Sunflower Condominium v. Owners Insurance Company ( 2020 )

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT February 7, 2020
_________________________________
Christopher M. Wolpert
Clerk of Court
SUNFLOWER CONDOMINIUM
ASSOCIATION, INC., a Colorado
nonprofit corporation,
Plaintiff Counter Defendant -
Appellant,
No. 18-1478
v. (D.C. No. 1:16-CV-02946-WJM-NYW)
(D. Colo.)
OWNERS INSURANCE COMPANY,
Defendant Counterclaimant -
Appellee.
_________________________________
ORDER AND JUDGMENT*
_________________________________
Before BRISCOE, LUCERO, and EID, Circuit Judges.
_________________________________
This is an insurance case first brought in state court but then removed to
federal court under diversity jurisdiction, 28 U.S.C. § 1332. Plaintiff Sunflower
Condominium Association (Sunflower) filed this action against Owners Insurance
Company (Owners) claiming that Owners breached a policy of commercial property
coverage and commercial general liability insurance, and also engaged in common
law and statutory bad faith, by failing to fully cover an incident of hail damage that
*
This order and judgment is not binding precedent, except under the doctrines
of law of the case, res judicata, and collateral estoppel. It may be cited, however, for
its persuasive value consistent with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
occurred to Sunflower’s condominium complex. Owners filed a counterclaim
alleging that Sunflower violated the terms of the policy by (a) failing to timely report
the hail damage, and (b) submitting a claim and proof of loss that grossly overstated
the cost of repairing the hail damage. The district court granted summary judgment
in favor of Owners on all of Sunflower’s claims. The case then proceeded to trial on
Owners’ counterclaim, and the jury found in favor of Owners. The district court
entered final judgment in favor of Owners.
Sunflower now appeals, arguing that the district court (1) erroneously
instructed the jury to impute fraudulent intent to Sunflower through the conduct of its
independent contractors, (2) erred in denying Sunflower’s Rule 50 motion for
judgment as a matter of law (JMOL), (3) erred in concluding that the policy afforded
Owners a recoupment remedy, (4) denied Sunflower a fair trial as the result of two
erroneous evidentiary rulings, and (5) erred in granting summary judgment in favor
of Owners on all of Sunflower’s claims. Exercising jurisdiction pursuant to 28
U.S.C. § 1291, we reject all of these arguments and affirm the judgment of the
district court.
I
Factual background
Sunflower is a nonprofit, multi-family homeowners association that is
incorporated under the laws of the State of Colorado. Sunflower oversees twenty-
three separate multi-family condominium buildings containing over 100 individual
housing units, a clubhouse, and six detached garage buildings (collectively the
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Sunflower Property). Sunflower has a board of directors comprised of volunteer
members.
Client Preference Realty & Management, LLC (Client Preference), acting
pursuant to a contract with Sunflower, handled the day-to-day management of the
Sunflower Property. Under the terms of the contract between Sunflower and Client
Preference, Sunflower agreed to pay Client Preference a 4% special projects fee for
projects at the Sunflower Property that cost over $300,000.00.
In 2011, Client Preference assigned employee Denyse Countryman to be the
property manager for the Sunflower Property. Countryman did not maintain an
office on-site at the Sunflower Property, but instead visited the Sunflower Property
approximately three times per month. Countryman regularly conducted property
inspections, but primarily looked for covenant violations during those inspections.
In 2013, Sunflower purchased from Owners an insurance policy (the Policy)
providing commercial property coverage and commercial general liability coverage.
The term of the Policy extended from November 12, 2013, to November 12, 2014.
Owners, prior to issuing the policy, inspected the Sunflower Property to determine its
condition and verify that it was appropriate to insure.
On September 29, 2014, a severe wind and hailstorm damaged portions of the
common areas of the Sunflower Property. In particular, the storm resulted in hail
damage to roofs, gutters, and screens on the condominium and garage structures.1
1
According to the record, the Sunflower Property was previously damaged by
hail storms in June 2009 and June 2012.
3
Countryman was not at the Sunflower Property at the time of the storm and allegedly
has no recollection of the storm. Further, Countryman was allegedly not contacted
after the storm by anyone at Sunflower regarding property damage sustained during
the storm.
In April 2015, Countryman hired a roofing contractor, R3NG, Inc. (R3NG), to
prepare a proposal to fix a leaking roof on one of the individual housing units at the
Sunflower Property. Jason Domecq, the R3NG employee/owner who prepared the
proposal, observed what appeared to be hail damage on the roof and made a note to
that effect in his written proposal, immediately below his detailed descriptions of the
items that needed to be repaired. Domecq stated in his note: “There is evidence of
hail impacts on both the flat and steep roofs and it is recommended that your
insurance company be contacted immediately. You may have a claim.” Restricted
App., Vol. 1 at 192. On April 27, 2015, Countryman forwarded R3NG’s proposal to
every board member via email, with instructions to review and approve the proposal.
Every board member responded to Countryman’s email and approved the proposal.
On September 24, 2015, Countryman was at the Sunflower Property and
observed damage to downspouts and window trims. Countryman contacted Adjusters
International Matrix Business Consulting (Matrix) to inspect the Sunflower Property
and determine the extent and cause of the damages. On October 7, 2015,
Countryman met a Matrix employee, Fred Mahe, at the Sunflower Property for
purposes of conducting an inspection. Mahe concluded that there was significant hail
damage to the Sunflower Property that needed to be repaired.
