Insurer Directed to Defend Insured

services, aimco retained an independent contractor to create and manage its objections to the recommendation. additionally, nutmeg filed its own motion for promise to provide insurance. see mgmt. specialists v. northfield ins., 117 p.3d 4 clerk of court purpose on its head by allowing an insurer to use the complaint rule to refuse a establishing that the allegations in the complaint are solely and entirely within the separately and limited its analysis to comparing the allegations individually with undercut an insured's legitimate expectation of a defense. if anything, such an complaint--a broader version of the exception than we apply today. aimco provides these services for properties wholly insured and that give rise to a duty to defend. additionally, the actual practices of the colorado supreme court in duty- defend. id. at 1145. we acknowledged that ordinarily the complaint rule limits at 1088-90. citing concerns an insured would be required to establish facts that duty to defend. see compass, 984 p.2d 615-16. after considering the two and "broker" synonymously). record" on this issue. ctr. for native ecosystems v. cables, 509 f.3d 1310, 1324 finally, nutmeg has argued on appeal that if we reverse the district court's we review the district court's grant of summary judgment de novo, using policy coverage. compass ins. co. v. city of littleton, 984 p.2d 606, 614 (colo. the allegations of the underlying complaint with the relevant provisions of the this same test to determine whether an insurer can ignore facts alleged in parallel "professional services" as defined by the policies, they have not raised this issue reimbursement after the underlying action has been settled. even though there is grant of summary judgment in favor of the insurer based on the district court's elisabeth a. shumaker sufficient information to provide nutmeg with reasonable notice that these suits -16- 73 (see supporting cases cited at 4-71 n. 1 and 4-73 n. 2); see also, e.g., first not have to establish these facts are true. rather, as in this case, the insured in connection with its efforts to provide property and risk management 9 ("nutmeg") issued two professional liability policies to aimco providing to different meanings." id. (internal quotation omitted). attention to the second exclusion, found only in the 2002-2003 policy, which real estate investment advisor, [or] tax fund manage[r]." (aplt. app. at 206.) nutmeg insurance company, "insurance broker," we hold that this exclusion did not excuse nutmeg from its 1 tepe v. rocky mountain hosp. & med. servs., 893 p.2d 1323, 1328 (colo. ct. colorado, and susan bernhardt and j. nicholas mckeever, jr., netzorg mckeever set forth in item 7 of the declarations requiring special learning or intellectual -12- entity for whom [aimco] is legally liable."2 the policies define a "wrongful act" as "any actual or alleged act, error complaint rule requiring an insurer to consider the allegations in parallel judicial mckay, circuit judge. (discussing koncilja v. trinity universal ins. co., 528 p.2d 939, 941 (colo. ct. excluded from coverage any claims "for, based upon, or arising from the reading of the individual complaints in conjunction with the insurance policy aimco was "procuring" and "obtaining" insurance for third parties, thus summary judgment on all claims and, in the alternative, a partial motion for acts" of aimco's independent contractors. however, both policies expressly for a fee, remuneration or other consideration . . . ." (aplt. app. at 189, 210.) services. finally, we think it is significant that colorado's licensing statute gov- of the damages sought from the insured, [it] has a duty to defend even if the ultimately determined nutmeg owed a duty to defend four of the seven lawsuits the insurance policies. the court determined two of the complaints did not allege as with the first purpose advanced by the complaint rule, we think an summary judgment on aimco's claims under the 2000-2002 policy. after examining the complaints taken together, we are satisfied they contained case. for example, in cotter the court considered two underlying tort suits filed aimco brought suit in colorado state court claiming nutmeg breached its several of these suits alleged either aimco's direct insurance administrator." (aple br. at 51.) in support of this interpretation, law. see flannery v. allstate ins. co., 49 f. supp. 2d 1223, 1227 (d. colo. clients alleging a failure to provide or maintain insurance. thus, we conclude, based on its position that none of the complaints alleged "wrongful acts" as avoid a legitimate duty to defend. and two unaffiliated entities improperly added exception precludes coverage because, under the allegations in the complaints, aimco v. nat'l union fire ins. co., no. 01-cv-2018 (d. colo. claims by each complaint separately; instead, the court considered both complaints together moot. retaining their premiums, as well as by using these companies to fraudulently asserted against them would deny the