Summary
recognizing that neither side is obligated to proceed with a second appraisal after the initial appraisal was vacated
Summary of this case from McCaffrey v. Great N. Ins. Co.Opinion
Civil Action No. 15-cv-01828-MSK-SKC
2019-09-03
COPPER OAKS MASTER HOME OWNERS ASSOCIATION, Plaintiff, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Defendant.
Christopher N. Mammel, Merlin Law Group-Denver, Denver, CO, Edward Eshoo, Jr., Merlin Law Group-Chicago, Chicago, IL, for Plaintiff. Cedric Dwight Logan, Evan Bennett Stephenson, Habib Nasrullah, Terence M. Ridley, Wheeler Trigg O'Donnell, LLP, Denver, CO, Kirstin Michelle Dvorchak, Clifton J. Latiolais, Jr., Campbell Wagner Frazier & Dvorchak, LLC, Greenwood Village, CO, for Defendant.
Christopher N. Mammel, Merlin Law Group-Denver, Denver, CO, Edward Eshoo, Jr., Merlin Law Group-Chicago, Chicago, IL, for Plaintiff.
Cedric Dwight Logan, Evan Bennett Stephenson, Habib Nasrullah, Terence M. Ridley, Wheeler Trigg O'Donnell, LLP, Denver, CO, Kirstin Michelle Dvorchak, Clifton J. Latiolais, Jr., Campbell Wagner Frazier & Dvorchak, LLC, Greenwood Village, CO, for Defendant.
OPINION AND ORDER DENYING MOTIONS FOR SUMMARY JUDGMENT
Marcia S. Krieger, Senior United States District Judge THIS MATTER comes before the Court pursuant to the Plaintiff's ("Copper Oaks") Motion for Partial Summary Judgment (# 175) , the Defendant's ("Am Fam") response (# 177) , and Copper Oaks' reply (# 180) ; and Am Fam's Motion for Summary Judgment (# 176) , Copper Oaks' response (# 178) , and Am Fam's reply (# 179) . Also pending is Am Fam's Motion for Leave (# 154) to file its summary judgment motion, which the Court now denies as moot, and Copper Oaks' motion (# 181) requesting that this Court certify certain legal questions to the Colorado Supreme Court, Am Fam's response (# 182) , and Copper Oaks' reply (# 183) .
FACTS
The Court assumes the reader's familiarity with the extensive proceedings to date, and offers only a brief summary here, elaborating as necessary in its analysis.
Copper Oaks owns and manages a multi-building apartment complex in Lakewood, Colorado. In September 2013, a hail storm caused damage to the property and Copper Oaks made a claim on its insurer, Am Fam, under the terms of is casualty insurance policy ("the Policy").
Am Fam conceded coverage and made an initial payment of nearly $500,000 on the claim. However, the parties disagreed as to the remaining value of the claim and Copper Oaks invoked an appraisal clause in the policy. Am Fam eventually agreed to appraise, but because it disputed whether certain items of damage claimed by Copper Oaks were caused by the hailstorm, proposed that the appraisers separately assess the valuation of disputed and undisputed items. Copper Oaks opposed that suggestion and commenced the instant action.
Because the procedural history of this case is of some significance in the Court's analysis, the Court explains that history in some detail. Copper Oaks' initial Complaint (# 5) alleged five causes of action: (i) a request for a declaration that, under the Policy's appraisal process, the appraisal panel was obligated to evaluate causation as well as to quantify losses, and that Am Fam must immediately proceed with appraisal; (ii) a "petition to compel appraisal," which essentially requested a finding that Am Fam was in breach of the contract regarding the appraisal process and a remedy of specific performance; (iii) a claim for breach of contract, in that Am Fam failed to pay benefits owed to Copper Oaks under the Policy; (iv) a claim for unreasonable delay in payment under C.R.S. § 10-3-1115 and 1116 ; and (v) a claim for common-law bad faith breach of contract under Colorado law.
In October 2015, Copper Oaks moved (# 31) to compel Am Fam to participate in the appraisal process specified by the Policy. Pursuant to an order of reference from this Court, in December 2015, the Magistrate Judge granted (# 40) that motion, directing the parties to proceed to an appraisal that encompassed questions of causation. Neither party sought review of the Magistrate Judge's order under 28 U.S.C. § 635(b) ; instead, the parties proceeded to appraisal as ordered.
The appraisal process was completed in mid-2017, and the pertinent events of that process are recited in detail in this Court's Order of July 23, 2018 (# 134) (the "July Order"), which is deemed incorporated herein. It is sufficient at this time to note that Copper Oaks' appraiser and the umpire selected under the terms of the Policy agreed on an award of roughly $3 million, over the objections of Am Fam's appraiser. Copper Oaks thereafter filed a motion for summary judgment in this action, arguing that Am Fam was now liable to it on the breach of contract claim in the amount of the appraisal award. Contending (among other things) that Am Fam's appraiser was not "impartial" as required by the Policy, Am Fam both opposed the summary judgment motion and separately moved (# 80) to vacate the appraisal award.
