National Interstate Insurance v. National Helium

FILED
United States Court of Appeals
Tenth Circuit
PUBLISH
May 13, 2014
UNITED STATES COURT OF APPEALS
Elisabeth A. Shumaker
Clerk of Court
TENTH CIRCUIT
HIGBY CRANE SERVICE, LLC;
NATIONAL INTERSTATE
INSURANCE COMPANY,
Plaintiffs - Appellees,
v. No. 13-3001
NATIONAL HELIUM, LLC, a Delaware
limited liability company; DCP
MIDSTREAM, LP, a Delaware limited
partnership,
Defendants - Appellants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
(D.C. No. 6:10-CV-01334-JAR-GLR)
Lee Thompson, Thompson Law Firm, LLC, Wichita, Kansas, for Defendants -
Appellants.
Tracy A. Cole (G. Andrew Marino with her on the brief), Gilliland & Hayes, LLC,
Wichita, Kansas, for Plaintiffs - Appellee s.
Before LUCERO, HARTZ, and GORSUCH, Circuit Judges.
HARTZ, Circuit Judge.
Plaintiff Higby Crane Service, LLC (Higby) entered into a Contract (the Contract)
with Defendant DCP Midstream, LP (DCP)1 that covered crane work to be done at the
gas processing plant of DCP’s wholly owned subsidiary National Helium, LLC (we will
refer to DCP and National Helium collectively as DCP). A fire negligently started by
DCP damaged Higby’s crane. The other Plaintiff, National Interstate Insurance Co.
(National), had issued Higby a commercial inland marine (CIM) policy covering direct
physical loss to certain property. National paid Higby under the policy and Plaintiffs
then sued DCP for the loss. DCP counterclaimed that Higby had breached the Contract
by failing to obtain a commercial general liability (CGL) policy that would have
indemnified DCP for its negligence and therefore Higby should bear the loss from the
damage to the crane. The United States District Court for the District of Kansas granted
summary judgment to Plaintiffs, and DCP appeals. Exercising jurisdiction under
28 U.S.C. § 1291, we reverse and remand for further proceedings to determine whether
the required CGL policy would have protected DCP from liability.
I. BACKGROUND
Under the Contract, which governed various service agreements between the
1
The named parties to the Contract were Higby and Duke Energy Field Services, LP,
which changed its name to DCP Midstream, LP after it executed the Contract.
2
parties, Higby provided crane and other services for DCP at the National Helium gas-
processing plant. Unfortunately, during the night of April 19‒20, 2008, a fire at the plant
severely damaged Higby’s crane, requiring repairs costing more than $250,000. After
National paid Higby for part of the loss under a CIM policy, Plaintiffs sued DCP in
Kansas state court for the repair costs. The claim alleged that “in the course of operating
the National Helium plant, [DCP] negligently and/or in violation of industry standard of
care, applicable rules, regulations and statutes released or vented various gases in such a
manner that a vapor cloud formed and ignited resulting in damage to [the] crane.” Aplt.
App. at 208. The case was removed to federal court under diversity jurisdiction. DCP
admitted negligence but counterclaimed against Higby, alleging that it had breached the
Contract by failing to obtain required insurance.
Paragraph 9.1 of the Contract required Higby to obtain various kinds of liability
insurance, including a CGL policy:
Throughout the term of this Agreement [Higby] shall carry and pay for . . .
Commercial General Liability Insurance covering liabilities for death and
personal injury and liabilities for loss of or damage to property with
combined single limit of not less than $3,000,000 per occurrence. This
insurance must cover all operations of [Higby] required to fulfill this
Agreement.
3
Id. at 71. Paragraph 9.2 required the CGL policy to list DCP as an additional insured:2
“The insurance policies described above shall include [DCP], its affiliates and
coventurers, and their directors, officers, and employees as additional assureds. All
insurance required hereunder and provided by [Higby] shall be primary coverage.” Id. at
72. Paragraph 9.3 required the policies to waive subrogation rights against DCP.3
DCP moved for summary judgment. It argued that the Contract waived any rights
of Higby or National to seek recovery from DCP. Plaintiffs filed a cross-motion for
2
The terms assured and insured are generally interchangeable in the insurance context.
