UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT

________________ _________________ ROCKHILL INSURANCE COMPANY, Plaintiff - Counter Defendant - Appellee

v. CFI-GLOBAL FISHERIES MANAGEMENT; HEIRLOOM I, LLC., Defendant - Counterclaimant - Appellant. Nos. 18-1201 & No. 18-1207 (D.C. No. 1:16-CV-02760-RM-MJW) (D. Colo.)

________________ _____________ ORDER AND JUDGMENT *

________________ _________________ Before BRISCOE , LUCERO , and MORITZ , Circuit Judges.

________________ _________________ CFI-Global Fisheries Management (“CFI”) and Heirloom I, LLC., (“Heirloom”) appeal a district c ourt order granting summary jud gment in favor of Rockhill Insurance Company (“Ro ckhill”). The district court co ncluded that an exclusion in CFI’s professional liability policy for faulty wor kmanship barred recovery for damages related t o poor design and construction of a river enhancement project. It further ruled that C FI’s bad faith claims failed b ecause the company did

* This order and judgment is not binding precedent, except under the doctrines of law of the case, res judicata , and collateral estoppel. It may be cited, however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 1 0th Cir. R. 32.1. FILED United States Court of Appeals Tenth Circuit 

### July 24, 2019
Elisabeth A. Shumaker Clerk of Court2 not show Rockhill caused a busines s loss. We affirm the distri ct court’s order as to CFI’s common law bad faith clai m. However, we conclude the fau lty workmanship exclusion does not apply to damag es caused by negligent design work. We reverse the district court’s rulings on co verage under the professional liability policy and CFI’s statutory bad faith claim. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm in part, reverse in part, and remand for further proceed ings consistent with this order and judgment.
I Heirloom owned property in sout hwestern Colorado. In 2012, it contracted with CFI to design and construct a fisheries enhancement projec t on the property. CFI completed the project, but its work was defective and the p roject was destroyed by natural processes four times i n three years. Heirloom paid more than $800,000 to CFI under the contract. On July 20, 2015, Heirl oom initiated arbitra tion proceedings ag ainst CFI for breach of contract and negligence related to the design and exe cution of the project. CFI requested that Rockhill, its p rofessional and general liabi lity insurer, defend it in the arbitration. CFI had taken out an insurance policy with Ro ckhill, which included three coverage components: (1) commercial general liability co verage, which generally applies to “‘bodily inj ury’ or ‘property damage’” but excludes coverage for liability arising from professiona l services; (2) contractor’s pollution liability coverage; and (3) professional liability coverage. The profess ional liability coverage form applies to damages arising from a “[p]rofessional services incident,” defined as3 “any negligent act, error or omi ssion” in “your rendering, or y our failing to render, ‘professional services ’” that “results in injury or damage.” I t also states that “your work” means: “(1) Wo rk or operations perfo rmed by you or on yo ur behalf; and (2) Materials, parts or equipment fu rnished in connection with such work or operations.” On August 21, 2015, Rockhill sent CFI a letter agreeing to defe nd the arbitration but reserving its ri ght to deny coverage. In outli ning Rockhill’s coverage position, the insurer implied som e of the damages could fall wi thin the policy, but discussed several exclusions t hat might apply. Rockhill identi fied Exclusion M of the professional liability po licy, which reads in full: M. Faulty Workmanship Based upon, arising out of or for any loss, cost or expense inc urred to withdraw, recall, inspect, repair, replace, adjust, remove or d ispose of “your work”. This includes, but is not limited to, the cost to investigate “your work”, or the cost of any materials, parts, labor or equi pment furnished in connection with suc h withdrawal, recall, inspectio n, repair, replacement, adjustment , removal or disposal. Rockhill also noted Exclusion P of the professional liability p olicy, which states: P. Expressed or Implied Warranties Based upon, as a consequen ce of or arising out of: (1) Any expressed or implied warranties or guarantees, or (2) Any cost or other estimate s for construction, renovation, r emoval or demolition being exceeded or inaccurate. However, this exclusion does not apply to a warranty or guarant y by you that your “professional services” are in conformity with genera lly accepted architectural or engineering standards. The letter states that Heirloom’s “allegations relative to CFI’ s designs potentially implicate a ‘professional servic es incident’ that would trigger coverage” but “[t]o the extent that the damages sought a rise out of . . . faulty workma nship apart from your4 professional services . . . the [Professional Liability] Form w ill not provide coverage for such damages.” In November 2015, Rockhill offere d to settle with Heirloom for $15,000. Heirloom promptly rejected th is offer, demanding $990,000. A year passed with no additional settlement offers. On October 3, 2016, two week s before the arbitration was set to begin, Rockhill wrote to CFI that the entirety of th e damages claimed were excluded from coverage. The insurer proposed CFI agr ee to fund a settlement with Heirloom in which CFI would pay 75% of settlement costs up to $ 500,000, with Rockhill paying the remaining 25%. CFI responded on October 11, stating Rockhill’s proposal was a breach of its duties as an insurer an d demanding Rockhill immediately pursue and fund settlement with Heirloom. Three days later, Heirloom made a settlement proposal of $750,000. CFI asked Rockhill to accept and fund the offer. Rockhill responded that it would be willing to pay $150 ,000 towards the settlement. The arbitration proceeded fro m October 17 to 21, 2016. During the arbitration, Rockhill informed C FI it had offered an updated se ttlement of $260,000 to Heirloom, after CFI explaine d it could contri bute only $10,0 00 to a settlement offer. Internal communications indicate Rockhill authorized a potentia l offer up to $400,000. The arbitrators awarded Heirl oom $609,994.91 plus pre-judgment interest. The parties subseque ntly stipulated to an additional $265,000 a ward of attorney’s fees and costs. Neither party requested the arb itrators’ decision be accompanie d by an explanation