Shortly thereafter, this Court sua sponte issued an Order to Show Cause (# 82) , explaining that it had concerns as to whether Copper Oaks had sufficient standing to bring each of the claims asserted in the Complaint. The Court observed that Copper Oaks' first two claims, essentially seeking to compel an appraisal, had been rendered moot by that appraisal having occurred. The Court also stated that, based on its reading of the Policy, Copper Oaks' claim(s) for breach of contract were premature, as the Policy stated that Am Fam's obligation to pay benefits did not accrue until an appraisal had been completed. Because that appraisal had not been completed as of the time the action was commenced, the Court believed that Copper Oaks lacked standing to bring some of all of its remaining claims. In December 2017, the Court held a hearing (# 94) on the Order to Show Cause and decided to bifurcate Copper Oaks' first two claims – the request for a declaration concerning the Policy's appraisal language and the request to compel an appraisal – from the remaining claims for breach and unreasonable delay. The Court expressed some doubt as to whether Copper Oaks had sufficient standing to pursue those claims but elected not to reach that issue "put[ting] those [claims] aside because they are arguably claims that are going to be tried to a jury." (The Court subsequently permitted Copper Oaks to supplement those claims.) As to the appraisal claims, the Court indicated its intention to resolve those claims via a bench trial. Neither party objected to that process.
Copper Oaks then filed its Amended and Supplemental Complaint (# 95) . This pleading did not modify Copper Oaks' breach of contract and unreasonable delay claims, but it substantially refined the appraisal-based claims. Because the appraisal contemplated by the declaratory judgment claim had occurred, Copper Oaks' new request for a declaration sought a judgment that Am Fam was obligated to pay the appraisal award within 30 days of the award's issuance, that Am Fam's failure to challenge the award within 30 days of its issuance constituted a waiver of any ability to challenge the award thereafter, and that Am Fam's failure to pay the award thereafter constituted unreasonable delay in violation of Colorado statutory law. In essence, Copper Oaks' declaratory judgment claim restated its unreasonable delay claim. Copper Oaks' refinement of its second claim for relief no longer sought to compel appraisal, but instead sought to compel Am Fam to "immediately provide Copper Oaks with the benefits of the Policy in light of the Appraisal Award," essentially restating Copper Oaks' breach of contract claim. Thus, for all practical purposes, then, Copper Oaks' original appraisal-based claims disappeared from the Amended Complaint.
Am Fam responded with counterclaims (# 96) alleging generally that George Keys, Copper Oaks' appraiser, and Robert Norton, the umpire in the appraisal process, were not "impartial" as required by the Policy but were, in fact, involved in a "scheme" (along with Copper Oaks' counsel) to artificially inflate the appraisal award. Based on these facts, Am Fam's counterclaims sought: (i) a declaratory judgment that the Policy does not provide coverage for Copper Oaks' claim due to Copper Oaks' failure to fully perform under the terms of the Policy and because of the "fraud" committed by its agents (namely, Mr. Keys, Mr. Norton, and perhaps its counsel); (ii) a declaratory judgment vacating the appraisal award as having been secured in violation of the terms of the Policy; (iii) alternatively, a declaration that some or all of Copper Oaks' claim is not covered by the Policy because the damage at issue was not caused by an event covered by the Policy; (iv) a claim for breach of contract, in that Copper Oaks failed to comply with the requirements of the appraisal process and by concealing material facts, entitling Am Fam to damages in the form of recoupment of the $500,000 it initially paid on the claim; and (v)-(vii) claims sounding in breach of the covenant of good faith and fair dealing, unjust enrichment, and recoupment, all based on essentially the same facts as the breach of contract claim.
On April 9, 2018, the Court held a Pretrial Conference (# 111) in anticipation of the bench trial discussed at the December 2017 hearing. The Court explained that there was a dispute "as to whether the condition precedent, the appraisal process, has been satisfied. That's what we are going to be trying." Neither party disagreed with the scope of what was being tried nor objected to the fact that it was being tried to the Court. The Court conducted the trial over five days in late May 2018. The Court then issued the July Order. In summary, the Court found that Mr. Keys was not an "impartial" appraiser as required by the Policy (and that Mr. Norton was not an "impartial" umpire under the standards upon which the parties had agreed). More specifically, the Court found that Mr. Keys was not impartial because he: (i) failed to disclose that he worked pursuant to a contingent fee agreement with Copper Oaks (and that Copper Oaks had participated in purposefully concealing certain facts about that arrangement); (ii) failed to disclose to Am Fam several judicial decisions from other cases he had worked on that found him to be partial for various reasons; (iii) failed to disclose that he had a longstanding personal and professional relationship with Mr. Mammel, Copper Oaks' counsel, and (iv) had not disclosed a longstanding referral relationship with Copper Oaks' public adjuster. Accordingly, the Court vacated the appraisal award. Because the Court deemed completion of the appraisal process to be a condition precedent to Copper Oaks' breach of contract claim(s), the Court also directed that judgment would enter in favor of Am Fam on Copper Oaks' first and second claims for relief in the Amended Complaint and dismissed Copper Oaks' claim(s) for breach of contract due to lack of standing. The only claim to survive was Copper Oaks' claim for unreasonable delay in payment of benefits, and with regard to that claim, the Court directed the parties to prepare for a jury trial.
The Court's reference to "condition precedent" requires a bit of elaboration. The Policy provides that neither party may bring a legal action "unless there has been full compliance with all of the terms of this insurance." Although the Policy provides that the appraisal provision is optional, once that provision was invoked by Copper Oaks, completion of that process became one of "the terms of this insurance" – that is, it was necessary for the parties to complete that process and obtain a binding valuation of Copper Oaks' loss before Copper Oaks could commence this suit.
The Court frequently referred to Copper Oaks as asserting only four claims, failing to acknowledge its common-law bad faith claim. However, because a bad faith claim is more correctly described as a "bad-faith breach of contract" claim, the insurer's breach of the contract is an essential component. For these reasons, the Court's dismissal of Copper Oaks' traditional breach of contract claim for lack of standing applies equally to its bad-faith claim.