See Dauphin Cnty. Bar Ass’n v. Mazzacaro, 351 A.2d 229, 231 (Pa. 1976) (“The term
‘assured’ is generally considered to be synonymous with the term ‘insured,’ . . . .);
Black’s Law Dictionary 879 (9th ed. 2009) (definition of insured, stating, “Also termed
assured”).
3
Paragraph 9.3 states in full:
The insurance policies described above shall, in addition be so written or
endorsed to provide that the insurer shall assign and relinquish unto [DCP]
(i) any right of recovery which the insurer may have or acquire against
[DCP], its affiliates or coventurers, or their directors, officers, or employees
for payments made or to be made under such policies, and (ii) any lien or
right of subrogation which the insurer may have or acquire for payments
made or to be made to any person who asserts a claim against [DCP], its
affiliates or coventurers or their directors, officers, or employees. The
assignment shall be written and is intended to permit [DCP] to obtain an
offset or credit against any claim filed or prosecuted against [DCP], its
affiliates or coventurers, or any of their officers, directors, or employees by
any person or entity to or for whom the insurer pays monies or other
benefits. Nothing herein shall limit or affect [DCP]’s rights and coverage
as an additional assured under such insurance policies.
Aplt. App. at 72.
4
summary judgment asserting that the Contract did not require Higby to waive the right of
subrogation under a CIM policy. Of particular importance to this appeal, DCP responded
to the cross-motion by alleging that Higby had breached the Contract by failing to obtain
a CGL policy and that because of the breach, Higby assumed the risk of loss and cannot
collect from DCP. Plaintiffs did not produce a CGL policy4 but contended that the
Contract required only “coverage for [Higby’s] liability arising from its operations” and
“Higby ha[d] no liability for the fire.” Id. at 154 (bolding omitted).
The district court granted Plaintiffs’ cross-motion for summary judgment and
denied DCP’s motion for summary judgment. It ruled that the Contract required
Plaintiffs to obtain only a liability policy covering claims brought by third parties and that
because the CIM policy was not required by the Contract, “the subrogation requirement[]
d[id] not apply to the CIM policy.” Id. at 165. Further, said the court, the contractual
requirement that DCP be listed as an additional insured did not help DCP because the
Contract required coverage only for damages caused by Higby’s operations, not DCP’s.
Finally, assuming that Higby breached the Contract by failing to obtain a CGL policy, the
court held that this was inconsequential because the loss was covered by a policy (the
CIM policy) not required by the Contract.
4
At oral argument Plaintiffs asserted that Higby actually obtained the required CGL
policy, but they did not raise this point in the district court or in their answer brief in this
court, and there is no record support for the assertion.
5
DCP appealed. Although its opening brief suggests that it is challenging only the
denial of its summary-judgment motion, the parties clarified at oral argument that the
issue before us is the propriety of the district court’s grant of summary judgment against
DCP.
II. DISCUSSION
“We review the district court’s grant of summary judgment de novo, applying the
same standards that the district court should have applied.” Merrifield v. Bd. of Cnty.
Comm’rs, 654 F.3d 1073, 1077 (10th Cir. 2011) (internal quotation marks omitted).
Summary judgment shall be granted “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). On review, “[w]e examine the record and all reasonable inferences that
might be drawn from it in the light most favorable to the non-moving party.” Merrifield,
654 F.3d at 1077 (internal quotation marks omitted). The Contract provides that it should
be interpreted under Colorado law and the parties agree that we should apply Colorado
law. Summary judgment on a contract dispute should be granted if the contractual
language is unambiguous. See Gomez v. Am. Elec. Power Serv. Corp., 726 F.2d 649, 651
(10th Cir. 1984). The language is ambiguous “if it is fairly susceptible to more than one
interpretation.” E. Ridge of Fort Collins, LLC v. Larimer & Weld Irrigation Co., 109
P.3d 969, 974 (Colo. 2005) (internal quotation marks omitted).
