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In Travelers, the Central District of Illinois held that, under both Illinois and Colorado law, the TCPA statutory damages are remedial for purposes of insurability.
Summary of this case from ACE Am. Ins. Co. v. Dish Network, LLCOpinion
No. 04CA1396.
June 15, 2006. Certiorari Granted October 16, 2006.
Appeal from the District Court, Jefferson County, No. 02CV410, R. Brooke Jackson, J.
Roberts Levin Patterson PC, Bradley A. Levin, Jeremy A. Sitcoff, Denver, Colorado, for Plaintiff-Appellee.
Ballard Spahr Andrews Ingersoll LLP, Leslie A. Eaton, Denver, Colorado, for Defendants-Appellants.
Defendants, Travelers Casualty and Surety Company and Travelers Casualty Co. of Connecticut (collectively Travelers), appeal the trial court's judgment in favor of plaintiff, Village Homes of Colorado, Inc. We affirm.
I. Background
Travelers issued a comprehensive general liability (CGL) and a comprehensive excess liability (umbrella) insurance policy to Village Homes, a home builder. Subject to certain conditions, each policy provided coverage for occurrences during the period of August 1, 1995, to August 1, 1996.
In April 2000, three homeowners sued Village Homes, alleging that Village Homes was liable for construction defects related to expansive soils. In July 2001, a fourth home-owner sued Village Homes on the same basis. Village Homes tendered the defense of the cases to Travelers, which denied coverage.
Village Homes sued Travelers, alleging that it had settled the two underlying suits for approximately $788,580, and that Travelers was obligated to indemnify it for a total amount of about $315,000.
After receiving the case on stipulated facts, the court concluded that Travelers was obligated to indemnify Village Homes in the amount of $200,000.
Travelers contends that the trial court erred when it concluded there was coverage under the policies. We disagree.
II. The Insuring Agreement
The CGL policy obligates Travelers to pay sums that Village Homes becomes legally obligated to pay as damages because of property damage that (1) is caused by an "occurrence" and (2) takes place during the policy period. The policy defines "occurrence" to mean "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."
Travelers concedes that because the parties stipulated that the property damage to the homes is $200,000, the umbrella policy is not implicated. Therefore, our analysis is limited to the terms of the CGL policy.
III. Stipulated Facts
The homeowners alleged that the property damage that was caused by Village Homes' negligent construction began on the date the homes were first sold and continued through the date of the complaints. They alleged that, as a result of this continuing property damage, Village Homes was liable to them for damages as measured by, among other things, the cost of repairing the damage to the homes.
The parties submitted two stipulations of fact. To the first stipulation, they attached copies of the CGL policy, the complaints the homeowners filed in the two lawsuits, and certified copies of the homeowners' deeds. They also stipulated that:
• Travelers issued the CGL policy to Village Homes;
• the policy period was August 1, 1995, to August 1, 1996; and
• three of the homeowners purchased the homes from prior owners in 1997, and the fourth homeowner purchased the home in 1999.
In the second stipulation, the parties stipulated that:
• there was property damage to the four homes;
• the property damage resulted from an "occurrence",
• the "occurrence" was during the policy period; and
• the property damage to the homes during the policy period was $200,000.
The parties did not stipulate to any other allegations made in Village Homes' complaint or amended complaint.
IV. Issue Presented
The parties presented this case to the trial court to determine whether the supreme court decision in Browder v. United States Fidelity Guaranty Co., 893 P.2d 132 (Colo. 1995), compels the conclusion that the CGL policy here does not afford coverage to Village Homes.
In the trial court, Travelers did not contend that (1) the sums Village Homes was legally obligated to pay to the homeowners did not constitute damages as that term is used in the insuring agreement; (2) Village Homes' liability to the homeowners was not premised on the stipulated occurrence; or (3) Village Homes' liability did not include the stipulated $200,000 damage to the property.
On appeal, Travelers does not contend that there is insufficient evidence to show that Village Homes' liability to the homeowners was because of property damage caused by an occurrence that took place during the policy period.