The case did not stay on track for trial, however. Shortly thereafter, Copper Oaks filed a new lawsuit in state court, which was removed and subsequently consolidated into the current action. Copper Oaks' new Consolidated Amended Complaint (# 172) alleges four claims, all arising under Colorado law: (i) a demand for specific performance under the Policy, requiring Am Fam to participate in a new appraisal process; (ii) a claim that Am Fam breached the Policy by refusing to participate in appraisal proceedings in 2015 and again following the vacatur of the original appraisal award in 2018; (iii) an "alternative" claim for breach of contract alleging that Am Fam breached the Policy in certain other respects; and (iv) unreasonable delay in the payment of insurance benefits in violation of C.R.S. § 10-3-1104 et seq.
Am Fam filed a counterclaim (# 173) , alleging that: (i) Copper Oaks breached the Policy by reporting inflated claims, selecting a partial appraiser and umpire, and concealing facts during the appraisal process, and that Am Fam was therefore relieved of the duty to pay any claim by Copper Oaks; and (ii) that for the same reasons, Am Fam is entitled to recoup tall benefits it previously paid to Copper Oaks on the claim.
Subsequently, both sides filed summary judgment motions. Am Fam's motion (# 176) essentially argues that Copper Oaks is collaterally estopped from challenging the findings by the Court in the July Order and that such findings conclusively resolve Am Fam's counterclaims for a declaration that Copper Oaks forfeited coverage by committing fraud and otherwise breaching provisions of the Policy. Copper Oaks filed its own summary judgment motion (# 175) , arguing that it is entitled to judgment on its breach of contract claims and unreasonable delay claims.
ANALYSIS
A. Standard of review
Rule 56 of the Federal Rules of Civil Procedure facilitates the entry of a judgment only if no trial is necessary. See White v. York Intern. Corp. , 45 F.3d 357, 360 (10th Cir. 1995). Summary adjudication is authorized when there is no genuine dispute as to any material fact and a party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). Substantive law governs what facts are material and what issues must be determined. It also specifies the elements that must be proved for a given claim or defense, sets the standard of proof and identifies the party with the burden of proof. See Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ; Kaiser-Francis Oil Co. v. Producer's Gas Co. , 870 F.2d 563, 565 (10th Cir. 1989). A factual dispute is "genuine" and summary judgment is precluded if the evidence presented in support of and opposition to the motion is so contradictory that, if presented at trial, a judgment could enter for either party. See Anderson , 477 U.S. at 248, 106 S.Ct. 2505. When considering a summary judgment motion, a court views all evidence in the light most favorable to the non-moving party, thereby favoring the right to a trial. See Garrett v. Hewlett-Packard Co. , 305 F.3d 1210, 1213 (10th Cir. 2002).
If the movant has the burden of proof on a claim or defense, the movant must establish every element of its claim or defense by sufficient, competent evidence. See Fed. R. Civ. P. 56(c)(1)(A). Once the moving party has met its burden, to avoid summary judgment the responding party must present sufficient, competent, contradictory evidence to establish a genuine factual dispute. See Bacchus Indus., Inc. v. Arvin Indus., Inc. , 939 F.2d 887, 891 (10th Cir. 1991) ; Perry v. Woodward , 199 F.3d 1126, 1131 (10th Cir. 1999). If there is a genuine dispute as to a material fact, a trial is required. If there is no genuine dispute as to any material fact, no trial is required. The court then applies the law to the undisputed facts and enters judgment.
If the moving party does not have the burden of proof at trial, it must point to an absence of sufficient evidence to establish the claim or defense that the non-movant is obligated to prove. If the respondent comes forward with sufficient competent evidence to establish a prima facie claim or defense, a trial is required. If the respondent fails to produce sufficient competent evidence to establish its claim or defense, then the movant is entitled to judgment as a matter of law. See Celotex Corp. v. Catrett , 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
This case involves cross-motions for summary judgment. "Because the determination of whether there is a genuine dispute as to a material factual issue turns upon who has the burden of proof, the standard of proof and whether adequate evidence has been submitted to support a prima facie case or to establish a genuine dispute as to material fact, cross motions must be evaluated independently." In re Ribozyme Pharmaceuticals, Inc., Securities Litig. , 209 F. Supp. 2d 1106, 1112 (D. Colo. 2002) ; see also Atlantic Richfield Co. v. Farm Credit Bank of Wichita , 226 F.3d 1138, 1148 (10th Cir. 2000) ; Buell Cabinet Co. v. Sudduth , 608 F.2d 431, 433 (10th Cir. 1979) ("Cross-motions for summary judgment are to be treated separately; the denial of one does not require the grant of another.").
B. Am Fam's motion
The Court begins with Am Fam's motion. Under Colorado law, a party bringing a breach of contract claim must show: (i) the existence of a legally-binding contract; (ii) that the party performed its obligations under the contract or that performance of its obligations was excused; (iii) that the opposing party failed to perform its obligations under the contract; and (iv) resultant injury. Western Distib. Co. v. Diodosio , 841 P.3d 1053, 1058 (Colo. 1992).