6
Typical CGL policies broadly protect an insured business from liability for all
bodily injury and property damage resulting from accidents and then list exclusions from
that coverage. See Hoang v. Assurance Co. of Am., 149 P.3d 798, 802 (Colo. 2007).
DCP argues that if Higby had obtained the CGL policy required by the Contract, the
policy would have indemnified DCP for its negligence in damaging the crane. It would
then follow that Higby could not successfully sue DCP because under Colorado law a
“party who agrees to procure the insurance and fails to do so assumes the position of the
insurer and, thus, the risk of loss.” Richmond v. Grabowski, 781 P.2d 192, 194 (Colo.
App. 1989). And if Higby could not recover against DCP for DCP’s negligence, then
neither could National because “the subrogated insurer [has] no greater rights than the
insured.” United Fire Grp. ex rel. Metamorphosis Salon v. Powers Elec., Inc., 240 P.3d
569, 573 (Colo. App. 2010) (internal quotation marks omitted).
Plaintiffs respond by asserting that the CGL policy required by the Contract would
not have covered DCP’s liability for the damage to the crane. They advance two
arguments in support of their assertion: (1) the policy would not cover negligence of
DCP that injures Higby because the CGL policy was only to cover claims from third
parties—that is, parties other than Higby and DCP, and (2) the policy would not cover the
loss because the loss was not caused by “Higby’s actions in performing its work,” Aplee.
Br. at 13. We are not persuaded. As we proceed to explain, the Contract is ambiguous
regarding what specific coverage the CGL policy would have to provide. Perhaps the
policy would not cover DCP’s negligence in this case; perhaps it would. Additional
7
evidence concerning the parties’ understanding of the CGL requirement may show that
the contemplated policy would not have provided coverage, but case law suggests that
CGL policies issued in similar circumstances may well have provided coverage here.
To begin with, we note the imprecision of the Contract’s description of the
required CGL policy. Paragraph 9.1 states: “Throughout the term of this Agreement
[Higby] shall carry and pay for . . . Commercial General Liability Insurance covering . . .
liabilities for loss of or damage to property . . . . This insurance must cover all operations
of [Higby] required to fulfill this Agreement.” Aplt. App. at 71. And ¶ 9.2 provides:
“The insurance policies described above shall include [DCP], its affiliates and
coventurers, and their directors, officers, and employees as additional assureds. All
insurance required hereunder and provided by [Higby] shall be primary coverage.” Id. at
72. What does it mean to make DCP an additional insured under a policy that “must
cover all operations of [Higby] required to fulfill this Agreement”? Clearly the liability
must relate to Higby’s operations, but in what way?
One clue may be found in common CGL policies. Absent other evidence of
intent, one can assume that the required CGL policy would have typical provisions. An
important source for standard language is the Insurance Services Office, Inc. (ISO). The
ISO has been described by the Supreme Court as “an association of approximately 1400
domestic property and casualty insurers, . . . [which] is the almost exclusive source of
support services in this country for CGL insurance. [It] develops standard policy forms
and files or lodges them with each State’s insurance regulators; most CGL insurance
8
written in the United States is written on these forms.” Hartford Fire Ins. Co. v.
California, 509 U.S. 764, 772 (1993) (citation omitted). Although the ISO has at least
one form with alternative language, in 2008 (when the crane was damaged) most insurers
apparently used an additional-insured endorsement that extended coverage to liability
“arising out of the named insured’s operations.” Jeffrey W. Stempel, Insurance
Interpretation: Nevada Supreme Court Adds Its Voice to the Emerging Chorus of Giving
Broad Construction to Commonly Used “Additional Insured” Endorsements, 16 Nev.
Law 31, 33 (July 2008) (internal quotation marks omitted). Thus, one possible
reasonable interpretation of the contractual requirement is that Higby was to procure a
CGL policy that covered DCP’s liability “arising out of [Higby’s] operations.” Indeed,
Plaintiffs used “arising from” language in district court, contending that the Contract
required only “coverage for [Higby’s] liability arising from its operations.” Aplt. App. at
154 (bolding omitted).
