UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT

________________ _________________ GERALD H. PHIPPS, INC., d/b/a GH Phipps Construction Company, a Colorado corporation, Plaintiff - Appellant,

v. TRAVELERS PROPER TY CASUALTY COMPANY OF AMERICA, a Connecticut corporation, Defendant - Appellee. No. 16-1039 (D.C. No. 1:14-CV -01642-PAB-KLM) (D. Colo.)

________________ _________________ ORDER AND JUDGMENT *

________________ _________________ Before MATHESON , McKAY , and MORITZ , Circuit Judges.

________________ _________________ After water damaged a building it was renovating, Gerald H. Phipps, Inc., d/b/a GH Phipps Construc tion Company, (“GHP”) so ught coverage under its builders’ risk insurance polic y. GHP’s insurer, Traveler s Property Casualty Company of America (“Travelers”), denied the clai m, and GHP sued for breach of contract, common law bad faith, and statutory bad faith. GHP also sought a declaratory judgment regarding coverage. The distri ct court granted summary judgment for

* This order and judgment isn’t binding precedent, except under the doctrines of law of the case, res judi cata, and collateral estoppel. But it may be cited for its persuasive value. See Fed. R. App. P. 32.1; 10th Cir. R. 32.1. FILED United States Court of Appeals Tenth Circuit 

### February 16, 2017
Elisabeth A. Shumaker Clerk of Court2 Travelers on all claims, and GHP appeals. B ecause we agree with the district court that GHP doesn’t seek damages for a lo ss to covered property, we affirm.
B ACKGROUND The University of Denver hired GHP to renovate and expand the University’s library. Because the library contained asbe stos, the University hired two companies— Excel Environmental and Herron Enterprise s—to perform environmental testing and asbestos mitigation in conjunction with the renovation. But the University wanted to avoid the cost of removing asbestos in two elevator shafts and f our stairwells, so it limited the scope of GHP’s renovations in t hose areas. Specifically, GHP planned to remove and replace handrails in the stairwells; update lighting fixtures; repair existing concrete floors; pa tch and paint the existing drywall; and install new or reroute existing mechanical, plumbi ng, and electric al systems. GHP was completing installation of a new roof on the library when water from melting snow leaked into the building. The water damaged existing drywall and insulation in the stairwells and elevator shafts that GHP pla nned to preserve and update (“the damaged areas”). Before the snowmelt mishap, GHP had completed some preliminary work in the damaged ar eas to designate lo cations for future installation of mechanical, plumbing, and electrical systems. But GHP hadn’t yet installed any new materials, updated any ligh ting fixtures, or patc hed and painted any existing drywall in th e damaged areas. GHP notified Travelers of the water da mage and initiated a claim under its builders’ risk insurance policy (“the po licy”). Following an initial inspection,3 Travelers advised GHP the loss was covere d. GHP then hired Excel and Herron to perform environmental testi ng and asbestos removal in the damaged areas, ultimately incurring $804,661.76 in costs to remove as bestos, remove and re place drywall, and install new fire-proofing materials in the da maged areas before it could proceed with its planned renovations in those areas. But after further review of the policy, Travelers notified GHP the loss wasn’t covered after all; it explai ned that “the damage was onl y to the existing building and not to [GHP’s] work.” App. vol. 1, 116. C iting the policy’s definition of “Builders’ Risk,” which expressly excludes “[b]uildings or structures that existed at the ‘job site’ prior to the incep tion of th[e] policy,” id. , Travelers formally denied GHP’s claim. Almost one year later, GHP asked Trav elers to reconsider its denial of coverage. In response, Travelers acknowledg ed that GHP had completed preliminary work in the damaged areas before the water damage occurre d. But Travelers explained that the policy would cover GHP ’s completed work only if “the water damaged material or items installed by GHP ” in the damaged areas. App. vol. 4, 412. Because its investigation s howed that the water instea d damaged only “portions of the existing structure” and that GHP’s prel iminary work didn’t include installing any new materials or items in the damaged areas, Travelers reaffirmed its initial decision to deny coverage. Id. at 404. GHP sued Travelers, seeking a declar atory judgment on c overage and also asserting claims for breach of contr act, common law insurance bad faith, and4 statutory insurance bad faith. Travelers moved for partial summary judgment on the statutory bad faith claim. Th e district court granted th e motion, concluding that Colorado’s one-year statute of limita tions barred the st atutory claim. Travelers then moved for summary j udgment on the remaining claims. The district granted that motion as well, concluding that GHP failed to demonstrate a loss to covered property. The court reasone d that GHP didn’t introduce evidence establishing (1) that the water damaged GH P’s own work in the damaged areas or (2) that GHP sought damages for the costs of redoing its own work in those areas. The court further reasoned that the damaged ar eas, as existing struct ures, were excluded from coverage under the policy’s definition of “Builders’ Risk.” App. vol. 5, 501. GHP appeals both summary judgment orders.
D ISCUSSION We review the district court’s decisi on to grant summary judgment de novo, applying the same legal standard as the dist rict court and viewing the record, and all reasonable inferences that might be drawn from it, in GHP’s favor. Forney Indus., Inc. v. Daco of Mo., Inc. , 835 F.3d 1238, 1251 (10th Cir. 2016). Summary judgment is appropriate if “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). GHP first challenges the district cour t’s order granting summary judgment on its breach of contract, common law bad fa ith, and declaratory judgment claims, arguing that the district court incorrectly interpreted the policy. Thus, we begin our analysis by considering th e policy’s plain language. See State Farm Mut. Auto. Ins. v.5 Stein , 940 P.2d 384, 387 (Colo. 199 7) (noting that Colorado courts enforce insurance policies as written, unless the policy language is ambiguous). 1 The policy provides that Travelers “wil l pay for direct physical loss of or damage to Covered Property from any of the Covered Caus es of Loss.” App. vol. 3, 277. The policy defines “Covered Pr operty” as “Builders’ Risk.” Id. The policy then defines “Builders’ Risk” as Property described in the Declarati ons under “Builders’ Risk” owned by [GHP] or for which [GHP is] legally liable consisting of: a. Buildings or structures including temporary structures while being constructed, erected or fabricated at the “job site”; b. Property that will become a pe rmanent part of the buildings or structures at the “job site”: (1) While in transit to the “job s ite” or temporary storage location; (2) While at the “job site” or at a temporary storage location. Id. at 293. Critically, the policy expressly provide s that “‘Builders’ Risk’ does not include . . . [b]uildings or st ructures that existed at the ‘job site’ prior to the inception of th[e] policy.” Id. As the insured, GHP has the initial burden of demonstr ating coverage. See Rodriguez ex rel. Rodriguez v. Safeco Ins. Co. of Am. , 821 P.2d 849, 853 (Colo. App. 1991). If GHP meets this burden, the burden shifts to Travelers to “establish the