of reasoning. How ever, attached to the final aw ard is a spreadsheet5 identifying invoices paid to third party contractors who worked on the river enhancement project following CF I’s failures, and a line item f or remaining construction. Rockhill filed a declaratory-judg ment action against CFI and He irloom prior to the issuance of the award. It s ought a declaration that it had no duty to defend and indemnify CFI in connection wi th the Heirloom arbitration. CFI and Heirloom asserted counterclaims for decla ratory judgment and breach of c ontract. CFI also asserted statutory and common law bad faith claims against Rock hill based upon its failure to timely settle. The dis trict court granted summary j udgment for Rockhill, holding the entirety of the damag es awarded to Heirloom were ex cluded under the policy’s Faulty Workmanship exc lusion, along with the attorneys ’ fees and costs. On CFI’s bad faith claims, the court held that CFI failed to prese nt any evidence to prove any business loss caused by non- settlement. CFI and Heirloom t imely appealed.
II We review de novo the grant of summary judgment. MarkWest Hydr ocarbon, Inc. v. Liberty Mut. Ins. Co., 558 F.3d 1184, 1189 (10th Cir. 2 009). In doing so, we view the facts in the light mos t favorable to the non-moving pa rty. Id. at 1189-90. Summary judgment is proper if “ there is no genuine dispute as t o any material fact and the movant is entitled to j udgment as a matter of law.” Fe d. R. Civ. P. 56(a). We apply Colorado substantive la w in this diversity action. Se e Specialty Beverages, L.L.C. v. Pabst Brew ing Co., 537 F.3d 1165, 1175 (10 th Cir. 2008). We “look to the rulings of the highe st state court” to guide our i nterpretation of state law.6 Stickley v. State Farm Mut. Aut o. Ins. Co., 505 F.3d 1070, 1077 (10th Cir. 2007) (quotation omitted). If the hi ghest state court has not addres sed a question, we predict how it would rule after g iving “proper regard to releva nt rulings of other courts of the State.” Id. (quotation omitted).
A Under Colorado law, “[a]n insuran ce contract is subject to the general rules of contract interpretation.” Am. F amily Mut. Ins. Co. v. Hansen, 375 P.3d 115, 120 (Colo. 2016). “It is axiomatic t hat a contract must be constru ed to ascertain and effectuate the intent of the par ties as determined primarily fr om the language of the contract.” E. Ridge of Fort C ollins, LLC v. Larimer & Weld Irr . Co., 109 P.3d 969, 974 (Colo. 2005). We apply “the plain and generally accepted m eaning of the words used,” id., but “ascertain the me aning of the contract by exami ning the entire instrument and not by viewing clau ses or phrases i n isolation.” Copper Mountain, Inc. v. Indus. Sys., Inc., 208 P. 3d 692, 697 (Colo. 2009) (quot ation omitted). We agree with the district court that the damages awarded by th e arbitrators resulted from a “profe ssional services incident.” Thus, the on ly issue is whether an exclusion places the damages award outside of otherwise availab le coverage. “Exclusions must be clear and sp ecific to be enforceable.” Hoa ng v. Assurance Co. of Am., 149 P.3d 798, 802 (Colo. 2007). In determining whether the Faulty Workmanship exclusion barred cove rage, the district court focus ed on a broad definition of “work” as an “ac tivity involving mental or physic al effort done in order to achieve a purpose or result.” New Oxford American Dictionar y 1990 (3d ed.7 2010). It thus held the Faulty W orkmanship exclusion’s referen ces to “your work” applied to both desi gn and construction. We disagree, and conclude the dis trict court failed to assess t he context in which the term work is used. “A word may take on a variety of meanings in different contexts. Dictionaries can infor m us of all the accepted meani ngs, but not which of those meanings fits in a particu lar context.” Pompa v. Am. Fam ily Mut. Ins. Co., 520 F.3d 1139, 1143 (10th Cir. 2008). And we pay particular attent ion to context when a term has some definitions that are “virtually b oundless.” See Reg’l Bank of Colo., N.A. v. St. Paul Fire & Marine Ins. Co., 35 F.3d 494, 498 (10th Cir. 1994) (quotation omitted). Three contextual gui deposts convince us that the Fau lty Workmanship exclusion was not intended to cover design failings. First, the clause appears in a professional liability policy. As a general matter, such policies cover damages aris ing from professional services rendered—in this case, CFI’s professional design service in providing a plan for the stream modification. Professional serv ices are those “arising out of a vocation, calling, occupation, or employment involvi ng specialized knowledge, labo r, or skill, and the labor or skill involved is predomin antly mental or intellectual , rather than physical or manual.” Zurich Am. Ins. Co. v. O ’Hara Reg’l Ctr. for Rehab., 529 F.3d 916, 924 (10th Cir. 2008) (quotation om itted). Thus, the overall purpos e of the professional liability coverage was for CFI to obtain insurance for its “men tal or intellectual” undertakings rather than its “ physical or manual” work. Accord ingly, the cases8 Rockhill cites construing similar exclusions in commercial gene ral liability policies do not govern our interpretati on of a professional liability po licy. Second, the heading “Faulty Workm anship” clearly evinces the na rrower scope of the exclusion. 1 As Rockhill itself stated to CF I: “To the extent that the da mages sought arise out of . . . faulty workmanship apart from your pr ofessional services . . . the [Professional Liability] Fo rm will not provide coverage for such damages.” The term “workmanship” typically ref ers to “the art or skill of a w orkman,” which is an individual “employed or skilled in some for m of manual, mechani cal or industrial work.” See Random House Webster’ s College Dictionary (2d ed. 2 000). Consistent with the general purpose of pro fessional liability coverage, th e term distinguishes manual and physical work from professional undertakings. See M ack Trucks Inc. v. BorgWarner Turbo Systems, Inc., 508 F. App’x 180, 184 (3d Cir. 2012) (unpublished) (holding that desi gn services fall outside the or dinary definition of workmanship). Finally, the words in the body of the exclusion are more natura lly read as relating to construction, rather than design. The exclusion re moves coverage for the costs to “withdraw, recall, ins pect, repair, rep lace, adjust, r emove or dispose of” work, including “any materials, p arts, labor or equipment furni shed.” Read as a

