The stupid arguments that lawyers will make to try to "help" their clients (and enrich themselves) are limitless. Here is a really hilarious argument that lawyers tried to make that somehow explosions caused a building collapse and not a mudslide during the ferocious September 2013 floods in Colorado.
In Paros Properties v. Colorado Casualty, the Owner’s property was demolished by a mudslide. The owner claimed the Building was destroyed not by the mudslide itself, but by a resulting explosion, as there was a loud noise accompanying the collapse. The District court granted the insurer, Colorado Casualty, summary judgment. The Tenth Circuit affirmed, even though it ruled that the notice of removal was too late. But because the district court correctly ruled on the merits and the jurisdictional requirements were satisfied at that time, the judgment below was affirmed, rather than burden the state court and the parties by requiring relitigation.
As to the policy coverage, it was apparently undisputed that the building was demolished in a landslide / mudslide, and that these causes were excluded under the policy. Water was also an excluded cause. Because the water exclusion was not limited to surface water, it included the water in this case. There was an “explosion” exception to the exclusions for water or mudslide:
But if any of the above . . . results in fire, explosion or sprinkler leakage, we will pay for the loss or damage caused by that fire, explosion or sprinkler leakage (if sprinkler leakage is a Covered Cause of Loss).
As noted, the Owner argued that the mudslide “caus[ed] the Building to violently and suddenly burst apart with a loud boom,” that is to say, caused the building to explode, thus bringing the damage within the explosion exception to the water exclusion. The Tenth Circuit wasn’t convinced, and disagreed that “demolition by an external cascade of water, mud, and debris is an explosion under the Policy.” To accept the Owner’s interpretation would virtually eliminate the exclusion. The Court gave examples of explosions and non-explosions.
PUBLISH
UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT
_________________________________
PAROS PROPERTIES LLC,
Plaintiff - Appellant,
v.
COLORADO CASUALTY INSURANCE
COMPANY; OHIO SECURITY
INSURANCE COMPANY,
Defendants - Appellees.
No. 15-1369
_________________________________
Appeal from the United States District Court
for the District of Colorado
(D.C. No. 1:14-CV-01190-MSK-NYW)
_________________________________
Mark D. Changaris (Kathleen T. Alt and George V. Berg, Jr., with him on the brief),
Berg Hill Greenleaf & Ruscitti, LLP, Boulder, Colorado, for Plaintiff-Appellant.
Brian J. Spano (Lyndsay K. Arundel, with him on the brief), Lewis Roca Rothgerber
LLP, Denver, Colorado, for Defendants-Appellees.
_________________________________
Before TYMKOVICH, Chief Judge, HARTZ, and MORITZ, Circuit Judges.
_________________________________
HARTZ, Circuit Judge.
_________________________________
I. INTRODUCTION
A mudslide destroyed a commercial building (the Building) in Boulder, Colorado,
owned by Paros Properties LLC (the Owner) and insured under a policy (the Policy) issued by Colorado Casualty Insurance Company (the Insurer). The Owner filed an insurance claim but the Insurer denied payment because damage from mudslides is excluded from policy coverage. The Owner then filed a state-court suit seeking payment under the Policy and damages for bad-faith breach of the insurance contract. It argued that the mudslide caused the building to explode, bringing the incident within the scope of an explosion exception to the Policy’s mudslide exclusion. The Insurer removed the
action to federal court, which granted summary judgment to the Insurer. On appeal the Owner argues (1) that the district court lacked subject-matter jurisdiction because the Insurer’s removal from state court was untimely and (2) that the district court erred on the merits in holding that there was no coverage. We have jurisdiction under 28 U.S.C. § 1291. We hold that the notice of removal was too late. But because the district court correctly ruled on the merits and the jurisdictional requirements were satisfied at that time, we affirm the judgment below rather than burden the state court and the parties by requiring relitigation.
II. BACKGROUND
Torrential rainfall hit Boulder in September 2013. On the night of September 12 a violent flow of water, mud, and debris thundered down a hillside into the Building, causing extensive damage. The Owner submitted an insurance claim but the Insurer denied it after a brief inspection. It explained in a letter: “The inspection revealed that there was a Mudslide that caused the damage to your buildings. Damages caused by Mudslides or Mudflows are specifically excluded under your policy.” Aplt. App., Vol. 2 at 268.
