                                                                                FILED
                                                                   United States Court of Appeals
                                                                           Tenth Circuit

                                                                         February 3, 2011
                         UNITED STATES COURT OF APPEALS                Elisabeth A. Shumaker
                                                                           Clerk of Court
                                       TENTH CIRCUIT



 DAVID K. PANICO; JANICE L.
 PANICO,

           Plaintiffs-Appellants,
 v.                                                           No. 10-1219
 STATE FARM FIRE AND CASUALTY                        (D.C. No. 09-cv-02398-RPM)
 COMPANY,                                                     (D. Colo.)

           Defendant-Appellee.



                                    ORDER AND JUDGMENT*


Before BRISCOE, Chief Judge, EBEL and O’BRIEN, Circuit Judges.



       After examining the briefs and appellate record, this panel has determined

unanimously that oral argument would not materially assist in the determination of this

appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is, therefore,

submitted without oral argument.

       This case concerns an insurance company’s duty under Colorado law to defend its



       *
        This order and judgment is not binding precedent, except under the doctrines of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.
insureds against claims by third parties. The plaintiff/appellants, David Panico and Janice

Panico (the Panicos), sold a property and the buyers, Martha Cesery Taylor and Walter

Taylor (the Taylors), sued them upon discovering the property was not as represented.1

State Farm Fire and Casualty Company (State Farm) refused to defend the Panicos in the

suit brought by the Taylors, and the Panicos then sued State Farm for breach of insurance

contract. The district court determined that the Taylors’ claims were not covered under

the Panicos’ insurance policies, and granted summary judgment in State Farm’s favor.

Exercising jurisdiction under 28 U.S.C. § 1291, we affirm.

                                             I

       The Panicos sold a property in Aspen, Colorado (the Property) to the Taylors.

David Panico had built the house on the Property, and also had designed and built several

additions to the house. The Taylors lived in Florida, and relied primarily on their real

estate agent and an inspector to ensure that the Property was acceptable. According to the

Taylors’ complaint, after purchasing the Property, they discovered that it was virtually

uninhabitable due to serious design and construction defects, mold, rodents, and drainage

problems. The Taylors sued the Panicos and the real estate agent.




       1
          We note that the Taylors have subsequently taken bankruptcy. The Taylors’ case
is stayed “until such time the Court receives an order from the Bankruptcy Judge saying
that the [Taylors] shall be allowed to proceed.” Aplt. App. at 32. Prior to the stay, a
magistrate judge issued a report and recommendation recommending that the case be
dismissed as a sanction for discovery violations. Id. at 31.

                                             2
       The Taylors’ complaint

       The Taylors’ complaint asserts three claims for relief against the Panicos. Count

one (titled Fraudulent Misrepresentation) alleges that the Panicos made false

representations about the condition of the Property, that the Panicos knew the

representations were false or that they were acting in reckless disregard of the truth, and

that the Panicos knew that the Taylors were relying on that information and the Panicos

intended to induce their reliance. Aplt. App. at 47. Count two (titled Fraudulent

Concealment Nondisclosure) alleges that the Panicos failed to disclose and/or concealed

material facts about the condition of the Property, with the intent that the Taylors would

take a course of action that they might not have taken had they known the truth. Id.

Count three (titled Negligent Misrepresentation Causing Financial Loss in a Business

Transaction) alleges that the Panicos gave false, inaccurate, or incomplete material

information to the Taylors in the course of a business transaction from which the Panicos

stood to benefit, that the Panicos were negligent in communicating the information, and

that the Panicos gave the information with the intent or knowledge that the Taylors would

act or decide not to act in reliance upon the information. Id. at 48.