4
At a board meeting in late October of 2015, Countryman presented the
information she had received from Matrix and received approval from the Board to
hire Matrix and proceed with filing a claim with Owners for the hail damage. On
November 19, 2015, the Board met and executed a written contract with Matrix.
Under the terms of that contract, Matrix was to receive 10% of any amount paid by
Owners to Sunflower.
Countryman in turn hired R3NG to help Matrix establish the scope of the
damage and the amount of the claim to be submitted to Owners. Countryman agreed,
on behalf of Sunflower, to pay R3NG for its work.
Dave Ford, a public adjuster employed by Matrix, worked together with
Domecq from R3NG to prepare a proof of loss for the Sunflower Property. Together,
Ford and Domecq estimated that the cost of repairing the hail damage to the
Sunflower Property was approximately 1.8 million dollars.
On December 20, 2015, Sunflower notified its insurance agent regarding the
damages resulting from the storm. Owners, after learning of the damages, responded
by hiring an independent adjuster named Gary Stevens. Stevens met Ford at the
Sunflower Property and, after examining the Sunflower Property, agreed on the scope
of damage that was sustained by the Sunflower Property.
On May 4, 2016, Ford sent Owners a “Sworn Statement In Proof of Loss” that
included the estimate that was prepared by Ford and Domecq. Sondra Kalcevic, the
board president, signed the statement. The statement alleged that the loss occurred
5
“about the 29th day of September 2014” due to “Wind and Hail.” ECF No. 94, Exh.
M at 5.
After receiving Sunflower’s statement, Owners hired an engineer and a
building consultant to assist in reviewing the statement. The engineer inspected the
Sunflower property and found hail damage to several of the roofs. She was allegedly
unable, however, to determine when the hail damage occurred. More specifically,
she could not differentiate between hail damage from the September 2014 storm and
prior hail storms in 2009 and 2012.
Stevens, the independent adjuster hired by Owners, ultimately concluded that
the replacement cost value of the damage to the Sunflower Property was
$857,233.89, and that the actual cash value was $590,458.91. In August 2016,
Owners made a payment of $515,458.10 to Sunflower in an attempt to resolve the
claim. This payment represented the actual cash value estimated by Stevens, minus
Sunflower’s $75,000 deductible. In April 2017, Owners made an additional payment
to Sunflower in the amount of $92,000.00.
Procedural background
On September 28, 2016, Sunflower filed a complaint against Owners in
Colorado state district court. The first claim for relief alleged that Owners breached
the insurance contract by failing to pay Sunflower for all damages it sustained from
the September 29, 2014 storm. The second claim for relief sought a declaratory
judgment regarding Sunflower’s right to “coverage for the cost of necessary repairs
to [the Sunflower Property] less the applicable deductible.” Aplt. App., Vol. 1 at 54.
6
On December 2, 2016, Owners removed the case to the United States District
Court for the District of Colorado on the basis of diversity of citizenship.
Sunflower amended its complaint three times after removal. The third
amended complaint included the original claims for breach of contract and
declaratory judgment, and included two new claims: statutory bad faith under Colo.
Rev. Stat. §§ 10-3-1115, -1116, and common law insurance bad faith.
Owners, in its answer to the third amended complaint, asserted as a defense
that Sunflower’s claims were “barred in whole or in part as a result of [Sunflower’s]
misrepresentations, false statements, and non-cooperation with Owners.” ECF
No. 66 at 8. This defense relied on provisions of the Policy that precluded coverage
in the event that the insured concealed or misrepresented a material fact or otherwise
committed fraud (hereinafter Fraud Clauses). The first of those Fraud Clauses stated:
“This Coverage Part [i.e., Commercial Property coverage] is void in any case of
fraud by you as it relates to this Coverage Part at any time. It is also void if you or
any other insured, at any time, intentionally conceal or misrepresent a material fact
. . . .” Aplt. App., Vol. 20 at 5700. A related provision likewise stated, in pertinent
part: “We will not pay for any loss or damage in any case of: 1. Concealment or
misrepresentation or a material fact; or 2. Fraud committed by you or any other
insured (‘insured’) at any time and relating to coverage under this policy.” Id.
at 5718. Owners alleged that Sunflower violated the Fraud Clauses by
misrepresenting the date when it first learned of the hail damage to the Property, and
also by misrepresenting the amount needed to repair the damage. Owners also
7
asserted, in pertinent part, a counterclaim against Sunflower for breach of the Fraud
Clauses.
The parties filed cross motions for summary judgment. Sunflower moved for
partial summary judgment with respect to Owners’ concealment, misrepresentation or
fraud defense and Owners’ counterclaims for fraud and recoupment. Sunflower
argued that Owners could not prove that the date Sunflower had alleged it first
discovered the hail damage was false, or that Sunflower intended Owners to take any
specific action as a result of the date of discovery. Sunflower also argued that
Owners could not prove that the R3NG/Ford estimate of damages was a material fact
or that Owners was ignorant of its falsity. Owners, for its part, moved for summary
judgment with respect to all of Sunflower’s claims.