If we then look at court decisions interpreting CGL coverage with this additional-
insured language, we see that such coverage could well encompass DCP’s liability to
Higby. A particularly informative and instructive decision of the Southern District of
New York probably suffices by itself to show the possibility (a possibility sufficient to
defeat Plaintiffs’ summary-judgment motion) that the CGL policy contemplated by the
Contract would have protected DCP. In Liberty Mutual Fire Insurance Co. v. E.E. Cruz
& Co., Inc., 475 F. Supp. 2d 400, 402–03 (S.D.N.Y. 2007), as here, the additional insured
sought coverage for its liability for damage to the named insured’s property at the work
9
site. The City of New York had contracted with TAP Electrical Contracting Service, Inc.
(TAP) to provide electrical systems for a project to install 15 large sewage retention
tanks. The City and others negligently caused millions of gallons of sewage to flood the
project site, damaging TAP’s installed electrical components as well as its equipment and
uninstalled components stored at the site. See id. at 403. The contract between TAP and
the City required TAP to obtain CGL insurance that named the City as an additional
insured and protected the City from “claims for property damage . . . which may arise
from operations under [the] contract, whether such operations are performed by [TAP] or
anyone directly or indirectly employed by [TAP].” Id. at 404. TAP obtained a CGL
policy from Liberty Mutual that included an additional-insured endorsement providing:
Who is insured is amended to include as an insured any person or
organization for whom you are performing operations when you and such
person or organization have agreed in writing in a contract or agreement
that such person or organization be added as an additional insured on your
policy. Such person or organization is an additional insured only with
respect to liability arising out of your ongoing operations performed for
that insured.
Id. (emphasis added) (internal quotation marks omitted). Liberty Mutual paid TAP for its
losses (coincidentally, TAP had also obtained property-loss policies from Liberty
Mutual) and then sued the City as TAP’s subrogee. See id. at 403.
The legal issue relevant to the case before us is whether the CGL policy covered
the City’s liability to TAP. See id. at 407–12. The insurer raised two arguments against
coverage that parallel Plaintiffs’ arguments here. First, it argued that the policy was only
to protect the City against claims by third parties, not TAP. See id. at 407. TAP (just as
10
Higby here) was the named insured and the City (just as DCP here) was an additional
insured. The court rejected the argument, explaining that “agreements requiring that a
party procure a policy protecting another party from liability and the resulting additional
insured endorsements in commercial general liability policies are not construed to
preclude coverage for the additional insured against claims of negligence by the named
insured against the additional insured.” Id. at 408. Second, the insurer argued that
“damage sustained to TAP’s equipment and installed and uninstalled electrical
components at the Project sites [did not arise] from the performance of TAP’s ongoing
operations, under the terms of the TAP CGL Policy.” Id. It asserted that “the mere
presence of property and materials [like a crane parked at the National Helium plant]
does not fall within the policy’s definition of ‘operations,’ which instead requires some
‘action’ by TAP.” Id. at 407 (internal quotation marks omitted). The court rejected this
argument as well, noting that arising out of is construed broadly under New York law “in
general liability insurance contracts.” Id. at 409. The court said that it did not matter that
TAP was not actively working when the injury occurred because the term ongoing
operations in the additional-insured endorsement means “operations under the Contract
occurring prior to the completion of the work contracted for.” Id. at 411. The mere
“presence of TAP’s equipment and installed and uninstalled electrical components at the
job site,” said the court, “is part of the performance of TAP’s obligation” under the
contract. Id. The court explained that it was immaterial that “the occurrence was
allegedly unrelated to TAP’s work under the Contract” because New York law provides
11
coverage even when the cause of the harm “had nothing to do with the named insured’s
work for the additional insured.” Id. (brackets and internal quotation marks omitted).
Perhaps we could ignore Liberty Mutual if it were contrary to the great weight of
authority. But it is not. First, it is not an isolated ruling in holding that additional-insured
coverage under a CGL policy extends beyond protection against liability to third parties.
