Paros Properties LLC v. Colorado Casualty Insurance

FILED
United States Court of Appeals
PUBLISH Tenth Circuit

UNITED STATES COURT OF APPEALS August 29, 2016

Elisabeth A. Shumaker
FOR THE TENTH CIRCUIT Clerk of Court
_________________________________

PAROS PROPERTIES LLC,

Plaintiff - Appellant,
No. 15-1369
v.

COLORADO CASUALTY INSURANCE
COMPANY; OHIO SECURITY
INSURANCE COMPANY,

Defendants - Appellees.
_________________________________

Appeal from the United States District Court
for the District of Colorado
(D.C. No. 1:14-CV-01190-MSK-NYW)
_________________________________

Mark D. Changaris (Kathleen T. Alt and George V. Berg, Jr., with him on the brief),
Berg Hill Greenleaf & Ruscitti, LLP, Boulder, Colorado, for Plaintiff-Appellant.

Brian J. Spano (Lyndsay K. Arundel, with him on the brief), Lewis Roca Rothgerber
LLP, Denver, Colorado, for Defendants-Appellees.
_________________________________

Before TYMKOVICH, Chief Judge, HARTZ, and MORITZ, Circuit Judges.
_________________________________

HARTZ, Circuit Judge.
_________________________________

I. INTRODUCTION

A mudslide destroyed a commercial building (the Building) in Boulder, Colorado,

owned by Paros Properties LLC (the Owner) and insured under a policy (the Policy)
issued by Colorado Casualty Insurance Company (the Insurer). The Owner filed an

insurance claim but the Insurer denied payment because damage from mudslides is

excluded from policy coverage. The Owner then filed a state-court suit seeking payment

under the Policy and damages for bad-faith breach of the insurance contract. It argued

that the mudslide caused the building to explode, bringing the incident within the scope

of an explosion exception to the Policy’s mudslide exclusion. The Insurer removed the

action to federal court, which granted summary judgment to the Insurer. On appeal the

Owner argues (1) that the district court lacked subject-matter jurisdiction because the

Insurer’s removal from state court was untimely and (2) that the district court erred on the

merits in holding that there was no coverage. We have jurisdiction under 28 U.S.C.

§ 1291. We hold that the notice of removal was too late. But because the district court

correctly ruled on the merits and the jurisdictional requirements were satisfied at that

time, we affirm the judgment below rather than burden the state court and the parties by

requiring relitigation.

II. BACKGROUND

Torrential rainfall hit Boulder in September 2013. On the night of September 12 a

violent flow of water, mud, and debris thundered down a hillside into the Building,

causing extensive damage. The Owner submitted an insurance claim but the Insurer

denied it after a brief inspection. It explained in a letter: “The inspection revealed that

there was a Mudslide that caused the damage to your buildings. Damages caused by

2
Mudslides or Mudflows are specifically excluded under your policy.” Aplt. App., Vol. 2

at 268.

The Owner retained counsel to challenge the denial. Counsel hired an engineer,

who inspected the Building on October 15, 2013, and (after a site inspection a year later)

issued a report on his findings on November 3, 2014. According to the report, “The

debris laden flow impacted the south elevation of the structure, causing a sudden reaction

of the wall structure.” Report of Edward L. Fronapfel, Supp. Aplee. App., Vol. 1 at 65.

The impact caused the property to “split into two separate structures along a north-south

wall line. The eastern portion laterally displaced to the northeast, while the western

portion laterally displaced to the northwest. The roof structure collapsed where the

building separation occurred due to the sudden loss of the bearing walls.” Id. at 73. The

Owner demolished the building on October 23, 2013.

On October 24, 2013, counsel for the Owner sent a letter to the Insurer claiming

wrongful denial of coverage. It stated that the “force of the mudslide caused [the

Owner’s] building, literally, to explode,” Aplt. App., Vol. 4 at 631, and that the resultant

damage was therefore compensable under the explosion exception to the mudslide

exclusion in the Policy. It also accused the Insurer of failing to conduct a full and

reasonable investigation of the Owner’s claim before denying coverage and, somewhat

oddly given the building’s demolition, requested that the Insurer “complete its

investigation into the facts and circumstances surrounding the loss to the . . . Building.”

Id. at 634. On November 14, the Insurer, which had not been advised of the demolition,

3
informed the Owner that it would continue to investigate the claim and had scheduled an

engineer to inspect the site the next morning. When the engineer arrived, he saw that the

Building had been demolished.

