City of Lakewood v. Safety National Casualty Corp

COLORADO COURT OF APPEALS 2017COA29
Court of Appeals No. 15CA2039
Jefferson County District Court No. 14CV32279
Honorable Christopher J. Munch, Judge
City of Lakewood, Colorado,
Plaintiff-Appellant and Cross-Appellee,
v.
Safety National Casualty Corporation,
Defendant-Appellee and Cross-Appellant.
JUDGMENT AFFIRMED
Division VII
Opinion by JUDGE HARRIS
Lichtenstein and Richman, JJ., concur
Announced March 9, 2017
Sherman & Howard, L.L.C., Christopher R. Mosley, Jennifer Kirk Morris,
Denver, Colorado, for Plaintiff-Appellant and Cross-Appellee
Treece Alfrey Musat P.C., Paul E. Collins, Carol L. Thomson, Denver, Colorado,
for Defendant-Appellee and Cross-Appellant
¶1 The City of Lakewood (City) has an insurance policy that
covers losses arising from the workers’ compensation or employers’
liability laws of any state on account of bodily injury to an
employee.
¶2 After a City police officer was killed by friendly fire, his widow
filed a lawsuit under 42 U.S.C. § 1983 (2012), alleging that the City
and various fellow officers had violated the deceased officer’s rights
under the Federal Constitution. The City sought indemnification
for its own defense costs and those of the officers named in the
lawsuit, which the City has an independent statutory duty to cover.
The insurance company, Safety National Casualty Corporation,
denied coverage.
¶3 The district court concluded that a § 1983 claim does not arise
under an employer liability law of any state and granted summary
judgment for the insurance company. We agree. And while the
district court did not reach the separate question of whether the
officers’ defense costs are covered by the policy, we conclude that
they are not. Accordingly, we affirm the summary judgment in
favor of the insurance company.
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I. Background
¶4 The insurance company issued a “Specific Excess Workers’
Compensation and Employers’ Liability Insurance Agreement” to
the City. The policy indemnified the City, as an employer, for “Loss
sustained by the EMPLOYER because of liability imposed upon the
EMPLOYER by the Workers’ Compensation or Employers’ Liability
Laws of” Colorado or other states, “on account of bodily injury by
accident” to “Employees of the EMPLOYER” engaged in job-related
activities.
¶5 “Loss” included two categories of reimbursable costs. First,
the City could recoup from the insurance company any “actual
payments, less recoveries, legally made by the EMPLOYER to
Employees and their dependents in satisfaction of: (a) statutory
benefits, (b) settlements of suits and claims, and (c) awards and
judgments.” Second, the City could recoup its “Claim Expenses,”
which is defined as the City’s own litigation expenses.
¶6 During the term of the policy, one of the City’s police officers
was accidentally shot and killed by a fellow officer while both were
on duty. The slain officer’s widow later filed a lawsuit under 42
U.S.C. § 1983, alleging that the fellow officer, two of his supervising
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officers, and the City had violated her husband’s federal
constitutional rights by subjecting him to the unreasonable use of
deadly force.
¶7 The City sought indemnification under the policy for the costs
of its own defense and the defense of the individual officers. When
the insurance company denied the claim, the City filed a
declaratory judgment action.
¶8 On cross-motions for summary judgment, the district court
reasoned that § 1983 did not qualify as an “employers’ liability law”
of the State of Colorado or any other state, and therefore it
concluded that the policy did not cover the City’s losses incurred in
connection with its defense of the lawsuit. The court did not
address the City’s separate claim that it suffered additional losses
because of liability imposed by sections 24-10-110 and 29-5-111,
C.R.S. 2016, which require the City to cover defense costs for its
peace officers.
II. Discussion
¶9 On appeal, the City contends that the district court erred in
granting summary judgment to the insurance company because the
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policy unambiguously covers all defense costs incurred by the City
in connection with the § 1983 lawsuit.
A. Standard of Review and Principles of Interpretation
¶ 10 We review a trial court’s decision granting summary judgment
de novo. Oasis Legal Fin. Grp., LLC v. Coffman, 2015 CO 63, ¶ 30.