Based on Browder, Travelers argues that (1) coverage was not triggered because the homeowners acquired the homes after the expiration of the insurance policy, and (2) there is no coverage because the homeowners did not suffer any actual harm during the policy period.
V. Policy Interpretation and Standard of Review
When determining the rights and obligations that exist under an insurance policy, we apply principles of contract interpretation and attempt to carry out the parties' reasonable expectations when the policy was issued. We enforce insurance contracts as written, giving the words and phrases their plain and ordinary meaning. Cotter Corp. v. Am. Empire Surplus Lines Ins. Co., 90 P.3d 814 (Colo. 2004); Thompson v. Md. Cas. Co., 84 P.3d 496 (Colo. 2004). "Our construction of the policy provisions must be `fair, natural and reasonable' rather than strained or strictly technical." Pub. Serv. Co. v. Wallis Cos., 986 P.2d 924, 939 (Colo. 1999) (quoting Johnson v. Am. Family Life Assurance Co., 583 F.Supp. 1450, 1453 (D.Colo.1984)). "Courts should not rewrite insurance policy provisions that are clear and unambiguous." Compass Ins. Co. v. City of Littleton, 984 P.2d 606, 613 (Colo. 1999). However, when the terms of an insurance policy are ambiguous, they must be strictly construed against the insurer and in favor of the policyholder. Allstate Ins. Co. v. Avis Rent-A-Car Sys., Inc., 947 P.2d 341 (Colo. 1997); U.S. Fid. Guar. Co. v. Budget Rent-A-Car Sys., Inc., 842 P.2d 208, 211 (Colo. 1992); Am. Family Mut. Ins. Co. v. Johnson, 816 P.2d 952, 953 (Colo. 1991).
We review the trial court's interpretation of an insurance contract de novo. Globe Indem. Co. v. Travelers Indem. Co., 98 P.3d 971, 973 (Colo.App. 2004).
VI. Coverage Triggered
Travelers argues that coverage was not triggered. We disagree.
A. Trigger of Coverage
"Trigger of coverage" refers to circumstances that activate coverage under a CGL policy and is determined based on the language of the policy. So-called claims-made policies provide coverage "for claims made during the policy period", in contrast, "an occurrence policy provides coverage for all `occurrences' which take place during a policy period." Ballow v. PHICO Ins. Co., 875 P.2d 1354, 1357 (Colo. 1993) (emphasis added).
Triggering occurs when a threshold event implicates an insurance policy's coverage. The fact that a policy has been triggered means that there may be liability coverage under that policy, subject to the policy's terms, the application of any exclusions in the policy, and any other defenses the insurer may raise. Thus, a policy that has not been triggered does not provide any coverage, while a policy that has been triggered may or may not provide coverage, depending on the circumstances of the case.
Pub. Serv. Co. v. Wallis Cos., supra, 986 P.2d at 937 n. 11.
In occurrence policies, the trigger of coverage is usually bodily injury or property damage during the policy period. Consequently, an occurrence policy that was in effect when injury or damage happened may provide coverage even when a claim alleging that the policyholder is liable for the injury or damage is not filed until many years later. In this way, an occurrence policy does not expire, but, rather, continues in effect after the policy period ends.
B. Conclusion Regarding Trigger
Travelers stipulated that there was property damage to the purchasers' homes, the property damage resulted from an occurrence, the occurrence was during the policy period, and the property damage to the homes during the policy period was $200,000. It thus stipulated to all conditions necessary to trigger coverage.
Nonetheless, Travelers contends that there is "no operative effect" to its stipulation that there was property damage resulting from an occurrence during the policy period because coverage was not triggered. However, the determination of whether coverage is triggered is based on the application of the policy terms to the facts. Under the plain and ordinary meaning of the policy terms here, the triggering event is an occurrence during the policy period, and Travelers stipulated to that event.
Therefore, we conclude that coverage was triggered.
