FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT February 16, 2017
_________________________________
Elisabeth A. Shumaker
Clerk of Court
GERALD H. PHIPPS, INC., d/b/a GH
Phipps Construction Company, a Colorado
corporation,
Plaintiff - Appellant,
v. No. 16-1039
(D.C. No. 1:14-CV-01642-PAB-KLM)
TRAVELERS PROPERTY CASUALTY (D. Colo.)
COMPANY OF AMERICA, a Connecticut
corporation,
Defendant - Appellee.
_________________________________
ORDER AND JUDGMENT*
_________________________________
Before MATHESON, McKAY, and MORITZ, Circuit Judges.
_________________________________
After water damaged a building it was renovating, Gerald H. Phipps, Inc.,
d/b/a GH Phipps Construction Company, (“GHP”) sought coverage under its
builders’ risk insurance policy. GHP’s insurer, Travelers Property Casualty Company
of America (“Travelers”), denied the claim, and GHP sued for breach of contract,
common law bad faith, and statutory bad faith. GHP also sought a declaratory
judgment regarding coverage. The district court granted summary judgment for
*
This order and judgment isn’t binding precedent, except under the doctrines
of law of the case, res judicata, and collateral estoppel. But it may be cited for its
persuasive value. See Fed. R. App. P. 32.1; 10th Cir. R. 32.1.
Travelers on all claims, and GHP appeals. Because we agree with the district court
that GHP doesn’t seek damages for a loss to covered property, we affirm.
BACKGROUND
The University of Denver hired GHP to renovate and expand the University’s
library. Because the library contained asbestos, the University hired two companies—
Excel Environmental and Herron Enterprises—to perform environmental testing and
asbestos mitigation in conjunction with the renovation. But the University wanted to
avoid the cost of removing asbestos in two elevator shafts and four stairwells, so it
limited the scope of GHP’s renovations in those areas. Specifically, GHP planned to
remove and replace handrails in the stairwells; update lighting fixtures; repair
existing concrete floors; patch and paint the existing drywall; and install new or
reroute existing mechanical, plumbing, and electrical systems.
GHP was completing installation of a new roof on the library when water from
melting snow leaked into the building. The water damaged existing drywall and
insulation in the stairwells and elevator shafts that GHP planned to preserve and
update (“the damaged areas”). Before the snowmelt mishap, GHP had completed
some preliminary work in the damaged areas to designate locations for future
installation of mechanical, plumbing, and electrical systems. But GHP hadn’t yet
installed any new materials, updated any lighting fixtures, or patched and painted any
existing drywall in the damaged areas.
GHP notified Travelers of the water damage and initiated a claim under its
builders’ risk insurance policy (“the policy”). Following an initial inspection,
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Travelers advised GHP the loss was covered. GHP then hired Excel and Herron to
perform environmental testing and asbestos removal in the damaged areas, ultimately
incurring $804,661.76 in costs to remove asbestos, remove and replace drywall, and
install new fire-proofing materials in the damaged areas before it could proceed with
its planned renovations in those areas.
But after further review of the policy, Travelers notified GHP the loss wasn’t
covered after all; it explained that “the damage was only to the existing building and
not to [GHP’s] work.” App. vol. 1, 116. Citing the policy’s definition of “Builders’
Risk,” which expressly excludes “[b]uildings or structures that existed at the ‘job
site’ prior to the inception of th[e] policy,” id., Travelers formally denied GHP’s
claim.
Almost one year later, GHP asked Travelers to reconsider its denial of
coverage. In response, Travelers acknowledged that GHP had completed preliminary
work in the damaged areas before the water damage occurred. But Travelers
explained that the policy would cover GHP’s completed work only if “the water
damaged material or items installed by GHP” in the damaged areas. App. vol. 4, 412.
Because its investigation showed that the water instead damaged only “portions of
the existing structure” and that GHP’s preliminary work didn’t include installing any
new materials or items in the damaged areas, Travelers reaffirmed its initial decision
to deny coverage. Id. at 404.
GHP sued Travelers, seeking a declaratory judgment on coverage and also
asserting claims for breach of contract, common law insurance bad faith, and
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statutory insurance bad faith. Travelers moved for partial summary judgment on the
statutory bad faith claim. The district court granted the motion, concluding that
Colorado’s one-year statute of limitations barred the statutory claim.
Travelers then moved for summary judgment on the remaining claims. The
district granted that motion as well, concluding that GHP failed to demonstrate a loss
to covered property. The court reasoned that GHP didn’t introduce evidence
establishing (1) that the water damaged GHP’s own work in the damaged areas or (2)
that GHP sought damages for the costs of redoing its own work in those areas. The
court further reasoned that the damaged areas, as existing structures, were excluded
from coverage under the policy’s definition of “Builders’ Risk.” App. vol. 5, 501.