Summary judgment is appropriate only if the pleadings and
supporting documents demonstrate no genuine issue of material
fact and the moving party is entitled to judgment as a matter of law.
C.R.C.P. 56(c); Laughman v. Girtakovskis, 2015 COA 143, ¶ 8. The
interpretation of an insurance policy presents a question of law
and, therefore, is appropriate for summary judgment. Mt. Hawley
Ins. Co. v. Casson Duncan Constr., Inc., 2016 COA 164, ¶ 3.
¶ 11 An insurance policy is “merely a contract that courts should
interpret in line with well-settled principles of contract
interpretation.” Cyprus Amax Minerals Co. v. Lexington Ins. Co., 74
P.3d 294, 299 (Colo. 2003). Accordingly, words should be given
their plain and ordinary meaning, unless contrary intent is
evidenced in the policy. Id.; see also Chacon v. Am. Family Mut. Ins.
Co., 788 P.2d 748, 750 (Colo. 1990). Provisions of the policy should
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be read as a whole, rather than in isolation. Simon v. Shelter Gen.
Ins. Co., 842 P.2d 236, 239 (Colo. 1992).
B. Reimbursement of the City’s Own Costs of Defense
¶ 12 There is no dispute that the City has suffered a loss as defined
by the policy. A “Loss” for purposes of coverage includes the City’s
“Claim Expenses,” defined as its own costs of defense. The question
is whether the loss is a result of liability imposed on the City by
“Employers’ Liability Laws” of Colorado or “other State(s).”
¶ 13 The term “Employers’ Liability Laws” is not defined in the
policy. But courts and commentators generally agree that an
employer liability policy is designed to cover an employer’s liability
to employees for work-related injuries that do not fall within the
exclusive remedy provisions of workers’ compensation statutes.
See, e.g., TKK USA, Inc. v. Safety Nat’l Cas. Corp., 727 F.3d 782,
791 (7th Cir. 2013) (Employer liability insurance policies “fill ‘gaps
in workers’ compensation law that sometimes allow an employee to
sue his employer in tort, bypassing the limits on workers’
compensation relief.’” (quoting Hayes Lemmerz Int’l, Inc. v. Ace Am.
Ins. Co., 619 F.3d 777, 779 (7th Cir. 2010))); Devine v. Great Divide
Ins. Co., 350 P.3d 782, 786 (Alaska 2015) (stating that employers’
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liability insurance provides coverage for claims that do not come
within workers’ compensation statutes); 7B John Appleman,
Insurance Law and Practice § 4571, at 2 (Walter F. Berdal ed., 1979)
(“[W]orkers’ compensation is routinely written in combination with
an employer’s liability policy to provide protection for those
situations where [workers’] compensation may not apply and thus
avoid a gap in protection because employee claims subject to
workers’ compensation law are generally excluded in other types of
liability policies.”).
¶ 14 The City argues that the § 1983 municipal liability claim must
be covered by the employers’ liability portion of the policy because it
is a claim based on work-related injuries that falls outside the
ambit of the workers’ compensation laws. But this overstates the
scope of the coverage under the policy.
¶ 15 An “employers’ liability law” cannot mean any statutory or
common law claim that might subject the employer to liability
because of an employee’s bodily injury. If the insurance company
had intended to provide such broad coverage, it would not have
restricted coverage to claims arising under workers’ compensation
or employers’ liability laws; it would simply have agreed to
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reimburse the City for any losses it became obligated to pay on
account of bodily injury by accident to an employee. The City’s
construction reads any limitation out of the contract, a result we
cannot endorse. In construing a contract, we must give effect to all
of its words and provisions so that none are rendered meaningless.
Copper Mountain, Inc. v. Indus. Sys., Inc., 208 P.3d 692, 697 (Colo.
2009).
¶ 16 But if not all claims for employees’ injuries fall within the term
“employers’ liability laws,” which claims does the policy cover?