The Owner retained counsel to challenge the denial. Counsel hired an engineer,
who inspected the Building on October 15, 2013, and (after a site inspection a year later) issued a report on his findings on November 3, 2014. According to the report, “The debris laden flow impacted the south elevation of the structure, causing a sudden reaction of the wall structure.” Report of Edward L. Fronapfel, Supp. Aplee. App., Vol. 1 at 65. The impact caused the property to “split into two separate structures along a north-south wall line. The eastern portion laterally displaced to the northeast, while the western portion laterally displaced to the northwest. The roof structure collapsed where the building separation occurred due to the sudden loss of the bearing walls.” Id. at 73. The
Owner demolished the building on October 23, 2013.
On October 24, 2013, counsel for the Owner sent a letter to the Insurer claiming
wrongful denial of coverage. It stated that the “force of the mudslide caused [the Owner’s] building, literally, to explode,” Aplt. App., Vol. 4 at 631, and that the resultant damage was therefore compensable under the explosion exception to the mudslide exclusion in the Policy. It also accused the Insurer of failing to conduct a full and reasonable investigation of the Owner’s claim before denying coverage and, somewhat oddly given the building’s demolition, requested that the Insurer “complete its investigation into the facts and circumstances surrounding the loss to the . . . Building.” Id. at 634. On November 14, the Insurer, which had not been advised of the demolition, informed the Owner that it would continue to investigate the claim and had scheduled an engineer to inspect the site the next morning. When the engineer arrived, he saw that the
Building had been demolished.
On January 29, 2014, the Owner’s attorney sent an email to the Insurer with
“further explanation of the amounts of the losses suffered by our client.” Aplt. App., Vol. 4 at 625. The email indicated that the Building loss exceeded $1.1 million. (The policy limit was $907,600.) The record contains no indication that the Insurer responded to this email.
On February 26, 2014, the Owner filed its suit in Colorado state court. The
complaint alleged “catastrophic damage to the Property and its contents” and claimed damages relating to cleanup, reconstruction, and loss of income and use. Complaint, Aplt. App., Vol. 1 at 21 ¶ 19. It did not quantify the damages other than to say that “[t]he amount in dispute is more than $15,000.” Id. at 20 ¶ 6. It also referenced, but did not attach, correspondence sent “[o]n or about January 30, 2014.” Id. at 23 ¶ 31. On appeal the Owner claims that this was a reference to its January 29 email tallying losses exceeding $1.1 million.
On April 23, 2014, in its initial damages disclosures under Colorado Rule of Civil
Procedure 26(a)(1)(C), the Owner claimed to be “in the process of calculating specific damage amounts” and listed the amount of all damages as “TBD.” Aplt. App., Vol. 1 at 30. Two days later, the Owner served its first supplemental disclosures, enumerating damages exceeding $1.3 million. Id. at 32–33. Three days after that, the Insurer removed the case to the United States District Court for the District of Colorado. The Owner moved that court to remand, but the court denied the motion and later granted summary judgment to the Insurer.
IV. POLICY COVERAGE
Turning to the merits, we agree that the Owner failed to raise a genuine issue of
material fact that the damage to the Building is covered by the Policy. The critical policy provision is the “Water Exclusion Endorsement,” which excludes from coverage any damage caused by the following water-based sources:
1. Flood, surface water, waves (including tidal wave and tsunami),
tides, tidal water, overflow of any body of water, or spray from any of
these, all whether or not driven by wind (including storm surge);
2. Mudslide or mudflow;
3. Water that backs up or overflows or is otherwise discharged from a
sewer, drain, sump, sump pump or related equipment;
4. Water under the ground surface pressing on, or flowing or seeping
through:
a. Foundations, walls, floors or paved surfaces;
b. Basements, whether paved or not; or
c. Doors, windows or other openings; or
5. Waterborne material carried or otherwise moved by any of the water
referred to in Paragraph 1., 3., or 4., or material carried or otherwise
moved by mudslide or mudflow.
This exclusion applies regardless of whether any of the above, in
Paragraphs 1. through 5., is caused by an act of nature or is otherwise
caused.
Supp. Aplee. Appx., Vol. 8 at 555. There is, however, an exception to this exclusion for damage from explosions:
But if any of the above, in Paragraphs 1. through 5., results in fire, explosion or sprinkler leakage, we will pay for the loss or damage caused by that fire, explosion or sprinkler leakage (if sprinkler leakage is a Covered Cause of Loss).
Id. In short, the Policy does not cover damage caused by water, but does cover damage caused by an explosion caused by water.