On May 14, 2018, the district court issued a written order addressing both
motions for summary judgment. The district court denied Sunflower’s motion for
summary judgment on Owners’ counterclaims in its entirety. In doing so, the district
court concluded that, as to the alleged untimely reporting of the insurance claims,
Owners’ ignorance of the falsity of Sunflower’s date of discovery was not an element
of Owners’ claim that Sunflower violated the Policy’s Fraud Clauses. The district
court further concluded that the date Sunflower actually discovered the damage was
“‘reasonably relevant’ to [Owners’] investigation, given that it form[ed] the basis of
[Owners’] late notice claim,” and “that ‘reasonable minds could differ’ regarding the
materiality of the misrepresentations.” ECF No. 149 at 10-11. The district court also
concluded that, based upon the evidence before it, “a reasonable jury could find that
8
[Sunflower] knowingly and deliberately misrepresented the date of discovery to
[Owners], implying that [Sunflower] acted with the intent to deceive.” Id. at 11.
As for Owners’ defense and counterclaim that Sunflower knowingly
misrepresented the cost of repairing the damages in its proof of loss, the district court
concluded it was immaterial whether, in fact, Owners attached any importance to
Sunflower’s estimate. Instead, the district court concluded the question was
“whether a reasonable insurance company would attach importance to the matter.”
Id. at 12. The district court concluded that “a reasonable jury could find that a
reasonable insurance company could attach importance to [Sunflower’s] cost of
repair estimate.” Id. The district court rejected as immaterial Sunflower’s argument
that Owners was long wary of the truthfulness of Sunflower’s estimate. And,
ultimately, the district court denied Sunflower’s motion for summary judgment after
concluding that genuine issues of material fact existed that precluded granting
summary judgment on this defense/counterclaim.
As for Owners’ motion for summary judgment, the district court first
concluded that “a reasonably diligent property manager” in Countryman’s position
“would have read the e-mail [from Domecq regarding the hail damage] at the time it
was received,” and that, consequently, Sunflower “was on notice of the damage” at
the time Countryman “received Domecq’s “April 2015 e-mail” and “the prompt
notice provision [of the Policy] was [also] triggered.” Id. at 16. The district court
further concluded “that no reasonable jury could find that [Owners] waived its late
notice defense.” Id. at 17. The district court also concluded that Owners “met its
9
burden to show that it was prejudiced by the delayed notice” from Sunflower. Id.
at 20. The district court thus concluded that “there [wa]s no genuine issue of
material fact that [Sunflower] violated the notice-prejudice rule” and that,
consequently, Owners was entitled to summary judgment in its favor “with respect to
[Sunflower’s] breach of contract claims.” Id. at 21. The district court also concluded
that, because Sunflower’s breach of contract claims failed, Owners was entitled to
summary judgment with respect to Sunflower’s bad faith claims as well.
On October 15, 2018, the case proceeded to trial on Owners’ counterclaim for
breach of the Fraud Clauses. After hearing five days of evidence, the jury found in
favor of Owners on its counterclaim.
Final judgment in the case was entered on November 15, 2018. The judgment
stated, in pertinent part: “judgment is entered in favor of Defendant-Counterclaimant
Owners Insurance Company and against Plaintiff-Counterclaim Defendant Sunflower
Condominium Association, Inc., in the principal amount of $608,409.96 with
prejudgment interest of $105,352.18, for a total of $713,762.14, with post-judgment
interest at the federal statutory rate of 1.52% until paid.” ECF No. 237 at 1.
Sunflower filed a timely notice of appeal.
II
Sunflower raises five issues on appeal. We conclude, as discussed in greater
detail below, that all five issues lack merit. Consequently, we affirm the judgment of
the district court.
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1) Did the district court err in instructing the jury to impute fraudulent
intent to Sunflower through the conduct of R3NG and Domecq?
In its first issue on appeal, Sunflower argues that the district court erred in
instructing the jury to impute fraudulent intent to Sunflower through the conduct of
R3NG and Domecq, both of whom Sunflower refers to as its independent contractors.
Sunflower asserts that “[t]he lynchpin of Owners’ counter-claim [wa]s that Sunflower
breached the contract’s fraud clause by offering what Owners claims was an
intentionally inflated estimate.” Aplt. Br. at 29. As noted, the Policy’s Fraud
Clauses stated, in pertinent part, that the commercial property coverage portion of the
Policy was “void in any case of fraud by you as it relates to this Coverage Part at any
time. It is also void if you or any other insured, at any time, intentionally conceal or
misrepresent a material fact . . . .” Aplt. App., Vol. 20 at 5700. Sunflower argues
that, because this policy language makes no reference to “agents” of the insured, it is
therefore limited to concealments or misrepresentations made directly by Sunflower.
Sunflower argues that “Owners’ entire counter-claim, however, turned on Owners’
argument that Sunflower’s agents fraudulently inflated the Ford/R3NG Estimate.”
Aplt. Br. at 30 (emphasis in original). Sunflower in turn argues that “Owners did not
introduce evidence that anyone at Sunflower, its management, or its own employees
were aware the independent adjuster or roofers had falsely inflated the estimate.” Id.
“Consequently,” Sunflower argues, “Owners insisted upon and received numerous
instructions that the jury should impute the intent of any ‘agent’ appointed to act on
behalf of Sunflower to Sunflower.” Id. “Further,” Sunflower argues, “the court
11
expressly instructed the jury to consider Matrix and Ford the legal agents of
Sunflower and to impute Ford’s state of mind and intent to Sunflower as a matter of
law, regardless of whether Sunflower was actually aware the Ford/R[3]NG Estimate
was intentionally inflated.” Id. “Though the court’s instructions did not expressly
tell the jury to consider R3NG an ‘agent’ of Sunflower,” Sunflower argues “there
were several instructions on agency that allowed the jury to impute the knowledge
and intent of the third-party roofing contractor to Sunflower as well.” Id.