       Some of the factual allegations made in the General Allegations portion of the

Taylors’ complaint are also relevant here. The Taylors allege that, shortly after her first

visit to view the Property,

       Ms. Cesery Taylor experienced severe respiratory problems and was placed
       under a doctor’s care in Aspen and again upon her return to Florida, but she
       attributed the illness to a “sick” plane. Based upon her prior experience

                                              3
       with [a property the real estate agent had previously showed to her], she
       believed that [the real estate agent] would never have shown her a mold-
       infested property, and she believed the statements of [real estate agent]
       representatives that the . . . [P]roperty had been thoroughly and
       professionally inspected.

Id. at 41. Additionally, the Taylors allege that, upon arriving to move in, “[a]fter less

than an hour’s exposure, [Cesery Taylor] became sufficiently ill that she required

repeated medical consultation and treatment.” Id. at 43.

       The Panicos’ insurance policy

       The Panicos demanded that State Farm defend them against the Taylors’ suit, and

State Farm declined. State Farm argues that the Taylors’ claims are not covered.

Although the parties have not determined which of the Panicos’ three State Farm

insurance policies actually applies here, they agree that the relevant language in each

policy is identical.2 The relevant coverage is the personal liability coverage, which

provides:

       If a claim is made or a suit is brought against an insured for damages
       because of bodily injury or property damage to which this coverage applies,
       caused by an occurrence, we will:

       1.       pay up to our limit of liability for the damages for which the insured
                is legally liable; and

       2.       provide a defense at our expense by counsel of our choice.

Aplt. App. at 129. An occurrence is “an accident, including exposure to conditions,

which results in: a. bodily injury; or b. property damage.” Id. at 119. Bodily injury is


       2
           For simplicity’s sake, this order and judgment will refer to “the policy.”

                                               4
“physical injury, sickness, or disease to a person.” Id. at 118. Property damage is

“physical damage to or destruction of tangible property, including loss of use of this

property.” Id. at 119. Certain types of liability are excluded from personal liability

coverage, including “property damage to property rented to, occupied or used by or in the

care of any insured . . . .” Id. at 132.

                                              II

       Standard of review

       We review a grant of summary judgment de novo, applying the same standards as

the district court. Jones v. Okla. City Pub. Sch., 617 F.3d 1273, 1277 (10th Cir. 2010).

Summary judgment is proper only if there are no genuine issues of material fact and the

movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). We examine the

record in the light most favorable to the non-moving party. Thomas v. Int’l Bus. Machs.,

48 F.3d 478, 484 (10th Cir. 1995).

       Governing law

       The interpretation of an insurance contract is a matter of state law and, sitting in

diversity, we look to the law of the forum state. Hous. Gen. Ins. Co. v. Am. Fence Co.,

115 F.3d 805, 806 (10th Cir. 1997). The parties agree that Colorado law applies in this

case. An insurance policy is a contract, and its terms are interpreted based on the

principles of contract interpretation. Undefined terms are given their plain, ordinary

meanings, or the “meaning[s] a person of ordinary intelligence would attach to [them].”

Simon v. Shelter Gen. Ins. Co., 842 P.2d 236, 240 (Colo. 1992). Ambiguous policy

                                              5
language is construed against the insurer. Hecla Mining Co. v. N.H. Ins. Co., 811 P.2d

1083, 1090 (Colo. 1991). A term is ambiguous if it is susceptible to more than one

reasonable interpretation. Id.

       The Panicos’ insurance policy provides for both defense against and

indemnification for covered liability. The duty to defend is triggered by a third party’s

assertion of claims that could potentially fall within policy coverage. Id. In contrast, the

duty to indemnify is triggered only by actual liability for covered occurrences. Id. To

determine whether there is a duty to defend, courts look “no further than the four corners

of the underlying complaint.” Cyprus Amax Minerals Co. v. Lexington Ins. Co., 74 P.3d

294, 299 (Colo. 2003). To avoid the duty to defend, the insurer bears the burden of

showing that the underlying claim cannot fall within policy coverage. Id. at 301. If the

underlying complaint asserts multiple claims, one of which is arguably covered, the

insurer has a duty to defend against all claims asserted. Fire Ins. Exch. v. Bentley, 953

P.2d 1297, 1300 (Colo. App. 1998). Thus, in this case, State Farm must show that none

of the Taylors’ claims potentially fall within the policy’s coverage.

