F I L E D

United States Court of Appeals

Tenth Circuit

JUN 14 2002

PATRICK FISHER

Clerk

PUBLISH

UNITED STATES COURT OF APPEALS

TENTH CIRCUIT

SCOTT’S LIQUID GOLD, INC., a

Colorado corporation,

Plaintiff-Appellee, 

v.

LEXINGTON INSURANCE

COMPANY, a Massachusetts

corporation,

Defendant-Appellant. 

No. 00-1258

Appeal from the United States District Court

for the District of Colorado

(D.C. No. 97-B-107)

Steven W. Black, (Wiley E. Mayne, with him on the brief), Holland & Hart, LLP,

Denver, Colorado, for Plaintiff-Appellee.

W. David Campagne, Sinnott, Dito, Moura & Puebla, P.C., San Francisco,

California, (Kenneth Sumner, Sinnott, Dito, Moura & Puebla, P.C., San

Francisco, California; Alan Epstein, Chris Mattison, Hall & Evans, L.L.C.,

Denver, Colorado, with him on the briefs), for Defendant-Appellant.

Before TACHA, Chief Judge, ANDERSON, and MURPHY, Circuit Judges.

MURPHY, Circuit Judge.
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I. INTRODUCTION

Plaintiff-Appellant Lexington Insurance Company (“Lexington”) appeals

the district court’s denial of its motion for summary judgment and grant of partial

summary judgment to Defendant-Appellee Scott’s Liquid Gold-Inc. (“Scott’s”). 

The district court ruled that Lexington had a duty to indemnify Scott’s for its

liability relating to releases of environmental contaminants. Lexington also

appeals the district court’s award of attorney fees to Scott’s. This court has

jurisdiction under 28 U.S.C. § 1291. We affirm the district court’s grant of

partial summary judgment to Scott’s but reverse the award of attorney fees.

II. BACKGROUND

Scott’s manufactures wood cleaners and preservatives. From 1955 to 1991,

it used 1,1,1-tricholoroethane (TCA) as an ingredient in these products. In 1970,

Scott’s began manufacturing its products at a plant approximately one mile south

of the Rocky Mountain Arsenal in Colorado. Environmental consultants hired by

Scott’s detected TCA in the soil and groundwater at Scott’s facility in 1989. The

parties do not dispute that Scott’s production activities contributed to the soil and

groundwater contamination. Sometime prior to 1989, TCA had been released into

the soil and groundwater, creating a plume of contamination which flowed

northwest toward the Arsenal. The parties dispute the timing of the TCA release

into the soil and groundwater.
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In the 1980s, the United States Environmental Protection Agency

discovered contaminants in drinking wells owned by South Adams County Water

and Sanitation District (“SACWSD”). The wells are near the Arsenal and Scott’s

facility. The United States Army, owner of the Arsenal, participated in the

investigation and found TCA and other contaminants in the drinking wells and in

groundwater flowing toward the Arsenal. The Army paid over $25 million to

investigate and remediate the contamination. In September 1994, the United

States sued Scott’s for contribution to the cleanup costs. Pursuant to a settlement

agreement, Scott’s paid $6 million to the United States and $200,000 to

SACWSD.

Scott’s sought reimbursement of these costs from its insurers, one of which

was Lexington. Scott’s held a Lexington excess insurance policy for the period

December 1, 1980 to December 1, 1981. Relevant to this appeal is language in

the “Insuring Agreements” and “Definitions” portions of the policy. The policy

provided as follows:

INSURING AGREEMENTS

I. Coverage – To pay on behalf of the Insured

the ultimate net loss in excess of the

retained limit . . . which the Insured shall

become legally obligated to pay as damages by

reason of the liability imposed upon the

Insured by law . . . because of – 

. . . ,

(b) Property Damage,
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. . . ,

as defined herein and caused by or arising

out of an occurrence.

. . . .

IV. Territory – Policy Period – This policy

applies only to occurrences happening

anywhere during the policy period.

DEFINITIONS

. . . .

8. Occurrence – With respect to . . .

Property Damage the term “Occurrence” means

an event, including continuous or repeated

exposure to conditions, which result [sic] in

. . . Property Damage neither expected nor

intended from the standpoint of the Insured. 