On January 29, 2014, the Owner’s attorney sent an email to the Insurer with

“further explanation of the amounts of the losses suffered by our client.” Aplt. App., Vol.

4 at 625. The email indicated that the Building loss exceeded $1.1 million. (The policy

limit was $907,600.) The record contains no indication that the Insurer responded to this

email.

On February 26, 2014, the Owner filed its suit in Colorado state court. The

complaint alleged “catastrophic damage to the Property and its contents” and claimed

damages relating to cleanup, reconstruction, and loss of income and use. Complaint,

Aplt. App., Vol. 1 at 21 ¶ 19. It did not quantify the damages other than to say that “[t]he

amount in dispute is more than $15,000.” Id. at 20 ¶ 6. It also referenced, but did not

attach, correspondence sent “[o]n or about January 30, 2014.” Id. at 23 ¶ 31. On appeal

the Owner claims that this was a reference to its January 29 email tallying losses

exceeding $1.1 million.

On April 23, 2014, in its initial damages disclosures under Colorado Rule of Civil

Procedure 26(a)(1)(C), the Owner claimed to be “in the process of calculating specific

damage amounts” and listed the amount of all damages as “TBD.” Aplt. App., Vol. 1 at

30. Two days later, the Owner served its first supplemental disclosures, enumerating

damages exceeding $1.3 million. Id. at 32–33. Three days after that, the Insurer

4
removed the case to the United States District Court for the District of Colorado. The

Owner moved that court to remand, but the court denied the motion and later granted

summary judgment to the Insurer.

III. TIMELINESS OF REMOVAL

A. General Principles

The Insurer was served with the complaint on February 26, 2014, and filed its

notice of removal on April 28, 2014. Under the federal removal statute the notice

ordinarily must be filed “within 30 days after the receipt by the defendant, through

service or otherwise, of a copy of the initial pleading setting forth the claim for relief

upon which such action or proceeding is based.” 28 U.S.C. § 1446(b)(1).1 This deadline

was clearly not met. The Insurer relies, however, on an escape hatch. Under another

provision of the removal statute, “if the case stated by the initial pleading is not

removable, a notice of removal may be filed within 30 days after receipt by the

defendant, through service or otherwise, of a copy of an amended pleading, motion, order

or other paper from which it may first be ascertained that the case is one which is or has

1
28 U.S.C. § 1446(b)(1) states:
The notice of removal of a civil action or proceeding shall be filed within
30 days after the receipt by the defendant, through service or otherwise, of a
copy of the initial pleading setting forth the claim for relief upon which
such action or proceeding is based, or within 30 days after the service of
summons upon the defendant if such initial pleading has then been filed in
court and is not required to be served on the defendant, whichever period is
shorter.

5
become removable.” Id. § 1446(b)(3).2 Most courts, including this one, have

consistently interpreted the term other paper broadly to include state-court filings and

discovery. See, e.g., Huffman v. Saul Holdings Ltd. Partnership, 194 F.3d 1072, 1079

(10th Cir. 1999) (30-day clock triggered by deposition testimony); DeBry v.

Transamerica Corp., 601 F.2d 480, 488–89 (10th Cir. 1979) (clock not triggered by

ambiguous deposition testimony); 14C Charles Alan Wright and Arthur R. Miller,

Federal Practice and Procedure § 3731, at 524 (“The federal courts have given the

reference to ‘other paper’ an expansive construction and have included a wide array of

documents within its scope.”) And this position has now been codified in 28 U.S.C. §

1446(c)(3)(A).3

The Insurer points out that it could not remove the case to federal court under

diversity jurisdiction (it is not disputed that the Owner and the Insurer are citizens of

different states) unless the amount in controversy was at least $75,000, see 28 U.S.C. §

2
28 U.S.C. § 1446(b)(3) states:
Except as provided in subsection (c) [setting a one-year time limit, unless
the plaintiff acted in bad faith to prevent removal], if the case stated by the
initial pleading is not removable, a notice of removal may be filed within
30 days after receipt by the defendant, through service or otherwise, of a
copy of an amended pleading, motion, order or other paper from which it
may first be ascertained that the case is one which is or has become
removable.
3
28 U.S.C. § 1446(c)(3)(A) states:
If the case stated by the initial pleading is not removable solely because the
amount in controversy does not exceed the amount specified in section
1332(a), information relating to the amount in controversy in the record of
the State proceeding, or in responses to discovery, shall be treated as an
‘other paper’ under subsection (b)(3).
6
1332(a) (requirements for diversity jurisdiction); id. § 1441(a) (requirements for

removal), and it contends that the initial complaint left in doubt whether the Owner’s

claim equaled or exceeded $75,000. It says that it was not put on notice until April 25,

when the Owner disclosed its damages computation of over $1.3 million.

