UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

_________________________________ 

AUTO-OWNERS INSURANCE 

COMPANY, a Michigan corporation, 

 Plaintiff - Counter-Defendant - 

Appellee, 

v. 

GEORGE FLEMING, an individual; 

JANIS FLEMING, an individual, 

 Defendants - Counterclaimants - 

Third-Party Plaintiffs - Appellants, 

v. 

CHARTER OAK FIRE INSURANCE 

COMPANY, a Connecticut corporation, 

 Third-Party Defendant - Appellee, 

and 

TIMBERSMITH, INC., a Utah 

corporation, 

 Defendant. 

No. 16-4118 

(D.C. No. 2:12-CV-00786-CW) 

(D. Utah) 

_________________________________ 

ORDER AND JUDGMENT*

_________________________________ 

Before TYMKOVICH, Chief Judge, LUCERO, and MORITZ, Circuit Judges. 

_________________________________ 

 *

 This order and judgment is not binding precedent, except under the doctrines 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 10th Cir. R. 32.1. 

FILED 

United States Court of Appeals

Tenth Circuit 

July 13, 2017

Elisabeth A. Shumaker 

Clerk of Court
2 

George and Janis Fleming appeal a district court order granting summary 

judgment to The Charter Oak Fire Insurance Company (“Charter Oak”) and AutoOwners Insurance Company (“Auto-Owners”). Exercising jurisdiction under 28 

U.S.C. § 1291, we affirm. 

I 

 The parties are familiar with the facts of this case, which we do not recite in 

detail. The Flemings hired Timbersmith, Inc. in 2008 to build a residential property 

in Utah. During construction, LC Builders, Inc., working with Timbersmith, 

incorrectly framed the house, and both Timbersmith and LC Builders ultimately 

abandoned the project before construction was completed. The Flemings filed a 

state-court action against LC Builders and an arbitration action against Timbersmith, 

asserting various claims for negligence and breach of contract. The Flemings 

prevailed in both actions and were awarded $1,113,780.63 against LC Builders and 

$1,109,642.50 against Timbersmith. The owners of both companies filed for 

bankruptcy before satisfying the judgments against them. 

 During the relevant period, LC Builders was insured by Charter Oak and 

Timbersmith was insured by Auto-Owners. Charter Oak was made aware of the 

litigation against LC Builders but determined that its policy did not cover the alleged 

damages. Accordingly, it declined to defend LC Builders. The parties dispute 

whether Auto-Owners received adequate notice of the arbitration proceedings against 

Timbersmith. However, after final judgment was entered, the Flemings contacted 

Auto-Owners and requested payment on behalf of Timbersmith. Auto-Owners 
3 

subsequently filed this declaratory judgment action against Timbersmith and the 

Flemings in state court, asserting that it had no duty to defend or indemnify 

Timbersmith against the Flemings’ claims. After removing the case to federal court 

on the basis of diversity jurisdiction, the Flemings filed a counterclaim against AutoOwners and a third-party complaint against Charter Oak, arguing that both insurance 

companies are obligated to pay the judgments against their insured. The parties filed 

cross-motions for summary judgment. The district court granted summary judgment 

in favor of Charter Oak and Auto-Owners. The Flemings timely appealed. 

II 

We review a grant of summary judgment de novo, viewing the evidence in the 

light most favorable to the non-moving party. Yousuf v. Cohlmia, 741 F.3d 31, 37 

(10th Cir. 2014). Summary judgment is warranted if “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). Because this is a diversity action, we apply the substantive law of 

the forum state, Utah. Signature Dev. Cos. v. Royal Ins. Co. of Am., 230 F.3d 1215, 

1218 (10th Cir. 2000). 

A 

The Flemings argue that because Charter Oak and Auto-Owners breached their 

respective duties to defend LC Builders and Timbersmith, they are now estopped 

from challenging coverage. In rejecting this argument, the district court determined 

the insurance companies are entitled to contest coverage under Utah law because the 

issue was not adjudicated in the prior litigation. We agree. 
4 

Utah law provides that, “as a general rule[,] when an insurer, whose policy 

requires it to defend its insured, receives notice of a suit against [the insured] and is 

allowed an opportunity to defend, but refuses, [the insurer] is bound by the findings 

and judgment therein.” McCarty v. Parks, 564 P.2d 1122, 1123 (Utah 1977). 

However, this general rule “does not extend to matters collateral or immaterial to the 

essential issues involved in the case, but is limited to those necessary to 

determination of the controversy between the immediate parties.” Id. Thus, an 

insurer whose liability for a judgment was not litigated or necessarily decided 

“should be afforded an opportunity to raise and have determined the issue as to its 

own liability, so long as doing so is not inconsistent with the findings on material 

issues which were determined between the plaintiff and defendant.” Id. These 

principles were recently reaffirmed by the Utah Supreme Court. See Speros v. 