All such exposure to substantially the same

general conditions shall be deemed one

occurrence.

Lexington refused to indemnify Scott’s or pay Scott’s legal expenses incurred in

the Army suit, and Scott’s sued in Colorado state court for breach of contract. 

The suit was later removed to federal court.

Both sides moved for summary judgment on coverage. Lexington argued

that the policy language dictated that coverage arose only if the property damage

suffered by the Army or SACWSD happened during the policy period, December

1, 1980 to December 1, 1981. Lexington contended coverage was not triggered

since there was no proof that the plume had migrated to the Arsenal or the

SACWSD wells during the policy period. Scott’s argued the contract did not
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require such proof. According to Scott’s, the definition of “occurrence” merely

required that the event ultimately resulting in property damage happen during the

policy period, not that the property damage also occur during the period.

The district court agreed with Scott’s and ruled that the continuous release

of TCA into the soil and groundwater beneath Scott’s facility constituted an

occurrence triggering coverage. The district court determined it was undisputed

that TCA releases into the soil and groundwater started before 1980 and

continued through 1981. The district court also ruled that Scott’s was entitled to

attorney fees incurred in the coverage litigation. In so doing, it recognized the

general rule that attorney fees are not recoverable in a contract action absent some

statute, court rule, or contract provision to the contrary. See Bernhard v. Farmers

Ins. Exch., 915 P.2d 1285, 1287 (Colo. 1996) (en banc). The district court,

however, concluded that the policy obligated Lexington to pay Scott’s reasonable

attorney fees incurred in an action to compel Lexington to provide coverage. The

district court reasoned that its own decision in Flannery v. Allstate Insurance Co.

interpreted Colorado law to require the insurer to pay attorney fees under similar

contract language. See Flannery, 49 F. Supp. 2d 1223, 1232-33 (D. Colo. 1999)

(discussing Allstate Ins. Co. v. Robins, 597 P.2d 1052, 1052-53 (Colo. Ct. App.

1979)).
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III. STANDARD OF REVIEW AND APPLICABLE LAW

Federal jurisdiction is based on diversity. The district court applied the

substantive law of the forum state, Colorado. See Vanover v. Cook, 260 F.3d

1182, 1186 (10th Cir. 2001). Neither party challenges the propriety of the

application of Colorado law. See Webco Indus., Inc. v. Thermatool Corp., 278

F.3d 1120, 1126 (10th Cir. 2002) (applying Michigan law after parties agreed to

its applicability).

We review a district court’s decision on summary judgment de novo,

applying the same standard as the district court. Hirase-Doi v. U.S. West

Communications, Inc., 61 F.3d 777, 781 (10th Cir. 1995). Summary judgment is

proper when the pleadings, discovery materials, and affidavits submitted by the

parties demonstrate that there is no genuine issue as to any material fact and that

the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). 

The court’s function at the summary judgment stage is not to weigh evidence but

merely decide whether there is a genuine issue of fact for trial. TPLC, Inc. v.

United Nat’l Ins. Co., 44 F.3d 1484, 1489 (10th Cir. 1995). An issue of fact is

genuine when the evidence is such that a factfinder could resolve the issue in

either party’s favor. Bennett v. Quark, Inc., 258 F.3d 1220, 1224 (10th Cir.

2001).
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The district court based the attorney fees award on its interpretation of the

insurance contract and principles of Colorado law. While this court generally

reviews a district court’s award of attorney fees for abuse of discretion, we

review the underlying legal analysis de novo. Towerridge, Inc. v. T.A.O., Inc.,

111 F.3d 758, 765 (10th Cir. 1997). 

IV. COVERAGE TRIGGER

In Colorado, a contract is interpreted according to the plain and ordinary

meaning of its language. Chacon v. Am. Family Mut. Ins. Co., 788 P.2d 748, 750

(Colo. 1990) (en banc). A court should enforce the insurance contract as written,

unless an ambiguity exists. Ballow v. PHICO Ins. Co., 875 P.2d 1354, 1359

(Colo. 1993) (en banc). The meaning of the term “occurrence” as defined in this

contract is at the heart of the coverage dispute. Lexington points out, correctly,

that an occurrence must happen during the policy period for coverage to attach. 