In order to properly address Sunflower’s arguments regarding the instructions,
it is necessary to review the history of the district court proceedings and several
related rulings made by the district court. Owners, in its answer to the Sunflower’s
third amended complaint, asserted, as both an affirmative defense and a
counterclaim, that Sunflower violated the Fraud Clauses of the Policy by knowingly
misrepresenting the costs of repairing the hail damage. Sunflower filed a written
reply to that counterclaim and asserted a number of affirmative defenses, but did not
allege that the Fraud Clauses were limited strictly to actions taken by Sunflower and
its employees, as opposed to its agents.
When Sunflower moved for summary judgment in October of 2017, it
maintained that Owners “ha[d] not paid the full amount of . . . damages” that was
owed to Sunflower under the Policy, and it argued that Owners could not “provide
evidence” to support its counterclaim “that Sunflower . . . committed fraud against
Owners.” ECF No. 93 at 1. More specifically, Sunflower argued that Owners could
not “prove either that the R3NG/Ford estimate [wa]s a material fact, or that Owners
12
was ignorant of its falsity.” Id. at 8. Sunflower asserted in support that Owners
attached no importance to the R3NG estimate, and it further asserted that “Owners
was aware, since before it paid the undisputed payment, that it did not trust the
estimate submitted by Sunflower.” Id. at 9. Nowhere in its summary judgment
motion, however, did Sunflower argue that the Policy’s Fraud Clauses were limited
by their language to actions committed by Sunflower, nor, for that matter, did
Sunflower make any other arguments regarding agency (e.g., that R3NG and Domecq
were independent contractors and not agents of Sunflower).
Approximately four months later, in early March 2018, the parties met with the
magistrate judge to prepare the final pretrial order. Owners asserted in the final
pretrial order, as both a defense and a counterclaim, that Sunflower “all but
encouraged its authorized agents to commit insurance fraud” by submitting a
knowingly inflated proof of loss to Owners. ECF No. 131 at 6. Sunflower, for its
part, asserted that Owners did not rely on, and indeed effectively ignored, the proof
of loss submitted by R3NG and Matrix on Sunflower’s behalf. Nowhere, however,
did Sunflower assert that Owners’ agency theory was precluded by the language of
the Fraud Clauses, nor did Sunflower otherwise assert that there were any pending
issues regarding agency.
On September 17, 2018, approximately one month prior to trial, the parties
filed three sets of proposed jury instructions. Included among Sunflower’s proposed
jury instructions was an instruction defining the term “independent contractor” and
effectively asking the jury to determine whether R3NG and/or Matrix were
13
independent contractors. ECF No. 164 at 10. Nowhere in this proposed instruction
was the term “agent” defined or even mentioned. Likewise, Sunflower’s proposed
verdict form contained no mention of the word agent. And, again, Sunflower made
no mention of the Policy strictly limiting fraudulent conduct to Sunflower alone.
Owners’ set of proposed jury instructions included a number of instructions
that addressed agency. For example, Owners’ proposed instruction I described how
an agency relationship is created and defined the terms agent and principal. ECF
No. 167 at 14. There was also a proposed instruction on the apparent authority of an
agent, another stating that any misrepresentations or omissions made by an agent are
deemed misstatements or omissions of the principal, and, finally, an instruction
stating that Matrix, Ford, Client Preference, Countryman, R3NG, Domecq, and every
board member were agents of Sunflower. Id. at 15–16. Although the caption of
Owners’ proposed instructions stated they were “DISPUTED,” Owners did not
identify Sunflower’s precise objection to the instructions, nor did Sunflower file a
written objection to Owners’ proposed instructions.
Lastly, Owners filed what it described as a set of proposed stipulated jury
instructions. One of those instructions stated that “[a]n agent is acting within the
scope of its authority when the agent is carrying on business for its principal which
the principal has expressly authorized or which is within the incidental, implied, or
apparent authority of the agent.” ECF No. 166 at 4. Others discussed incidental and
implied authority of an agent. Id. at 5. The final stipulated proposed instruction
stated that “[a] principal is considered to know or have notice of information if the
14
principal’s agent, while acting within the scope of the agent’s authority, learns or
receives notice of the information.” Id. at 7.
The case proceeded to trial on October 15, 2018. At the close of Owners’
case-in-chief, Sunflower moved for JMOL, arguing that (a) policyholders may legally
present inaccurate proofs of loss without conscious dishonesty or intent to defraud,
and (b) that Owners’ evidence failed to establish that Sunflower submitted a
knowingly inflated proof of loss. With respect to this latter argument, Sunflower
asserted that Owners presented the testimony of its independent adjuster Gary
Stevens, and that Stevens never talked to Ford or Domecq, the two people who
prepared Sunflower’s proof of loss. Again, however, Sunflower made no mention of
any issues regarding agency. The district court took Sunflower’s motion for JMOL
under advisement.
Sunflower presented the testimony of three witnesses in defense of Owners’
counterclaim: Countryman, Edward Fronapfel, an engineer who was hired by
Sunflower during the litigation to assess the property and determine if the damages
were caused by the September 29, 2014 hail storm, and Domecq. Countryman
conceded on cross-examination that Matrix was speaking for Sunflower when it
submitted the claim for damages to Owners and that Sunflower could not “pass the
buck” by claiming that it did not know of any misrepresentations in the proof of loss.
