IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLORADO

Lewis T. Babcock, Judge

Civil Action No. 11-cv-02652-LTB-BNB

OKLAND CONSTRUCTION COMPANY, INC., 

Plaintiff,

v.

THE PHOENIX INSURANCE COMPANY, a Connecticut insurance company; THE

TRAVELERS INDEMNITY COMPANY OF AMERICA, a Connecticut Insurance Company;

ST. PAUL FIRE AND MARINE INSURANCE COMPANY, a Connecticut insurance company;

ST. PAUL SURPLUS LINES INSURANCE COMPANY, a Connecticut insurance company;

TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, a Connecticut insurance

company; EVEREST NATIONAL INSURANCE COMPANY, a New Jersey insurance

company; and AMERICAN INTERNATIONAL SPECIALTY LINES INSURANCE

COMPANY, a New Jersey insurance company,

Defendants.

______________________________________________________________________________

ORDER

______________________________________________________________________________

This case is before me on Defendants The Phoenix Insurance Company, The Travelers

Indemnity Company of America, St. Paul Fire and Marine Insurance Company, St. Paul Surplus

Lines Insurance Company, and Travelers Property Casualty Company of America’s (collectively

referred to as “Travelers”) and Defendant Everest National Insurance Company’s (“Everest”)

Combined Motion for Summary Judgment Regarding Choice of Law [Doc # 240]. By this

motion, Travelers and Everest seek a determination that the claims asserted in this case are

governed by Utah law. By separate summary judgment motion, Plaintiff Okland Construction

Company, Inc. (“Okland”) seeks, among other things, a determination that the claims asserted in

this case are governed by Colorado law. See Doc # 241. Thus, for purposes of judicial

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economy, I consider whether Utah or Colorado law is controlling in this case. 

After consideration of the motion, all related pleadings, and the case file, I deny

Travelers and Everest’s motion for the reasons set forth below and conclude that the claims

asserted in this case are governed by Colorado law.

I. Background

This litigation arises out of the case of RiverGate Loft Condo. Ass’n v. RiverGate Loft

Partners LLC, et al., Case No. 10-CV-19 in the La Plata County District Court for the State of

Colorado (the “Underlying Case”), which in turn arose out of the construction of a residential/

commercial project in Durango, Colorado known as the RiverGate Loft Condominiums (the

“Construction Project”). Okland was the construction manager and general contractor for the

Construction Project and a defendant in the Underlying Case. 

Okland is a Utah corporation authorized to do business in Colorado with its principal

place of business in Salt Lake City, Utah and offices in Arizona, Colorado, and Utah. Travelers

is a Connecticut company with its principal place of business in Connecticut. Everest is a New

Jersey company with its principal place of business in New Jersey. Both Travelers and Everest

are licensed to transact business in Colorado. 

Travelers issued a series of one-year commercial general liability (“CGL”) policies to

Okland covering the period from April 1, 2004 to April 1, 2010. Travelers also issued two

professional liability (“PL”) policies to Okland covering the periods of April 1, 2009 to April 1,

April 1, 2011. Finally, Travelers issued three excess liability policies to Okland covering the

period from April 1, 2004 to April 1, 2007. Everest issued three excess liability policies to

Okland covering the period from April 1, 2007 to April 1, 2010. All of these policies were

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issued to Okland at its office in Salt Lake City, Utah. All premiums on these policies were paid

by Okland from its office in Salt Lake City, Utah. 

Travelers provided a defense to Okland in the Underlying Case. Prior to trial, Okland

agreed to settle the Underlying Case for $11,500,000. Travelers paid $4,000,000 of the

settlement amount, and Okland paid the remaining $7,500,000 via check listing the address for

Okland’s office in Salt Lake City, Utah and made payable to a Colorado law firm. 

In its Complaint, Okland asserts claims against Travelers and Everest for breach of

contract; bad faith breach of insurance contract; violation of C.R.S. § 10-3-1115 with a

corresponding request for attorney fees and two times the covered benefit pursuant to C.R.S. §

10-3-1116; and declaratory relief. Though Travelers and Everest’s motion does not specifically

address Okland’s claim for declaratory relief, this claim is derivative of Okland’s breach of

contract claim and therefore subject to the same choice of law analysis.