The question before us, then, is when could the Insurer “first . . . ascertain[] that

the case [was] one which [was] or [had] become removable.” Id. § 1446(b)(3). In

particular, could the Insurer have ascertained removability from the complaint itself and,

if not, could it have done so from some “other paper” it received before the Owner

disclosed its damages computation?

This circuit has been very strict in assessing whether the grounds for removal are

ascertainable. We require a specific allegation that damages exceed the federal

jurisdictional amount of $75,000.4 The 30-day clock does not begin to run until the

plaintiff provides the defendant with “clear and unequivocal notice” that the suit is

removable. Akin v. Ashland Chemical Co., 156 F.3d 1030, 1036 (10th Cir. 1998). In

4
It also suffices to allege facts from which the amount may be easily derived through
arithmetic. For example, if a class-action complaint seeks $25,000 for each of 500
plaintiffs, it alleges damages of $12.5 million. But the amount must be unambiguous.
Compare Kuxhausen v. BMW Fin. Servs. NA LLC, 707 F.3d 1136, 1140 (9th Cir. 2013)
(“[T]he statute requires a defendant to apply a reasonable amount of intelligence in
ascertaining removability. Multiplying figures clearly stated in a complaint is an aspect
of that duty.” (internal quotation marks omitted) (citation omitted)) with Cutrone v.
Mortgage Elec. Registration Sys., Inc., 749 F.3d 137, 139 (2d Cir. 2014) (In a case under
the Class Action Fairness Act requiring that the amount in controversy exceed
$5,000,000, see 28 U.S.C. § 1332(d)(2), “the named plaintiffs’ identification of their
damages ($6,835.20) and their allegation that the potential class ‘includes hundreds, and
likely thousands, of persons and entities,’ were not adequate to trigger the 30-day
removal period.”).
7
Akin federal jurisdiction hinged upon whether exposure to a toxic substance occurred

within a federal enclave. See id. at 1034. The complaint alleged “injuries sustained

‘while working at’ Tinker Air Force Base.” Id. at 1035. We held that this allegation “did

not provide unequivocal notice of the right to remove” because the phrase while working

at was ambiguous; it could have been a “geographical modifier” (meaning the exposure

occurred on the base) or a “durational modifier” (exposure occurred during the time the

plaintiffs were employed by the base). See id.

Huffman, 194 F.3d 1072, is similar. The plaintiffs leased space to operate a retail

furniture store, but the defendant landlord failed to fix a leaking roof for a number of

months. See id. at 1075. The lessees filed a complaint containing numerous allegations

from which the defendant might well have surmised that damages exceeded the

jurisdictional floor: that the “constant problem with the roof leaking made it almost

impossible to carry on a business,” that it “was impossible to avoid or prevent the moldy,

damp, smelly atmosphere of the store,” and that “[c]ustomers complained and often left

quickly without taking time to browse or really shop the furniture items because of these

intolerable conditions.” Id. (internal quotation marks omitted). Further, the complaint

sought actual and punitive damages. Id. at 1077. But as to dollar amount the complaint

said only that the plaintiffs sought “in excess of $10,000.” Id. at 1077 (internal quotation

marks omitted). We ruled that based on the complaint, the defendant “could only guess

as to whether the claim exceeded $75,000” and that the complaint therefore failed to put

the defendant on notice of removability. Id. The 30-day clock was not triggered until the

8
store owner’s deposition testimony that the plaintiffs sought more than $300,000. See id.

at 1079.

DeBry, 601 F.2d 480, illustrates that our strict standard also applies to notice

provided after the complaint. We considered whether the plaintiff’s deposition testimony

gave notice that he was a citizen of Utah (for purposes of establishing diversity of

citizenship). The complaint alleged that he had been a citizen of Utah until June 1972.

See id. at 481–82. He testified that after “mov[ing] to California [from Salt Lake City]

the first part of July of 1972,” he had “returned [to Salt Lake City] in August of [1974]

and purchased a unit.” Id. at 495. We held that this testimony did not give notice.

Because the plaintiff “did not say that he had permanently moved,” the defendant did not

“learn with certainty” from the deposition that the plaintiff was a citizen of Utah. Id. at

488–89.