In Capstone Building Corp. v. American Motorists Insurance Co., 67 A.3d 961, 968–70
(Conn. 2013), the University of Connecticut procured a CGL policy to cover itself, the
general contractor, and others for construction on a student housing complex. The
general contractor claimed coverage under the policy when the university sued it for
negligent work. See id. at 971–72. Although exclusions in the policy greatly limited the
contractor’s coverage, see id. at 982–86, the court saw “no basis in the language of the
[CGL] policy for limiting coverage to liability for harm to third parties. . . . [T]he
definition of ‘property damage’ in the commercial general liability policy does not
differentiate between damage to the contractor’s work and damage to other property.” Id.
at 976 (brackets and internal quotation marks omitted). And in Feldman v.
Transcontinental Insurance Co., No. 01-95-00362-CV, 1996 WL 15619, *4 n.4 (Tex. Ct.
App. Jan. 18, 1996), aff’d in part, rev’d in part on other grounds sub nom. CU Lloyd’s of
Tex. v. Feldman, 977 S.W.2d 568 (Texas 1998), the court wrote:
CU Lloyd’s . . . argues . . . that claims by the named insured against an
additional insured are not covered, and thus no duty to defend was even
triggered. CU Lloyd’s cites no authority for its position. In the absence of
an “insured versus insured” exclusion clause, we have not found any court
that has interpreted the “additional insured officer and director” language in
12
a standard commercial general liability policy to exclude coverage for an
additional insured when sued by the named insured.
The rule extending liability coverage to claims by the named insured has also been
widely adopted for automobile liability policies. See 7A Steven Plitt et al., Couch on
Insurance § 107:15 (3d ed. 2005) (“Absent any exclusionary language to the contrary, a
named insured under an automobile liability policy may maintain a direct action to
recover from the insurer for injuries caused by the negligent operation of the insured car
by an omnibus insured.”); Estate of Sodorff v. United S. Assurance Co., 980 F. Supp.
1004, 1007 (W.D. Ark. 1997) (“The majority of authority permits recovery [on the
insurance policy] to the named insured [when named insured is negligently injured by a
permissive driver].”); Broy v. Inland Mut. Ins. Co., 233 S.E.2d 131, 133 (W. Va. 1977)
(similar). We need not worry about whether there is also contrary authority (although
none has been cited to us). The point is only that the language in the Contract is
imprecise enough to include a CGL policy that would cover liability of one insured to
another.
Liberty Mutual also is not an outlier in holding that additional-insured coverage
for liability arising out of an insured’s ongoing operations can encompass harm to the
insured’s equipment passively sitting at the work site, even when caused by conduct
unrelated to the insured’s work. (We recognize that the Contract used the term
operations, not ongoing operations; but, if anything, ongoing operations is narrower than
operations.)
13
The language arising out of has been construed broadly. Couch on Insurance
explains:
The phrase[] [“arising out of” is] generally considered to mean “flowing
from” or “having its origin in.” Accordingly, use of these phrases does not
require a direct proximate causal connection but instead merely requires
some causal relation or connection. Courts have split on where “arising out
of” falls on the causation scheme with some courts finding it equivalent to
“but for” causation and others finding it somewhere between “but for”
causation and proximate causation.
7 Steven Plitt et al., supra § 101:52 (footnotes omitted); see, e.g., McIntosh v. Scottsdale
Ins. Co., 992 F.2d 251, 255 (10th Cir. 1993) (interpreting Kansas law to say that “arising
out of” requires more than but-for causation but less than proximate cause).
