Hiland Hills Townhouse Owners Association v. Owners Insurance Company

Filing 25

ORDER TO SHOW CAUSE: The Parties shall show cause, either jointly or individually, as to why this action should not be remanded for lack of jurisdiction as detailed herein by November 9, 2017. By Chief Judge Marcia S. Krieger on 10/26/2017. (msklc3)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Chief Judge Marcia S. Krieger
Civil Action No. 17-CV-1773-MSK-MEH
HILAND HILLS TOWNHOUSE OWNERS ASSOCIATION, INC.,
Plaintiff,
v.
OWNERS INSURANCE COMPANY,
Defendant.

ORDER TO SHOW CAUSE

THIS MATTER comes before the Court upon the Plaintiff’s Motion for Partial
Summary Judgment (# 22), the Defendant’s response thereto (# 24), and the Defendant’s Motion
for Summary Judgment (# 23). As it always does, the Court is required to determine whether it
has jurisdiction over the lawsuit. The Court has significant concerns in that regard. For the
reasons that follow, the parties are ordered to show cause as to why this suit should not be
remanded for lack of jurisdiction.
I. BACKGROUND
This is a hail-damage case. Plaintiff Hiland Hills Townhouse Owners Association
obtained a property insurance policy insured by Defendant Owners Insurance Co. covering the
term of November 2014 to November 2015 (the Policy). The Policy included a provision
allowing for independent appraisal of the insured property or amount of loss:
If we and you disagree on the value of the property or the amount of loss, either
may make written demand for an appraisal of the loss. In this event, each party
will select a competent and impartial appraiser. The two appraisers will select an
umpire. If they cannot agree, either may request that selection be made by a
1

judge of a court having jurisdiction. The appraisers will state separately the value
of the property and amount of loss. If they fail to agree, they will submit their
differences to the umpire. A decision agreed to by any two will be binding.
# 9-2 at 14.
The hailstorm occurred in June 2015 and Hiland Hills submitted a claim pursuant to the
Policy in October 2016, after the Policy term had ended. Unhappy with how long Owners took
to evaluate the claim, Hiland Hills brought this suit in state court in June 2017; Owners removed
it in July 2017. At the suit’s filing and removal, Hiland Hills’ public adjuster had completed its
review of the claim, but Owners’ engineer had not. Indeed, Owners made no determination with
regard to the claim until August 2, after the filing of the action and its removal. Owners denied
coverage in a September 1, 2017, letter that stated that Hiland Hills’ delay in submitting its claim
made it too difficult to determine what damage was attributable to the June 2015 storm as
opposed to subsequent storms.
Although no complaint was filed with the Notice of Removal as required by D.C. Colo.
L. Civ. R. 81.1(b), Hiland Hills filed an Amended Complaint (# 9) on August 1, 2017. It asserts
the following causes of action: (1) a claim to preserve its appraisal rights to determine the extent
of its loss,1 (2) breach of contract based on a failure to pay benefits under the Policy, and (3)
common-law bad faith based on unfair claim settlement practices. Hiland Hills now moves for
partial summary judgment on its motion to compel appraisal and Owners moves for summary
judgment on all claims, arguing that it has no obligations under the Policy because Hiland Hills
untimely submitted its claim.

1

This claim appears to be a request for a declaratory judgment directing Owners to perform its
obligations under the Policy.
2