Am Fam contends that Copper Oaks is collaterally estopped from disputing the factual findings made by the Court in the July Order – e.g. that Mr. Keys was not impartial for various reasons and that Copper Oaks worked with Mr. Keys to conceal certain facts about his contingent fee arrangement. Am Fam goes on to argue that, based on those factual findings, Copper Oaks cannot establish the second element of a breach of contract claim – performance of its own obligations under the Policy – and that Am Fam is therefore entitled to summary judgment on its own counterclaims seeking a declaration that Copper Oaks breached the Policy and for recoupment of the benefits Am Fam has already paid to Copper Oaks.
Am Fam's argument invokes four provisions of the Policy that it contends Copper Oaks violated.
• First, the Policy's "Appraisal Clause" requires that, when the appraisal process set forth in the Policy is invoked, "each party will select a competent and impartial appraiser." Am Fam contends that, based on the findings in the July Order that Mr. Keys was not impartial, Copper Oaks breached the Appraisal Clause.
• Second, the Policy's "Fraud Clause" provides that Am Fam will not pay any benefits under the Policy "in any case of [an insured's] concealment or misrepresentation of a material fact or fraud committed by [the insured] at any time and relating to coverage." Am Fam argues that the July Order made findings that Mr. Keys misrepresented and concealed various material facts, thereby violating the Fraud Clause.
• The third and fourth policy clauses invoked by Am Fam are largely derivative of the first two. Am Fam invokes the Policy's "Cooperation Clause," which requires Copper Oaks to "cooperate with [Am Fam] in the investigation or settlement of the claim." Am Fam's argument, in its entirety, regarding this clause is that Copper Oaks violated it "by actively misrepresenting and concealing material facts," presumably those described with regard to the Fraud Clause. Finally, the Policy contains a "Full Compliance Clause," which provides that Copper Oaks may not bring a legal claim against Am Fam "unless ... there has been full compliance with all terms of this insurance." Am Fam's argument that Copper Oaks violated this clause is derivative of its allegations regarding the other clauses as set forth above.
Copper Oaks' response offers a limited factual rebuttal of the Court's findings in the July Order, asserting that certain findings made by the Court are not supported by the record. But it primarily opposes Am Fam's motion on different grounds. First, Copper Oaks argues that the Court's findings in the July Order relating to Am Fam's equitable claim for vacatur of the appraisal award cannot constitute collateral estoppel against Copper Oaks because doing so would deprive Copper Oaks of its rights under the Seventh Amendment to the U.S. Constitution to have its legal claims for breach of contract adjudicated by a jury. Second, Copper Oaks argues that the Court's findings regarding misconduct by Mr. Keys do not bind it because Mr. Keys was not acting as Copper Oaks' agent during the appraisal.
The Court denies Am Fam's motion for several reasons. First, the Court finds that Mr. Keys was not acting as an agent of Copper Oaks during the appraisal, and thus, Copper Oaks is bound by any misconduct that Mr. Keys may have committed. In Norwich Union Fire Ins. Society v. Cohn , 68 F.2d 42 (10th Cir. 1933), the 10th Circuit (applying Oklahoma law) considered whether an insured had to submit to a second appraisal proceeding when a first appraisal proceeding failed, albeit not due to the fault of either the insurer or the insured. In making that determination, the 10th Circuit stated that:
while the appraisers are appointed by the parties, they are not subject to the control of the parties. They are not agents in law and ought not to be in practice. If appraisers were subject to the direction of the parties, the whole proceeding would be a useless ceremony, for if the parties cannot agree upon the loss by direct negotiation, [ ] they could not agree through agents subject to their direction. Fault of an appraiser is therefore not the fault of the party appointing him.
68 F.2d at 44. The rule set forth in Norwich – that "impartial" appraisers do not function as the agent of the party appointing them – has been adopted by several judges of this Court. Church Mutual Ins. Co. v. Coutu , 2017 WL 4029589 (D.Colo. Sept. 13, 2017) ; Hometown Community Assn., Inc. v. Philadelphia Indem. Ins. Co. , 2018 WL 2008853 (D.Colo. Apr. 30, 2018). More recently, the Colorado Supreme Court clarified the role of the appraiser in valuation disputes, making clear that an "impartial" appraiser must be "unbiased, disinterested, without prejudice, and unswayed by personal interest. She must not favor one side more than the other." Owners Ins. Co. v. Dakota Station II Condominium Assn. , 443 P.3d 47, 53 (Colo. 2019). This formulation of the appraiser's obligation further supports Copper Oaks' argument that an appraiser is not – and cannot – be said to be the agent of the party selecting it. The fundamental nature of the agency relationship is that the agent takes instruction and direction from the principal. See Farmers Life Ins. Co. v. Ignacio State Bank , 85 Colo. 46, 272 P. 1116, 1117 (1928) ("it is the duty of an agent to obey instructions"). Dakota Station 's requirement that an appraiser be disinterested and not favor one side over another is simply incompatible with the notion that the appraiser can also be an agent taking direction from the party that appointed it.
Am Fam does not cite to authority reaching a contrary position. Rather, it seems to accept the proposition in Norwich that appraisers are not agents, but stresses Norwich 's language that appraisers "ought not to be" agents "in practice." From this language, Am Fam argues – without citation – that "there are instances in which an appraiser is so clearly [ ]partial as to be considered the agent of the insured." The Court rejects this argument. As noted above, the essential characteristic of an agency relationship is the principal giving direction to the agent. If Am Fam had adduced evidence that Copper Oaks specifically directed Mr. Keys to take certain positions in the appraisal and Mr. Keys did so, the Court might be receptive to Am Fam's argument. But Am Fam did not and, more importantly, the Court made no particular findings that Copper Oaks directed Mr. Keys during the appraisal. Accordingly, the Court rejects Am Fam's contention that Mr. Keys was acting as Copper Oaks' agent during the appraisal.
