                                                                                 FILED
                                                                     United States Court of Appeals
                      UNITED STATES COURT OF APPEALS                         Tenth Circuit

                             FOR THE TENTH CIRCUIT                          August 10, 2020
                         _________________________________
                                                                         Christopher M. Wolpert
                                                                             Clerk of Court
 MICHAEL BETHEL,

       Plaintiff - Appellant,

 v.                                                          No. 19-1262
                                                (D.C. No. 1:17-CV-01456-CMA-KLM)
 BERKSHIRE HATHAWAY                                           (D. Colo.)
 HOMESTATE INSURANCE COMPANY,

       Defendant - Appellee.
                      _________________________________

                             ORDER AND JUDGMENT *
                         _________________________________

Before BRISCOE, EBEL, and LUCERO, Circuit Judges.
                   _________________________________

      Michael Bethel appeals the district court’s grant of summary judgment in favor

of Berkshire Hathaway Homestate Insurance Company on his claims of breach of

contract, common law bad faith, and unreasonable delay or denial of benefits.

Exercising jurisdiction under 28 U.S.C. § 1291, we reverse the court’s grant of

summary judgment on Bethel’s claims regarding Berkshire Hathaway’s use of a real

estate appraisal to value Bethel’s property, but we affirm its grant of summary

judgment regarding Bethel’s debris removal benefit.




      *
         This order and judgment is not binding precedent, except under the doctrines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.
                                            I

      This case arises from a fire that occurred at Bethel’s property in Rocky Ford,

Colorado, in December 2016. Bethel had purchased the property seven months

earlier from a friend who loaned him money for the transaction. Bethel added the

property to his existing insurance policy with Berkshire Hathaway (“the Policy”).

      Under the Policy, the property is insured for its “actual cash value” with a

limit of $407,000. It includes a “Building and Personal Property Coverage Form,”

under which it provides coverage for direct physical loss of or damage to the

property, subject to the policy limit. This coverage is further subject to the following

“Loss Conditions”:

      4. Loss Payment
            a. In the event of loss or damage covered by this Coverage Form,
            at our option, we will either:
                    (1) Pay the value of lost or damaged property;
                    (2) Pay the cost of repairing or replacing the lost or damaged
                    property . . . ;
                    (3) Take all or any part of the property at an agreed or
                    appraised value; or
                    (4) Repair, rebuild or replace the property with other
                    property of like kind and quality . . . .

                     We will determine the value of lost or damaged property, or
                     the cost of its repair or replacement, in accordance with the
                     applicable terms of the Valuation Condition in this
                     Coverage Form or any applicable provision which amends
                     or supersedes the Valuation Condition.
             ...
             d. We will not pay you more than your financial interest in the
             Covered Property.




                                            2
Additionally, under the “Valuation Condition,” Berkshire Hathaway “will determine

the value of Covered Property in the event of loss or damage . . . [a]t actual cash

value as of the time of loss or damage.”

      Although the Policy itself does not define “actual cash value,” Berkshire

Hathaway provided Bethel with a “Summary of Coverage” form (“the Summary”)

stating that “Actual Cash Value is the cost of repairing or replacing damaged

property with property of the same kind and quality less depreciation, subject to the

limits shown in your declaration page and policy.” The Summary further provides:

      This document is a summary of your commercial property coverage. The
      information in this document does not replace any policy provision.
      Please read your policy for details! In the event of a conflict between the
      policy and this disclosure form, your policy provisions shall prevail.

The Summary is not listed in any of the Policy’s schedules as one of the forms or

endorsements considered to be part of the Policy.

      Debris removal is also covered under the Policy. The “Debris Removal”

provision states:

      [W]e will pay your expense to remove debris of Covered Property caused
      by or resulting from a Covered Cause of Loss that occurs during the
      policy period. The expenses will be paid only if they are reported to us
      in writing within 180 days of the date of direct physical loss or damage.

      Berkshire Hathaway’s investigator, Steve Hansen, determined that the fire was

accidental and that Bethel’s property had suffered a total loss covered by the Policy.