II. Standard of Review 

The purpose of a summary judgment motion under Rule 56 is to assess whether trial is

necessary. White v. York Int'l Corp., 45 F.3d 357, 360 (10th Cir. 1995). Rule 56 provides that

summary judgment shall be granted if the pleadings, depositions, answers to interrogatories,

admissions, or affidavits show that there is no genuine issue of material fact and the moving

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

has the burden of showing that there are issues of material fact to be determined. Celotex Corp.

v. Catrett, 477 U.S. 317, 322 (1986). 

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A party seeking summary judgment bears the initial responsibility of informing the

district court of the basis for its motion, and identifying those portions of the pleadings,

depositions, interrogatories, and admissions on file together with affidavits, if any, which it

believes demonstrate the absence of genuine issues for trial. Celotex, 477 U.S. at 323; Mares v.

ConAgra Poultry Co., Inc., 971 F.2d 492, 494 (10th Cir. 1992). Once a properly supported

summary judgment motion is made, the opposing party may not rest on the allegations contained

in his complaint, but must respond with specific facts showing the existence of a genuine factual

issue to be tried. Otteson v. United States, 622 F.2d 516, 519 (10th Cir. 1980); Fed. R. Civ. P.

56(e).

If a reasonable juror could not return a verdict for the non-moving party, summary

judgment is proper and there is no need for a trial. Celotex, 477 U.S. at 323. The operative

inquiry is whether, based on all documents submitted, reasonable jurors could find by a

preponderance of the evidence that the plaintiff is entitled to a verdict. Anderson v. Liberty

Lobby, Inc., 477 U.S. 242, 250 (1986). However, summary judgment should not enter if,

viewing the evidence in a light most favorable to the nonmoving party and drawing all

reasonable inferences in that party's favor, a reasonable jury could return a verdict for that party. 

Anderson, 477 U.S. at 252; Mares, 971 F.2d at 494. 

III. Analysis

A. Choice of Law on Breach of Contract Claim 

The choice of law analysis with respect to Okland’s claim for breach of contract first

requires a determination of whether Colorado and Utah law differ on the question of whether

“rip and tear” costs, i.e. costs associated with the rip and tear of nondefective work in order to

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get to and repair defective work, are covered under standard CGL policies. See United Int’l

Holdings, Inc. v. Wharf (Holdings) Ltd., 946 F. Supp. 861, 866 (D. Colo. 1996) (choice of law

decision will not be made in the absence of an outcome-determinative conflict between

potentially applicable laws). 

In Greystone Constr., Inc. V. Nat’l Fire & Marine Ins. Co., 661 F.3d 1272 (10th Cir.

2011), the Tenth Circuit applied Colorado law in analyzing whether damage to homes resulting

from soil expansion that caused the foundation to shift constituted an “occurrence” under two of

the builder’s CGL policies so as to trigger a duty to defend. The Tenth Circuit concluded that

the Colorado Supreme Court would construe the term “occurrence” under standard form CGL

policies “to encompass unforeseeable damage to nondefective property arising from faulty

workmanship.” Id. at 1282. The Tenth Circuit therefore held that “injuries flowing from

improper or faulty workmanship constitute an occurrence so long as the resulting damage is to

nondefective property, and is caused without expectation or foresight.” Id. at 1284. The Tenth

Circuit noted that the determination of whether the damage was foreseeable “ask[s] whether

damages would have been foreseeable if the builder and his subcontractors had completed the

work properly.” Id. at 1285. 

Applying this construction of the term “occurrence” to the facts and circumstances of the

case, the Tenth Circuit further held that damage to the homes themselves, i.e. nondefective

property, may have resulted from an unforeseen occurrence so as to trigger the duty to defend

under the CGL policies but damage to the homes’ soil-drainage and structural elements, i.e.

defective property, did not. Id. at 1286 & 1289. The Tenth Circuit further explained the

distinction between defective and nondefective property as follows:

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The defective-nondefective principle flows from recognition that the faulty

workmanship, standing alone, is not caused by an accident - but that damage to

other property caused by the faulty workmanship (including both the

nondefective work product of the contractor and third-party property) is the result

of an accident. 