Auto-Owners Ins. Co. v. Summit Park Townhome Assn. , 198 F.Supp.3d 1239 (D.Colo. 2016) is not to the contrary. There, the court dismissed the insured's claims as a sanction after the insured nominated Mr. Keys – whom the court eventually found to be partial – as an appraiser. Although the outcome in Summit Park is that the insured suffered consequence for selecting Mr. Keys as appraiser, it is notable that the court did not base that sanction on findings that Mr. Keys was an agent of the insured. Rather, the court imposed that sanction because it found that the insured's attorneys had violated the court's order regarding an appraiser's required disclosures and found that parties are routinely bound by the actions of their attorneys.
The bulk of Am Fam's motion is based on findings by the Court about actions taken by Mr. Keys himself, not by Copper Oaks. Close review of the July Order establishes that the Court made only one pertinent finding about actions that Copper Oaks performed on its own behalf: that when Copper Oaks entered into an amended fee agreement with Mr. Keys, it made a "patently false" representation that it had had no prior financial arrangement with Mr. Keys as part of a "conscious attempt to conceal the existence" of the contingent fee. See July Order at 8-11. Thus, the next question is whether collateral estoppel precludes Copper Oaks from challenging that factual finding.
Am Fam may also be arguing that, simply because Copper Oaks tendered an appraiser who was later found to be impartial, Copper Oaks materially breached the Appraisal Clause. The parties have not explored the question of extent to which a party's state of mind bears on the existence of such a breach – e.g. whether the selection of a partial appraiser must be intentional, reckless, or negligent for the Appraisal Clause to be breached, or perhaps even whether breach of the Appraisal Clause is an issue of strict liability for the party selecting a partial appraiser. That inquiry requires an interpretation of the Policy itself, and the parties have not sufficiently framed that issue for the Court to resolve it now. Thus, the Court cannot conclude that the mere fact Copper Oaks' appraiser was disqualified operates to render Copper Oaks in material breach of the Appraisal Clause.
As the party invoking collateral estoppel, Am Fam bears the burden of proving the necessary elements. Stan Lee Media, Inc. v. Walt Disney Co. , 774 F.3d 1292, 1297-98 (10th Cir. 2014). It must show: (i) the issue previously decided is identical to the one presented in the instant action; (ii) the prior determination resulted in a final adjudication on the merits; (iii) the party to be estopped was a party or is in privity with a party to the prior determination; and (iv) that party had a full and fair opportunity to litigate the issue in the prior action. Frandsen v. Westinghouse Corp. , 46 F.3d 975, 978 (10th Cir. 1995). To satisfy the second element, Am Fam must show not only that the Court's prior findings were reduced to a final judgment, but that the findings were essential to the entry of that judgment. Frandsen , 46 F.3d at 978.
In Frandsen , the 10th Circuit expressly declined to resolve the unsettled question of whether federal or state principles govern the collateral estoppel inquiry in diversity cases, and it does not appear that the 10th Circuit has squarely resolved that issue since. 46 F.3d at 977-78. The court in Frandsen found that Utah and federal collateral estoppel principles were identical, and this Court notes that Colorado law identifies the same elements of collateral estoppel as well. Villas at Highland Park Homeowners Assn. v. Villas at Highland Park, LLC , 394 P.3d 1144, 1152 (Colo. 2017).
Putting aside other concerns, the Court finds that Copper Oaks is not collaterally estopped by the Court's prior findings about its concealment of Mr. Keys' contingent fee arrangement because Copper Oaks' own behavior was not essential to the Court's conclusion in the July Order. The question resolved by the Court was only whether Mr. Keys was impartial as required by the Policy. Although the fact that Mr. Keys had a contingent fee arrangement was an important basis for the Court's conclusion that Mr. Keys was partial, it was not the sole grounds for that conclusion. Even assuming it was, the Court's finding that Copper Oaks made a "patently false" representation in the amended fee agreement about its prior arrangement with Mr. Keys was not essential to the Court's conclusion that a contingent fee existed (or even that the parties understood that the amended agreement would retain that contingent fee arrangement on at least a de facto basis). Accordingly, the Court does not give preclusive effect to its finding regarding Copper Oaks' knowledge and actions as set forth in the July Order.
Indeed, it is conceivable that the Court could have reached the same conclusions about the fee agreement without making any findings as to Copper Oaks' knowledge or intentions. The Court's focus was on Mr. Keys' own partiality, that partiality could exist even if Copper Oaks intended in good faith to convert the initial contingent fee agreement to an hourly one. Mr. Keys' could have mistakenly understood that the contingent fee remained in place and exercised his appraisal duties believing himself to be under a contingent arrangement.
Moreover, even assuming the other elements were present, the Court would not give collateral estoppel effect to its July Order findings for an additional reason. The decision to allow collateral estoppel principles to be used offensively, as Am Fam seeks to do here, is one confined to the Court's discretion; it does not exist as a matter of right. Wallace B. Roderick Revocable Living Trust v. XTO Energy, Inc. , 725 F.3d 1213, 1221 (10th Cir. 2013). Here, the Court clearly advised the parties at the December 2017 hearing that issues relating to Copper Oaks' breach of contract claim (and, by inference, the factual question of whether Copper Oaks had performed its own obligations under the Policy) were being deferred to a future determination by a jury. Thus, the Court finds that it would be unfair to Copper Oaks to apply collateral estoppel to it – and thereby grant summary judgment on Am Fam's declaratory judgment counterclaim, effectively depriving Copper Oaks' of a trial on the merits of its breach of contract claim.