1 The district court did not give any weight to this phrase, con cluding it was merely a heading. But Colorado c ourts refer to headings in int erpreting contracts. See, e.g., Fed. Deposit Ins. Cor p. v. Fisher, 292 P.3d 934, 937 (Colo. 2013). And CFI correctly notes that the excl usion is incoherent absent the “Faulty Workmanship” heading. Without those words, the policy would read: “This in surance does not apply to: . . . Based upon, ari sing out of or for any loss . . . .”9 whole and in the context of the c overage agreements, we thus co nclude the parties intended the Faulty Workmanship exclusion to distinguish non-co vered construction work from covered prof essional services. The district court should not h ave granted summary judgment to Rockhill as to the design components of CFI’s w ork for Heirloom. Because the district court concluded otherwise, it did not c onsider whether the entire arb itration award (including attorney’s fees and co sts) is covered under a correc t reading of the exclusion or whether the damag es should or can be apportioned b etween design and construction. We thus leave that issue for the district court to consider in the first instance. 2
B CFI challenges the district cour t’s dismissal of its bad faith claim on two grounds. First, it argues that sta tutory damages are available . Per Colorado statute, an insurer may not “unreasonably delay or deny payment of a cla im for benefits owed.” Colo. Rev. Stat. § 10-3- 1115(1)(a). An insured “whose claim for payment of benefits has been unreasonably de layed or denied may bring an a ction in a district court to recover reasonable atto rney fees and court costs and t wo times the covered benefit.” § 10-3-1116(1).