Our strict rule is justified by important practical considerations. Litigation

concerning when the defendant realized or should have realized the amount in

controversy or the like can expend considerable resources of the court and the parties.

And the expenditure is wholly unnecessary. Any time the plaintiff wishes to start the 30-

day clock, it can provide the defendant with an unambiguous notice of what is being

claimed. For similar reasons, other circuits have held that they will not inquire into a

defendant’s subjective knowledge or what the defendant should have inferred from an

investigation or a review of its files. See, e.g., Moltner v. Starbucks Coffee Co., 624 F.3d

34, 38 (2d Cir. 2010) (“[T]he removal clock does not start to run until the plaintiff serves

9
the defendant with a paper that explicitly specifies the amount of monetary damages

sought . . . . Requiring a defendant to read the complaint and guess the amount of

damages that the plaintiff seeks will create uncertainty and risks increasing the time and

money spent on litigation.”); Foster v. Mut. Fire, Marine & Inland Ins. Co., 986 F.2d 48,

54 (3d Cir. 1993), overruled on other grounds by Murphy Bros., Inc. v. Michetti Pipe

Stringing, Inc., 526 U.S. 344 (1999) (“[T]he relevant test is not what the defendants

purportedly knew, but what [the plaintiff’s] documents said.”); Lovern v. Gen. Motors

Corp., 121 F.3d 160, 162 (4th Cir. 1997) (“[W]e will not require courts to inquire into the

subjective knowledge of the defendant, an inquiry that could degenerate into a mini-trial

regarding who knew what and when . . . . [The grounds for removal must] be apparent

within the four corners of the initial pleading or subsequent paper.”); Mumfrey v. CVS

Pharmacy, Inc., 719 F.3d 392, 399 (5th Cir. 2013) (seeking to “promote efficiency by

preventing courts from expending copious time determining what a defendant should

have known or have been able to ascertain at the time of the initial pleading” and to

“avoid encouraging defendants to remove cases prematurely for fear of accidentally

letting the thirty-day window to federal court close when it is unclear that the initial

pleading satisfies the amount in controversy”); Graiser v. Visionworks of Am., Inc., 819

F.3d 277, 285 (6th Cir. 2016) (“[A] defendant is not required to search its own business

records or perform an independent investigation into a plaintiff’s indeterminate

allegations to determine removability.” (internal quotation marks omitted)); Walker v.

Trailer Transit, Inc., 727 F.3d 819, 825 (7th Cir. 2013) (requiring “specific and

10
unambiguous notice that the case satisfies federal jurisdictional requirements and

therefore is removable. Assessing the timeliness of removal should not involve a fact-

intensive inquiry about what the defendant subjectively knew or should have discovered

through independent investigation.”); In re Willis, 228 F.3d 896, 897 (8th Cir. 2000) (per

curiam) (“[T]he thirty-day time limit of section 1446(b) begins running upon receipt of

the initial complaint only when the complaint explicitly discloses the plaintiff is seeking

damages in excess of the federal jurisdictional amount.”); Carvalho v. Equifax Info.

Servs., LLC, 629 F.3d 876, 886 (9th Cir. 2010) (“We adopted this bright-line approach to

avoid the spectre of inevitable collateral litigation over whether defendant had subjective

knowledge, or whether defendant conducted sufficient inquiry.” (alterations and internal

quotation marks omitted)); cf. Romulus v. CVS Pharm., Inc., 770 F.3d 67, 80 (1st Cir.

2014) (“The timeliness inquiry is limited to the information in the plaintiffs’ papers. . . .

The defendant has no duty to perform significant investigation of its own data to ascertain

removability.”).5

We now turn to the specifics of this case.

B. Application to this case

5
On the other hand, a defendant need not await such unambiguous notice before filing a
notice of removal. Once it reasonably believes that the jurisdictional prerequisites have
been satisfied, it can properly seek removal. The plaintiff may decide not to object. But
if there is a dispute, the court can resolve the parties’ factual and legal conflicts. See Dart
Cherokee Basin Operating Co., LLC v. Owens, 135 S. Ct. 547, 553–54 (2014) (“If the
plaintiff contests the defendant’s allegation, . . . both sides submit proof and the court
decides, by a preponderance of the evidence, whether the amount-in-controversy
requirement has been satisfied.”). That the defendant has the right to remove does not
mean the defendant has the duty to remove, which is triggered only by receipt of clear
and unequivocal notice from the plaintiff.
11
 The Owner relies on two sources to establish that the Insurer should have

ascertained the amount in controversy more than 30 days before it filed its notice of

removal: (1) an email sent before suit was filed and (2) the civil cover sheet filed with the

complaint. We first address the email.