Berkshire Hathaway issued an advance of $30,000 to Bethel before the appraisal

process was complete. It hired a real estate appraiser, who determined that the

market value of the property was $109,000 at the time of the fire. Based upon this

                                           3
appraisal, Berkshire Hathaway determined that the value of the property was

$109,000, and paid Bethel the remaining $79,000.

      In the same letter in which it informed Bethel of the result of the appraisal,

Berkshire Hathaway noted the terms of the debris removal coverage available under

the Policy. Under the debris removal provision, Bethel was obligated to report debris

removal expenses within 180 days of the date of loss. Berkshire Hathaway

acknowledged Bethel’s previous submission of a debris removal estimate but noted

that he had not submitted invoices or evidence of incurred expenses. It requested that

Bethel send “invoices, evidence of payment, and any other applicable documentation

for the debris removal expense associated with” his claim.

      Bethel sued, claiming entitlement to the policy limit of $407,000. He brought

claims of breach of contract, common law bad faith, and unreasonable delay/denial of

benefits under Colo. Rev. Stat. §§ 10-3-1115 and 1116. The parties filed cross-

motions for summary judgment on the meaning of “actual cash value” under the

Policy.

      The court granted summary judgment favoring Berkshire Hathaway,

concluding that Berkshire Hathaway did not breach the contract in evaluating the

property according to its market value and that the Summary was not controlling

because it conflicted with provisions in the Policy. Regarding Bethel’s debris

removal claim, the court held that submission of a bid did not meet the Policy’s

requirement of producing an “expense.” Bethel filed a motion to alter or amend the



                                           4
judgment pursuant to Federal Rule of Civil Procedure 59(e), which the court denied.

This appeal followed.

                                            II

      We review the grant of summary judgment de novo. See MarkWest

Hydrocarbon, Inc. v. Liberty Mut. Ins. Co., 558 F.3d 1184, 1189 (10th Cir. 2009).

The proper interpretation and construction of an insurance policy is a matter of law

subject to de novo review. See Ace Am. Ins. Co. v. Dish Network, LLC, 883 F.3d

881, 887 (10th Cir. 2018). Because we exercise diversity jurisdiction, we apply

Colorado substantive law. See Specialty Beverages, L.L.C. v. Pabst Brewing Co.,

537 F.3d 1165, 1175 (10th Cir. 2008).

      Under Colorado law, “[i]nsurance policies are contracts, and must be

construed to carry out the intent of the parties.” Allstate Ins. Co. v. Starke, 797 P.2d

14, 17 (Colo. 1990). “Whenever possible, the parties’ intent must be ascertained

from the policy language alone.” Id. at 17-18. A court “must enforce an insurance

policy as written unless the policy language contains an ambiguity.” Cary v. United

of Omaha Life Ins. Co., 108 P.3d 288, 290 (Colo. 2005). “A policy provision is

ambiguous if it is reasonably susceptible on its face to more than one interpretation.”

State Farm Mut. Auto Ins. Co. v. Stein, 940 P.2d 384, 387 (Colo. 1997). To

determine whether a policy provision is ambiguous, “we must evaluate the policy as a

whole and construe the language in harmony with the plain and generally accepted

meaning of the words employed, unless the intent of the parties, as expressed in the

contract, indicates that an alternative interpretation is intended.” Id.

                                            5
                                           A

      We first address Bethel’s claim that Berkshire Hathaway breached the Policy

by using a real estate appraisal to determine the “actual cash value” of his property.

Bethel argues that terms in the Policy’s optional additional Replacement Cost

coverage and in the Summary unambiguously demonstrate that “actual cash value”

means “replacement cost minus depreciation.” He therefore contends that Berkshire

Hathaway breached the Policy by using the property’s market value in compensating

him. In contrast, Berkshire Hathaway argues that the term “actual cash value”

unambiguously permits it to use market value in valuing the property. The district

court agreed with Berkshire Hathaway, concluding that the use of the term “actual

cash value” unambiguously allowed several possible methods of valuation, including

market value, and that Berkshire Hathaway therefore did not breach the Policy by

using the property’s market value.