GHP appeals both summary judgment orders.
DISCUSSION
We review the district court’s decision to grant summary judgment de novo,
applying the same legal standard as the district court and viewing the record, and all
reasonable inferences that might be drawn from it, in GHP’s favor. Forney Indus.,
Inc. v. Daco of Mo., Inc., 835 F.3d 1238, 1251 (10th Cir. 2016). Summary judgment
is appropriate if “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).
GHP first challenges the district court’s order granting summary judgment on
its breach of contract, common law bad faith, and declaratory judgment claims,
arguing that the district court incorrectly interpreted the policy. Thus, we begin our
analysis by considering the policy’s plain language. See State Farm Mut. Auto. Ins. v.
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Stein, 940 P.2d 384, 387 (Colo. 1997) (noting that Colorado courts enforce insurance
policies as written, unless the policy language is ambiguous).1
The policy provides that Travelers “will pay for direct physical loss of or
damage to Covered Property from any of the Covered Causes of Loss.” App. vol. 3,
277. The policy defines “Covered Property” as “Builders’ Risk.” Id. The policy then
defines “Builders’ Risk” as
Property described in the Declarations under “Builders’ Risk” owned by
[GHP] or for which [GHP 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.
Id. at 293.
Critically, the policy expressly provides that “‘Builders’ Risk’ does not
include . . . [b]uildings or structures that existed at the ‘job site’ prior to the inception
of th[e] policy.” Id.
As the insured, GHP has the initial burden of demonstrating coverage. See
Rodriguez ex rel. Rodriguez v. Safeco Ins. Co. of Am., 821 P.2d 849, 853 (Colo. App.
1991). If GHP meets this burden, the burden shifts to Travelers to “establish the
1
Colorado law applies in this diversity action. See Houston Gen. Ins. Co. v.
Am. Fence Co., 115 F.3d 805, 806 (10th Cir. 1997) (“The interpretation of an
insurance contract is governed by state law and, sitting in diversity, we look to the
law of the forum state.”).
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applicability of an exclusion from coverage.” Leprino Foods Co. v. Factory Mut. Ins.
Co., 453 F.3d 1281, 1287 (10th Cir. 2006) (quoting Fire Ins. Exch. v. Bentley, 953 P.2d
1297, 1301 (Colo. App. 1998)). And, if Travelers shows that an exclusion applies, the
burden shifts back to GHP to show the applicability of an exception to the exclusion. See
Rodriguez, 821 P.2d at 853.
At the outset, we note that GHP doesn’t even attempt to argue in its opening
brief that the damaged areas come within section (a) of the “Builders’ Risk”
definition as either a building or structure that was “being constructed, erected or
fabricated at the ‘job site.’” App. vol. 3, 293. Other than pointing out that the policy
fails to define “structure,” GHP makes no discernible argument about this language.
Aplt. Br. 25. In its reply brief, GHP argues that section (a)’s reference to a building
“while being constructed” is broad enough to include a building under renovation.
Aplt. Reply Br. 11. Thus, GHP argues, the policy necessarily covers the entire
building while it is being renovated, not just “the specific component of the building
that the contractor is working on or has worked on at the time of the loss.” Id.
Because GHP didn’t make this argument in its opening brief, we ordinarily would
decline to address it. See Starkey ex rel. A.B. v. Boulder Cty. Soc. Servs., 569 F.3d
1244, 1259 (10th Cir. 2009) (stating this court ordinarily declines to review new
arguments made in reply brief).
But, as Travelers argues, even assuming GHP could demonstrate that section (a)’s
plain language provides coverage for the damaged areas, there’s no question that the
damaged areas already existed at the job site before the policy’s inception. Thus, the
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damaged areas would be excluded from coverage under the “Builders’ Risk” definition’s
exclusionary language. And we aren’t persuaded by GHP’s argument that this
exclusionary language wouldn’t apply because, in GHP’s view, the damaged areas are
“merely building or structure components.” Aplt. Br. 25. As the district court reasoned,
whether the damaged areas are either “structures[,] or components of a structure or
building, the fact remains that [the damaged areas] . . . existed before the inception of the
policy.” App. vol. 5, 501.
Next, we address the parties’ shared assumption that section (a) implicitly
provides coverage for damage to GHP’s “work,” which, according to Travelers,
means materials and items that GHP installs on existing structures or in the existing
building during renovations. App. vol. 4, 412; see also Aplt. Br. 23 (asserting,
“Travelers has admitted that coverage exists under its policy in the event that GHP
worked on any of the walls damaged by water intrusion.”); Aplee. Br. 27 (“The plain
language of the policy thus insures GHP’s work at the site . . . .”). Relying on that
shared assumption, GHP argues that it raised a genuine dispute of material fact about
the nature and scope of the preliminary work it performed in the damaged areas, thus
precluding summary judgment.