2 Rockhill also argues in the alt ernative that the exclusion for “Expressed or Implied Warranties” b ars coverage. It point s to statements by Heirloom that CFI failed to warranty and repair w ork and thus breached its contra ct and/or warranty. As the district court explained, R ockhill failed to identify any p articular warranty or show that the arbitration damage s were related to the unidentif ied warranty. It again fails to do so before this court.10 Because the district court concl uded that the arbitration award was not covered, it did not consider wh ether Rockhill unreasonably deni ed or delayed coverage. See State Farm Mut. Auto. Ins. Co. v. Fisher, 418 P. 3d 501, 506 (Colo. 2018) (“[S]ection 10-3-1115’s pl ain language is clear, and it i mposes the duty it says it imposes—that is, an insurer c an’t unreasonably delay or deny paying a covered benefit without a reasonable ba sis for doing so.”). Instead, t he bulk of the district court’s analysis looked to wheth er Rockhill caused CFI a busine ss loss. But the statute contains no re quirement that an ins ured provide evidenc e of specific business loss or damages. See Hansen v . Am. Family Mut. Ins. Co., 383 P .3d 28, 38 (Colo. App. 2013), rev’d on other gr ounds, 375 P.3d 115 (Colo. 2013). Accordingly, the district court should not have di smissed CFI’s claim for statut ory bad faith damages for failure to demonstrate evid ence of business loss. We reman d so the district court may consider whether CFI’s statu tory claim meets the required r easonableness standard in light of our coverage holding. Second, CFI challenges the dismi ssal of its common law bad fait h claim. CFI alleges that Rockhill’s refusal to settle with Heirloom caused the destruction of its business. An insurer’s bad faith breach of an insurance contra ct can give rise to tort liability. Nunn v. Mid -Century Ins. Co., 244 P.3d 116, 119 (Co lo. 2010). “For an insured to prevail on a bad faith claim against an insurer, the insured must establish the insurer acted unreasonably, causing damages to the insured. ” Bankr. Estate of Morris v. COPIC Ins. Co., 192 P.3d 519, 523 (Colo. App. 2008).11 The district court held CFI fai led to adduce evidence indicatin g that nonsettlement caused CFI a busine ss loss. We agree. To prevail o n a common law bad faith claim, CFI must show that both its business declined and Rockhill’s alleged bad faith actions during settlement negotiations caused the decline . Although CFI presented evidence that its busin ess declined precipitously aft er the dispute with Heirloom arose, it provided no evidence that Rockhill’s actions caused that lost business. And mere assertions tha t the timing of its business decline aligned with the settlement negotiations are ins ufficient. See Norris v. Baxter Healthcare Corp., 397 F.3d 878, 885 (10th Cir. 2005) ( “[C]orrelation does not equal c ausation.”). Without evidence of a causational (not c orrelational) link, CFI’s non-s ettlement claim necessarily fails. 3
III For the forgoing reasons, we AFFIRM the district court’s dismissal of CFI’s common law bad faith claim based on non-settlement. However, w e REVERSE the district court’s grant of summa ry judgment on the application o f the Faulty

3 CFI also argues Rockhill inappr opriately advanced a recoupment claim without having reserved its ri ght to do so. See Colo. Rev. Sta t. § 13-20- 808(7)(b)(III). However, the distr ict court correctly held CFI failed to support its assertion that the company expe nded resources defending that cl aim, which was later abandoned.12 Workmanship exclusion to CFI’s d esign work and its grant of sum mary judgment on CFI’s claim of statutory bad faith. We REMAND for further proceedings consistent with this order and judgment.

Entered for the Court

Carlos F. Lucero Circuit Judge