1 Colorado law applies in this diversity action. See Houston Gen. Ins. Co. v. Am. Fence Co. , 115 F.3d 805, 806 (10th Cir. 1997) (“The interpretation of an insurance contract is govern ed by state law and, sitting in diversity, we look to the law of the foru m state.”).6 applicability of an exclusion from coverage.” Leprino Foods Co. v. Factory Mut. Ins.
Co. , 453 F.3d 1281, 1287 (1 0th Cir. 2006) (quoting Fire Ins. Exch. v. Bentley , 953 P.2d 1297, 1301 (Colo. App. 1998)). And, if Travelers shows that an exclusion applies, the burden shifts back to GHP to show the app licability of an exceptio n to the exclusion. See Rodriguez , 821 P.2d at 853. At the outset, we note that GHP doesn’t even attempt to argue in its opening brief that the damaged area s come within section (a) of the “Builders’ Risk” definition as either a buildi ng or structure that was “bei ng constructed, erected or fabricated at the ‘job site.’ ” App. vol. 3, 293. Other than pointing out that the policy fails to define “structure,” GHP makes no discernible argument about this language. Aplt. Br. 25. In its reply brief, GHP argues that section (a)’s re ference to a building “while being constructed” is broad enough to include a building under renovation. Aplt. Reply Br. 11. Thus, GHP argues, th e policy necessarily covers the entire building while it is being renovated, not just “the specific component of the building that the contractor is work ing on or has worked on at the time of the loss.” Id. Because GHP didn’t make this argument in its opening brief, we ordinarily would decline to address it. See Starkey ex rel. A.B. v. Boulder Cty. Soc. Servs. , 569 F.3d 1244, 1259 (10th Cir. 2009) (stating this court ordinarily declines to review new arguments made in reply brief). But, as Travelers argues, even assuming GHP could demonstrate that section (a)’s plain language provides coverage for the damaged areas, there’s no question that the damaged areas already existed at the job site before the policy’s inception. Thus, the7 damaged areas would be excluded from covera ge under the “Builders’ Risk” definition’s exclusionary language. And we aren’t persuaded by GHP’s argument that this exclusionary language wouldn ’t apply because, in GHP’s view, the damaged areas are “merely building or structure components .” Aplt. Br. 25. As the district court reasoned, whether the damaged areas are either “struc tures[,] or components of a structure or building, the fact remains that [the damaged areas] . . . existed before the inception of the policy.” App. vol. 5, 501. Next, we address the parties’ shared assumption that s ection (a) implicitly provides coverage for damage to GHP’s “work,” which, according to Travelers, means materials and items that GHP installs on existing stru ctures or in the existing building during renovations . App. vol. 4, 412; see also Aplt. Br. 23 (asserting, “Travelers has admitted that coverage ex ists under its policy in the event that GHP worked on any of the walls damaged by wate r intrusion.”); Aplee. Br. 27 (“The plain language of the policy thus in sures GHP’s work at the site . . . .”). Relying on that shared assumption, GHP argues that it raised a genuine dispute of material fact about the nature and scope of the preliminary wo rk it performed in the damaged areas, thus precluding summary judgment. But even if we assume th at (1) section (a) implicitly provides coverage for a loss to any materials or items GHP installed on or in th e damaged areas, (2) the water damaged GHP’s preliminary work in thos e areas, and (3) GHP had to redo that preliminary work, these assumptions don’t advance GHP’s assertion that it seeks damages for a covered loss. Instead, GHP seek s the costs of removing existing8 asbestos, replacing damaged insulation, and removing and replacing existing, damaged drywall. 2 Thus, GHP seeks recovery for the loss to the damaged areas themselves, not for any loss to its preliminary “work” in those areas. And, as we’ve discussed, the policy expressly exclude s the damaged areas from coverage as “[b]uildings or structures th at existed at the ‘j ob site’ prior to the inception of th[e] policy.” App. vol. 3, 293