Although the Insurer has the burden of establishing that the Owner’s loss fell
within the exclusion, see Colorado Intergovernmental Risk Sharing Agency v. Northfield Ins. Co., 207 P.3d 839, 842 (Colo. App. 2008), the Owner does not dispute that the damage was caused by a mudslide. But it makes two arguments why it is still covered:
(1) the damage to the Building was not caused by surface water and is therefore not within the water-exclusion provision; (2) the Building was destroyed not by the mudslide itself, but by a resulting explosion. We are not persuaded.
A. Surface Water
The Owner’s surface-water argument is easily resolved. The Owner relies on
Heller v. Fire Insurance Exchange, a Division of Farmers Insurance Group, 800 P.2d 1006, 1007 (Colo. 1990), in which runoffs of melted snow damaged a mountain residence in Vail, Colorado. The insurance policy excluded loss caused by “flood, surface water, waves, tidal water, overflow of a body of water, or spray from any of these, whether driven by wind or not.” Id. at 1008 n.2. The insurer denied coverage on the ground that surface water had caused the damage. See id. at 1008. The Colorado Supreme Court ruled for the plaintiffs. It defined surface water in part as water that “follows no defined course or channel.” Id. at 1009. But in that case the “path of the water had been diverted
. . . by three parallel trenches . . . . fifteen to twenty feet long, three feet wide, six inches deep, and lined with plastic sheets, rocks and tree limbs.” Id. at 1007. The court reasoned that “the runoff lost its character as surface water when it was diverted by the trenches and therefore was not within the surface water exclusion.” Id. at 1009.
The Owner argues that, as in Heller, the water here lost its character as surface
water because it “was diverted by man-made parking lots, roadways, drainpipes, and culverts on Flagstaff Mountain uphill from the Building.” Aplt. Br. at 57. This diversion seems less dramatic than the one in Heller, but the factual distinctions are of no consequence because the terms of the policies are different. In Heller the relevant exclusion was for surface water. See Heller, 800 P.2d at 1008. The exclusion here encompasses “surface water,” but it also includes “mudslide or mudflow.” Supp. Aplee. App., Vol. 8 at 555. The Owner concedes the damage to have been caused by “an avalanche of mud, rocks, and debris . . . [that] careened into the Building.” Aplt. Br. at 2.
The Owner does not, and could not, make any argument that the avalanche was not a mudslide. And under the Policy it makes no difference whether any water causing the avalanche had been diverted by manmade features; mudslide damage is excluded whether the mudslide “is caused by an act of nature or is otherwise caused.” Supp. Aplee. App.,Vol. 8 at 555.
B. Explosion
As for the Owner’s second argument, the facts do matter. The Owner contends
that the mudslide “caus[ed] the Building to violently and suddenly burst apart with a loud boom,” that is to say, caused the building to explode, thus bringing the damage within the explosion exception to the water exclusion. Aplt. Br. at 2. We disagree that demolition by an external cascade of water, mud, and debris is an explosion under the Policy.
“In interpreting a contract, we seek to give effect to the intent and reasonable
expectations of the parties.” Thompson v. Maryland Cas. Co., 84 P.3d 496, 501 (Colo. 2004) (en banc). “Accordingly, unless the parties intend otherwise, terms in an insurance policy should be assigned their plain and ordinary meaning.” Id. To comport with public policy and principles of fairness, we construe ambiguous terms in an insurance policy against the insurer. See id. at 501–02. We also “read the provisions of the policy as a whole, rather than reading them in isolation.” Cyprus Amax Minerals Co. v. Lexington Ins. Co., 74 P.3d 294, 299 (Colo. 2003) (en banc); see Sec. Ins. Co. of Hartford v. Houser, 552 P.2d 308, 310 (Colo. 1976) (en banc) (interpreting an insurance-policy
clause based on the purpose of the clause within the policy).
The Policy itself does not define the term explosion. But that does not mean that
the term must be construed to encompass all possible meanings, even if found in the dictionary. Context matters. We would be reluctant, for example, to construe policy language to include figurative meanings. See Rhinelander v. Ins. Co. of Pennsylvania, 8 U.S. 29, 44 (1807) (“Commercial contracts have but little connection with figurative language.”). Although a football player may “explode” off the line of scrimmage, we would not construe the exception to the exclusion to include damage to a wall from someone (even someone who is 6’6” tall and weighs 330 pounds) fleeing a flash flood.
Nor does it make sense to construe the term explosion in a way that would undermine the exclusion to which it is an exception. The Owner urges us to find an explosion any time an external impact transfers sufficient kinetic energy to a structure to destroy it. But the exclusion includes tidal waves, tsunamis, and mudslides, which all typically produce extreme forces that can smash anything in their paths; to adopt the Owner’s conception would be to read those exclusions out of the Policy.