Accordingly, the Court declines to give collateral estoppel effect to the findings in its July Order for the purposes sought by Am Fam, and thus denies Am Fam's motion in its entirety.
C. Copper Oaks' motion
Copper Oaks' motion is somewhat unclear. The Court understands Copper Oaks to seek summary judgment on: (i) the second claim for relief, sounding in breach of contract, which appears to contend that Am Fam's failure to promptly proceed to appraisal following Copper Oaks' demand on or about February 27, 2015 constitutes a breach of the Appraisal Clause; (ii) the first claim for relief, sounding in breach of contract, which alleges that Am Fam has refused and continues to refuse to engage in (re-)appraisal proceedings following the vacatur of the prior appraisal award, and for which Copper Oaks seeks an order of specific performance compelling Am Fam to enter into a second appraisal process; and (iii) the fourth claim for relief, sounding in unreasonable delay of payment, based on Am Fam's refusal to proceed with appraisal between February 27, 2015 and December 1, 2015.
Copper Oaks presents its motion with regard to the unreasonable delay claim in three separate point headings, but it is not clear to the Court that the three arguments address three different time periods or tender three different arguments. The Court confesses that it is unable to ascertain any meaningful distinctions in the arguments presented in each of the three-point headings. Copper Oaks' reply brief does not meaningfully clarify the matter, as it discusses the unreasonable delay claim in only a single point heading.
The Court summarily denies Copper Oaks' motion in the first instance because many of its key factual averments are not supported by citations to (much less attachment of) admissible evidence. See Fed. R. Civ. P. 56(c)(1)(A). For example, some of Copper Oaks' key factual assertions, it cites only to its own Complaint or Amended Complaint or other pleadings, rather than evidence in an admissible form. See e.g. Docket # 175 at 9 (supporting its contention that it demanded appraisal on February 27, 2015 by citing to its own Amended Complaint and to Am Fam's Counterclaims). A party's unverified pleading is not sufficient evidence to support (or oppose) summary judgment. See Williams v. McCallin , 439 Fed.Appx. 707, 710 (10th Cir. 2011). Nevertheless, in the interests of completeness, the Court discusses Copper Oaks' motion based on the contents of the record without regard to their evidentiary character.
In fairness, Am Fam's summary judgment response is similarly bereft of supporting materials or meaningful citations to key factual assertions. Had Copper Oaks' motion conformed with the requirements of Rule 56, the Court might have granted it due to Am Fam's own failure to comply with the requirements of Rule 56.
1. Breach of contract claim (first appraisal)
The Court understands Copper Oaks' first argument to be that Am Fam breached the Policy by failing to promptly commence appraisal proceedings upon Copper Oaks' request in 2015. The Court has set forth the elements of a breach of contract claim above. The Court understands it to be undisputed that the Policy constitutes a valid and enforceable contract. The Court further understands Copper Oaks to contend that it complied with its obligations under the Policy's Appraisal Clause by writing to Am Fam on February 27, 2015, indicating that it was demanding appraisal. As to Am Fam's alleged breach, Copper Oaks contends that Am Fam did not respond its appraisal demand until June 11, 2015, and when it did so, it imposed extra-contractual conditions on that appraisal. As a result of Am Fam's refusal to promptly proceed to appraisal without conditions, Copper Oaks asserts that it was injured insofar as it had to commence litigation and expend attorney fees in order to compel Am Fam to appraisal.
The Appraisal Clause does not set specific deadlines by which one side must respond to the other side's demand for appraisal. For that reason alone, the question of whether Am Fam's delay constituted a breach of the Appraisal Clause is necessarily a question of fact that must be determined by the factfinder. In addition, there appear to be factual disputes that are material to whether Am Fam diligently responded to Copper Oaks' demand. In its Answer, Am Fam states that its adjuster, Harold Miller, responded to Copper Oaks' February 2015 demand for appraisal on the same day Am Fam received it, leaving a voicemail for Copper Oaks' adjuster and explaining that Am Fam would engage in appraisal once its own contractor completed its review of Copper Oaks' estimate. Docket # 173, ¶ 30. Such review was completed on March 23, 2015. The record appears to reflect that Am Fam communicated the results of that review to Copper Oaks, as Am Fam's June 11 letter informs Copper Oaks that "you have been provided with copies of our most recent estimates," but it is not clear whether the parties had any further discussions about the claim or the appraisal thereafter. The June 11 letter also indicates that Am Fam had, at that time, already selected its appraiser, informing Copper Oaks that J.R. Whipple would conduct the appraisal on its behalf. Thus, there are triable questions as to what steps the Policy allowed Am Fam to take before agreeing to the appraisal process, whether it pursued those steps diligently, and what facts it communicated to Copper Oaks during this time frame. These factual disputes further demonstrate that trial on this claim is necessary.