                                             III

       The Panicos argue that the Taylors brought three types of claims that trigger

coverage: claims for bodily injury caused by exposure to conditions in the home; claims

for property damage caused by the Panicos’ misrepresentation of the condition of the

Property; and claims for property damage caused by faulty construction and/or negligent

maintenance. Aplt. Br. at 20-21. We conclude that State Farm has no duty to defend

                                              6
because the Taylors did not bring bodily injury claims, and the property damage claims

are subject to the owned property exclusion.

       The personal injury allegations

       The Panicos contend that the Taylors’ complaint triggers the duty to defend

because it contains allegations of bodily injury to Cesery Taylor caused by exposure to

conditions at the Property. However, there is no duty to defend here because the Taylors

did not, in fact, make any personal injury claim. The complaint mentions Cesery Taylor’s

reaction to exposure to the house only to provide a factual context for the property

damage claims made and to illustrate the severity of the Property’s problems. The

complaint does not seek damages, or any other relief, for bodily injuries.

       Under Colorado law, the insurer must tender a defense if “the underlying

complaint alleges any facts or claims that might fall within the ambit of the policy . . . .”

Cyprus Amax, 74 P.3d at 301 (emphasis omitted). Generally, this means that courts do

not inquire into the validity of the allegations when considering a duty to defend, and that

complaints are to be read liberally with a view towards affording coverage to the insured.3

Id. at 297. However, this rule does not mean that the mere mention of one or two facts


       3
         The Colorado Court of Appeals has also stated that it is “the factual allegations
in the complaint, and not the legal claims, that determine an insurer’s duty.” Gerrity Co.
v. CIGNA Prop. & Cas. Ins. Co., 860 P.2d 606, 607 (Colo. App. 1993). This statement
was made in the context of a claim that was labeled a negligence claim but was really a
breach of contract claim. The Colorado courts look beyond the legal labels attached to a
claim to determine if it is truly a covered claim or not. The courts do not, however, look
beyond the claims asserted to see if there are other claims that could have been asserted
based on the facts.

                                               7
that could constitute part of a covered claim triggers coverage if it is clear that those facts

are not part of any claim for relief. If there is no claim, there is no duty to defend. See

Constitution Assocs. v. N.H. Ins. Co., 930 P.2d 556, 563 (Colo. 1996) (“[T]he duty to

defend pertains to the company’s duty to affirmatively defend its insured against pending

claims.” (emphasis added)); Carl’s Italian Rest. v. Truck Ins. Exch., 183 P.3d 636, 638

(Colo. App. 2007) (“A duty to defend arises when factual allegations in the underlying

complaint, if sustained, would impose a liability on the insured that is arguably covered

by the policy.” (emphasis added)). The Panicos’ interpretation of the duty to defend

would require insurers to defend against suits alleging only non-covered claims if a court

could conceive of a covered claim that would be supported by the facts recited. This

would greatly expand an insurer’s duty to defend, and would require courts to speculate

and assume the role of advocate for the plaintiff in the underlying lawsuit.

       The Taylors’ complaint does not seek relief for bodily injury to Cesery Taylor.

The complaint clearly seeks recovery for the economic damages incurred in the purchase

of the Property: the cost to bring the Property up to its warranted condition, or the

difference between what the Taylors paid for the Property and what they received.

Because the Taylors’ complaint cannot reasonably be read as an attempt to hold the

Panicos liable for bodily injury, State Farm’s duty to defend is not triggered.