1. Presuit email

On January 29, 2014, the Owner’s counsel sent an email to the Insurer setting

forth an assessment of the losses suffered from destruction of the Building. The

assessment, which totaled almost $1.2 million, arose from damage to the building, lost

rental income, and debris removal. We first consider whether the email can be

considered an “other paper” and then whether it would suffice to provide notice as part of

the complaint.

A written demand from counsel may be an “other paper” under § 1446(b)(3)

“from which it may first be ascertained that the case is one which is or has become

removable.” Several circuit courts have so held. See Romulus, 770 F.3d at 78; Babasa v.

LensCrafters, Inc., 498 F.3d 972, 975 (9th Cir. 2007); Addo v. Globe Life & Acc. Ins.

Co., 230 F.3d 759, 762 (5th Cir. 2000). See generally Wright & Miller, Federal Practice

and Procedure § 3731, at 524, 545 (“The federal courts have given the reference to ‘other

paper’ an expansive construction and have included a wide array of documents within its

scope . . . [including] correspondence between the parties and their attorneys or between

the attorneys.”). But those cases have involved only postsuit demands. This limitation

makes sense because the statutory language clearly does not contemplate “papers”

12
submitted before the complaint was filed. After all, the removal clock under § 1446(b)(3)

starts ticking upon receipt of the “paper,” so the time for removal after receipt of a presuit

paper could well expire before service of the complaint and would never extend beyond

the time permitted by § 1446(b)(1)—which is 30 days after service of the complaint or

summons. We agree with the other circuits to have considered the matter that a presuit

communication is not an “other paper.” See Chapman v. Powermatic, Inc., 969 F.2d 160,

164 (5th Cir. 1992) (“By its plain terms the statute requires that if an ‘other paper’ is to

trigger the thirty-day time period of the second paragraph of § 1446(b), the defendant

must receive the ‘other paper’ only after it receives the initial pleading.”); Carvalho, 629

F.3d at 885–86 (same).

Perhaps, however, presuit demand could provide adequate notice if it were

incorporated into the complaint. The Owner points out that its complaint contains the

allegation that “[o]n or about January 30, 2014, [Owner] followed up with [the Insurer]

again to provide updated information regarding [the Owner’s] damages.” Complaint,

Aplt. App., Vol. 1 at 23 ¶ 31. But this reference fails for two reasons. First, there is

ambiguity about the date. The allegation in the complaint refers to an email sent “on or

about January 30,” which is not a “clear and unequivocal” reference to an email actually

sent on January 29. Second, the email does not communicate a demand. It sets forth

alleged damages without stating how much the Insurer must pay. Indeed, the total

damages asserted in the email exceed the policy limits, so the Owner was presumably not

seeking payment of all the listed damages. Also, if the Owner’s claim was limited to the

13
loss caused by an explosion resulting from the mudslide, the claim would not include

property damage caused by the mudslide alone.

2. Civil Cover Sheet

The Owner also alleges that the Insurer was on notice of the amount in

controversy because of the civil cover sheet filed in state court with the complaint. For

cases seeking $100,000 or less, Colorado uses a simplified procedure with detailed early

disclosures and limited discovery. See C.R.C.P. 16.1. So that the court can determine

whether the procedure applies, civil complaints (except in certain types of excluded cases

not present here) must be accompanied by a civil cover sheet indicating whether the

amount in controversy exceeds $100,000. See C.R.C.P. 16.1(b)(3). In this case the

Owner checked the box indicating that the suit sought more than $100,000.

If the cover sheet is not considered part of the “initial pleading” under §

1446(b)(1), it is at least properly considered an “other paper” under § 1446(b)(3). The

question is whether its content provides adequate notice.

We previously declined to decide in an unpublished opinion whether a defendant

could support its removal notice by reference to a plaintiff’s check mark on the Colorado

civil cover sheet. See Warner v. CitiMortgage, Inc., 533 Fed. Appx. 813, 816 (10th Cir.

2013). But at least one federal district judge in Colorado has determined that the cover

sheet is notice that starts the removal clock. See Henderson v. Target Stores, Inc., 431 F.