Copper Oaks' reply brief seems to sharpen the issue, arguing that it believes Am Fam breached the contract by virtue of the June 11 letter, which was "wholly inconsistent with the appraisal language in the policy." As the Court understands it, Am Fam disputed whether all of the losses claimed by Copper Oaks were actually caused by the hail storm in question. Am Fam's June 11 letter thus indicated that "there are additional items in your estimate which are not included in our estimate" and that this dispute "may therefore involve determinations of coverage" – that is, whether the disputed items were caused by the hail storm. Am Fam acknowledged that "we are willing to proceed to appraisal on these additional items at this time," but stated that it was not waiving its right to dispute coverage for those items at a later time. Thus, Am Fam proposed that the appraisers separately assess the agreed-upon losses and the disputed losses. The record reflects that Copper Oaks opposed this request, and after some written exchanges between the parties, Copper Oaks commenced this litigation in order to force Am Fam to engage in a single appraisal of all claimed losses. Copper Oaks strenuously contends that Am Fam's suggestion that causation questions implicated issues of coverage for the loss is contrary to "law in this District [that] was already established and clear by the time of this suit," citing to various District Court and state trial court opinions. The Court has significant doubt that the cases Copper Oaks relies upon stand for the proposition it asserts, or that such opinions have any dispositive effect, but the Court need not reach these questions. The record reflects that Am Fam unambiguously expressed its willingness to begin appraisal proceedings as of June 11, going so far as to identify its own appraiser. Am Fam simply requested that such appraisal calculate the value of agreed-upon losses and disputed losses separately. Nothing in the Appraisal Clause specifically addresses how an appraisal should proceed when there are disputes concerning both valuation and causation. This Court cannot say that, as a matter of law, Am Fam's proposal that the appraisers evaluate the agreed-upon and disputed items separately operated to fundamentally deprive Copper Oaks of the benefits of the appraisal process. (Indeed, one could make the cogent argument that additional granularity in the appraisal award would facilitate, rather than hinder, resolution of the coverage disputes.) Whether the factfinder will ultimately conclude that Am Fam's June 11 letter constituted a repudiation, rather than acceptance, of the appraisal process is a matter this Court need not decide; it is sufficient to conclude here that Copper Oaks has not demonstrated that it is entitled to summary judgment on its breach of contract claim relating to the first appraisal.
2. Breach of contract claim (second appraisal)
The Court understands Copper Oaks' second argument to seek summary judgment on its claim that Am Fam is currently in breach of the Policy's Appraisal Clause by not having agreed to conduct a new appraisal following the Court's vacatur of the prior appraisal award. Copper Oaks seeks an order of specific performance, requiring Am Fam to engage in a second appraisal.
This argument is particularly underdeveloped, insofar as Copper Oaks points to no Policy language that entitles it to a second appraisal proceeding when a prior award has been nullified. Certainly, nothing in the Appraisal Clause or anywhere else in the Policy addresses what should occur in that situation. In the absence of contractual language that requires such a second appraisal proceeding, the Court cannot conclude that Am Fam has breached the Policy by refusing to participate in such a proceeding.
Nor is it clear that, as a matter of law, Am Fam is required to participate in a second appraisal. Copper Oaks cites to no law whatsoever in support of this argument. Am Fam, on the other hand, points to Norwich . In Norwich , considering similar policy language (albeit under Oklahoma law), the 10th Circuit held that where an appraisal fails, albeit without fault of either party, "neither party may require a second appraisal where the first fails without his fault"; rather, the parties' dispute simply moves to the courts as if no appraisal had been demanded in the first place. 68 F.2d at 44 ("if the appraiser for the insured is so arbitrary that the appraisal fails, the only mischief that follows is that the courts determine the amount of the loss"). This Court finds Norwich 's reasoning persuasive and adopts it here: Copper Oaks invoked the appraisal process, an appraisal was had, and yet no valid award resulted. Under such circumstances, neither side is obligated or required to proceed with a second appraisal. Instead, Copper Oaks' losses will be evaluated by the factfinder in this action, just as if Copper Oaks had never demanded appraisal in the first place.
The Court need not make any findings here as to whether any party was at fault for the failure of the first appraisal.
Norwich does seem to dispose of Am Fam's argument that Copper Oaks' claims are now barred because the failure to complete an appraisal prevents Copper Oaks from satisfying the Full Compliance Clause. Considering an equivalent clause, Norwich concluded that "the insured must in good faith comply therewith; he must name a competent and disinterested appraiser and must not directly or indirectly prevent the making of an award. But when this has been done, he has complied with the terms of his contract, and if the award fails without his fault, he may bring his action on the policy without seeking or consenting to further appraisals." 68 F.2d at 45.
Of course, if Am Fam is ultimately able to convince the factfinder that the failure of the appraisal award here was the fault of Copper Oaks, dismissal of Copper Oaks' claims in part or whole due to failure of the Full Compliance Clause might be appropriate.
Thus, Copper Oaks' motion on this claim is denied.
It remains unclear to the Court whether the entirety of Copper Oaks' current First Claim for Relief relates solely to an attempt to require Am Fam to participate in a second appraisal or if there is more to that claim. To the extent that the claim turns solely on a second appraisal occurring, the Court advises Copper Oaks that, for the reasons stated herein, the Court is prepared to grant summary judgment in favor of Am Fam on this claim pursuant to Fed. R. Civ. P. 56(f)(1), and Copper Oaks shall have 14 days from the date of this Order to show cause why judgment on its First Claim for Relief should not be granted to Am Fam.