Fricke, 98 P.3d 28, 31, 34-39 (Utah 2004) (holding that insurer had “forfeited its 

opportunity to dispute the underlying facts” giving rise to insured’s liability by 

breaching duty to defend, but considering insurer’s argument challenging policy 

coverage (emphasis added) (citing McCarty, 564 P.2d at 1123-24)).1

 1

 The Flemings’ citation to Summerhaze Co., L.C. v. Federal Deposit 

Insurance Corp., 332 P.3d 908 (Utah 2014), does not alter our interpretation of Utah 

law. The issue presented in that case was whether the court had subject matter 

jurisdiction over the plaintiffs’ claims, despite their failure to exhaust administrative 

remedies. Id. at 911. The plaintiffs asserted that the administrative claims review 

process did not apply because the agency had “tendered defense of the claim[s] to 

BancInsure and thus lost authority to resolve the claims.” Id. at 920. It was in 

rejecting this argument—and considering the effect of a tender of defense on the 

rights of the agency—that the Utah Supreme Court discussed estoppel and an 

insurer’s duty to defend. See id. at 920-21. However, that discussion was only 
5 

The underlying litigation between the Flemings and the construction 

companies addressed the companies’ liability for negligence and the damages owed. 

“[T]here was no necessity for any adjudication as to whether” the damages were 

covered under the relevant insurance policies. McCarty, 564 P.2d at 1123. 

Accordingly, neither insurer is estopped from challenging coverage.2

B

 We must next consider whether the Charter Oak or Auto-Owners insurance 

policies (collectively, “Policies”) provide coverage for the damage awards against LC 

Builders and Timbersmith. The district court concluded that neither Policy applies. 

Again, we agree. 

Under Utah law, “[a]n insurance policy is merely a contract between the 

insured and the insurer and is construed pursuant to the same rules applied to 

ordinary contracts.” Alf v. State Farm Fire & Cas. Co., 850 P.2d 1272, 1274 (Utah 

1993); see also Houston Gen. Ins. Co. v. Am. Fence Co., 115 F.3d 805, 806 (10th 

Cir. 1997) (interpretation of insurance contract governed by state law). The parties 

do not contend that any provisions in the Policies are ambiguous. Thus, there is no 

 

intended to provide context to the jurisdictional analysis and was not necessary to the 

ultimate resolution of the case. Such dicta should not be taken to overrule the 

express holdings of McCarty and Speros, which were not cited. Cf. Alexander v. 

Sandoval, 532 U.S. 275, 282 (2001) (the court “is bound by holdings, not language”). 

2

 Our conclusions on this and on the issue of coverage, infra, obviate the need 

to address whether Auto-Owners received adequate notice of the arbitration against 

Timbersmith or whether either insurer breached its duty to defend. 
6 

presumption in favor of the insured, and “the policy language is construed according 

to its usual and ordinary meaning.” Alf, 850 P.2d at 1274. 

Both Policies are Commercial General Liability (“CGL”) policies with 

substantially similar coverage.3

 The Policies cover “property damage” caused by an 

“occurrence,” which is defined as “an accident, including continuous or repeated 

exposure to substantially the same general harmful conditions.” “[A]ccident” is not 

further defined by the Policies. However, Utah law has consistently construed the 

term in the insurance policy context as being 

descriptive of means which produce effects which are not their natural 

and probable consequences. . . . An effect which is the natural and 

probable consequence of an act or course of action is not an accident, 

nor is it produced by accidental means. It is either the result of actual 

design, or it falls under the maxim that every man must be held to 

intend the natural and probable consequence of his deeds. 

N.M. ex rel. Caleb v. Daniel E., 175 P.3d 566, 569 (Utah 2008) (quotation omitted). 

Under this definition, “harm or damage is not accidental if it is the natural and 

probable consequence of the insured’s act or should have been expected by the 

insured.” Id. (footnote omitted). 

 Applying Utah law, this court has previously determined that “the natural 

results of an insured’s negligent and unworkmanlike construction do not constitute an 

occurrence triggering coverage under a CGL policy.” Emp’rs Mut. Cas. Co. v. 

Bartile Roofs, Inc., 618 F.3d 1153, 1174 (10th Cir. 2010) (brackets and quotation 

omitted); see also Farmington Cas. Co. v. Duggan, 417 F.3d 1141, 1142 (10th Cir. 

 3

 The one substantive difference between the Policies, which relates to the 

“your work” coverage exclusion, does not affect the outcome of this appeal. 
7 

2005) (“Most policies of [CGL] insurance exclude the insured’s faulty workmanship 

from coverage. The rationale for such exclusions is that faulty workmanship is not 

an insurable ‘fortuitous event,’ but a business risk to be borne by the insured.” 

(quoting Lee R. Russ & Thomas F. Segalla, 9 Couch on Insurance § 129:11 (3d ed. 