C. Travelers' Contentions
We reject Travelers' contention that Browder, supra, requires us to conclude that coverage was not triggered.
In Browder, a general contractor built and sold a motel. For five months during construction and nine months after construction was completed, the seller was insured under a special multi-peril policy. On the day the policy period ended, the seller sold the motel and transferred ownership of the insurance policy to the same purchasers.
The policy obligated the insurer to pay all sums the seller became legally obligated to pay as damages because of bodily injury or property damage caused by an occurrence and "arising out of the ownership, maintenance or use of the insured premises and all operations necessary or incidental to the business of the seller conducted at or from the insured premises." Browder, supra, 893 P.2d at 134. The policy indicated that it applied to liability the seller assumed under a warranty that work performed by or on behalf of the seller would be done in a workmanlike manner.
More than eight years later, the purchasers discovered cracking and sagging in the buildings and sued the seller for failure to construct the motel in a workmanlike manner. The seller filed for bankruptcy, and the purchasers filed a proof of claim that resulted in a stipulated judgment.
The trial court granted the insurer's motion for summary judgment, and the supreme court affirmed, holding that no occurrence that would trigger coverage under the policy damaged the purchasers' interest while the seller "was the insured." Browder, supra, 893 P.2d at 135. The court stated that "any liability [seller] may have had for damages to the [purchasers] would not have been triggered until the policy was no longer in effect." Browder, supra, 893 P.2d at 135.
1. Coverage After Policy Period
Travelers misconstrues the court's meaning of the phrase "no longer in effect."
Although the occurrence policy in Browder would normally have remained in effect and continued to provide coverage to the seller after the policy period ended, the seller transferred the policy and, thereby, endeavored to transfer coverage under it. Contrary to Travelers' contention, the phrase "no longer in effect" does not refer to the end of the policy period, but, rather, to the fact that the seller's liability arose after coverage had been transferred.
This interpretation is confirmed later in the Browder decision where the court stated that a 1993 Massachusetts decision was unpersuasive and distinguishable. The court again explained that, as soon as the Browder purchasers obtained their ownership interest, the seller "immediately ceased" to be insured pursuant to the concurrent assignment of the policy, and any "occurrence that would trigger coverage under the policy" damaged the purchasers' legal interests only after the seller was no longer insured under the policy. Browder, supra, 893 P.2d at 135 (distinguishing Trs. of Tufts Univ. v. Commercial Union Ins. Co., 415 Mass. 844, 616 N.E.2d 68 (1993)).
2. Accident Required to Trigger Coverage
Travelers also misconstrues the Browder court's holding that there must be actual damage to a third party to trigger coverage.
Determining what event triggers coverage is not always easy, especially when, as here, the policy requires that there be an "accident" during the policy period.
In Samuelson v. Chutich, 187 Colo. 155, 529 P.2d 631 (1974), the insured's allegedly negligent act occurred during the policy period, but the negligence did not result in bodily injury until it caused an explosion after the policy period. The policy applied only to "accidents" that occurred during the policy period, and the issue was whether there had been such an accident. The supreme court ruled that the term "accident" implies a misfortune and injury or damage to a victim, and not the negligent act that causes the "misfortune." Thus, the court concluded that the accident occurred at the time of the explosion, not when the allegedly negligent acts were committed. Samuelson v. Chutich, supra, 187 Colo. at 160, 529 P.2d at 634.
In Browder, the policy was triggered when an accident resulted in bodily injury or property damage during the policy period. Citing Chutich, the court stated that liability insurance does not compensate an insured for his own loss, but, rather, for damages the insured must pay to others because of his own actions. Browder, supra, 893 P.2d at 134 n. 3 (citing Rowland H. Long, The Law of Liability § 1.01 (1994)). Citing Bartholomew v. Insurance Co. of North America, 502 F.Supp. 246 (D.R.I.1980) (an "accident" occurs when the negligent act results in injury to another), aff'd sub nom. Bartholomew v. Appalachian Ins. Co., 655 F.2d 27 (1st Cir. 1981), the Browder court stated that "[i]t is well-settled that the time of the occurrence of an accident is not the time the wrongful act was committed but the time when the complaining party was actually damaged." Browder, supra, 893 P.2d at 134 n. 2.