Aplt. App., Vol. 19 at 4999. She also conceded that, under the terms of the contract
between Sunflower and Client Preference, Client Preference was to receive a “special
projects fee” of 4% of the gross amount of the total cost of repairs to the Sunflower
15
Property, and that she personally would receive 35% of that 4% special projects fee.
Id. at 5001. Domecq, for his part, had no explanation for numerous categories of
damages alleged in the proof of loss and, on several occasions, conceded that certain
charges listed in the proof of loss were unjustified. He also contradicted his
deposition testimony on multiple occasions. Ultimately, and perhaps most damaging
to Sunflower, Domecq conceded that the multiple errors that Owners identified in his
proof of loss could reasonably suggest that the errors were intentional rather than
random. Id. at 5348.
At the close of all the evidence, Sunflower renewed its motion for JMOL and
argued, for the first time ever in the proceedings, that the Policy required that any
concealment, misrepresentation or fraud have been committed directly by the insured,
and not by the insured’s agents. Id., Vol. 20 at 5371. Sunflower in turn argued that
Owners presented no evidence that “anyone on behalf of Sunflower . . . was involved
whatsoever in the conduct which is the . . . inflation of the estimate.” Id. at 5373.
The district court responded: “What you’re effectively asking me to rule as a matter
of law that the only way” that Owners’ “counterclaim goes to the jury is if I rule as a
matter of law that the intentional misrepresentation or concealment could only have
been done by Sunflower and none of its agents.” Id. at 5373–74. Sunflower’s
counsel responded: “Correct.” Id. at 5374. The district court then stated: “Can I ask
you why you’ve waited to this point to raise this issue?” Id. Sunflower’s counsel
responded: “I don’t think it’s a matter of waiting as much as a matter of discovering
it as we were doing more research, Your Honor.” Id. Owners’ counsel argued, in
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part, that Sunflower had waived these arguments by failing to raise them at an earlier
stage of the proceedings. Id. at 5377. The district court noted that Sunflower was
“springing this on me at the last moment.” Id. at 5384. Consequently, the district
court took the matter under advisement and directed the parties to file supplemental
briefs addressing the issue raised by Sunflower, including whether Sunflower had
waived or forfeited the issue that Sunflower could only be liable for concealment,
misrepresentation or fraud that it committed.
Owners also moved for JMOL on the issue of whether Matrix, Ford, Client
Preference, Countryman, R3NG and Domecq were Sunflower’s agents as a matter of
law such that their statements in relation to the insurance claim and proof of loss
were binding on Sunflower. Id. at 5391. The district court concluded, as a matter of
law, that Client Preference, Matrix and Ford were agents of Sunflower. Id. at
5418-20. But the district court concluded that genuine issues of material fact existed
regarding whether R3NG and Domecq were agents of Sunflower. Id. at 5421. Thus,
the district court granted in part and denied in part Owners’ motion for JMOL.
At the end of the fourth day of trial, shortly after the parties made their oral
JMOL motions, the district court conducted an instruction conference. During that
conference, Sunflower objected to the district court’s proposed instructions regarding
agency, which included instructions on agency relationship, scope of authority,
incidental authority, implied authority, apparent authority, and knowledge imputed to
principal. Sunflower argued: “The basis for the objection is that under the explicit
terms of the contract [i.e., the Policy], Owners must prove that Sunflower breached
17
the fraud provision, not anything related to one of its agents. What Sunflower’s
agents did or didn’t do are entirely unrelated to this case.” Id. at 5440. The district
court took that objection under advisement.
The next morning, on the fifth and final day of trial, Sunflower filed its brief in
support of its renewed motion for JMOL, and also filed objections to the district
court’s proposed agency instructions. Sunflower argued in its brief that, “[a]ccording
to the plain language of the Policy, Owners must prove that Sunflower, rather than its
agents, violated the fraud clause,” and that “Owners ha[d] failed to present any
evidence at trial that Sunflower intentionally misrepresented either the amount of the
loss by submitting an inflated claim, or the date of loss.” ECF No. 218 at 1. “As a
result,” Sunflower argued, it “should be granted judgment as a matter of law on
Owners’ claim for Breach of Contract.” Id.
The district court denied Sunflower’s renewed motion for JMOL and overruled
its objections to the proposed agency instructions. In doing so, the district court
concluded that “Sunflower’s written submission entirely fail[ed] to address the
waiver question that the Court and Owners repeatedly raised during oral argument on
the motion,” and “thus deem[ed] Sunflower to have conceded the issue.” ECF
No. 231 at 2. The district court also concluded that, in any event, Sunflower forfeited
its arguments by failing to raise them “at an appropriate time.” Id. at 3. Had
Sunflower raised its arguments at an earlier stage, the district court noted, it might
“have obviated most of the testimony and evidence presented at trial.” Id. The
district court concluded “it would be fundamentally unjust to put Owners to its proof
18
on its counterclaim at a week-long jury trial, and then consider at this late date
arguments from Sunflower which, if now accepted by the Court, would render the
entire trial a nullity.” Id. In sum, the district court concluded “that Sunflower
forfeited both arguments,” i.e., that agency principles did not apply and that
recoupment was not a remedy allowed under the Policy, “for failure to timely raise
them before trial.” Id.
Sunflower’s opening appellate brief entirely ignores this procedural history
and, more significantly, the district court’s forfeiture ruling. We have long and
consistently held that “[a]n issue or argument [that is] insufficiently raised in the
opening brief is deemed waived.” Becker v. Kroll, 494 F.3d 904, 913 n.6 (10th Cir.