      We disagree with the parties and the district court: under the Policy, the

meaning of “actual cash value” is ambiguous. If, as in this case, Berkshire Hathaway

elects to cover a loss by “paying the value of lost or damaged property,” it must value

the property at the property’s “actual cash value.” 1 The Policy itself does not define


      1
         Coverage under the Policy for direct physical loss of or damage to the
property is subject to the Loss Conditions, which provide Berkshire Hathaway, “at
[its] option,” four courses of action in the event of covered loss or damage: (1)
paying the value of lost or damaged property; (2) paying the cost of repair or
replacement; (3) taking all or part of the property at an agreed upon or appraised
value; or (4) repairing, rebuilding, or replacing the property with other property of
the same kind or quality. The Policy further states that Berkshire Hathaway “will

                                           6
“actual cash value,” and we conclude that neither the Policy itself nor common

meanings of the term provide sufficient guidance as to the parties’ intended meaning.

      Looking to the “popular[] and generally accepted meaning” of “actual cash

value,” the district court concluded that the Policy was unambiguous. To divine the

term’s meaning, the court looked to Couch on Insurance, which delineates “a priority

of rules to determine actual cash value . . . : (1) where market value is easily

determined, actual cash value is market value, (2) if there is no market value,

replacement or reproduction cost may be used, (3) failing the other two tests, any

evidence tending to formulate a correct estimate of value may be used.” 12 Couch on

Ins. 3d § 175:24 (2018). Based on these rules, the district court concluded that

Berkshire Hathaway’s defining “actual cash value” to mean “market value” did not

breach the contract because Berkshire Hathaway presented evidence that (1) it was

possible to determine the market value of the property and (2) market value was a

superior method of calculation because it was “almost impossible to calculate the

amount of depreciation.”




determine the value of lost or damaged property, or the cost of its repair or
replacement, in accordance with the applicable terms of the Valuation Condition . . .
or an[] applicable provision which amends or supersedes the Valuation Condition.”
The Valuation Condition in turn provides that the value of covered property will be
determined “[a]t actual cash value as of the time of loss or damage.” In short, if
Berkshire Hathaway decides to pay the value of the property, as it has in this case, it
is required to value the property using “actual cash value.” But the Policy provides
no further information as to how Berkshire Hathaway will determine the property’s
“actual cash value.”

                                            7
       Although the district court’s interpretation may be one reasonable reading of

the Policy, we disagree with the court’s analysis. Our charge is to determine the

parties’ specific intended meaning when they entered into the Policy. See Starke,

797 P.2d at 17 (“Insurance policies are contracts, and must be construed to carry out

the intent of the parties.”). Absent unambiguous language, it is not enough to

determine the universe of possible meanings, which is all the district court

accomplished through its reference to Couch on Insurance. 2 The fact that market

value was an available method tells us little about the parties’ intended meaning of

“actual cash value” in this Policy. 3

       In determining that market value was an acceptable meaning of “actual cash

value,” the district court cited as persuasive McFarland v. State Farm Fire & Casualty

Co., No. 17-CV-00291-MSK-STV, 2017 WL 3034623 (D. Colo. July 18, 2017), in

which the court held it was “clear that ‘actual cash value’ stands for a specific

concept in insurance law where the insured is paid only what the asset is worth at the

time of loss, a theory of coverage distinct from ‘replacement cost,’ where the insured



       2
        To be sure, the parties could have intended for “actual cash value” to include
several possible methods, including the prioritized list in Couch on Insurance.
However, there is no evidence in the Policy itself that this was the parties’ intent.
And accepting that a range of meanings sufficiently defines a term as to render it
unambiguous would circumvent our charge to determine the specific meaning
intended by the parties.
       3
        Further, even if we were to accept that the list from Couch on Insurance
unambiguously defined “actual cash value,” the district court overlooked the parties’
dispute regarding the extent to which depreciation was calculable, which in turn
would impact the propriety of using market value.
                                           8
receives the amount to replace the asset.” Id. at *2. But McFarland’s distinction

between “actual cash value” and “replacement cost” does not help us determine

whether “actual cash value” is the same as “replacement cost without depreciation,”

as Bethel argues. Although “actual cash value” may very well mean an “insured is

paid only what the asset is worth at the time of loss,” id., this tells us nothing about

how the insurer is to determine what that asset is worth.