Where Colorado law fits on the spectrum is not entirely clear. But some clues
appear in a decision of the Colorado Court of Appeals. In Travelers Property Casualty
Co. v. Farmers Insurance Exchange, 240 P.3d 521, 523 (Colo. App. 2010), the court
addressed coverage under a commercial-liability policy that protected an additional
insured (a shopping center) from “liability that arises out of a commercial tenant’s use of
leased premises.” Id. at 522 (internal quotation marks omitted). The issue was whether
the policy protected the shopping center from liability to someone who had visited the
tenant’s restaurant and then was injured when she slipped on ice in the shopping center’s
parking lot. See id. The court said that coverage “depends on the nexus between the
covered property and the injuries complained of and on whether the injury would not
have occurred ‘but for’ the use of the insured property.” Id. at 523. In particular, “[t]he
party seeking coverage must show that except for the use of the insured property, the
14
accident or incident in question would never have taken place.” Id. at 523–24 (brackets
and internal quotation marks omitted). The court denied coverage, explaining:
Here, customer’s patronage of the restaurant was not integrally related to
her injury at the time of the accident. Her visit to the restaurant did not
expose her to any increased risk of falling in the parking lot. It was not
necessary for her to visit the restaurant in order to come in contact with the
ice hazard. The parties concede that she could have visited another store,
and never visited the restaurant, yet still have walked into the parking lot,
encountered the ice hazard, and fallen. Moreover, customer could have
avoided the ice by taking a different path from the restaurant to her car.
Thus, her visit to tenant’s premises was not the “but-for” cause of injury.
Id. at 524.
We recognize that we cannot infer from a decision denying coverage that in some
other particular situation coverage would be found. But it is significant that the grounds
for denial in Travelers do not apply to the damage to Higby’s crane. The question in
Travelers was whether the restaurant patron was exposed to injury only because she had
visited the restaurant. The answer was no because (1) she could have been exposed to the
danger if she had been attracted to the shopping center by another merchant and (2) she
could have visited the restaurant and not been exposed to the danger. Here, though, the
crane was exposed to the fire because, and only because, it was on the site to perform
work under the Contract. Nothing else would have attracted it to the site; and its work
location was at the point of danger. In our view, Travelers suggests that there was a
sufficient causal relation between Higby’s operations and the fire damage to the crane to
say that the fire damage “arose out of” Higby’s operation.
15
Further, Liberty Mutual is not alone in extending the concept of “operations” to
encompass the positioning of equipment. In FH Martin Construction Co. v. Secura
Insurance Holdings, Inc., No. 289747, 2010 WL 1873087 (Mich. Ct. App. May 11,
2010), the issue was whether an injury resulting from a ladder left in place at a
construction site by a subcontractor arose “out of ongoing operations” of the
subcontractor even though the subcontractor was not using the ladder at the time. The
general contractor, FH Martin Construction Company (FH Martin), had hired the
subcontractor to provide construction services. See id. at *1. The subcontractor’s CGL
policy named FH Martin as an additional insured but “only with respect to liability
arising out of [the subcontractor’s] ongoing operations performed for [FH Martin].” Id.
at *3 (internal quotation marks omitted). The ladder had been used by the subcontractor
but was locked and chained in place while the subcontractor spent several days
performing work inside the building. See id. at *1. A man not employed by the
subcontractor had been hired to pour new sidewalks. See id. Because he needed to move
the ladder to complete his work, he climbed the ladder and cut the chain; the ladder
shifted and he fell. See id.
On appeal “the only issue [was] whether the liability at issue arose out of [the
subcontractor’s] ongoing operations performed for FH Martin.” Id. at *3 (internal
quotation marks omitted). The insurer argued that “there was no evidence that [the
injured man’s] fall arose out of [the subcontractor’s] operations, which must be
distinguished from the provision of equipment.” Id. at *2. The court disagreed. See id.
16
at *4. It explained that the ladder had been placed against the building to facilitate the
subcontractor’s operations and constituted ongoing operations until it completed the work
even though its “operations moved from the roof to the interior of the store.” Id. “[T]he
phrase arising ‘out of your ongoing operations,’” said the court, “plainly encompasses the
placement and securing of the ladder.” Id. One could make a similar comment about
Higby’s crane. See also Colo. Cas. Ins. Co. v. Safety Control Co., Inc., 288 P.3d 764,
773 (Ariz. Ct. App. 2012) (injury caused when automobile collided with concrete barriers
at road construction site arose out of barrier supplier’s ongoing operations even if its
employees were not maneuvering the barriers at the time because supplier was obligated
to remove the barriers after road construction was complete); Duininck Bros., Inc. v.