Supp. 2d 1143, 1144 (D. Colo. 2006) (civil cover sheet is an “other paper” that put the

defendant on notice that the amount in controversy exceeded $75,000). We think that

14
view is sound. There is no ambiguity in the cover sheet. And we see no reason not to

credit an assertion by an officer of the court on a matter of significant consequence in the

state proceeding (whether or not simplified procedures will apply). Because the Insurer’s

notice of removal was filed more than 30 days after it received the cover sheet, the notice

was untimely.

That does not, however, end the matter. Although the district court should have

remanded the case to state court, a lot of water has now flowed under the bridge. Must

we now order that the litigation start anew in state court? The Supreme Court tells us no.

In Caterpillar Inc. v. Lewis, 519 U.S. 61, 64 (1996), a unanimous Supreme Court

declared that “a district court’s error in failing to remand a case improperly removed is

not fatal to the ensuing adjudication if federal jurisdictional requirements are met at the

time judgment is entered.” In that case the federal district court (erroneously) denied a

motion to remand a removed case when the parties were not completely diverse; the

nondiverse parties later settled and the case proceeded to trial and judgment. See id. at

64. The Supreme Court ruled that the defective removal did not require that the judgment

be vacated. Untimeliness is a “statutory flaw,” not a “jurisdictional defect.” Id. at 73

(emphasis omitted). And “[o]nce a diversity case has been tried in federal court,” the

Court wrote, “considerations of finality, efficiency, and economy become

overwhelming.” Id. at 75. “To wipe out the adjudication postjudgment, and return to

state court a case now satisfying all federal jurisdictional requirements, would impose an

15
exorbitant cost on our dual court system, a cost incompatible with the fair and

unprotracted administration of justice.” Id. at 77.

Here, it was clear by the time the Insurer filed its notice of removal that the

amount in controversy exceeded $75,000. Although there was no trial in this case, this

circuit has confirmed that the rule of Caterpillar applies not only after a trial but also

when “judgment is based on . . . a district court’s ruling on a dispositive motion.”

Huffman, 194 F.3d at 1080. Remand to state court would therefore be improper if we

upheld the summary judgment. On the other hand, the efficiency rationale of Caterpillar

would disappear if we reversed the district court’s summary judgment, because the case

would need to proceed anew anyway, and it might as well proceed in state court as in

federal. See id. But, as we proceed to explain, we affirm the judgment below.

IV. POLICY COVERAGE

Turning to the merits, we agree that the Owner failed to raise a genuine issue of

material fact that the damage to the Building is covered by the Policy. The critical policy

provision is the “Water Exclusion Endorsement,” which excludes from coverage any

damage caused by the following water-based sources:

1. Flood, surface water, waves (including tidal wave and tsunami),
tides, tidal water, overflow of any body of water, or spray from any of
these, all whether or not driven by wind (including storm surge);

2. Mudslide or mudflow;

3. Water that backs up or overflows or is otherwise discharged from a
sewer, drain, sump, sump pump or related equipment;

4. Water under the ground surface pressing on, or flowing or seeping
through:
16
 a. Foundations, walls, floors or paved surfaces;

b. Basements, whether paved or not; or

c. Doors, windows or other openings; or

5. Waterborne material carried or otherwise moved by any of the water
referred to in Paragraph 1., 3., or 4., or material carried or otherwise
moved by mudslide or mudflow.

This exclusion applies regardless of whether any of the above, in
Paragraphs 1. through 5., is caused by an act of nature or is otherwise
caused.

Supp. Aplee. Appx., Vol. 8 at 555. There is, however, an exception to this exclusion for

damage from explosions:

But if any of the above, in Paragraphs 1. through 5., results in fire,
explosion or sprinkler leakage, we will pay for the loss or damage
caused by that fire, explosion or sprinkler leakage (if sprinkler leakage
is a Covered Cause of Loss).

Id. In short, the Policy does not cover damage caused by water, but does cover damage

caused by an explosion caused by water.

Although the Insurer has the burden of establishing that the Owner’s loss fell

within the exclusion, see Colorado Intergovernmental Risk Sharing Agency v. Northfield

Ins. Co., 207 P.3d 839, 842 (Colo. App. 2008), the Owner does not dispute that the

damage was caused by a mudslide. But it makes two arguments why it is still covered:

(1) the damage to the Building was not caused by surface water and is therefore not

within the water-exclusion provision; (2) the Building was destroyed not by the mudslide

itself, but by a resulting explosion. We are not persuaded.