insured the protection afforded by the necessary for an insured to establish facts through discovery or other means; could be compromised). this purpose remains even when an insurer simply app. 1974), in a parenthetical). ambiguous provisions are "construed against the alleged in parallel judicial proceedings. thus, because the colorado supreme that there is no genuine issue as to any material fact and that the movant is this includes services "as a real estate agent/broker, property manager, asset the insured's actual liability is not considered; instead, the duty is based on defense it knows it has a duty to provide simply because certain facts pled in entitled to judgment as a matter of law." fed. r. civ. p. 56(c). colorado law able to escape its defense obligation by ignoring the true facts and relying on rely solely on the allegations contained in the complaint" to dispute the existence any covered conduct and the other five were excluded from coverage under the tion of rights. insurance policy. see hecla, 811 p.2d at 1089. however, throughout the course consideration to "solely the policy and the complaint." id. nevertheless, we held court has not addressed this specific issue, we "must determine what decision the sources available to the insurer at the time the defense is demanded . . . .") establish a duty to defend, and found it could not. compass, 984 p.2d at 615-16. 1999). accepted rule on this issue by those states that have considered it seems to be that, made against property management companies by their clients for a breached during the relevant period aimco did not procure individual insurance of a ponzi scheme by adding unaffiliated companies to the policies and then drafter and in favor of providing coverage." compass, 984 p.2d at 619 (internal allegations in the complaint." windt, supra at 4-74. given this authority, we partial summary judgment on the 2000-2002 policy. we decline to do so here colorado law. mincin v. vail holdings, inc., 308 f.3d 1105, 1108-09 (10th cir. "allegations in the complaint, which if sustained, would impose a liability covered 1991); compass ins. co. v. city of littleton, 984 p.2d 606 (colo. 1999); and "affirmatively expressed coverage through broad promises," limitations on that companies that provided surety bonds guaranteeing the pfas,4 (holding that the better practice on issues raised but not ruled on by the district specific issue raised in this case; namely, whether an insurer, in determining its duty to defend aimco in the underlying lawsuits. (kan. 1993) (stating an insurer determines the existence of a duty to defend by the insured. rather, the insurer must consider such complaints in conjunction to effect or maintain any insurance." (aplt. app. at 221.) colorado courts have duty to defend, can disregard its knowledge of facts outside an individual an exception (1) would not "undercut the purposes" underlying the rule, and (2) was referred to a magistrate judge for consideration. the magistrate judge "might fall within coverage of the policy," hecla, 811 p.2d at 1089. involving a portion of the evidence on which nutmeg's motion relies. ruling on attempting to avoid its duty to defend based on an exclusion "bears the burden of defendant-appellee. judicial proceedings of which it is aware at the time it refuses to defend an based on the allegations contained in the individual complaints. both parties filed considering this purpose in light of the case before us, we conclude that an exception protects an insured's interest. indeed, to hold otherwise would turn this whereby it purchased insurance from a single insurer using all the managed 90 p.3d at 828. in essence the first purpose of the rule is to protect the "peace of insurance program. under his direction, aimco retained and worked with v. hecla, 811 p.2d at 1090). the hecla court explained that requiring insureds to complaint but contained in related complaints and known to the insurer. in hecla -20- allegations of the complaint themselves would not give rise to such a duty." deemed as providing services as an "insurance broker," we note that nutmeg has resulting from aimco's efforts to provide professional services for others for a american family mutual ins. co., 520 f.3d 1139 (10th cir. 2008). remand. evers v. regents of univ. of colo., 509 f.3d 1304, 1310 (10th cir. 2007) cv-7344 (s.d.n.y. claims against aimco filed nov. 22, 2002); lumbermans and restated the court's ruling from hecla that an insurer refusing to defend "must under colorado law, "when an insurer refuses to defend and the insured inapplicable to this case. the underlying complaints allege wrongful acts publish actually support requiring an insurer to consider evidence not contained in any bond." (aplt. app at 221.) the same legal standard applied by the district court. cooperman v. david, 214 complaint. in response, nutmeg argues the colorado supreme court has clearly this case requires us to consider whether, under colorado law, an insurer and adopted by the district court, which we hold to be correct. background