
no dispute that the Insureds’ au pair placement services involve providing information and
advice to au pairs and host families about what to expect from the employment relationship
between the host family and the au pair. State Department regulations obligate the Insureds to
perform such services. Colony acknowledges that the Insureds’ business activities involve
providing advice (i.e., counseling services) to au pairs and host families.
Colony asserts that the Beltran complaint, when “stripped to its essence,” claims that the
Insureds cheated au pairs on wages. Colony argues that “cheating people does not qualify as the
provision of a ‘professional service.’” Pl.’s Mot. at p. 1. That is, Colony argues that coverage
does not exist under the Professional Liability Insuring Agreement of each policy because the
acts of conspiring to fix wages or failing to pay wages required by law are not “professional
Colony is correct that no coverage exists for the Sherman Act claim alleged by the
Beltran Plaintiffs. That claim does not fall within the scope of the policies’ professional liability
insuring agreement because “counseling” does not include the alleged agreement to fix wages.
At oral argument, the court expressed the view that the Sherman Act claim should be
excluded as an intentional wrongful act and coverage would be against public policy. After
argument the defendants provided information that insurance companies do provide coverage for
antitrust claims. The plaintiff prevails on this claim because the policies’ definition of
professional services does not encompass price fixing.
Because the Sherman Act claim is the only claim alleged by the Beltran Plaintiffs against
Au Pair Int’l, Colony has no duty to provide a defense to that insured.3
With respect to Go Au Pair and Expert Au Pair, the determination of the duty to defend
requires examination of other claims and not simply the gravamen of the Beltran complaint. The
Beltran Plaintiffs seek compensatory damages from Go Au Pair and Expert Au Pair for, among
other claims, negligent misrepresentation and breach of fiduciary duty, based on allegations that
they gave erroneous advice and information to au pairs about the terms of their employment. In
addition to the allegations of price fixing, the underlying complaint alleges other wrongful acts,
•falsely informing au pairs that the $195.75 programmatic wage floor is a
maximum wage or a wage fixed by the government (¶ 144);
•improperly telling the au pairs a law existed that set the wage at $195.75 and by
implication that this was legal when, in fact, Federal and State minimum wage
laws could require higher minimum wages for 45 hours of work (¶¶ 236, 239);
•failing to advise the au pairs that since the au pairs’ contractual wage was only
$4.35, the only way that wage could ever satisfy State and Federal minimum
wages was if the wage were accompanied by legal wage credits for furnished
facilities (¶ 241);
•making misstatements about wages to induce au pairs to sign up at suppressed
illegal wages without realizing that they could seek higher stipends from
Sponsors or the families (¶ 255);
•failing to exercise reasonable care when informing the au pairs the stipend could
not be adjusted (¶ 256).
In addition to professional liability coverage, the Au Pair Int’l policy includes a
commercial general liability coverage (CGL) form. The Insureds’ opposition brief does not
address that coverage, thereby conceding that it does not apply to the claims alleged in the
Those allegations support the claims of breach of fiduciary duty and negligent misrepresentation
against Go Au Pair and Expert Au Pair and fall within the coverage described in the professional
liability insuring agreements of their policies.
Colony contends that coverage is avoided by the application of various policy exclusions.
The burden is on the insurer to show the applicability of an exclusion. Compass Ins. Co. v. City
of Littleton, 984 P.2d 606, 614 (Colo.1999); Citizens Prop. Ins. Corp. v. Salkey, 190 So. 3d
1092, 1094 (Fla. Dist. Ct. App. 2016), reh’g denied (Apr. 20, 2016).
Colony argues that coverage is excluded entirely by the exclusion for any claim “based
upon or arising out of any act, omission or offense committed with knowledge of its wrongful
nature or with the intent to cause damage.”
Colony’s argument fails because it interprets that exclusion too broadly. The phrase
“arising out of” in the exclusion does not mean it encompasses claims predicated on negligent
conduct. The claims of breach of fiduciary duty and negligent misrepresentation alleged against
Go Au Pair and Expert Au Pair do not require proof of conscious wrongdoing or intent to injure.
The “knowledge of wrongful nature exclusion” does not excuse Colony’s duty of defense to Go
Au Pair and Expert Au Pair.
Colony contends that the “personal profit” exclusion applies to avoid its duty of defense.
That exclusion precludes coverage for any claim “[b]ased upon or arising out of . . . the gaining
by any insured of any personal profit, gain or advantage to which the insured is not legally
Colony’s argument about the personal profit exclusion is not persuasive. Such
exclusionary language avoids coverage only for claims that require an illegal profit or gain as an
element of the claim. See Alstrin v. St. Paul Mercury Ins. Co., 179 F. Supp. 2d 376, 400 (D. Del.
2002) (“[T]he personal profit exclusion] by its terms, requires a profit or gain that is illegal; not
an illegal act that produces a profit or gain to the insured as a by-product.”). Although the
underlying complaint alleges that the Insureds benefitted financially from the alleged wrongful
conduct, that is not the type of “personal profit, gain or advantage” that would be within the
personal profit exclusion.