Thus, there is no "accident" when an insured's negligence damages the insured's property. Instead, an "accident" occurs only when the insured's negligence results in bodily injury to someone else or damage to property owned by another. As the Browder court stated, a basic tenet of liability insurance is that "a third party must suffer actual damage within the policy period [for the insured] to recover under a liability policy." Browder, supra, 893 P.2d at 134.
Indeed, other divisions of this court have applied Browder consistently with this understanding of the rule. See Globe Indem. Co. v. Travelers Indem. Co., supra (policyholder entitled to CGL coverage when there was no dispute that actual damage to the property occurred during the policy period); Leprino v. Nationwide Prop. Cas. Ins. Co., 89 P.3d 487 (Colo.App. 2003) (policyholder was not entitled to coverage when the third party's complaint did not allege actual damage to property during the policy period); Union Pac. R.R. v. Certain Underwriters at Lloyd's, London, 37 P.3d 524 (Colo.App. 2001) (where policyholder denied liability in a consent decree and the agency concluded that no remedial action was necessary, policyholder failed to establish requisite damage to property and, therefore, was not entitled to indemnification).
Contrary to Travelers' argument, the Browder court's observation of the existence of a "basic tenet" of liability insurance did not expand the scope of existing law or create a new tenet. Nor did the Browder court overrule other cases in which it had held that insurance contracts are to be enforced as written, giving the policy's words and phrases their plain and ordinary meaning, and applying them to the facts of a particular case. For these reasons, we decline to adopt the reasoning in Hoang v. Monterra Homes (Powderhorn) LLC, 129 P.3d 1028 (Colo.App. 2005)( cert. granted Mar. 20, 2006, 2006 WL 1586645), in which a division of this court concluded that a policyholder was not entitled to coverage where the property damage occurred before the third-party claimants purchased the damaged property.
Based on the terms of the policy, the decision in Browder, and the authorities upon which the Browder court relied, we reject Travelers' contention that the party to whom the insured becomes liable must have owned the damaged property during the policy period.
3. Accident Stipulated
The insuring agreement obligates Travelers to pay all sums that Village Homes becomes legally obligated to pay as damages because of property damage that is caused by an occurrence during the policy period. For there to be an occurrence during the policy period, there must have been an "accident" that resulted in bodily injury or property damage during that period. And, here, Travelers stipulated that there was an occurrence and property damage to the homes during the policy period. The policy defines "occurrence" to mean "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Thus, under the terms of the policy, when Travelers stipulated that there had been an occurrence, it also stipulated that there had been an accident during the policy period.
4. Ownership at Time of Property Damage
Travelers also relies on the Browder court's reliance on Hoppy's Oil Service v. Insurance Co. of North America, 783 F.Supp. 1505, 1508 (D.Mass.1992), and the fact that it distinguished the holding in Garriott Crop Dusting Co. v. Superior Court, 221 Cal.App.3d 783, 270 Cal.Rptr. 678 (1990). Again, Travelers' reasoning is not persuasive.
The Browder court also applied the "owned property exclusion." There, the seller owned the property and the policy during the entire policy period, and during that time, its coverage rights were subject to the policy's conditions and exclusions. The owned property exclusion expressly barred coverage for damage to property owned or occupied by the seller. Thus, the court concluded that the policy excluded coverage for any damage to the motel during the policy period because the premises were owned by the seller during that entire period.
In this regard, the supreme court referred to the decision in Garriott Crop Dusting Co. v. Superior Court, supra, and noted that the policies in Garriott stated that the damaged property "must not belong to the insured." Browder, supra, 893 P.2d at 135; Garriott, supra, 270 Cal.Rptr. at 682. The supreme court then distinguished the facts in Garriott, observing that the claimant there "had a possible subrogated right to pursue an action against the insurer," Browder, supra, 893 P.2d at 135, but that (1) the seller was the only party in Browder who sustained damage during the policy period, (2) the seller was expressly precluded from asserting a coverage claim because of the owned property exclusion, and, thus, (3) the purchasers could not recover as subrogees of the seller.