17
 A. Surface Water

The Owner’s surface-water argument is easily resolved. The Owner relies on

Heller v. Fire Insurance Exchange, a Division of Farmers Insurance Group, 800 P.2d

1006, 1007 (Colo. 1990), in which runoffs of melted snow damaged a mountain residence

in Vail, Colorado. The insurance policy excluded loss caused by “flood, surface water,

waves, tidal water, overflow of a body of water, or spray from any of these, whether

driven by wind or not.” Id. at 1008 n.2. The insurer denied coverage on the ground that

surface water had caused the damage. See id. at 1008. The Colorado Supreme Court

ruled for the plaintiffs. It defined surface water in part as water that “follows no defined

course or channel.” Id. at 1009. But in that case the “path of the water had been diverted

. . . by three parallel trenches . . . . fifteen to twenty feet long, three feet wide, six inches

deep, and lined with plastic sheets, rocks and tree limbs.” Id. at 1007. The court

reasoned that “the runoff lost its character as surface water when it was diverted by the

trenches and therefore was not within the surface water exclusion.” Id. at 1009.

The Owner argues that, as in Heller, the water here lost its character as surface

water because it “was diverted by man-made parking lots, roadways, drainpipes, and

culverts on Flagstaff Mountain uphill from the Building.” Aplt. Br. at 57. This diversion

seems less dramatic than the one in Heller, but the factual distinctions are of no

consequence because the terms of the policies are different. In Heller the relevant

exclusion was for surface water. See Heller, 800 P.2d at 1008. The exclusion here

encompasses “surface water,” but it also includes “mudslide or mudflow.” Supp. Aplee.

18
App., Vol. 8 at 555. The Owner concedes the damage to have been caused by “an

avalanche of mud, rocks, and debris . . . [that] careened into the Building.” Aplt. Br. at 2.

The Owner does not, and could not, make any argument that the avalanche was not a

mudslide. And under the Policy it makes no difference whether any water causing the

avalanche had been diverted by manmade features; mudslide damage is excluded whether

the mudslide “is caused by an act of nature or is otherwise caused.” Supp. Aplee. App.,

Vol. 8 at 555.

B. Explosion

As for the Owner’s second argument, the facts do matter. The Owner contends

that the mudslide “caus[ed] the Building to violently and suddenly burst apart with a loud

boom,” that is to say, caused the building to explode, thus bringing the damage within the

explosion exception to the water exclusion. Aplt. Br. at 2. We disagree that demolition

by an external cascade of water, mud, and debris is an explosion under the Policy.

“In interpreting a contract, we seek to give effect to the intent and reasonable

expectations of the parties.” Thompson v. Maryland Cas. Co., 84 P.3d 496, 501 (Colo.

2004) (en banc). “Accordingly, unless the parties intend otherwise, terms in an insurance

policy should be assigned their plain and ordinary meaning.” Id. To comport with public

policy and principles of fairness, we construe ambiguous terms in an insurance policy

against the insurer. See id. at 501–02. We also “read the provisions of the policy as a

whole, rather than reading them in isolation.” Cyprus Amax Minerals Co. v. Lexington

Ins. Co., 74 P.3d 294, 299 (Colo. 2003) (en banc); see Sec. Ins. Co. of Hartford v.

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Houser, 552 P.2d 308, 310 (Colo. 1976) (en banc) (interpreting an insurance-policy

clause based on the purpose of the clause within the policy).

The Policy itself does not define the term explosion. But that does not mean that

the term must be construed to encompass all possible meanings, even if found in the

dictionary. Context matters. We would be reluctant, for example, to construe policy

language to include figurative meanings. See Rhinelander v. Ins. Co. of Pennsylvania, 8

U.S. 29, 44 (1807) (“Commercial contracts have but little connection with figurative

language.”). Although a football player may “explode” off the line of scrimmage, we

would not construe the exception to the exclusion to include damage to a wall from

someone (even someone who is 6’6” tall and weighs 330 pounds) fleeing a flash flood.

Nor does it make sense to construe the term explosion in a way that would undermine the

exclusion to which it is an exception. The Owner urges us to find an explosion any time

an external impact transfers sufficient kinetic energy to a structure to destroy it. But the

exclusion includes tidal waves, tsunamis, and mudslides, which all typically produce

extreme forces that can smash anything in their paths; to adopt the Owner’s conception

would be to read those exclusions out of the Policy.