2007); see Bronson v. Swensen, 500 F.3d 1099, 1104 (10th Cir. 2007) (“[W]e
routinely have declined to consider arguments that are not raised, or are inadequately
presented, in an appellant’s opening brief.”). Adhering to this rule, we conclude that
Sunflower has effectively waived any challenge to the district court’s forfeiture
ruling regarding the agency instructions by failing to acknowledge or challenge that
ruling in its opening appellate brief.
2) Did the district court err in denying Sunflower’s Rule 50 motion?
In its second issue on appeal, Sunflower challenges the district court’s denial
of its motion for JMOL at the close of all the evidence, arguing that there was no
evidence that it intentionally misrepresented or concealed a material fact, aside from
erroneously imputing the acts of its independent “agents.” Aplt. Br. at 34.
According to Sunflower, “the only reason the many instructions on ‘agency’ were
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included in the charge was because there was otherwise nothing showing Sunflower
itself ‘intentionally’ misrepresented the amount of the loss.” Id. (emphasis in
original). “Thus,” Sunflower argues, “this case presents the secondary problem that
the only evidentiary basis the jury could have relied on for finding a breach of
contract by Sunflower was the intent of persons or entities other than Sunflower,
which . . . is not supported by the contractual language as a matter of law.” Id. at
34-35 (emphasis in original). “Under these circumstances,” Sunflower argues, this
“Court should reverse and render a take nothing judgment on Owners’ counter-claim
because there is legally insufficient evidence Sunflower or ‘another insured’
‘intentionally’ violated the fraud clause.” Id. at 35.
Sunflower’s challenge to the district court’s denial of its motion for JMOL is,
at bottom, essentially the same as Sunflower’s challenge to the district court’s agency
instructions. Specifically, Sunflower is asserting that it was entitled to JMOL
because (a) the plain language of the Policy’s Fraud Clauses limited the scope of
those clauses to actions taken directly by Sunflower and its employees, and does not
apply to actions taken by agents working on behalf of Sunflower, such as R3NG and
Domecq, and (b) Owners presented no evidence at trial establishing that Sunflower or
its employees were responsible for the misrepresentations contained in the proof of
loss. As discussed above, however, Sunflower fails in its opening appellate brief to
address the district court’s conclusion that it forfeited these arguments by failing to
raise them in a timely fashion prior to trial. We therefore conclude that, as with its
20
challenge to the district court’s instructions on agency, Sunflower has effectively
waived any challenge it may have to the district court’s forfeiture ruling.
3) Does the Policy provide a recoupment remedy?
In its third issue on appeal, Sunflower argues that the Policy does not provide
any recoupment remedy, and thus does not allow Owners to recoup the amounts that
it paid to Sunflower. In other words, Sunflower argues that Owners “seeks to insert a
remedy into the Policy that it does not provide – return or recoupment of an
Undisputed Payment the insurer already made on a claim.” Aplt. Br. at 40.
Sunflower argues that “[t]his is not just a waiver problem,” but also “a basic contract
interpretation problem” and “[t]he remedy provided by the District Court is not in the
Policy.” Id. at 41. Sunflower in turn argues that we “must interpret the Policy
language as written resolving any ambiguity in favor of the insured under the well-
established rules” governing contracts of insurance. Id.
Notably, Sunflower makes no attempt to identify what ruling of the district
court it is actually challenging. As previously discussed, Sunflower first argued that
the Policy does not allow for recoupment when it renewed its motion for JMOL at the
close of all the evidence. The district court concluded that Sunflower had forfeited
this argument by failing to raise it in a timely fashion prior to trial.
Because Sunflower once again fails to acknowledge, let alone directly
challenge, the district court’s forfeiture ruling in its opening brief, we conclude that
Sunflower has effectively waived any challenge to that ruling. See Becker, 494 F.3d
21
at 913 n.6 (“An issue or argument [that is] insufficiently raised in the opening brief is
deemed waived.”).
4) Did the district court deny Sunflower a fair trial as a result of two
evidentiary rulings?
In its fourth issue on appeal, Sunflower argues that it was denied a fair trial as
a result of the district court’s decision to (a) admit contractor’s invoices and bids that
were prepared before the 2014 storm, and (b) exclude evidence of Owners’
investigation of Sunflower’s claim. We review for abuse of discretion the trial
court’s evidentiary rulings. Ryan Dev. Co., L.C. v. Ind. Lumbermens Mut. Ins. Co.,
711 F.3d 1165, 1170 (10th Cir. 2013).
a) Admission of contractor’s bids and invoices
During Owners’ case-in-chief, the district court permitted Geoffrey Page, a
senior claims adjuster employed by Owners, to testify about the amounts of written
bids and invoices that Sunflower received from roofing contractors in 2007. Those
bids and invoices, which were prepared approximately seven years prior to the storm
that caused the damage claimed by Sunflower in this case, related to various roof
repairs at the Sunflower Property. Page also testified that he used Xactimate
software2 to change Sunflower’s 2016 estimate of damages resulting from the 2014
storm to reflect 2007 pricing and in turn gave that altered pricing report to Gary
2
According to the record, Xactimate software is commonly used by
contractors and insurance adjusters to determine the cost of repairs.
22
Stevens, the independent adjuster who was hired by Owners to review Sunflower’s
proof of loss and estimate in this case.