. Thus, whether GHP seeks coverage for the damaged areas under section (a)’s explicit language or under so me shared assumption that se ction (a) implicitly covers GHP’s “work” to existing buildings or st ructures during a re novation project, the policy’s exclusionary language applies. Finally, GHP makes no cogent argument th at the damaged areas come within section (b) of the “Builders’ Risk” definition. GHP points out that the policy doesn’t

2 In attempting to establis h that it seeks costs for redoing its preliminary work in the damaged areas, GHP directs us to three portions of the record: (1) a summary of damages attached to its proposed supplem ent to the civil sche duling order, (2) its entire response to Travelers’ summary judgment motion, and (3) testimony from GHP’s superintendent, Don J ohnson, and GHP’s presiden t, Kurt Klanderud. But those portions of the record don’t estab lish that GHP seeks anything other than restoration costs. First, GHP’s summary of damages only lists invoices GHP paid for water and asbestos mitigation, not for redoing any layout and penetration work. Second, while GHP fails to point us to a specific page or portion of its response to Travelers’ summary judgment motion, we di d find a conclusory assertion that “GHP now seeks recovery of amounts expended to remove the drywall and perform the necessary abatement work, wh ich was necessary to restor e the [damaged areas] to their pre-water intrusion cond ition.” App. vol. 5, 430. But th at statement supports our conclusion that GHP seeks restoration costs, not GHP’s assertion that it seeks costs for redoing its own work. Finally, Johnson and Klanderud both testified that GHP completed preliminary work in the damaged areas. But neither Johnson nor Klanderud testified that GHP incurred or sought costs fo r redoing that work. Thus, we agree with the district court’s conclu sion that GHP doesn’t seek damages for the costs of redoing its own work.9 define the term “structur e” and argues that the dama ged areas must therefore constitute “[p]roperty that will become a permanent part of the buildings or structures at the ‘job site.’” Aplt. Br. 25 (emphasis omitted) (quoting App. vol. 3, 293). It further argues that because the “Builders’ Risk” de finition excludes existing “buildings or structures” but doesn’t exclude existing “property,” treating the damaged areas as “property” renders the exclusionary language inapplicable. Aplt. Br. 25-26. But we agree with Travelers that section (b) provides coverage for personal property—i.e., fixtures or building materials—that will become part of the permanent buildings or struct ures “being constructed, erec ted, or fabricated at the ‘job site.’” App. vol. 3, 293. See, e.g. , 5-50 New Appleman on Insurance Law Library Edition § 50.02[c][i] (2016) (“Property covered under a builders risk policy usually includes the structures on the construc tion site, as well as materials that have not yet been incorporated into the stru cture.”). Because, GHP makes no claim for damage to its personal propert y at the job site, the second basis for “Builders’ Risk” coverage is also inapplicable. In sum, because GHP doesn’t seek dama ges for a loss to covered property, we affirm the district court’s order granting summary judgmen t in favor of Travelers on GHP’s claims for breach of contract and common law bad faith, and on GHP’s request for a declaratory judgment on coverage. And this conclusion makes it unnecessary for us to resolv e whether, as GHP argues, th e district court erroneously concluded that GHP’s statutor y bad faith claim was time-ba rred. Instead, we affirm the district court’s order granting summ ary judgment to Travelers on that claim10 because—for the reasons discussed above —GHP failed to demonstrate a loss to covered property. See MarkWest Hydrocarbon, Inc. v. Liberty Mut. Ins. Co. , 558 F.3d 1184, 1193 (10th Cir. 2009) (“It is settled law in Colorado that a bad faith claim must fail if, as in the case here, coverage was properly denied and the plaintiff’s only claimed damages flowed from th e denial of coverage.”); see also Richison v. Ernest Grp., Inc. , 634 F.3d 1123, 1130 (10th Cir. 2011) (“We have long said that we may affirm on any basis supported by the record , even if it require s ruling on arguments not reached by the district court or even presented to us on appeal.”). Affirmed.

Entered for the Court
Nancy L. Moritz Circuit Judge