3. Unreasonable delay
Finally, Copper Oaks seeks judgment on its claim for unreasonable delay pursuant to C.R.S. § 10-3-1115 and - 1116. In pertinent part, those statutes provide that an insurer "shall not unreasonably delay or deny payment of a claim for benefits" and that an insured who experiences such an unreasonable denial may bring suit to recover the delayed payment plus liquidated damages and attorney fees. An insured bringing an unreasonable delay claim must show that the insurer delayed or denied paying benefits "without a reasonable basis" to do so. Fisher v. State Farm Mut. Auto. Ins. Co. , 419 P.3d 985, 990 (Colo.App. 2015) ; C.R.S. § 10-3-1115(2). Whether an insurer has a reasonable basis to delay or deny payment of a claim requires consideration of an array of factors, including various types of unfair claim settlement practices as recited in C.R.S. § 10-3-1104(h), industry standards, as well as whether the insured's claim was "fairly debatable." Etherton v. Owners Ins. Co. , 829 F.3d 1209, 1225-29 (10th Cir. 2016).
Copper Oaks argues that it has shown, as a matter of law, that Am Fam delayed payment of benefits without a reasonable basis because: (i) Am Fam failed to respond to Copper Oaks' invocation of the appraisal process from February 27 to June 11, 2015; (ii) that Am Fam failed to actually commence the appraisal until ordered by the Court on December 1, 2015; and (iii) Am Fam insisted on attaching conditions to the appraisal process that were not supported by the Policy or by existing law.
The preceding discussion makes clear that, at a minimum, there are disputed facts about when Am Fam responded to Copper Oaks' demand for appraisal, what Am Fam did in the interim, when Am Fam agreed to commence the appraisal, and under what terms. These disputes of fact preclude any finding that Am Fam's conduct was unreasonable as a matter of law. Even assuming – without finding – that Am Fam violated one or more of the unfair claims practices in C.R.S. § 10-3-1104(h), such a violation is but one factor that must be weighed among all others, and that weighing is usually reserved for the factfinder. Vaccaro v. American Family Ins. Group , 275 P.3d 750, 759 (Colo.App. 2012). Thus, Copper Oaks' motion for summary judgment on its unreasonable delay claim is denied.
D. Motion to Certify
Copper Oaks requests that this Court certify two questions of law to the Colorado Supreme Court pursuant to Colo. App. R. 21.1 : (i) "whether, once liability under an insurance policy has arisen, liability under the unreasonable delay/denial statute is determined independent of whether the insurance policy has been breached thereafter by conduct of either the insurer or insured"; and (ii) "whether liability under the unreasonable delay/denial statute is excused under circumstances where the insured violates, after coverage is admitted, a concealment, misrepresentation, or fraud provision which does not state that the policy is void as a matter of law."
The Court declines to certify either question. Both questions become relevant only in future circumstances: if Copper Oaks succeeds at trial on an unreasonable delay claim and Am Fam succeeds on its claim for a declaration that Copper Oaks materially breached its obligations under the Policy, under the Fraud Clause or otherwise. Only if both conditions are satisfied would the Court need to determine these issues. In such event, the Court can take up the question of certification. Accordingly, the motion is denied.
E. Future proceedings
Because of the procedural tangles that have occurred to date, the Court takes this opportunity to declare how the remainder of the case will proceed.
As set forth above, the Court finds that there is no basis for Copper Oaks to demand a second appraisal, and thus, no such appraisal will occur. Rather, the case will proceed to trial and the factfinder will determine the value (and causation) of Copper Oaks' losses.
The Court finds that there is no need for further discovery. All of the pertinent events occurred between the 2013 hail storm and the August 2016 appraisal award (or, at the very latest, Am Fam's October 2017 motion to vacate the appraisal award), well before the March 2018 discovery cutoff (# 78). The fundamental legal and factual issues in this case have not materially changed since that time. The Court further declines to entertain any further dispositive motions. Thus, the next step in this case is trial.
Based on the Court's reading of the parties' pleadings, as framed by the briefing on the instant motions, the following claims will be tried:
1. Copper Oaks' breach of contract claim based on Am Fam's failure to pay for all property damage caused by the hail storm. (Copper Oaks' Third Claim for Relief)
2. Copper Oaks' claim of bad-faith breach of contract relating to Am Fam's failure to pay for all property damage caused by the hail storm. (Copper Oaks' Third Claim for Relief)
3. Copper Oaks' breach of contract claim that Am Fam's failure to comply with claims-handling procedures set forth in the Policy (e.g. the Appraisal Clause). (Copper Oaks' Second Claim for Relief) 4. Copper Oaks' unreasonable delay claim. (Copper Oaks' Fourth Claim for Relief)
5. Am Fam's counter-claim for a declaration that Copper Oaks materially breached one or more provisions of the Policy – the Appraisal Clause, Fraud Clause, Cooperation Clause, or Full Compliance Clauses. (Am Fam's First Counterclaim)
6. Am Fam's claim for recoupment. (Am Fam's Second Counterclaim)
Because there is necessarily an overlap in the pertinent facts, it is the Court's intention to try Am Fam's counterclaims simultaneously with Copper Oaks' legal claims, and that the jury will be asked to provide an advisory verdict on the equitable claims.
The parties shall begin the preparation of a Proposed Pretrial Order consistent with these instructions and the directives in the Trial Preparation Order (# 29) . That Proposed Pretrial Order shall be filed within 28 days of this Order. Thereafter the parties shall jointly contact chambers to schedule a Pretrial Conference.
CONCLUSION
For the foregoing reasons, Am Fam's Motion for Leave (# 154) to file a summary judgment motion is DENIED AS MOOT . Copper Oak's Motion for Summary Judgment (#175) and Am Fam's Motion for Summary Judgment (# 176) are DENIED . Copper Oaks' motion (#181) requesting that this Court certify certain legal questions to the Colorado Supreme Court is DENIED without prejudice as premature. The parties will proceed to prepare for trial as set forth herein.