                                            B

      Bethel makes two arguments that the Policy unambiguously demonstrates that

“actual cash value” means “replacement cost minus depreciation.” He first directs us

to the Policy’s optional “Replacement Cost” coverage, which states that

“Replacement Cost (without deduction for depreciation) replaces Actual Cash Value

in the Valuation Loss Condition of” the Policy if the policyholder selects this

additional coverage. 4 Bethel argues that because selecting this optional coverage

would have allowed him to recoup the replacement cost without depreciation, “actual

cash value,” as used elsewhere in the Policy, must mean “replacement cost with a

deduction for depreciation.” We disagree that the Policy unambiguously requires this

interpretation. The “Replacement Cost” provision differentiates between “actual

cash value” and “replacement cost without deduction for depreciation.” Aside from

the obvious conclusion that “actual cash value” is not the same as “replacement cost

without deduction for depreciation,” this provision offers no guidance as to what


      4
         Bethel does not dispute Berkshire Hathaway’s assertion that he did not select
this optional “Replacement Cost” coverage for this property.
                                            9
“actual cash value” means. To demonstrate: one could plausibly replace “actual

cash value” in the Replacement Cost provision with either party’s proposed

meaning—“market value” or “replacement cost minus depreciation”—and under

either definition, the provision would differentiate between the concepts of

“replacement cost without depreciation” and “actual cash value.” 5

      Bethel further argues that the Summary provided to him along with the Policy,

which defines “actual cash value” as the “cost of repairing or replacing damaged or

destroyed property with property of the same kind and quality less depreciation,”

demonstrated that the parties intended “actual cash value” to mean “replacement cost

minus depreciation.” The district court concluded that the Summary’s definition did

not control because the Summary’s definition conflicted with the Policy and the

Summary limited its own applicability in the event of a conflict.

      We disagree with Bethel that the Summary dictates the conclusion that “actual

cash value” unambiguously means “replacement cost minus depreciation.” The

Summary is not part of the Policy and “does not replace any policy provision.” It

expressly instructs insureds to “read [the] policy for details” and states that “in the


      5
         Bethel also argues that the “Replacement Cost” coverage sets forth a two-
step process that only functions if the Policy defines “actual cash value” to mean
“replacement cost minus depreciation.” According to him, the Policy first requires
an insurer to pay the “actual cash value” of the property—or “replacement cost minus
depreciation.” Then, after repairs or replacement, the insurer would pay an
additional amount reflecting recoverable depreciation. Berkshire Hathaway agrees
that the Policy requires a two-step process but argues that this process functions
regardless of the method used to determine “actual cash value.” We agree: as the
Policy is written, either definition of “actual cash value” may be used in the first step
of the process.
                                           10
event of a conflict between the policy and this disclosure form, [the] policy

provisions shall prevail.” A court may refer to external evidence of the parties’

intent only if it has already determined that the contract is ambiguous. See Kuta v.

Joint Dist. No. 50(J) of Cntys. of Delta, Gunnison, Mesa & Montrose, 799 P.2d 379,

382 (Colo. 1990) (“Extrinsic evidence is only admissible to prove intent where the

terms of the contract are ambiguous.”). Because the Summary is not part of the

Policy, it cannot support a conclusion that the Policy is unambiguous. To the extent

that the district court considered the Summary in determining whether the Policy was

unambiguous, it erred.

                                           C

      For these reasons, we conclude that the Policy itself and the definitions used

by the district court leave too much ambiguity to conclusively determine the parties’

intended meaning of “actual cash value.” “Actual cash value” is “fairly susceptible”

to both Bethel’s and Berkshire Hathaway’s proposed interpretations, Dorman v.