1995 & Supp. 2005))).4 Two exceptions to this general rule might exist “where 

defective workmanship causes damage to property other than the work product 

itself,” Cincinnati Ins. Co. v. AMSCO Windows, 921 F. Supp. 2d 1226, 1260 (D. 

Utah 2013), or where damage is caused by “the negligent acts of [the insured’s] 

subcontractors,” Great Am. Ins. Co. v. Woodside Homes Corp., 448 F. Supp. 2d 

1275, 1281 (D. Utah 2006).5 

Pursuant to these rules, we conclude the Flemings have failed to provide 

sufficient evidence that the judgments against LC Builders and Timbersmith include 

a covered “occurrence” under the Policies. The Flemings allege only faulty 

 4

 To the extent the Flemings disagree with this reading of Utah law, we are 

“bound by our own prior interpretations of state law,” absent “an intervening 

decision of the state’s highest court.” Kokins v. Teleflex, Inc., 621 F.3d 1290, 1295 

(10th Cir. 2010) (quotation omitted). 

5

 The Utah Supreme Court has not directly addressed whether these two 

scenarios constitute an “occurrence” under a CGL policy. In diversity cases, 

“[w]here no controlling state decision exists, the federal court must attempt to predict 

what the state’s highest court would do.” Wankier v. Crown Equip. Corp., 353 F.3d 

862, 866 (10th Cir. 2003). Both Cincinnati Insurance Co. and Great American 

Insurance Co.—District of Utah cases—predicted that Utah courts would likely 

endorse a definition of “occurrence” that includes damage to property other than the 

work product itself or damage caused by a subcontractor’s negligence. See 921 F. 

Supp. 2d at 1260; 448 F. Supp. 2d at 1281. Because the Flemings have failed to 

demonstrate a coverable occurrence even applying such a definition, we will assume 

without deciding that these are accurate predictions. 
8 

construction causing damage to the insureds’ own work. There are no allegations in 

the pleadings, nor factual findings in the final judgments against the insured, that the 

“defective workmanship cause[d] damage to property other than the work product 

itself.” Cincinnati Ins. Co., 921 F. Supp. 2d at 1260.6

 The Flemings’ vague 

assertions, without citations to record evidence, that LC Builders and Timbersmith 

caused “latent defects” or “dangerous,” “unsafe,” and “hazardous” conditions in the 

home are insufficient to demonstrate coverage. MacKenzie v. City & Cty. of Denver, 

414 F.3d 1266, 1273 (10th Cir. 2005) (“Unsupported conclusory allegations . . . do 

not create an issue of fact.”). 

Further, the Flemings have failed to present evidence that any of the faulty 

workmanship was performed by subcontractors of Timbersmith or LC Builders. In 

the arbitration petition against Timbersmith, the Flemings expressly alleged that Cory 

Lowder—owner of LC Builders—worked on their home as an employee of 

Timbersmith. They now reverse course and assert that Lowder and LC Builders were 

Timbersmith’s subcontractors. However, they offer no record evidence supporting 

this contention or rebutting the substantial evidence provided by defendants 

confirming Lowder and LC Builders’ employee status. Accordingly, the Flemings 

have failed to demonstrate a genuine dispute of fact on this issue.

 6

 The district court noted evidence that part of the foundation had to be 

chiseled out to move piping that was incorrectly placed due to defective framing. 

The Flemings argued below that this evidence was irrelevant and inadmissible. To 

the extent they now assert this is admissible evidence demonstrating coverage, we 

decline to consider the argument as it was addressed only summarily in their reply 

brief. Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 679 (10th Cir. 1998) 

(“Arguments inadequately briefed in the opening brief are waived . . . .”). 
9 

There is a similar lack of evidence that LC Builders’ defective work was 

performed by subcontractors. The Flemings did not allege in their state-court 

complaint that LC Builders employed any subcontractors, and although the final 

judgment against LC Builders cursorily concluded that LC Builders and “their subcontractors” were negligent, the issue was immaterial to a determination of LC 

Builders’ liability in those proceedings. See McCarty, 564 P.2d at 1123. Even 

assuming we are bound by the court’s statement, the Flemings have failed to specify 

which portions of the work were performed by LC Builders and which were 

performed by a subcontractor on LC Builders’ behalf, making it impossible for us to 

determine what—if any—damage might be covered. 

As the party asserting a loss under an insurance policy, the Flemings have the 

burden of demonstrating coverage. See Utah Farm Bureau Ins. Co. v. Dairyland Ins. 

Co., 634 F.2d 1326, 1328 (10th Cir. 1980); Cincinnati Ins. Co., 921 F. Supp. 2d at 

1233. They have failed to do so.7

III 

 For the foregoing reasons, the district court is AFFIRMED. 

Entered for the Court 

Carlos F. Lucero 

Circuit Judge 

 7

 In light of this conclusion, we need not address whether the Policies’ 

coverage exclusions would also bar the Flemings’ recovery.