Id. at 1287. 

In Colorado Pool Sys., Inc. v. Scottsdale Ins. Co., — P.3d —, 2012 WL 5265981 (Colo.

App. Oct. 25, 2012), cert. granted, 2013 WL 4714283 (Colo. Sept. 3, 2013), a panel of the

Colorado Court of Appeals applied the Tenth Circuit’s holding in Greystone and held that a CGL

policy did not cover damage incurred in demolishing and replacing an improperly installed pool

but did cover “rip and tear” work to nondefective third-party work including damage to a deck,

sidewalk, retaining wall, and electrical conduits. The Colorado Supreme Court has granted

certiorari in Colorado Pool Sys., see Colorado Pool Sys., 2013 WL 4714283 at *1, and Colorado

law on CGL policy coverage for “rip and tear” costs therefore could soon be clarified. For now,

however, Greystone provides the analytical framework for determining whether there is CGL

policy coverage for such costs under Colorado law. 

A comprehensive statement of Utah law on this issue can be found in Cincinnati Ins. Co.

v. AMSCO Windows, 921 F. Supp. 2d 1226 (D. Utah 2013). There, the issue before the district

court was whether damage caused by defective windows and/or defective window installation to

other property including water damage to the carpet, padding, floors, walls, and ceilings of the

residences and water marks at the soffit, corbels, sills, and walls” was an “occurrence” within the

meaning of the CGL policies at issue. Id. at 1232-33 & 1253. 

After noting that the term “occurrence” is to be broadly and liberally construed in favor

of extending coverage to the insured, id. at 1241, the district court cited and summarized

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numerous cases analyzing the meaning of this term including Greystone. Id. at 1241-60. 

Ultimately, the district court concluded that the Utah Supreme Court, if presented with the

question, would hold that “where defective workmanship causes damage to property other than

the work product itself, then such damage results from an accidental “occurrence” within the

meaning of CGL policy language.” Id. at 1260. The district court noted that this conclusion was

supported by Greystone since there the Tenth Circuit noted “a strong recent trend in the case law

interpreting ‘occurrence’ to encompass unanticipated damage to nondefective property resulting

from poor workmanship.” Id. at 1261 (quoting Greystone, 661 F.3d at 1282). 

Thus, although the issue has not yet been addressed by either the Colorado or Utah

Supreme Court, other courts in both states have predicted that they would similarly interpret the

term “occurrence” as used in CGL policies. While neither Greystone nor Cincinnati specifically

involved “rip and tear” costs, the same principles would be applied under both Colorado and

Utah law in determining whether there was coverage for such costs under the applicable CGL

policies. Without deciding the ultimate question of coverage then, I conclude that there is

presently no conflict between Colorado and Utah law that requires a choice of law analysis with

respect to Okland’s claim for breach of contract. Accordingly, this claim, as well as Okland’s

claim for declaratory judgment, shall be governed by Colorado law. See Pepsi-Cola Bottling Co.

of Pittsburg, Inc. v. PepsiCo, Inc., 431 F.3d 1241, 1255 (10th Cir. 2005) (substantive law of the

forum state governs in diversity action). 

B. Choice of Law on Extra Contractual Claims

The choice of law analysis with respect to Okland’s common law bad faith and statutory

claims first requires a determination of whether Colorado and Utah law differ with respect to 

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these claims. See United Int’l Holdings, Inc., supra. 