What makes most sense in the present context is the classical notion of an

explosion, as from a bomb or leaking gas. Such an explosion involves a buildup of

internal pressure and a sudden bursting outward in all available directions. The exception

would apply, for example, if a mudslide damaged a gas pipe, creating a leak of gas that

was ignited and exploded. Our understanding of the term is consistent with that of other

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courts construing “explosion” in an insurance policy. See Pre-Cast Concrete Prods., Inc.

v. Home Ins. Co., 417 F.2d 1323, 1328 (7th Cir. 1969) (“[A]n explosion occurs when the

pressure inside the container exceeds the strength of the container and results in a sudden

release of the pressure.”); Jersey Ins. Co. of N.Y. v. Heffron, 242 F.2d 136, 139 (4th Cir.

1957) (finding an explosion where “the roof, falling intact like a huge piston … gradually

built a compression of air . . . great enough to burst the first story windows”);

Commercial Union Fire Ins. Co. v. Bank of Ga., 197 F.2d 455, 457 (5th Cir. 1952) (In a

bursting-fire-hydrant case, “the bursting [was] caused by excessive pressure, and the

pressure [was] caused by pent-up energy.”); Bower v. Aetna Ins. Co., 54 F. Supp. 897,

898 (N.D. Tex. 1944) (“The application of a force from within the radiators which the

radiators, or the pipes, could not resist, and burst, or exploded is apparently what

happened.”); Sperling v. Allstate Indemnity Company, 944 A.2d, 210, 217 (Vt. 2007) (“In

the absence of the release of energy through an ignitable substance, decisions require a

buildup of internal pressure preceding the rupture in order to define the event as an

explosion.”).

To convince us that the term explosion includes causes not driven by internal

pressure, the Owner points to Stone Container Corp. v. Hartford Steam Boiler Inspection

& Ins. Co., 165 F.3d 1157, 1160 (7th Cir. 1999), which states in dictum that a

watermelon explodes when shot through with a bullet. But that statement does not help

the Owner. The court was asked to limit the term explosion to an event caused by

“combustion or some other chemical reaction.” Id. at 1159. It declined, explaining that

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to limit explosion in that way would improperly exclude from the term’s scope an atomic

bomb or “volcanic explosions, as well as the ‘explosion’ of a tire caused by a blowout,

the explosion of a melon caused by a bullet . . . .” Id. at 1160. This comment reflects a

(seemingly correct) belief that the melon explodes due to some source other than

combustion or chemical reaction. It does not suggest that the source is something other

than a buildup of internal pressure. And that is, in fact, the case, as far as we can discern:

a bullet entering a watermelon compresses the fluid within it and creates a hydrostatic

shock wave through the fluid that presses in all directions against the rind until it bursts.

See “Hydrostatic shock,” available at https://en.wikipedia.org/wiki/Hydrostatic_shock

(last visited August 2, 2016); “Why do watermelons explode,” available at

http://bit.ly/1qC0OfW (last visited August 2, 2016).

Given our understanding of the policy language, we must affirm the district court.

The Owner does argue briefly that a buildup of internal pressure did damage the building.

Drawing an analogy to the popping of an overfilled balloon, the Owner suggests “that

mud, water, and debris may have filled up the Building to the point of failure, at which

time the walls burst outward in a catastrophic and sudden explosion.” Aplt. Br. at 55.

The problem for the Owner is that there is no evidence to support this argument. The

Owner’s own engineer found that the north-traveling mudslide displaced the building’s

walls upon impact, not after filling the building with mud. See Fronapfel Report, Supp.

Aplee. App., Vol. 1 at 65 (“The debris laden flow impacted the south elevation of the

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structure, causing a sudden reaction of the wall structure . . . .”).6 The walls moved

laterally to the north, not outward in all directions. And the roof did not burst outward as

from an explosion, but rather “collapsed.” Id. at 73.

V. CONCLUSION

We AFFIRM the district court’s orders denying the Owner’s motion to remand

and granting summary judgment to the Insurer. Our affirmance moots the Owner’s other

arguments on appeal.

6
The expert who prepared the report testified at his deposition as follows:
Q. There’s no evidence of any internal gases or internal pressures that
caused the damage to the building, is there?
...
A. When we’re talking about internal pressures to the loss of the bearing,
potentially, yes. If we’re talking about like a pressure vessel, I don’t
believe so. We’re talking pressure differentials, but we’re not talking
internal pressure increase like blowing up a balloon. I didn’t see that. The
walls didn’t shift all outward in one blow. I believe they moved in one
direction.
Deposition of Edward Fronapfel, Aplt. App., Vol. 19 at 2297.
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