Colony argues that its duty to defend is excused by the exclusion for employment-related
That exclusion does not avoid Colony’s duty to defend Go Au Pair and Expert Au Pair
because the Beltran Plaintiffs’ claims of negligent misrepresentation and breach of fiduciary
duty do not depend on proof of an employer-employee relationship between the Insureds and au
Colony argues that its duty to defend is excused by the exclusion for any claim based
upon or arising out of the “rights or duties under any agreement including disputes over fees for
That argument fails because the Beltran complaint does not allege a fee dispute within
the meaning of that exclusion. See, e.g., ACE Am. Ins. Co. v. Ascend One Corp., 2007 WL
1774495, at *4 (D. Md. 2007) (“The simplest understanding of a ‘fee dispute’ is a disagreement
regarding the amount the consumer paid for services . . . .”). The Beltran Plaintiffs do not
complain about any fees charged by the Insureds for their services.
Colony contends that its duty to defend is excused by the exclusion for “any claim based
upon or arising out of any claim for payment of any fine, sanction or penalty of any nature
against the insured or the insured’s client,” and the endorsement which states that the policy does
not apply to “any claim for or any awards of (1) punitive, exemplary or multiple damages; or (2)
equitable non-pecuniary relief; including any fines, penalties, court imposed sanctions, return or
restitution of legal fees, costs or other expenses associated with such awards. ”
If, at the conclusion of the underlying action, the Beltran Plaintiffs obtain an award in
their favor, those exclusions may significantly limit Colony’s duty of indemnification. At this
stage, those exclusions do not excuse Colony’s duty to defend Go Au Pair and Expert Au Pair
because the Beltran Plaintiffs seek compensatory damages for their claims, in addition to other
types of relief.
Colony contends that coverage is barred by the fortuity doctrine, asserting that the
Beltran complaint describes a long-standing scheme and any loss resulting from such a scheme
could not be fortuitous.
The fortuity doctrine, a common law principle, provides that one may not obtain
insurance for a loss that either has already taken place or is in progress. See Pittston Co.
Ultramar Am. Ltd. v. Allianz Ins. Co., 124 F.3d 508, 516 (3d Cir. 1997). The focus of the
doctrine is the time when the insurance contract was formed. Colony’s argument about the
fortuity doctrine fails because the allegations of the complaint are not evidence of what the
Insureds knew about potential liability when they purchased the policies. The present record
contains no such evidence.
Because Colony is obligated to defend Go Au Pair and Expert Au Pair against the claims
alleged in the underlying complaint, the determination of whether Colony is obligated to
indemnify those insureds must await the conclusion of that action.
Because Colony owes no obligation of defense to Au Pair Int’l, Colony owes it no duty
of indemnification. The Au Pair Int’l policy is governed by Colorado law, and the law of that
State provides that when “there is no duty to defend, there is no duty to indemnify.” City of
Arvada v. Colo. Intergovernmental Risk Sharing Agency, 988 P.2d 184, 187 (Colo. 1999).
Colorado law also provides that when an insurer defends under a reservation of rights and
there is an ultimate finding of no coverage, the insurer is entitled to seek reimbursement of its
defense costs. See Hecla Mining Co. v. N.H. Ins. Co., 811 P.2d 1083, 1089 (Colo. 1991); Cotter
Corp. v. Am. Empire Surplus Lines Ins. Co., 90 P.3d 814, 828 (Colo. 2004); Valley Forge Ins.
Co. v. Health Care Mgmt. Partners, Ltd., 616 F.3d 1086, 1093 (10th Cir. 2010). Colony is
entitled to reimbursement of the amount it has expended defending Au Pair Int’l.
Based on the foregoing, it is
ORDERED that Plaintiff’s motion for summary judgment  is denied as to defendant
Expert Group International Inc. d/b/a Expert Au Pair; it is
FURTHER ORDERED that Plaintiff’s motion for summary judgment  is denied as to
defendant Go Au Pair Operations LLC d/b/a American Cultural Exchange, and it is
FURTHER ORDERED that Plaintiff’s motion for summary judgment  is granted as
to defendant Au Pair International, Inc. The court declares that Colony Insurance Company
owes no duty of defense or indemnification to defendant Au Pair International, Inc. with respect
to the claims alleged in the action entitled Johana Paola Beltran, et al. v. Interexchange, Inc., et
al., 14-cv-03074-CMA-CBS, in the United States District Court for the District of Colorado.
Final judgment will enter against Au Pair International after the conclusion of
proceedings to determine the amount of defense costs that Plaintiff is entitled to recover from Au
Pair International, Inc. It is
FURTHER ORDERED that Plaintiff’s motion  to strike Defendants’ supplemental
briefing is denied.
Dated: May 17, 2017
BY THE COURT:
s/Richard P. Matsch
Richard P. Matsch, Senior Judge
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