Stevens also testified about the 2007 bids and invoices. Stevens explained
that, as part of his investigation in this case, he attempted to determine how much the
repairs requested by Sunflower in its proof of loss would have cost in 2007 dollars.
Stevens contrasted the amounts requested by Sunflower from Owners, adjusted to
reflect 2007 pricing, with the amounts contained in the bids and invoices that
Sunflower actually received from contractors in 2007. Stevens testified that he had
never before seen such a “massive” difference in prices, i.e., the difference between
the amounts that Sunflower actually paid for roof repairs in 2007 and the amounts
that Sunflower requested from Owners in 2016. Aplt. App., Vol. 18 at 4813.
Although Sunflower objected to the admission of the 2007 bids and invoices,
the district court overruled that objection and admitted them for the limited purpose
of serving as “evidence of Sunflower’s notice of the amount it was invoiced to
replace the roofs in 2007 and Sunflower’s willingness to pay such price.” ECF
No. 225 at 13 (jury instructions). The district court specifically instructed the jury
regarding the limited purpose of this evidence. Id.
Sunflower argues in its appeal that, contrary to the district court’s limiting
instruction, the 2007 “invoices/bids were intended to be used—and were exclusively
used—as proof of the alleged ‘truth’ stated in them: that the roofs were less
expensive to repair at a previous time in order to have the jury compare them to the
Ford/R3NG Estimate.” Aplt. Br. at 48. Sunflower in turn argues that “the
23
invoices/bids were completely irrelevant and highly prejudicial.” Id. at 49.
Sunflower asserts that “the invoices/bids lack[ed] any detail about the itemized
materials costs, labor costs and other critical elements necessary to make a
comparison to the detailed Xactimate estimate they were used to attack.” Id.
“Additionally,” Sunflower argues, “they were not related to Storm damage because
they predated the [2014] Storm entirely.” Id. Sunflower also argues that the limiting
instruction given to the jury by the district court “failed to cure [the] prejudice” that
resulted from the documents’ admission. Id. at 50. Sunflower asserts that “[o]nce
the court allowed Owners to publish the numbers from these bids and invoices to the
jury and invited its witnesses and the jury to speculate about their relevance to the
cost of repairs for damage from the Storm, that comparison permeated the entire
case.” Id. Thus, Sunflower argues, “the admission of such irrelevant and prejudicial
evidence and its extensive use throughout the case demonstrates reversible harm just
from the admission of this evidence.” Id. at 51.
We reject Sunflower’s arguments and conclude that the district court acted
within its discretion in admitting the 2007 bids and invoices for the limited purpose
outlined in its instruction to the jury. In admitting this evidence, the district court
noted that Sunflower “failed to explain why [Owners’] proposal to have Gary Stevens
explain how to compare the estimates [wa]s improper.” ECF No. 204 at 7. The
district court also explained that Sunflower was “free to challenge [Stevens’]
comparison technique on cross examination,” and it therefore agreed with Owners
“that [Sunflower’s] argument [went] to the weight attributable to the proffered
24
testimony, but d[id] not preclude its admission altogether.” Id. Notably, Sunflower
makes no mention of these rationales in its opening appellate brief.
Even assuming, for purposes of argument, that the district court abused its
discretion by admitting the 2007 bids and invoices, it is clear that the admission of
this evidence was harmless in light of the evidence presented at trial by both Owners
and Sunflower. For its part, Owners presented extensive testimony from Stevens, the
independent adjuster it hired to review Sunflower’s proof of loss. Stevens testified,
independent of the evidence of the 2007 bids and invoices, about multiple categories
of items in Sunflower’s proof of loss that, based upon his experience and expertise,
were inflated and unreasonably excessive. Sunflower, during its case, presented
testimony from Jason Domecq of R3NG, one of the two people who prepared and
submitted the proof of loss on behalf of Sunflower. As previously discussed,
Domecq proved to be a disastrous witness for Sunflower. Domecq offered no
explanation for numerous line items contained in the proof of loss. He also, on
several occasions, conceded that certain charges listed in the proof of loss were
unjustified. And, perhaps most surprisingly, he conceded that the multiple errors that
Stevens identified in the proof of loss could reasonably indicate that the errors were
intentional rather than random. Thus, the 2007 bids and invoices were but a small
part of the evidence supporting Owners’ counterclaim for fraud and
misrepresentation.
b) Exclusion of evidence of Owners’ investigation of Sunflower’s claim
25
Sunflower also asserts that the district court abused its discretion by
“exclud[ing] evidence of [three] detailed reports prepared by Stevens for Owners
related to the Storm damage, which would have been relevant for the jury to conduct
an apples-to-apples comparison.” Aplt. Br. at 51. Owners objected to admission of
these reports on the grounds that they went “to the claims handling” issues raised by
Sunflower “that the [district court] ha[d] already” resolved. Aplt. App., Vol. 18
at 4747. Sunflower argued in response that the reports were relevant for purposes of
impeaching Stevens. Id. at 4749. The district court sustained Owners’ objection
“because [the reports] [we]re matters directly [involving] the claims handling,” but it
informed Sunflower that it “w[ould] allow in a limited form [the reports] to be used
as potential impeachment of . . . Stevens” (i.e., without actually admitting the
reports). Id.
Sunflower cross-examined Page, Owners’ senior claims adjuster, about eleven
items that Stevens failed to include in his initial estimate of damages. Id. at 4750–51.