What makes most sense in the present context is the classical notion of an
explosion, as from a bomb or leaking gas. Such an explosion involves a buildup of internal pressure and a sudden bursting outward in all available directions. The exception would apply, for example, if a mudslide damaged a gas pipe, creating a leak of gas that was ignited and exploded.
Our understanding of the term is consistent with that of other courts construing “explosion” in an insurance policy. See Pre-Cast Concrete Prods., Inc. v. Home Ins. Co., 417 F.2d 1323, 1328 (7th Cir. 1969) (“[A]n explosion occurs when the
pressure inside the container exceeds the strength of the container and results in a sudden release of the pressure.”); Jersey Ins. Co. of N.Y. v. Heffron, 242 F.2d 136, 139 (4th Cir. 1957) (finding an explosion where “the roof, falling intact like a huge piston … gradually built a compression of air . . . great enough to burst the first story windows”); Commercial Union Fire Ins. Co. v. Bank of Ga., 197 F.2d 455, 457 (5th Cir. 1952) (In a bursting-fire-hydrant case, “the bursting [was] caused by excessive pressure, and the pressure [was] caused by pent-up energy.”); Bower v. Aetna Ins. Co., 54 F. Supp. 897, 898 (N.D. Tex. 1944) (“The application of a force from within the radiators which the
radiators, or the pipes, could not resist, and burst, or exploded is apparently what happened.”); Sperling v. Allstate Indemnity Company, 944 A.2d, 210, 217 (Vt. 2007) (“In the absence of the release of energy through an ignitable substance, decisions require a buildup of internal pressure preceding the rupture in order to define the event as an explosion.”).
To convince us that the term explosion includes causes not driven by internal
pressure, the Owner points to Stone Container Corp. v. Hartford Steam Boiler Inspection & Ins. Co., 165 F.3d 1157, 1160 (7th Cir. 1999), which states in dictum that a watermelon explodes when shot through with a bullet. But that statement does not help the Owner. The court was asked to limit the term explosion to an event caused by “combustion or some other chemical reaction.” Id. at 1159. It declined, explaining that to limit explosion in that way would improperly exclude from the term’s scope an atomic bomb or “volcanic explosions, as well as the ‘explosion’ of a tire caused by a blowout,
the explosion of a melon caused by a bullet . . . .” Id. at 1160. This comment reflects a (seemingly correct) belief that the melon explodes due to some source other than combustion or chemical reaction. It does not suggest that the source is something other than a buildup of internal pressure. And that is, in fact, the case, as far as we can discern:
a bullet entering a watermelon compresses the fluid within it and creates a hydrostatic shock wave through the fluid that presses in all directions against the rind until it bursts.
See “Hydrostatic shock,” available at https://en.wikipedia.org/wiki/Hydrostatic_shock (last visited August 2, 2016); “Why do watermelons explode,” available at http://bit.ly/1qC0OfW (last visited August 2, 2016).
Given our understanding of the policy language, we must affirm the district court. The Owner does argue briefly that a buildup of internal pressure did damage the building.
Drawing an analogy to the popping of an overfilled balloon, the Owner suggests “that mud, water, and debris may have filled up the Building to the point of failure, at which time the walls burst outward in a catastrophic and sudden explosion.” Aplt. Br. at 55.
The problem for the Owner is that there is no evidence to support this argument. The Owner’s own engineer found that the north-traveling mudslide displaced the building’s walls upon impact, not after filling the building with mud. See Fronapfel Report, Supp. Aplee. App., Vol. 1 at 65 (“The debris laden flow impacted the south elevation of the structure, causing a sudden reaction of the wall structure . . . .”).6 The walls moved laterally to the north, not outward in all directions. And the roof did not burst outward as
from an explosion, but rather “collapsed.” Id. at 73.
V. CONCLUSION
We AFFIRM the district court’s orders denying the Owner’s motion to remand
and granting summary judgment to the Insurer. Our affirmance moots the Owner’s other arguments on appeal.
6 The expert who prepared the report testified at his deposition as follows:
Q. There’s no evidence of any internal gases or internal pressures that
caused the damage to the building, is there?
. . .
A. When we’re talking about internal pressures to the loss of the bearing,
potentially, yes. If we’re talking about like a pressure vessel, I don’t
believe so. We’re talking pressure differentials, but we’re not talking
internal pressure increase like blowing up a balloon. I didn’t see that. The
walls didn’t shift all outward in one blow. I believe they moved in one
direction.
Deposition of Edward Fronapfel, Aplt. App., Vol. 19 at 2297.