Under C.R.S. § 10-3-1116(1), one whose claim for the payment of benefits under an

insurance policy has been unreasonably delayed or denied may recover reasonable attorney fees,

court costs, and two times the covered benefit. There is no comparable Utah statute but Utah

law recognizes a common law right to recover attorney fees on bad faith claims. See Campbell

v. State Farm Mutual Auto. Ins. Co., 65 P.3d 1134, 1168 (Utah 2001), rev’d on other grounds,

538 U.S. 408 (2003). In contrast, Colorado law does not recognize a common law right to

recover attorney fees on bad faith claims. See Berhnhard v. Farmers Ins. Exch., 915 P.2d 1285

(Colo. 1996). Under these circumstances, I am satisfied that there is a conflict between Colorado

and Utah law that mandates a choice of law analysis with respect to Okland’s extra contractual

claims. 

In determining what law applies to these claims, I apply Colorado’s choice of law rules. 

Pepsi-Cola Bottling Co. of Pittsburg, Inc., 431 F.3d at 1255. Colorado follows the “most

significant relationship” approach in determining which law applies to tort actions. Boone v.

MVM, Inc., 572 F.3d 809, 810-11 (10th Cir. 2009). See also Pham v. State Farm Mut. Auto. Ins.

Co., 70 P.3d 567, 571 (Colo. App. 2003) (under Colorado law, claims for bad faith breach of

insurance contract lie in tort). This approach considers the following factors in determining

which state has the most significant relationship :

(a) the needs of the interstate and international systems,

(b) the relevant policies of the forum, 

(c) the relevant policies of other interested states in determination of the particular

issue,

(d) the protection of justified expectations,

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(e) the basic policy underlying the particular field of law,

(f) certainty, predictability and uniformity of result, and 

(g) ease in determination and application of the law to be applied.

Id. (citing Restatement (Second) Conflict of Laws §§ 6(2) & 145). In considering these factors, I

must also take the following contacts into account: 

(a) the place where the injury occurred,

(b) the place where the conduct causing the injury occurred,

(c) the domicile, nationality, place of incorporation and place of business of the

parties, and

(d) the place where the relationship, if any, between the parties is centered.

Id. (citing Restatement (Second) Conflict of Laws § 145(2)). 

Colorado has substantial connections to this case stemming from the fact that the insured

risk is located here. Okland’s payment of the $7,500,000, though made from Utah, was the

direct result of litigation and related settlement proceedings that took place in Colorado for the

benefit of Colorado homeowners. Both Okland’s injury and the conduct giving rise to it were

therefore centered in Colorado. 

Utah also has connections to this case since Okland is a Utah corporation with its

principal place of business there. In addition, the insurance contracts covering the Construction

Project were entered into and maintained by Okland in Utah. The policies did not, however,

insure any risks located in Utah. See Doc # 241, pp. 6-7. 

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In weighing Colorado and Utah’s connections to the particular circumstances of this case,

I note that Utah’s connections are further removed and should therefore be accorded less weight. 

See Restatement (Second) Conflict of Laws § 145(2) (relevant contacts “are to be evaluated

according to their relative importance with respect to the particular issue”). Utah’s more remote

connections to the circumstances of this case further lead me to conclude that Colorado has a

greater interest in its outcome than Utah. Colorado’s interest this case is further demonstrated by

the fact that Colorado has enacted extensive laws, including C.R.S. §§ 10-3-1115 & 1116, to

regulate insurance practices within its borders. Since Travelers and Everest are licensed to

transact business in Colorado and in fact specifically insured risks located in Colorado, it was

certainly foreseeable that they would be subject to Colorado law. 

After consideration of the relevant factors under then, I conclude that Colorado has the

most significant relationship to the issues involved in this case and that Okland’s extra

contractual claims shall therefore be governed by Colorado law. It follows that Okland’s

statutory claim under C.R.S. §§ 10-3-1115 & 1116 is not subject to dismissal on the basis that it

is precluded by Utah law. 

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IV. Conclusion

For the reasons set forth above, IT IS HEREBY ORDERED as follows:

1. Travelers and Everest’s Combined Motion for Summary Judgment Regarding Choice

of Law [Doc # 240] is DENIED; and 

2. The claims asserted in this case shall be governed by Colorado law.

Dated: March 6 , 2014 in Denver, Colorado.

BY THE COURT:

 s/Lewis T. Babcock 

LEWIS T. BABCOCK, JUDGE

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