Lexington argues, however, that before an occurrence can exist property damage

must also exist. Accordingly, Lexington submits that, since the Army and

SACWSD suffered no property damage from the TCA plume during the policy

period, the plume was not an occurrence that existed within the policy period. 

We disagree. 

The definition of occurrence in the Lexington policy is “an event, including

continuous or repeated exposure to conditions, which result [sic] in . . . Property
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Damage.” The definition, unlike that used in many policies, contains no express

requirement that property damage be manifest within a certain time frame in order

for the event to qualify as an occurrence. Cf. Browder v. United States Fid. &

Guar. Co., 893 P.2d 132, 134 (Colo. 1995) (en banc) (interpreting a policy which

defined occurrence as “an accident . . . which results, during the policy period, in

. . . property damage” (emphasis added)); Fire Ins. Exch. v. Bentley, 953 P.2d

1297, 1300 (Colo. Ct. App. 1998) (same); Robert E. Keeton & Alan I. Widiss,

Insurance Law 595 (practioner’s ed. 1988) (discussing the definition of

occurrence common in standard automobile insurance policy forms: an accident

“which results, during the policy period, in . . . property damages” (emphasis

added)). Without such a temporal qualifier, the plain meaning of the definition is

that an occurrence exists whenever an event happens that will result in property

damage, regardless of when the property damage occurs.

Lexington argues that under Colorado law property damage within the

policy period is a prerequisite to coverage. See Browder, 893 P.2d 132;

Samuelson v. Chutich, 529 P.2d 631 (Colo. 1974) (en banc). Contrary to

Lexington’s assertion, Browder and Chutich are not controlling. Both involve

very different policy language than that at issue in this case.

In Browder, the policy defined “occurrence” as “an accident . . . which

results, during the policy period, in . . . property damage.” 893 P.2d at 134
1

 Colorado’s body of insurance caselaw deals overwhelmingly with policies

which define an occurrence using the narrower term “accident.” See, e.g.,

Browder v. United States Fid. & Guar. Co., 893 P.2d 132, 134 (Colo. 1995) (en

banc); Hecla Mining Co. v. N.H. Ins. Co., 811 P.2d 1083, 1086 (Colo. 1991) (en

banc); Fire Ins. Exch. v. Bentley, 953 P.2d 1297, 1300 (Colo. Ct. App. 1998);

Employers’ Fire Ins. Co. v. W. Guar. Fund Servs., 924 P.2d 1107, 1108-09 (Colo.

Ct. App. 1996); M.L. Foss, Inc. v. Liberty Mut. Ins. Co., 885 P.2d 284, 285 (Colo.

Ct. App. 1994); Am. Employer’s Ins. Co. v. Pinkard Constr. Co., 806 P.2d 954,

955 (Colo. Ct. App. 1990).

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(emphasis added). Thus, unlike the policy at issue in this case, the Browder

policy expressly required property damage to occur during the policy period.

The policy in Chutich read, “This policy applies only to accidents which

occur during the policy period.” 529 P.2d at 633 (emphasis added). In deciding

that coverage was triggered only if property damage happened during the policy

period, the Colorado Supreme Court quoted with approval an Arizona case

holding that the word ‘accident’ “clearly implies a misfortune with concomitant

damage to a victim.” Id. at 635 (quoting Century Mut. Ins. Co. v. S. Ariz.

Aviation, Inc., 446 P.2d 490, 492 (Ariz. Ct. App. 1968)); see also Carroll v.