Applying the pertinent law, we conclude that employers’ liability
laws are workers’ compensation-type claims: they include employee
injury statutes that have displaced common law claims —
occupational disease laws, for example — as well as employer
liability-type common law tort claims that might fall outside the
relevant statutes. See TKK, 727 F.3d at 788 (rejecting insurer’s
argument that “Employers’ Liability Laws” included only statutes
that displace the common law, and reading the term to include
common law claims); Erie Ins. Prop. & Cas. Co. v. Stage Show Pizza,
JTS, Inc., 553 S.E.2d 257, 262 (W. Va. 2001) (finding employers’
liability policy covers an “action for common law damages” that is
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not barred by workers’ compensation laws). By the policy’s plain
terms, though, the common law claims must arise under the laws of
Colorado or “other State(s).”
¶ 17 Thus, the City’s claim for reimbursement of its costs incurred
in defending the § 1983 lawsuit is covered only if § 1983 qualifies as
a state “employers’ liability law,” meaning it is either a state statute
that displaces an employee’s common law claims for workplace
injuries, or it constitutes a state common law claim related to, but
falling outside, a workers’ compensation scheme. We conclude that
it is neither.
¶ 18 Section 1983 is not a workers’ injury statute that displaces
common law claims with a new cause of action. Indeed, the statute
is not itself the source of any substantive rights, Espinoza v. O’Dell,
633 P.2d 455, 460 (Colo. 1981); rather, it serves as a statutory
vehicle to provide remedies for the deprivation of rights granted by
the Federal Constitution or by other federal laws. Mosher v. City of
Lakewood, 807 P.2d 1235, 1238 (Colo. App. 1991).
¶ 19 Nor could § 1983 be construed as a “common law” claim. The
statute allows a plaintiff to vindicate rights conferred under the
Federal Constitution and federal statutes, not under the common
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law. Assertion of a common law claim “is not only not required, it is
not sufficient to state a claim under § 1983.” Meier v. McCoy, 119
P.3d 519, 526 (Colo. App. 2004).
¶ 20 In any event, as the City acknowledges, § 1983 is not a law of
Colorado or any other state. Still, it insists that fact is not an
obstacle to coverage because federal laws are included in the
policy’s definition of “state” laws. We disagree.
¶ 21 Under the policy, “State” means “any state, territory, or
possession of the United States of America and the District of
Columbia.” The City says that because the United States territories
and the District of Columbia fall under the exclusive jurisdiction of
the federal government, see U.S. Const. art. I, § 8, cl. 17 (Congress
has exclusive jurisdiction over District of Columbia); U.S. Const.
art. IV, § 3, cl. 2 (Congress has exclusive jurisdiction over United
States territories), these entities are governed exclusively by federal
law and, therefore, their inclusion in the definition of “State”
demonstrates that “state” law encompasses federal law. The
argument stumbles at the second step.
¶ 22 True, Congress has jurisdiction over the District of Columbia
and all United States territories, but the United States Code is not
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the exclusive law that applies. Puerto Rico, for example, has its
own constitution and its own civil and criminal code. See Calero-
Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 671 (1974).
Included within its code is a workers’ compensation statute. See
P.R. Laws Ann. tit. 11, §§ 1-42 (2016) (Compensation System for
Work-Related Accidents Act); see also D.C. Code §§ 32-1501
to -1545 (2016) (workers’ compensation). Thus, we interpret the
inclusion of the District of Columbia and United States territories
within the definition of “States” as an acknowledgment that, for
purposes of workers’ compensation and employers’ liability laws,
those entities function essentially as independent states.
¶ 23 Moreover, had the insurance company intended to cover
claims arising under federal law, it is unlikely that it would have
expressed that intent by reference to the District of Columbia or
United States territories. More likely, the policy would simply say
that coverage is provided for loss sustained by an employer because
of liability imposed by workers’ compensation or employers’ liability
laws of Colorado, any other state, or the United States. See Flores-
Rosales v. United States, Nos. EP-08-CV-98-KC & EP-06-CR-1717-
KC, 2009 WL 1783703, at *2 (W.D. Tex. June 3, 2009) (“The term
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‘laws of the United States’ unambiguously means federal
laws . . . .”); see also Grand Lodge A. O. U. W. of Okla. v. Hopkins, 52
P.2d 4, 12 (Okla. 1935) (“If appellant intended to reduce the term of
extended insurance on account of loans to the insured, it would
have been an easy matter to have so provided in the policy; and the
inference from its failure to do so is that it did not so intend.”).1
We therefore conclude that the City’s defense costs, which
were sustained because of liability imposed as a result of the
widow’s § 1983 claim, did not arise from a state workers’
compensation or employers’ liability law and were not covered by
the policy.