contractor. upon receiving notice of these suits, aimco contacted nutmeg to factually-related complaints are not pled in the particular complaint at issue. the by different sets of plaintiffs but involving a common core of operative facts. considered. thus, there will be no prejudice. additionally, even if an insured is policies also extended coverage, under certain circumstances, to the "wrongful allegations contained in the underlying complaint together with the provisions of app. 1994) (internal quotation omitted). in contrast, because an insurer has operative facts." (aplt. app. at 1342.) indeed, the complaints were filed within a forced to litigate whether these facts were known to the insurer, the insured would skill, performed by [aimco] in the ordinary conduct of its profession for others examined each complaint--together with the insurance policies--separately and 1999). in determining the existence of a duty to defend, the court must compare related complaints that it is aware of, but that are outside the complaint directly at (aplt. app. at 189, 210.) references to the parties involved in the other lawsuits and to the same factual the colorado supreme court has issued three principal cases concerning provisions. because we believe that the policies underlying colorado's complaint if at the time an insurer determines whether it has a duty to defend, the insurer is coverage from, respectively, november 20, 2000, to november 20, 2002, and insured by the state. see hecla, 811 p.2d at 1092. finally, in compass the insured's `legitimate expectation of a defense.'" cotter, 90 p.3d at 828 (quoting "examining the allegations in the complaint or petition and considering any facts -6- make a good faith determination of its duty to defend. which entails the selection and procurement of necessary insurance coverage for performance of providing professional services as a real estate agent/broker, especially in light of the fact that aimco specifically negotiated coverage for purposes. the first purpose served by the complaint rule is to "protect[] the resulting from claims . . . as a result of a wrongful act by [aimco] or any quotation omitted). a provision is ambiguous when it "is reasonably susceptible bear the "burden of proving they are entitled to a defense from liability claims or omission in the rendering of or failure to render professional services." (aplt. the colorado supreme court would likely "recognize an exception" because such of claims made for "failure to maintain insurance"). however, this exclusion is item 7 of the declarations states, "professional services: solely in the app. at 189, 210.) "professional services," in turn, is defined as "those services (emphasis and footnote omitted); spivey v. safeco ins. co., 865 p.2d 182, 188 we now turn our consideration to the second requirement from pompa; namely, provided that "[nutmeg] will pay on behalf of [aimco] all sums . . . which all insurance brokers are actually compensated for their services through exception requiring an insurer, in determining its duty, to consider facts alleged in (aptl.app. at 186, 207.) these either erroneous allegations in the complaint or the absence of certain material after examining the complaints, we agree with the magistrate judge's properties to obtain a favorable rate. 8 obtain additional premium financing. other complaints, as well as in nutmeg's own internal memoranda. thus, we are provide its defense under the professional liability policies. nutmeg declined could consider the extrinsic fact of an insured's conviction which was not alleged 5 "[a] person who, for compensation, brings about or negotiates contracts of not been ruled on by the district court we will leave them to the district court on we now turn to the application of this exception in the case before us. it is different cities together rather than separately to determine that an insurer had a -2- the second purpose served by the complaint rule is to prevent an insurer or involvement with the scheme or liability for the actions of aimco's independent for the district of colorado action that would subject it to liability in the underlying action." pompa, 520 left only to consider whether the complaints, when considered together, division filed july 11, 2003). would simply have to show the insurer was aware of alleged facts outside the pleadings, the discovery and disclosure materials on file, and any affidavits show performance of or failure to perform services as an . . . insurance broker." (aplt. determination that four of the complaints included language that "arguably" commissions that are paid by insurers." id. (internal quotation omitted). policies' insurance broker exclusion. upon finding no duty to defend, the district whether an insured, rather than an insurer, could rely on extrinsic facts to in pompa, we addressed whether, under colorado's complaint rule, a court id. at 829-30. similarly, in hecla the court, in its determination of the insurer's p.2d at 1089 n.10. specifically, an insured, in an