CUNA Mut. Ins. Soc’y, 894 P.2d 746, 753 (Colo. 1995) (en banc) (holding that

“[a]n unanticipated or unusual result flowing from a commonplace cause may be

an accident” (emphasis added)). Thus, unlike an “occurrence” or an “event,” an

“accident” cannot exist without some form of damage. The broad term “event” in

the occurrence definition of the Lexington policy does not appear to have been

directly addressed in the Colorado cases.1

 The plain meaning of such a broad
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definition, coupled with the tendency of Colorado courts to interpret “occurrence”

against the insurer, compel the conclusion that an event which eventually results

in property damage should be deemed an occurrence under this contract. See,

e.g., Bentley, 953 P.2d at 1301 (“An ‘occurrence’ is to be broadly construed

against the insurer.”). If that event happens during the policy period then

coverage is triggered, regardless of when the property damage becomes manifest.

Thus, if contamination of the soil and groundwater in this case happened

during the policy period, December 1, 1980 to December 1, 1981, coverage is

triggered, regardless of when the TCA plume crossed the Army and SACWSD

property. The district court concluded the only evidence presented demonstrated

that contamination of the groundwater underneath Scott’s facility began prior to

1980 and continued through the policy period. We agree that no genuine issue of

fact exists as to release during the policy period.

Scott’s offered the affidavits of two experts in support of its motion for

partial summary judgment. One expert, Dr. Chirlin, stated in his affidavit that,

according to his analysis of groundwater flow and velocity, the TCA plume

passed the arsenal boundary by early 1981. Chirlin further opined that “in order

for the groundwater to have traveled the distance from Scott’s facility to the

Arsenal boundary by early 1981, it must have been contaminated by events at

Scott’s beginning prior to 1976.” Chirlin also concluded that, based on the length
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of the plume, TCA had continued to leach into the groundwater beneath Scott’s

facility through at least 1991. The other expert, Mr. Folkes, stated in his affidavit

that “TCA more likely than not began to seep into the soil between 1971 and

1976, and was present in the soil through 1980-81, into later years. 

Contamination of the groundwater also occurred continuously during these years.” 

In opposition, Lexington offered excerpts from the depositions of Folkes

and Chirlin in both this coverage case and the underlying suit brought by the

Army against Scott’s. In Chirlin’s depositions, he stated that he did not actually

know when contamination started at Scott’s facility. In Folkes’ deposition in the

underlying case, he stated that “I don’t know when [TCA] first became located in

the groundwater below the Scott’s facility.” Lexington contends these statements

indicate that contamination could have occurred after the policy period and thus

create a genuine issue of material fact.

In response to the specific question whether they actually knew the earliest

date of contamination, both experts responded no. A thorough reading of

Chirlin’s and Folkes’ deposition testimony, however, reveals that neither

disclaimed having an opinion as to the date of contamination. Both experts used

groundwater flow velocity estimates and the known date of contamination of

other areas to infer the start of contamination at Scott’s facility. Because these

calculations involved estimates of groundwater flow velocity and numerous other
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variables, it would be impossible for each expert to know precisely the start date

of contamination. Yet, the calculations did permit both experts to conclude that

more likely than not the contamination began before and continued through the

policy period. Lexington cites no evidence conflicting with these opinions or the

underlying calculations. Thus, based on the evidence presented, a factfinder

could only find for Scott’s. Summary judgment for Scott’s on the coverage issue

is therefore proper.

V. ATTORNEY FEES

Scott’s recognizes that in the absence of a statute, court rule, or contract

provision to the contrary, attorney fees should not be awarded in Colorado. 

Bernhard, 915 P.2d at 1287. It argues, however, that the following language in

the insurance contract mandates the award of attorney fees incurred in this

coverage action:

INSURING AGREEMENTS

. . . .

II. Defense, Settlement, Supplementary

Payments – Solely as respects occurrences

covered under this policy . . . but not

covered under the underlying insurance . . .

or under any other underlying insurance

collectible by the Insured, the Company

shall:

. . . ;

(c) reimburse the Insured for all

reasonable expenses incurred at the
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Company’s request, (including actual

loss of wages or salary, but not

loss of other income, not to exceed

$75 per day) because of his

attendance at hearings or trials at

such request.

The district court relied upon its previous decision in Flannery, which in turn

relied upon Allstate Insurance Co. v. Robins, in which the Colorado Court of

Appeals determined that language similar to section II(c) required the insurer to

pay the insured attorney fees incurred in a suit for coverage. See Robins, 597

P.2d 1052, 1052-53 (Colo. Ct. App. 1979). 