1 The City’s argument that it had a reasonable expectation of
coverage is based on the same argument that the policy purported
to cover federal claims. For the reasons explained above, we
disagree that an ordinary insured would have construed the term
“Laws of [Colorado], or other State(s)” to mean federal law.
Accordingly, the doctrine of reasonable expectations does not apply
to extend coverage under the policy to the City’s litigation costs.
See Bailey v. Lincoln Gen. Ins. Co., 255 P.3d 1039, 1054 (Colo.
2011) (stating that under doctrine of reasonable expectations, even
if policy language is not technically ambiguous, it may be construed
in favor of coverage where the insured would reasonably believe
that claim is covered, but doctrine does not expand coverage on a
“general equitable basis” (quoting Johnson v. Farm Bureau Mut. Ins.
Co., 533 N.W.2d 203, 206 (Iowa 1995))).
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C. Reimbursement of the Officers’ Defense Costs
¶ 24 Next, the City contends it is entitled to reimbursement for
amounts it paid to cover the fellow officers’ defense costs. The
district court did not address this claim, but we may decide the
issue without a remand because the scope of coverage presents a
question of law subject to de novo review in any case. See Bd. of
Cty. Comm’rs v. Colo. Oil & Gas Conservation Comm’n, 81 P.3d
1119, 1124 (Colo. App. 2003).
¶ 25 Again, coverage turns on whether the City has suffered a
defined loss that resulted from liability arising under a state
employers’ liability law.
¶ 26 Under the Colorado Governmental Immunity Act, section
24-10-110, a municipality is liable for the costs of defense of any of
its employees where the claim against the employee arises out of
injuries sustained from an act of that employee conducted during
the course and scope of his employment. In addition, section
29-5-111 requires a municipality to provide a defense for its peace
officers to any civil action alleging a tort committed within the scope
of their employment.
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¶ 27 Even if sections 24-10-110 and 29-5-111 qualify as employers’
liability laws — an issue we do not decide — the City must have
suffered a “loss” under the policy because of liability imposed by
those statutes. The City says the indemnification payments to the
fellow officers named in the widow’s § 1983 lawsuit qualify as a
“loss” because those amounts constitute “actual payments . . . to
Employees . . . in satisfaction of . . . statutory benefits.” We are not
persuaded.
¶ 28 As an initial matter, if the policy was intended to cover
third-party indemnification claims, it would likely have included
express language to that effect. See, e.g., Clackamas Cty. v.
Midwest Emp’rs Cas. Co., No. 07-CV-780-PK, 2009 WL 4916364, at
*2 (D. Or. Dec. 14, 2009) (holding policy provided coverage to
employer for defense costs paid to employees in connection with
§ 1983 lawsuit where policy expressly covered “[d]amages for which
[the county is] liable to a third party by reason of a claim or suit
against [the county] by that third party to recover the damages
claimed against such third party as a result of injury to [the
county’s] employee”); see also Cyprus, 74 P.3d at 299 (in construing
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an insurance policy, courts may not add provisions to extend
coverage beyond those contracted for).
¶ 29 In the absence of an actual third-party indemnification
provision, the City attempts to shoehorn its indemnification
payments into the definition of “loss,” but the resulting construction
is counterintuitive and at odds with the plain language and obvious
intent of the loss provision. Under the policy, “Loss” is defined as
follows:
(1) “Loss” – shall mean actual payments, less
recoveries, legally made by the EMPLOYER to
Employees and their dependents in
satisfaction of: (a) statutory benefits, (b)
settlements of suits and claims, and (c) awards
and judgments. Loss shall also include Claim
Expenses, paid by the Employer, as defined in
Paragraph (2) of this Section. The term Loss
shall not include the items specifically
excluded by Paragraph (3) of this Section.