Howe Precast, Inc., No. 4:06-CV-441, 2008 WL 4372709, at *8 (E.D. Tex. Sept. 19,
2008) (same).
The only case cited by Plaintiffs as supporting a narrower view of the term
operations is Weitz Co., LLC v. Mid-Century Insurance Co., 181 P.3d 309, 313 (Colo.
App. 2007). Weitz cited the dictionary definition of operation as “‘a doing or performing
esp. of action: WORK, DEED.’” Id. at 313 (quoting Webster’s Third New International
Dictionary 1581 (2002)). In the context of that case, however, nothing really turned on
the precise language of the definition. A general contractor was named as an additional
insured on a subcontractor’s CGL policy “but only with respect to liability arising out of
[the subcontractor’s] ongoing operations performed for [the general contractor].” Id. at
311 (emphasis and internal quotation marks omitted). Two years after the subcontractor
17
completed its work, the property owner sued the general contractor for alleged
construction defects. See id. The insurer argued that the policy did not provide coverage
“because the endorsement was limited to ‘ongoing operations’ and, therefore, did not
include coverage for claims arising out of the subcontractor’s completed work or
operations.” Id. (internal quotation marks omitted). The court agreed, stating that “the
term ‘ongoing operations’ used in conjunction with ‘only’ in the endorsement limits the
coverage,” id. at 313, and did not include “completed operations,” id. at 315 (internal
quotation marks omitted). The critical word was ongoing, not operations. Weitz does not
discuss what constitutes operations before the contract has been completed and therefore
has little relevance to our case.
Finally, we decline to address two arguments by Plaintiffs that we must construe
any ambiguity in the Contract against DCP. First, Plaintiffs argue on appeal (although
they did not argue the point in district court) that we must construe any ambiguities in the
Contract against the drafter. Under Colorado law, however, courts should first seek to
derive the parties’ intent from the plain language of the contract, and if this is not
possible, they should then resort to “extrinsic evidence from which [the parties’] intent
may be inferred.” Moland v. Indus. Claim Appeals Office, 111 P.3d 507, 511 (Colo. App.
2004). Only after these methods fail may a court, “as a last resort,” construe ambiguities
against the drafter. Id. We should not rely on this interpretive rule before the parties
have had a chance to put on evidence of their intent. Second, Plaintiffs invoke Colorado
law that an agreement indemnifying a party against its own negligence must be expressed
18
clearly and unequivocally. See Constable v. Northglenn, LLC, 248 P.3d 714, 716 (Colo.
2011). But they cite no authority applying this proposition to additional-insured
provisions in contracts, cf. Exide Corp. v. Millwright Riggers, Inc., 727 N.E.2d 473, 482
(Ind. App. 2000) (rule of strict construction of indemnification agreements does not apply
to agreements to obtain insurance), nor have they addressed whether the rule applies to
this particular contract, see Constable, 248 P.3d at 716 (the rule does not ordinarily apply
to contracts between sophisticated parties of equal bargaining power). We therefore
leave the issue for the district court to resolve in the first instance.
Because Plaintiffs have not met their burden to show that the Contract
unambiguously supports their position, we must reverse the grant of summary judgment
and remand to the district court. On remand the district court is not limited to the
arguments made on appeal when considering whether the CGL policy contemplated by
the Contract would protect DCP against liability to Higby. For example, it may consider
(1) the applicability of Colo. Rev. Stat. Ann. § 13-21-111.5 (West 2007), which voids
some contracts requiring the purchase of insurance, and (2) the observation that “CGL
policies often contain an exclusion for damage to property owned by the insured in order
to prevent the CGL policy from serving as a property insurance policy,” Hoang v.
Assurance Co. of Am., 149 P.3d 798, 802 (Colo. 2007).
III. CONCLUSION
We REVERSE the grant of summary judgment and REMAND for further
proceedings.
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