But even if we assume that (1) section (a) implicitly provides coverage for a
loss to any materials or items GHP installed on or in the damaged areas, (2) the water
damaged GHP’s preliminary work in those areas, and (3) GHP had to redo that
preliminary work, these assumptions don’t advance GHP’s assertion that it seeks
damages for a covered loss. Instead, GHP seeks the costs of removing existing
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asbestos, replacing damaged insulation, and removing and replacing existing,
damaged drywall.2 Thus, GHP seeks recovery for the loss to the damaged areas
themselves, not for any loss to its preliminary “work” in those areas. And, as we’ve
discussed, the policy expressly excludes the damaged areas from coverage as
“[b]uildings or structures that existed at the ‘job site’ prior to the inception of th[e]
policy.” App. vol. 3, 293.
Thus, whether GHP seeks coverage for the damaged areas under section (a)’s
explicit language or under some shared assumption that section (a) implicitly covers
GHP’s “work” to existing buildings or structures during a renovation project, the
policy’s exclusionary language applies.
Finally, GHP makes no cogent argument that the damaged areas come within
section (b) of the “Builders’ Risk” definition. GHP points out that the policy doesn’t
2
In attempting to establish that it seeks costs for redoing its preliminary work
in the damaged areas, GHP directs us to three portions of the record: (1) a summary
of damages attached to its proposed supplement to the civil scheduling order, (2) its
entire response to Travelers’ summary judgment motion, and (3) testimony from
GHP’s superintendent, Don Johnson, and GHP’s president, Kurt Klanderud. But
those portions of the record don’t establish that GHP seeks anything other than
restoration costs. First, GHP’s summary of damages only lists invoices GHP paid for
water and asbestos mitigation, not for redoing any layout and penetration work.
Second, while GHP fails to point us to a specific page or portion of its response to
Travelers’ summary judgment motion, we did find a conclusory assertion that “GHP
now seeks recovery of amounts expended to remove the drywall and perform the
necessary abatement work, which was necessary to restore the [damaged areas] to
their pre-water intrusion condition.” App. vol. 5, 430. But that statement supports our
conclusion that GHP seeks restoration costs, not GHP’s assertion that it seeks costs
for redoing its own work. Finally, Johnson and Klanderud both testified that GHP
completed preliminary work in the damaged areas. But neither Johnson nor
Klanderud testified that GHP incurred or sought costs for redoing that work. Thus,
we agree with the district court’s conclusion that GHP doesn’t seek damages for the
costs of redoing its own work.
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define the term “structure” and argues that the damaged areas must therefore
constitute “[p]roperty that will become a permanent part of the buildings or structures
at the ‘job site.’” Aplt. Br. 25 (emphasis omitted) (quoting App. vol. 3, 293). It
further argues that because the “Builders’ Risk” definition excludes existing
“buildings or structures” but doesn’t exclude existing “property,” treating the
damaged areas as “property” renders the exclusionary language inapplicable. Aplt.
Br. 25-26. But we agree with Travelers that section (b) provides coverage for
personal property—i.e., fixtures or building materials—that will become part of the
permanent buildings or structures “being constructed, erected, or fabricated at the
‘job site.’” App. vol. 3, 293. See, e.g., 5-50 New Appleman on Insurance Law
Library Edition § 50.02[c][i] (2016) (“Property covered under a builders risk policy
usually includes the structures on the construction site, as well as materials that have
not yet been incorporated into the structure.”). Because, GHP makes no claim for
damage to its personal property at the job site, the second basis for “Builders’ Risk”
coverage is also inapplicable.
In sum, because GHP doesn’t seek damages for a loss to covered property, we
affirm the district court’s order granting summary judgment in favor of Travelers on
GHP’s claims for breach of contract and common law bad faith, and on GHP’s
request for a declaratory judgment on coverage. And this conclusion makes it
unnecessary for us to resolve whether, as GHP argues, the district court erroneously
concluded that GHP’s statutory bad faith claim was time-barred. Instead, we affirm
the district court’s order granting summary judgment to Travelers on that claim
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because—for the reasons discussed above—GHP failed to demonstrate a loss to
covered property. See MarkWest Hydrocarbon, Inc. v. Liberty Mut. Ins. Co., 558 F.3d
1184, 1193 (10th Cir. 2009) (“It is settled law in Colorado that a bad faith claim must
fail if, as in the case here, coverage was properly denied and the plaintiff’s only
claimed damages flowed from the denial of coverage.”); see also Richison v. Ernest
Grp., Inc., 634 F.3d 1123, 1130 (10th Cir. 2011) (“We have long said that we may
affirm on any basis supported by the record, even if it requires ruling on arguments
not reached by the district court or even presented to us on appeal.”).
Affirmed.
Entered for the Court
Nancy L. Moritz
Circuit Judge
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