(2) “Claim Expenses” – shall mean court
costs . . . and the reasonable allocated costs of
investigation, adjustment, defense, and
appeal . . . of claims, suits or proceedings
brought against the EMPLOYER under the
Workers’ Compensation or Employers’ Liability
Laws of [Colorado] or other State(s) . . . .
Under the City’s reading of paragraph (1), “Loss” includes any
payments made by the employer to any of its employees in
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connection with an employers’ liability law, so long as the payment
relates to some employee’s accidental injury. We reject that broad
construction.
¶ 30 The policy provides the following definition of “Employee”:
[A]s respects liability imposed upon the
EMPLOYER by the Workers’ Compensation
Law of any State, the word Employee shall
mean any person performing work which
renders the EMPLOYER liable under the
Workers’ Compensation Law of [Colorado],
which is the State of the injuries or
occupational disease sustained by such
person.
¶ 31 Under a narrow reading, this definition indicates that an
“Employee” includes only persons performing work for which the
employer is liable under the workers’ compensation law of Colorado,
and not other employers’ liability laws, as those laws are not
referenced in the definition. Thus, the City’s liability to the fellow
officers, which does not arise under workers’ compensation laws of
Colorado, is not covered.
¶ 32 But even under a broader reading, the definition makes clear
that the term “Employee” refers to the injured employee, not to an
employee potentially responsible for the injury. The policy defines
“Employee” with respect to claims arising under workers’
15
compensation laws, and does not mention employers’ liability laws.
If we apply the same definition of “Employee” to liability imposed
under closely related employers’ liability laws, cf. Sullivan v. Indus.
Claim Appeals Office, 22 P.3d 535, 538 (Colo. App. 2000)
(“[D]efinitions of words used elsewhere in the same statute furnish
authoritative evidence of legislative intent.”), the fellow officers still
do not qualify as “Employees.” An “Employee” is the “person” who
has “sustained” the “injuries or occupational disease.”
¶ 33 Moreover, only this definition of “Employee” gives effect to the
phrase “less recoveries.” The policy limits reimbursable loss to
“actual payments, less recoveries,” made by the employer to the
employee in satisfaction of statutory benefits. We read the
“recovery” contemplated by this provision as a reference to the
requirement that a workers’ compensation claimant who recovers
from a third-party tortfeasor must reimburse the employer or its
insurer for any benefits paid. See Jorgensen v. Colo. Comp. Ins.
Auth., 967 P.2d 172, 173 (Colo. App. 1998), aff’d, 992 P.2d 1156
(Colo. 2000). If loss includes payments to non-injured employees,
we are left to wonder about the meaning of the term “recoveries.”
16
¶ 34 Finally, an interpretation that calls for the insurance company
to reimburse the City for payments made to any of its employees
under various indemnification statutes would transform a workers’
compensation-employers’ liability policy into a third-party
indemnification policy. We must avoid a construction that
contradicts the clear intent of the policy to cover only workers’
injury claims. See Atmel Corp. v. Vitesse Semiconductor Corp., 30
P.3d 789, 792 (Colo. App. 2001) (“A contract must always be
interpreted in light of the intentions of the contracting parties.”),
abrogated on other grounds by Ingold v. AIMCO/Bluffs, L.L.C.
Apartments, 159 P.3d 116 (Colo. 2007).
¶ 35 Thus, we conclude that “loss” means payments made by the
City to the injured employee and his or her dependents. Under this
definition, the City’s indemnification payments to the officers
named in the lawsuit do not qualify as “losses” under the policy,
and the City is not entitled to reimbursement from the insurance
company.
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III. Conclusion
¶ 36 The judgment is affirmed.2
JUDGE LICHTENSTEIN and JUDGE RICHMAN concur.
2In light of our disposition, we need not address the insurance
company’s claim asserted on cross-appeal.
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