West American Insurance v. Giuseppe's Depot Restaurant Corp.

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
SEP 27 2004
FOR THE TENTH CIRCUIT
PATRICK FISHER
Clerk
WEST AMERICAN INSURANCE
COMPANY,
Plaintiff-Appellee-
Cross-Appellant,
v. Nos. 03-1488 & 03-1505
(D.C. No. 01-MK-1188 (MJW))
GIUSEPPE’S DEPOT RESTAURANT (D. Colo.)
CORPORATION, doing business as
Giuseppe’s Old Depot Restaurant;
NATIONWIDE AGRIBUSINESS
INSURANCE COMPANY, doing
business as Farmland Insurance;
ACORN PETROLEUM, INC., doing
business as Ochs Brothers,
Defendants-Appellants-
Cross-Appellees.
ORDER AND JUDGMENT *
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
Before ANDERSON and BALDOCK , Circuit Judges, and MARTEN , ** District
Judge. ***
In this diversity suit, Defendants Giuseppe’s Depot Restaurant
Corporation, Nationwide Agribusiness Insurance Company, and Acorn
Petroleum, Inc. (hereinafter Giuseppe’s) appeal from a declaratory judgment,
entered following a bench trial, in favor of Plaintiff West American Insurance
Company. The district court ruled that, although a West American insurance
policy covering Giuseppe’s tenant liability on its leased premises was ambiguous,
the fire insurance policy limit was $250,000 based on the parties’ intent at the
time of execution. On appeal, Giuseppe’s argues the court applied the wrong
legal standard in construing the policy. According to Giuseppe, once the court
concluded the policy was ambiguous as to the amount of coverage, Colorado law
required the court to construe the policy against West American to require fire
coverage for the highest general liability limit in the policy. On cross-appeal,
West American argues the court erred in finding the policy was ambiguous as
to the $250,000 policy limit.
**
The Honorable J. Thomas Marten, District Judge, United States District
Court for the District of Kansas, sitting by designation.
***
After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument.
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Our jurisdiction arises under 28 U.S.C. § 1291. When, as here, the relevant
facts are undisputed, we review the district court’s interpretation of an insurance
contract de novo. Fed. Ins. Co. v. Tri-State Ins. Co. , 157 F.3d 800, 802 (10th
Cir. 1998). In exercising its diversity jurisdiction, the district court appropriately
applied the substantive law of Colorado. See Blackhawk-Central City Sanitation
Dist. v. Am. Guar. & Liab. Ins. Co. , 214 F.3d 1183, 1188 (10th Cir. 2000). We
do the same. Applying the appropriate standard, we conclude the district court
properly construed the insurance policy under Colorado law and also properly
received the undisputed extrinsic evidence of the parties’ intent.
Under Colorado law,
[a]n insurance policy is merely a contract that courts should interpret
in line with well-settled principles of contract interpretation. In
undertaking the interpretation of an insurance contract, courts should
be wary of rewriting provisions, and should give the words contained
in the contract their plain and ordinary meaning, unless contrary
intent is evidenced in the policy. Courts should read the provisions
of the policy as a whole, rather than reading them in isolation.
Courts may neither add provisions to extend coverage beyond that
contracted for, nor delete them to limit coverage. However, because
of the unique nature of insurance contracts and the relationship
between the insurer and insured, courts do construe ambiguous
provisions against the insurer and in favor of providing coverage to
the insured.
Cyprus Amax Minerals Co. v. Lexington Ins. Co. , 74 P.3d 294, 299 (Colo. 2003)
(internal citations omitted). Insurance contracts “must be construed to carry
out the intent of the parties. Whenever possible, the parties’ intent must be
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ascertained from the policy language alone.” Bengtson v. USAA Prop. & Cas.
Ins. , 3 P.3d 1233, 1235 (Colo. Ct. App. 2000); Allstate Ins. Co. v. Starke, 797
P.2d 14, 17-18 (Colo. 1990) (accord). But if the policy is ambiguous, “[e]xtrinsic
evidence may assist the trial court in determining whether and to what extent
actual liability . . . is covered by an existing policy.” Cyprus Amax Minerals
Co. , 74 P.3d at 301-02.
Giuseppe’s implicitly argues that, when a policy is ambiguous, the
parties’ actual intent is irrelevant. And it asserts, without citing adequate
authority, a court must always construe an ambiguous insurance contract
“to provide the most amount of coverage available” without receiving evidence
of actual intent. We disagree. 1
Although Colorado courts construe an ambiguous
insurance policy in favor of coverage, they “do so only to protect the reasonable
expectations of the insured at the time the insured purchased the policy.”
Bengtson , 3 P.3d at 1237 (citing Public Serv. Co. v. Wallis & Cos. , 986 P.2d
924 (Colo. 1999)). Based upon its uncontested findings, the district court
properly construed the policy and held Giuseppe’s reasonable expectation
at the time it purchased the policy was to receive tenant liability coverage
1
We agree with the district court, of course, that when an insurance company
seeks to totally avoid coverage through a standard exclusion and uses ambiguous
language to attempt to do so, the ambiguity is construed in favor of coverage. See
Black-Hawk Central City Sanitation Dist. , 214 F.3d at 1191.
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of $250,000 for fire damage in exchange for payment of an $89 yearly premium.
In so holding, the district court properly found the policy’s terms ambiguous
despite West American’s assertion to the contrary.
We have carefully reviewed the parties’ briefs, the record on appeal, and
the terms of the subject policy. We affirm the judgment of the district court for
substantially the reasons set forth in its thorough findings and conclusions, set
forth in open court on October 17, 2003.
AFFIRMED.
Entered for the Court
Bobby R. Baldock
Circuit Judge
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