The court's discussion of Garriot Crop Dusting is consistent with its reliance on Hoppy's Oil Service v. Insurance Co. of North America, supra. The facts in Hoppy's Oil were similar to those in Browder. In Browder, the seller built the motel and, upon its completion, owned and operated it during the policy period. The third party acquired the property after the policy period ended. In Hoppy's Oil, the insured owned and leased premises for use as a gasoline station from 1969 to 1985, during which time underground storage tanks leaked. The insurance policies provided coverage from July 1982 through June 1985. The third party acquired the property in July 1985, immediately after the last policy period ended.
The policy in Browder excluded coverage for damage to property owned by the seller. Similarly, the policy in Hoppy's Oil excluded coverage for damage to "(1) property owned or occupied by or rented to the insured, (2) property used by the insured, or (3) property in the care, custody or control of the insured or as to which the insured is for any purpose exercising physical control." Hoppy's Oil Serv. v. Ins. Co. of N. Am., supra, 783 F.Supp. at 1508.
Particularly in view of the exclusion of coverage for damage to property owned by the insured, the Hoppy's Oil court concluded that the essential predicate of property damage during the policy period could not be considered without attention to ownership of the property.
The court in Hoppy's Oil also rejected the third party's contention that it did not matter that the property was owned by the insured at the time of the occurrence, concluding that the policies applied to claims made by third parties "based upon occurrences within the policy period that result in injury to their (the third parties') property interests." Hoppy's Oil Serv. v. Ins. Co. of N. Am., supra, 783 F.Supp. at 1508. Acknowledging that the state supreme court had not yet considered the precise issue before it, the Hoppy's Oil court stated that its conclusion was consistent with relevant state precedent holding that an accident occurs not at the time of the wrongful act, but when the complaining party was actually damaged. Hoppy's Oil Sen. v. Ins. Co. of N. Am., supra, 783 F.Supp. at 1508.
Citing Hoppy's Oil, the Browder court stated that "[o]ccurrence policies protect an insured against claims `made by third parties based upon occurrences within the policy period that result in injury to their (the third parties') property interest."' Browder, supra, 893 P.2d at 134. Based on the court's citation to Hoppy's Oil, it is apparent that this statement simply emphasized the rule that, when there is an owned property exclusion, (1) there is no coverage for damage to property owned by the insured, and (2) it would be contrary to that exclusion to allow the owner to transfer title of damaged property to a third party and then to seek coverage for liability arising from that same damage.
Here, however, the owned property exclusion was not in issue. The homeowners' suit against Village Homes alleged that the property damage began on the date the homes were first sold and continued through the date of the complaints. And, in the coverage suit, Travelers did not allege that the property damage occurred while Village Homes owned the property, or that coverage is barred by the owned property exclusion.
Thus, we reject Travelers' contention, based on Hoppy's Oil and Browder, that Village Homes is not entitled to coverage because the homeowners to whom Village Homes is obligated to pay damages did not own the homes during the policy period.
VII. Conclusion
Travelers stipulated that there was property damage to the homes, that it resulted from an occurrence during the policy period, and that the damage to the homes during the policy period was $200,000. And, under the policy's definition of an occurrence, Travelers thus stipulated that there had been an accident and $200,000 in property damage during the policy period. Under the insuring agreement Travelers was obligated to pay the sums Village Homes was legally obligated to pay the homeowners. And Travelers did not contend that the $200,000 of damage during the policy period was not the cause of Village Homes' liability to the homeowners.
We conclude that the trial court correctly held that, under the terms of the policy, Travelers must pay $200,000 of the total sum Village Homes is obligated to pay to the homeowners.
The judgment is affirmed.
ROY, J., specially concurs.
RUSSEL, J., dissents.