During that cross-examination, Page conceded that Stevens had to prepare a revised
estimate to incorporate those eleven items and that the revised estimate was greater
than the initial estimate. Id. at 4751–52. During Sunflower’s cross-examination of
Stevens, it did not ask him similar questions, nor did it otherwise attempt to impeach
him using any of the three reports that were excluded by the district court. At the
conclusion of Sunflower’s cross-examination of Stevens, the district court stated on
the record: “Because the case law is clear that documents can be used for
impeachment purposes that have not been received into evidence, I am not precluding
26
you [Sunflower] from using any of the exhibits you referenced in your offer of proof
or any of the exhibits . . . as to which I’ve sustained objections . . . in an appropriate
attempt to impeach a witness provided that the foundation has been laid.” Id.
at 4923–24. Thereafter, Sunflower made an offer of proof to the district court
regarding the excluded exhibits. Sunflower stated that its “offer of proof relate[d] to
cross-examination of Gary Stevens,” and that “[h]ad [it] been allowed, [it] would
have introduced evidence of Exhibits 71, 76, and 80,” which “were various
documents that were prepared by . . . Stevens while he was serving as independent
adjuster during the claims process. They were a status report, a reserve report, and
then what he’s referred to as a closing report.” Id. at 4930. Sunflower in turn stated
that those reports “would have been significant” because “they talk[ed] about, on
multiple occasions, the need to meet with [Sunflower’s] public adjuster to try and
reach a resolution; that the two parties had essentially agreed to the scope of the
damage, and that it was just a matter of amount of damage; that the parties should
meet and reach an agreement as to the amount.” Id. at 4930–31. Sunflower also
stated that it would have “cross examine[d] [Stevens] on the fact that the information,
which [was] in the reports that he prepared, sa[id] nothing about inflated estimate,
fraud, or raise[d] any red flags whatsoever, which goes to his credibility as an expert
now testifying that clearly looking at an estimate that he had dating back to May of
2016 it shows evidence of clear massive fraud.” Id. at 4931.
Sunflower argues in its appeal that “[a]llowing the jury to hear the total
amount of Stevens’ estimate upon which the Undisputed Payment was based, without
27
admitting Stevens’ own detailed reports, prohibited the jury from fully comparing
and understanding the reasons behind the difference in the total values of these
estimates.” Aplt. Br. at 52 (emphasis in original). Sunflower also argues that the
“[a]dmission of those documents would have helped the jury understand how
Owners’ stories about fraudulent inflation and late notice causing prejudice were not
based [on] actual concerns of Owners’ [sic] during the claims process, and were
fabricated only after suit was filed.” Id.
We conclude, contrary to Sunflower’s assertions, that the district court did not
abuse its discretion in excluding the exhibits. To begin with, the district court
expressly ruled that Sunflower was free to cross-examine Stevens regarding the
exhibits, even though the exhibits would not be admitted. Nevertheless, Sunflower
chose not to do so, and it offers no explanation in its opening appellate brief for this
failure. Thus, as Owners correctly observes in its appellate response brief,
“Sunflower’s failure to use the exhibits” to impeach Stevens “is not the district
court’s error,” but rather “Sunflower’s” error. Aple. Br. at 42. In any event,
Sunflower did cross-examine Page regarding the excluded exhibits and elicited from
him that Stevens’ initial estimate erroneously omitted eleven different items of
damages.
5) Did the district court err in granting partial summary judgment in favor
of Owners on Sunflower’s claims for breach of contract and bad faith?
In its fifth and final issue on appeal, Sunflower argues that the district court
erred in granting partial summary judgment in favor of Owners on Sunflower’s
28
claims for breach of contract and bad faith. We review de novo the “district court’s
summary-judgment ruling, applying the same standard that applied in district court.”
Greer v. City of Wichita, 943 F.3d 1320, 1322 (10th Cir. 2019). We also “have
discretion to affirm” the district court’s summary judgment ruling “on any ground
adequately supported by the record, so long as the parties have had a fair opportunity
to address that ground.” Hasan v. AIG Prop. Cas. Co., 935 F.3d 1092, 1099 (10th
Cir. 2019) (quotations and brackets omitted).
Owners argues in response that the jury’s verdict supplies an independent basis
for affirming the district court’s summary judgment ruling on Sunflower’s breach of
contract and bad faith claims. Aple. Br. at 45–46. We agree. Because the jury found
that Sunflower violated the Policy’s Fraud Clauses, that determination effectively
voids the Policy. As a result, Owners could not, consistent with that verdict, be
found to have either breached the Policy or engaged in bad faith by failing to pay the
full amount of damages claimed by Sunflower, since Sunflower’s violation and the
resulting voidance of the contract preceded any alleged breach by Owners. See
generally Wilson v. Muckala, 303 F.3d 1207, 1219 (10th Cir. 2002) (concluding
“that, even if it was error to grant summary judgment for the board members, any
error was harmless” because “[p]laintiffs could not have sustained a cause of action
in negligence against these individuals when the alleged perpetrator himself was
exonerated of negligence”); Fraser v. Major League Soccer, LLC, 284 F.3d 47, 60-61
(1st Cir. 2002) (concluding that the grant of summary judgment on a particular claim
was harmless in light of the jury’s subsequent verdict).
29
III
The judgment of the district court is AFFIRMED. Sunflower’s motion to
maintain district court documents under seal is GRANTED.
Entered for the Court
Mary Beck Briscoe
Circuit Judge
30