effort to "establish coverage managed real estate investment trust that provides, for a fee, property could then compromise it in later proceedings, the court held an insurer was -13- the managed properties.1 koclanes & bernhardt llc, denver, colorado, with him on the briefs) for (d.c. no. 06-cv-00508-wdm-mjw) an insurance broker,6 pleadings in the case against the insured, but the allegations do state a claim of its duty. cotter, 90 p.3d at 827. finally, in compass, the court considered cas. co. v. progressive cas. co., 799 p.2d 1113, 1116 (n.m. 1990) (stating the alleged the provision of professional services by aimco as a property manager 6 provide professional services "for others for a fee."8 brokers, allegedly without aimco's knowledge, used aimco's program as part "insurance producer" is a common synonym for "insurance broker." see gleaned from the petition (and other pleadings), from the insured and from other in the underlying complaints that aimco was working as an agent for the insur- cation of the complaint rule. cotter corp. v. am. empire surplus lines ins. co., that aimco may provide as an "insurance broker." nutmeg argues this to determine if there were any allegations giving rise to the duty to defend. see to-defend cases provide further support for the application of an exception in this 7 believe the colorado supreme court would approve of an exception to the insurer cannot introduce extrinsic evidence to avoid its duty to defend, the court policy." hecla mining co. v. n.h. ins. co., 811 p.2d 1083, 1089 (colo. 1991). aware of in parallel complaints that tend to show a duty to defend would not 90 p.3d 814, 828 (colo. 2004). under this rule, a duty to defend arises when the no duty exists. id. at 1089 n.10, 1090. similarly, cotter addressed the same issue coverage must be defined in "clear and explicit terms." hecla, 811 p.2d at 1090 has a duty to defend its insured based on allegations contained in several separate -11- nutmeg cites to the black's law dictionary's definition of an insurance broker as we must now consider whether nutmeg was, nevertheless, excused from (10th cir. 2007). nutmeg also argues it is entitled to summary judgment on -8- several brokers and firms in placing the property and general liability insurance, ance companies or that it received a commission in connection with its insurance proceedings, of which it is aware, arising from a common core of operative facts. agents�are statutorily deemed to be representing the insurers' interest." 7a john covered by its policies. faith breach of an insurance contract, and denied all other pending motions as issue, will not undermine the second purpose. under this exception, it is not -19- underlying complaint "alleges any facts that might fall within the coverage of the mut. cas. co. v. aimco, no. 02�cv-9704 (s.d.n.y. filed dec. 6, 2002); -5- 1996) ("the insurer's defense duty is determined on the basis of information westrm�west risk markets, ltd. v. lumbermans mut. cas. co., no. 02- construed in favor of the insured to provide the broadest possible coverage." however, after reviewing these cases, we conclude the court has not addressed the (aimco), providing a defense based on two exclusions contained in the policies. an insurer definition of insurance producers. c.r.s. � 10-2-105(2)(f) (2009). in light of the state court would make if faced with the same facts and issue." rash v. j.v. before o'brien, mckay, and holmes, circuit judges. liability policy." hecla, 811 p.2d at 1090 n.11. rather, "[b]y purchasing this is particularly so given that this authority, and our decision in pompa, discussion -10- would be supported by sufficient authority. id. at 1147. accordingly, we apply whose operations do not entail solicitation of insurance from the public" from its not only by its initial denial-of-coverage letter (which addressed three of the app. at 197, 221.) in addition, the 2002-2003 policy excludes any claims "for, one of the property exclusions in the insurance policy." cotter, 90 p.3d at 829 (internal quotation pleaded." id. (internal quotation omitted). an insurer seeking to avoid its duty for the foregoing reasons we reverse the district court's grant of complaint that potentially or arguably place a claim within the policy's coverage "insurance administrator." these terms--like the term "insurance broker"--are district court's grant of summary judgment. above-cited authorities and the fact that nutmeg did not define the term court's analysis considered letters, which it analogized to complaints, sent to two no longer a danger of compromising the insured's defense, the complaint rule requirements we previously laid out in pompa and the colorado supreme court's like the insurance broker exclusion, this exclusion does not relieve nutmeg of its ensures that there is no "incentive for insurers to refuse to defend in the hope that hardin llp, chicago, illinois, for defendant-appellee. party complaint against the insured and the original complaint filed against the "[a]lso termed producer"); 7a grund, supra � 43.2 (using "insurance producer" 1 allan d. windt, insurance claims & disputes (5th ed. 2007) � 4:3 at 4-71 to 4- occurrences. that nutmeg was aware these complaints were related is revealed before this court. thus, we adopt the analysis employed by the magistrate judge omitted a portion of the black's law dictionary explanation stating that "almost of this litigation, the parties have disputed whether, under colorado law, a court creating a duty to defend when those facts are not alleged in the underlying for the tenth circuit aimco's partial motion for summary judgment on the issue of the duty to defend year of one another, implicated the same defendants, and often included those facts are ultimately true or false). erning "insurance producers"9 brought to its attention or which it could reasonably discover"); am. gen. fire & andrew m. low of davis graham & stubbs llp, denver, colorado, (thomas l. plaintiff-appellant, no. 08-1150 or insurance administrator, and we note that two of these four complaints were it is aware of and that policy exclusions must be read narrowly, we reverse the manager, loan services and administrator, risk manager, insurance administrator, insurance administrator, real estate investment advisor, tax fund management for the duty to defend: hecla mining co. v. n.h. ins. co., 811 p.2d 1083 (colo. grant of summary judgment we should, in the alternative, grant its motion for 3 fee, not its failure to do so. none of the complaints were brought by aimco's allegations contained in a single complaint in isolation when it is aware multiple not defined in the policies and, in light of colorado's policy of construing -17- cost of defending actions that facially fall within the terms of his policy." cotter, under the policy's terms. pompa, 520 f.3d at 1146. 32, 35-36 (colo. app. 2004) (construing a similar exclusion to exclude coverage although the parties have previously disputed the meaning of tenth circuit cotter, 90 p.2d at 818. in its analysis the court did not consider the allegations in apartment investment and mind that insurance promises" for claims made against an insured possibly falling the colorado supreme court has stated the complaint rule serves two the known but unpleaded factual basis of the claim that brings it arguably within november 20, 2002, to september 1, 2003. in relevant part, these policies court dismissed aimco's remaining claims, including indemnification and bad management services. an essential part of these services is risk management, indeed, "[t]he logic behind this rule is unassailable. an insurer should not be court is to "leav[e] the matter to the district court in the first instance"). aware of "information from which it appears that there might be coverage for any which is potentially or arguably within the policy coverage, or there is some apartment investment and management company ("aimco") is a self- duty to defend, did not differentiate between the allegations contained in a third- [the underlying] litigation will reveal that no duty to defend exists." cotter, 90 omitted). in making this determination, we rely on our decision in pompa v. cotter corp. v. am. empire surplus lines ins. co., 90 p.3d 814 (colo. 2004). basic capital mgmt., inc. v. aimco, no. 03-9530 (tex. 68th jud. dist. complaints arising from a common core of operative facts have been filed against insurers,5 wholly on the allegations contained in the pleadings filed against its insured"). 2 highlands ins. co. v. cananwill, inc., no. mrs-l-1874-03 (n.j. super. ct. law 2002). the district court, like the magistrate judge, examined each complaint duty to defend. nutmeg removed the case to the district court based on diversity. however, in compass there is no indication the insurer was aware of this refuses to defend without bringing a declaratory action and the insured sues for under the policy, might have to produce evidence in the declaratory-judgment rule do not allow an insurer to ignore ongoing parallel judicial proceedings which premium finance agreements ("pfas") aimco used to pay for the policies,3 expressly excludes "[m]anagement associations . . . owned by a subsidiary, properties in which it owns a partial interest, and limited to consideration of the allegations in the underlying complaint in showing id. (claims by first capital against aimco filed sept. 13, 2003). (whether or not, as with consideration of the allegations of the actual complaint, -4- others for a fee." (aplt. app. at 206.) onto aimco's policy.7 providing professional services as a "property manager," "risk manager," and but factually related complaints. specifically, the appellant insured appeals the undisputed the complaints at issue in this case arose from a "common core of instead, these facts are already known to the insurer and should have been the court considered whether an insurer that refused to defend could use facts f.3d 1162, 1164 (10th cir. 2000). summary judgment is appropriate where "the has never addressed whether an insurer can disregard its knowledge of facts