Even if the “at the Company’s request” language of section II(c) obligates

Lexington to pay Scott’s attorney fees incurred in a coverage action brought by

Scott’s, that duty, like the other duties under section II, is triggered only when an

occurrence is (1) covered under the Lexington policy and (2) not covered by the

underlying insurance agreements. The parties dispute whether Scott’s underlying

insurance covered the TCA plume. Lexington argues that since Scott’s exhausted

its underlying insurance policies, the TCA plume must have been covered by

those policies. Scott’s contends that the phrase “not covered” is susceptible to

two readings. First, it may mean that the event in question does not satisfy the

underlying policies’ criteria for a covered peril. Second, it may also mean that

though the event is an occurrence that would otherwise be covered, it is not an

insured event because the underlying policies have been exhausted. In other
2

 Scott’s also contends that Lexington never argued below that its duties

under section II were not triggered. We have reviewed the record and conclude

that Lexington sufficiently preserved the issue for appeal.

3

 Our agreement with the Fifth Circuit is limited to its holding that “not

covered” means an event does not meet the underlying policies’ definitions of a

covered event. We express no opinion on whether the lapsing of underlying

insurance polices would trigger the duties enumerated in section II or similar

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words, if the limits of the underlying policies have been reached, those policies

cannot be said to cover the occurrence. Scott’s argues that “not covered” is thus

ambiguous and should be construed against Lexington.

2

 We disagree.

The purpose of the “not covered” clause “is to provide for risks not insured

against by the underlying insurances.” See Unigard Mut. Ins. Co. v. Mission Ins.

Co., 907 P.2d 94, 99 (Colo. Ct. App. 1994). In Arcement v. Norman Industries,

Inc., the Fifth Circuit rejected the argument that an occurrence was not covered

by the underlying insurance policies simply because the insured had let those

policies lapse. 652 F.2d 395, 397 (5th Cir. Unit A June 1981) (per curiam), cited

with approval in Unigard, 907 P.2d at 99. The Fifth Circuit reasoned that “not

covered” referred to events not meeting the definition of a covered event in the

underlying insurance policies, not to a situation in which an event was a covered

event but the underlying insurers did not indemnify because the policies had

lapsed. Id. Similarly, “not covered” in the Lexington policy plainly refers to an

event which does not meet the definition of a covered event in the underlying

policies.3 There is no dispute that the TCA plume was a covered event under the
contractual language.

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definition employed by Scott’s underlying insurance policies. Scott’s cites no

evidence to the contrary and, indeed, stipulated that its other insurers paid

$5,920,000 of its TCA plume liability. Scott’s underlying insurers paid precisely

because the plume was a covered event under those policies.

If the parties had intended to obligate Lexington to reimburse Scott’s for

attorney fees when Scott’s exhausted its underlying insurance, they could have

easily specified that exhaustion of the underlying insurance policies renders an

occurrence “not covered.” See, e.g., Nat’l Union Fire Ins. Co. v. Travelers Ins.

Co., 214 F.3d 1269, 1272 (11th Cir. 2000) (interpreting policy that included the

provision: “This section shall also apply to occurrences not covered by any

underlying insurance due to exhaustion”); Hocker v. N.H. Ins. Co., 922 F.2d 1476,

1481-83 (10th Cir. 1991) (interpreting insurance contract expressly providing

excess insurer had duty to defend when underlying insurance exhausted). This

court will not reach a strained interpretation of a contract, especially when the

interpretation runs counter to the obvious intentions of the parties. See Allstate

Ins. Co. v. Starke, 797 P.2d 14, 17-18 (Colo. 1990) (en banc). Thus, Lexington is

not obligated by section II(c) to reimburse Scott’s for attorney fees incurred in

this coverage action. Because Scott’s references no other language in the contract

entitling it to attorney fees, the award was contrary to Colorado law.
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VI. CONCLUSION

The district court’s grant of summary judgment to Scott’s on the question

of coverage is AFFIRMED. The district court’s award of attorney fees is

REVERSED. The case is remanded for further proceedings consistent with this

opinion.