Source: http://www.coloradoconstructionlitigation.com/2012/05/analysis-of-district-court-order-on-tcd.html
Timestamp: 2019-04-21 02:24:31+00:00

Document:
Colorado Construction Litigation: An Analysis of the District Court Order on TCD v. AmFam.
An Analysis of the District Court Order on TCD v. AmFam.
Recently, this blog posted several articles regarding HB 10-1394, codified at C.R.S. § 13-20-808. As mentioned in those posts, C.R.S. § 13-20-808 has gathered an increasing amount of attention. Part of the interest is due to the ambiguous nature of how the trial courts are interpreting the statute. The following post analyzes the District Court of Summit County rulings in TCD, Inc. v. American Family Mutual Insurance Company, 2009CV148, which ultimately gave rise to the Court of Appeals' affirmation of the District Court's order that C.R.S. § 13-20-808 does not apply retroactively. The blog entry on that decision can be found here.
The TCD, Inc. case stems from construction of the Rio Grande Building at 333 Main Street, Frisco, Colorado (the “Project”). On or about September 15, 2006, TCD, Inc. (“TCD”) as general contractor, entered into an agreement with Frisco Gateway Center, LLC (“Gateway”), as developer, regarding construction of the Project. TCD then entered into a subcontract with Petra Roofing and Remodeling Company (“Petra”). The subcontract required Petra to “indemnify, hold harmless, and defend” TCD against claims arising out of the performance of Petra’s work on the Project. The subcontract also called for Petra to be named as an additional insured on the commercial general liability (“CGL”) insurance policy.
American Family Mutual Insurance Company (“AmFam”) issued a CGL insurance policy to Petra, effective August 22, 2006. It was amended on January 22, 2007 to add TCD, as an additional insured. The court found that the policy was cancelled, effective June 10, 2007, because of Petra’s failure to pay its premium.
A dispute eventually arose on the Project over performance and payment, which led to TCD filing a lawsuit against Gateway, (the “Underlying Action”). The Underlying Action’s purpose was to perfect and establish TCD’s right to a mechanic’s lien against the property. The Underlying Action also included counterclaims by Gateway which alleged, inter alia, that the roof installed by Petra leaked, failing to comply with the architect’s plans and specifications.
TCD demanded that AmFam defend and indemnify it in the Underlying Action, in accordance with the subcontract agreement with Petra and the insurance policy. Once AmFam denied that the policy provided TCD with any coverage, TCD initiated the present case, TCD, Inc. v. American Family Mutual Insurance Company, 2009CV148, in the District Court of Summit County, Colorado. TCD’s complaint sets forth claims for relief grounded in declaratory judgment, breach of insurance contract, breach of contract, and negligence. The issues raised, via summary judgment, are typical of insurance disputes: (1) does AmFam actually owe a duty to defend TCD regarding the counterclaims in the Underlying Action?; and (2) does AmFam actually have a duty to indemnify TCD regarding damages arising from the counterclaims in the Underlying Action?
The court decided that, as a matter of law, an insurer’s duty to defend arises solely from the complaint in the underlying action. To begin with, the court analyzed specific language of the CGL policies at issue, including the phrase “property damage,” which was caused by an “occurrence” during the policy period. The policies also had an additional insured endorsement with exclusions for bodily injury or property damage.
Upon review of the counterclaims in the Underlying Action, the court found that no claims of actual physical injury to tangible property existed, and especially none that purportedly occurred before the policy was canceled on June 10, 2007. The court found that none of the counterclaims in the Underlying Action set forth any averments, which fell within the property damage definition of the policy and which may have triggered a duty to defend TCD by AmFam.
Here is where the court began its discussion and analysis of General Security Indemnity Company of Arizona v. Mountain States Mutual Casualty Company, 205 P.3d 529 (Colo. App. 2009) and C.R.S. § 13-20-808 (also known as HB 10-1394). The court quoted General Security saying, “a claim for damages arising from poor workmanship, sanding alone, does not allege an accident that constitutes a covered occurrence, regardless of the underlying legal theory pled.” General Security, 205 P.3d at 534. TCD counter-argued that HB 10-1394, recently codified as C.R.S. § 13-20-808, was enacted by the legislature to overrule the General Security decision.
While the court agreed with the intention of C.R.S. § 13-20-808, it still found the statute wanting in relation to TCD’s position. The court found that the applicability clause of the statute provided that the statute would apply to all insurance policies “currently in existence” or issued on or after the effective date of May 21, 2010. Focusing on the phrase currently in existence, the court found that the policy at issue became effective in August 2006 and ended in June 2007. The court concluded that by the ordinary meaning of the plain language, the policy at issue was not currently in existence in May 2010, when the statute was enacted.
The court explained why C.R.S. § 13-20-808 did not apply to policy at issue, stating that statutes in general are presumed to be prospective. Only clear legislative intent must appear from the statute to overcome the presumption of prospective effect. The court found no clear legislative intent in the language of the statute, pointing out specifically the “currently in existence” language, that would overcome the presumption and demonstrate retrospective application was intended.
In sum, the court found that the counterclaims in the underlying complaint contained no allegations of property damage, which fell under the policy definitions or took place before the policy was cancelled in June 2007. The court granted AmFam’s motion for summary judgment, concluding that there was no issue of material fact as to both the lack of duty to defend and the duty to indemnify owed by AmFam to TCD, regarding the counterclaims in the Underlying Action.

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