II. DISCUSSION
A. Jurisdiction and Standing
Starting with the obvious, federal courts are courts of limited jurisdiction that possess
only the authority given to them by the United States Constitution and federal statutes.2
Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). Article III of the
Constitution restricts the authority of federal courts to adjudicating actual “cases” and
“controversies.” U.S. Const. art. III, § 2, cl. 1; Sprint Commc'ns Co. v. APCC Servs. Inc., 554
U.S. 269 (2008). A case or controversy can only be brought by a person with standing to sue.
Unlike doctrines that restrain federal courts from exercising jurisdiction based on the
characteristics of the claims themselves (e.g., doctrines of abstention or grants of exclusive
jurisdiction), the question of standing focuses on the party who seeks relief, rather than on the
issues that he or she wants adjudicated. See Flast v. Cohen, 392 U.S. 83, 95 (1968). A plaintiff
must demonstrate standing for each claim.
For each claim or type of relief sought, a plaintiff must show that there it is a “case or
controversy” at the time of filing of the lawsuit. DaimlerChrysler Corp. v. Cuno, 547 U.S. 332,
352 (2006). Thus, for each claim, Hiland Hills must demonstrate that: (1) it suffered an “injury
in fact” that is concrete and particularized, and actual or imminent (not merely conjectural or
hypothetical); (2) the injury is fairly traceable to the challenged action of the defendant; and (3) it
is likely, as opposed to merely speculative, that the injury will be redressed by the relief
requested. Friends of the Earth Inc. v. Laidlaw Envtl. Servs. Inc., 528 U.S. 167, 180–81 (2000);
Tandy v. City of Wichita, 380 F.3d 1277, 1283 (10th Cir.2004); Nova Health Sys. v. Gandy, 416
2

This is in contrast to state courts. Typically courts of general jurisdiction, state courts are
presumed to have the power to hear virtually any claim arising under federal or state law, except
those which Congress or the United States Constitution specifies can be heard only by federal
courts.
3

F.3d 1149, 1154 (10th Cir. 2005). That Hiland Hills suffered some injury subsequent to the
filing of the lawsuit does not convey standing.
B. Hiland Hills’ Claims
In this action, Hiland Hills has asserted a specific-performance claim, a breach-ofcontract claim, and a bad-faith claim. None of these claims appear to have been a “case or
controversy” at the time the action was initiated.
At the time that Hiland Hills filed this suit, the parties were performing their obligations
under the Policy. There had been no determination of the amount claimed under the Policy and
no refusal by Owners to pay such sum. Hiland Hills’ claim was unliquidated and payment of its
claim was subject to satisfaction of several conditions precedent. Among these were the
completion of Owners’ review of the claim, Owners’ determination of coverage,3 and in the
event of coverage but disagreement as to the amount of loss, completion of the appraisal process
specified in the Policy. Whether there would be a denial of coverage or a dispute in the amount
of loss was entirely speculative.4 In short, the claims asserted were premature.
Although it appears that a controversy developed after the suit was filed, this
development does not affect Hiland Hills’ standing. See Gandy, 416 F.3d at 1154. At the time
the action was initiated in state court and removed to this Court, Hiland Hills’ claims were not

3

Although an indication that Owners’ denial of coverage was imminent might create standing,
Hiland Hills had no such indication until August 2 at the earliest, when Owners’ engineer
completed its damage report.
4
Though the Court mostly addresses the classic breach-of-contract claim, Hiland Hills’ badfaith claim was just as speculative. Although the bad-faith claim hypothetically could be based
on an insufficient investigation, it would have to be an insufficient investigation that had
occurred as of the time of the filing of the Complaint. Given that Owners’ engineer had not
completed its report and Owners had not denied coverage until after the suit was filed, it is clear
that the investigation was ongoing at the time of filing.
4

yet ripe because it had not yet suffered an injury in the form of a breach of the terms of the
Policy.5
In the popular lexicon, federal courts do not operate as a “big box” store where you can
buy everything you need — our line of products is limited to “cases and controversies” brought
by parties with standing. The parties are invited to show cause, either jointly or individually, as
to why this action should not be remanded for lack of jurisdiction within 14 days of this order.
Either party will have an opportunity to respond to the arguments raised by the other party by
submitting a response brief no later than 7 days thereafter.
Dated this 26th day of October, 2017.
BY THE COURT:

Marcia S. Krieger
United States District Court

5

Assuming that the complaint is amended on remand or Owners brings a counterclaim seeking a
declaration that it is not obligated to cover the damage incurred, Owners would then be able to
remove the suit again.
5