from compromising the insured's defense in the underlying suit. see hecla, 811 cananwill, inc. v. aimco, no. mrs-l-3549-02 (n.j. super. ct. law div. insurance as an agent for someone else, but not as an officer, salaried employee, the scope of coverage"); but see st. paul ins. co. v. rahn, 641 s.w.2d 276, 279 neil lloyd (lisa a. brown and david c. scott with him on the briefs), of schiff because it appears that the district court has not ruled on a significant motion (tex. app. 1982) (holding that the insurer can determine its duty to defend "based potentially or arguably allege an "act, error or omission" in providing or failing to analysis in its duty-to-defend cases, we now hold that an insurer cannot view the f.3d at 1146; see also hecla, 811 p.2d at 1090 n.10 (explaining how the defense an insured, while litigating the duty to defend in a declaratory judgment action, stated that in all cases an insurer's duty to defend arises only from the bona fide -7- doubt as to whether a theory of recovery within the policy coverage has been first, we consider the policy provision excluding coverage for any services duty to defend "arises from the allegations on the face of the complaint or from united states court of appeals brings an action for defense costs," the duty to defend is determined by appli- within a year of the scheme's discovery, aimco had been sued as a aimco's indemnity and bad faith claims. however, because these issues have may also consider evidence outside the complaints in making this determination. -15- summary judgment and remand for further proceedings not inconsistent with faces a "heavy burden" of proving that the underlying claim cannot fall within the whether there is sufficient authority to support this approach. the generally insurance, the insured reasonably expects he will not be required to furnish the having considered the first policy exclusion at issue, we now turn our filed sept. 12, 2003). underlying complaints), but also by subsequent denial letters making reference to -3- roberts and bradley a. levin of , roberts levin & patterson, p.c., denver, among the first three complaints denied by nutmeg. as for the other complaints, w. grund et al., colorado practice � 43.2 (2d ed. 2006). there are no allegations e.g., black's law dictionary 206 (8th ed. 2004) (stating that "insurance broker" is united states court of appeals property manager, asset manager, loan services and administrator, risk manager, exception to the complaint rule requiring an insurer to consider facts which it is properties owned by unaffiliated third parties. nutmeg insurance company defendant or counterclaim defendant by: a lender that provided funds through by the policy." id. this duty arises even when it is "not apparent from the as well as arranging financing for those policies. however, at least one of these nat'l union against amico filed oct. 23, 2003). evidence at the time it refused to defend or, as in this case, the relevant facts were having thus considered the purposes underlying colorado's complaint rule, the existence of a duty to defend against a particular claim is a question of complaint rule was never meant to be used by insurers as a shield in order to -9- properties it manages. another of nutmeg's cited sources states that "[insurance] brokers�like specifically, aimco argues, while the colorado supreme court has held that an this opinion. management company [aimco] shall become legally obligated to pay as damages and claims expenses in the underlying complaint but would demonstrate the insurer had no duty to between the insured and the insurer." black's law dictionary 206 (8th ed. 2004). extrinsic to the underlying complaint to avoid its duty to defend. hecla, 811 p.2d -14- governs this action, and we review de novo the district court's interpretation of this motion now would deprive aimco of "a fair opportunity to develop the excuses nutmeg from a duty to defend against claims "arising from the failure to february 2, 2010 plaintiff�appellant. "performing the services of an insurance broker and not a risk manager or filed the insurance policy, except where an insurer provides a defense under a reserva- or licensed agent of an insurance company. the broker acts as an intermediary coverage broadly, could include aimco's procurement of insurance for the filed nov. 13, 2002). however, we believe that nutmeg's interpretation of this exclusion is too broad, appeal from the united states district court additionally, in considering whether aimco's alleged conduct should be p.3d at 828. omitted). "coverage provisions in an insurance contract are to be liberally -18- based upon, or arising from the failure to effect or maintain any insurance or intermediate, ltd., 498 f.3d 1201, 1206 (10th cir. 2007) (internal quotation bank of turley v. fid. & deposit ins. co. of md., 928 p.2d 298, 303-04 (okla. policies for the properties it managed. rather, aimco created its own program, found that similar exclusions can relieve an insurer of its duty-to-defend claims duty to defend.