       The property damage claims

       The Panicos argue that the Taylors brought claims for property damage, caused

either by the Panicos’ misrepresentations or their negligent construction and maintenance

                                               8
of the Property. To the extent that the Taylors’ complaint alleges such claims, they do not

trigger a duty to defend because they are subject to the owned property exclusion. The

policy excludes from coverage claims for “property damage to property rented to,

occupied or used by or in the care of any insured . . . .” Aplt. App. at 132. Whether we

look to the Panicos’ alleged misrepresentations concerning the Property, their alleged

negligent construction of the Property, or their alleged negligent maintenance of the

Property as the relevant occurrence, the Panicos cannot avoid the owned property

exclusion. All three would have taken place while the Panicos owned the property.

       In a recent case, the Colorado Court of Appeals held that an owned property

exclusion barred coverage of claims for property damage in connection with

misrepresentations in a property sale, even though the actual damage occurred after the

sale. Sachs v. Am. Family Mut. Ins. Co., No. 09CA1536, 2010 WL 3259822 (Colo. App.

Aug. 19, 2010). In Sachs, the plaintiffs in the underlying lawsuit purchased a house from

the Sachses. After the purchase, the house’s basement floor subsided by four inches, and

the buyers sued the Sachses for, among other things, negligent misrepresentation. The

Colorado Court of Appeals held that the owned property exclusion applies if the insured

owned the property at the time of the alleged misrepresentation, and “whether the subject

premises were sold before the injury or damage occurred is immaterial to the applicability

of the exclusion.” Id. at *5. Because the Sachses owned the property when they made

the alleged misrepresentations, the buyers’ claims were subject to the owned property

exclusion and the insurer had no duty to defend. Similarly, in the case before us, the

                                             9
Panicos owned the Property when they made the alleged misrepresentations.4

       Further, the Panicos owned or controlled the property when they negligently built

or maintained it, as well as when the resulting damage occurred. In review of cases from

other jurisdictions which involve similar claims and owned property exclusions, courts

have held that an owned property exclusion bars coverage of a home purchaser’s

negligence claims against the insured. See Lenning v. Commercial Union Ins. Co., 260

F.3d 574, 585 (6th Cir. 2001) (“[A]ny alleged poor craftsmanship or negligence actually

arose while the house was still under construction. Inasmuch as [the insured] owned the

property during the entire construction period and up until the closing, she was the owner

at the time the alleged damage occurred.”) (applying Kentucky law); Boggs v. Great N.

Ins. Co., 659 F. Supp. 2d 1199, 1213 (N.D. Okla. 2009) (“If the Boggses’ negligence

were to have caused any damage to the fireplaces, this damage would have occurred

while the Boggses owned the residence.” (footnotes omitted)); Cooley v. State Farm Fire

& Cas. Co., No. 09-CV-0332, 2009 WL 3378271, at *4 (E.D. Ark. Oct. 16, 2009)

(determining that the owned property exclusion applied because the underlying plaintiffs’

“allegations clearly relate to defects that arose and/or existed during the time the

[insureds] owned and resided in the residence”) (applying Arkansas law); Allstate Ins.

Co. v. Chaney, 804 F. Supp. 1219, 1223 (N.D. Cal. 1992) (determining that the owned



       4
        The policy covers only claims for property damage “caused by an occurrence.”
Aplt. App. at 129. The Panicos’ misrepresentations did not cause damage to the Property;
the Property was damaged before any misrepresentations were made to the Taylors.

                                             10
property exclusion applied because the misrepresented property damage occurred while

the insured owned the property) (applying California law). The Panicos owned the

Property at all relevant times, i.e., when the Panicos made the alleged misrepresentations

to the Taylors, when the Panicos negligently constructed the property, and when the

Panicos maintained the Property. The owned property exclusion applies here to bar

coverage of the Taylors’ claims against the Panicos.

       State Farm has no duty to defend because none of the Taylors’ claims is covered

by the Panicos’ liability insurance. Therefore, the decision of the district court is

AFFIRMED.


                                                   Entered for the Court


                                                   Mary Beck Briscoe
                                                   Chief Judge




                                              11