Petrol Aspen, Inc., 914 P.2d 909, 912 (Colo. 1996), and the district court erred in

concluding otherwise. Based on this erroneous conclusion, it granted summary

judgment on Bethel’s claims for breach of contract, common law bad faith, and

unreasonable delay or denial of benefits. We therefore reverse on these claims, and

we remand this case to the district court for full consideration of extrinsic evidence

bearing on the parties’ intended meaning of “actual cash value.” See id. (“[O]nce a

contract is determined to be ambiguous, the meaning of its terms is generally an issue

of fact to be determined in the same manner as other disputed factual issues,”

                                           11
including consideration of “extrinsic evidence of the parties’ intentions concerning

the term[s].” (quotation omitted)).

       This extrinsic evidence should include the Summary. The district court

discounted the Summary, concluding that it conflicted with the “Loss Payment” and

“Financial Interest” provisions in the Policy. Our review shows no such conflict. As

discussed above, the “Loss Payment” provision gives Berkshire Hathaway four

options in paying a claim, two of which are (1) paying “the value of lost or damaged

property” and (2) paying “the cost of repairing or replacing the lost or damaged

property.” The district court concluded that defining “value” consistent with the

Summary would render these two options redundant. But it overlooked a key phrase

in the Summary’s definition: “less depreciation.” Certainly, both the “Loss

Payment” provision and the Summary refer to repair and replacement, but only the

Summary refers to repair and replacement minus depreciation.

       Additionally, the court concluded that the Summary’s definition conflicted

with the “Financial Interest” provision, which states that Berkshire Hathaway would

not pay an insured “more than [his or her] financial interest in the Covered Property.”

According to the district court, this provision means only that Berkshire Hathaway

would not pay more than the market value of the property. That is incorrect. The

“Financial Interest” provision limits recovery by the policy holder to the extent of his

or her interest in the property. It does not specify how Berkshire Hathaway is to

value that interest.



                                          12
      Reading the “Financial Interest” provision in light of the entire Policy further

supports this interpretation. See U.S. Fid. & Guar. Co. v. Budget Rent-A-Car Sys.,

Inc., 842 P.2d 208, 213 (Colo. 1992) (“The meaning of a contract is found by

examination of the entire instrument and not by viewing clauses or phrases in

isolation.”). The provision is located in the “Loss Payment” section of the Policy,

which describes how losses will be paid, not in the “Valuation” section, which

describes how Berkshire Hathaway will determine the value of lost or damaged

property. See Fed. Deposit Ins. Corp. v. Fisher, 292 P.3d 934, 937 (Colo. 2013)

(considering section headings and entire instrument to determine meaning of policy

provision). Further, an endorsement to the Policy, titled “Loss Payable Provisions,”

states that John West, a Loss Payee under the Policy, also has a financial interest in

the property. Thus, interpreted properly, the “Financial Interest” provision ensures

that an insured and a Loss Payee do not receive more than their respective financial

interests; it does not specify how Berkshire Hathaway is to value the property.

                                          III

      We turn to Bethel’s claim regarding the debris removal coverage in the Policy.

Berkshire Hathaway “will pay your expense to remove debris of Covered Property

caused by or resulting from a Covered Cause of Loss that occurs during the policy

period. The expenses will be paid only if they are reported to us in writing within

180 days of the date of direct physical loss or damage.” After the fire, Bethel

submitted a written estimate that he had solicited for debris removal. Berkshire

Hathaway responded that Bethel had not submitted any “actual invoices” and

                                           13
requested that he “send [Berkshire Hathaway] the invoices, evidence of payment, and

any other applicable documentation for the debris removal expense associated with

this Claim.” It added that “[t]his information will then be reviewed to determine to

what extent the Policy may apply to those expenses.”

      Granting summary judgment favoring Berkshire Hathaway, the district court

concluded that although the Policy did not define the term “expense,” an “expense” is

“something expended to secure a benefit or bring about a result . . . [i.e., a] financial

burden or outlay.” Expense, Merriam-Webster, https://merriam-

webster.com/dictionary/expense (last visited July 30, 2020). Because Bethel only

submitted a bid, i.e., “[t]he offer of a price,” Bid, Oxford English Dictionary,

https://www.oed.com/view/Entry/18727 (last visited July 30, 2020), the court

concluded he did not incur a financial burden and therefore had not complied with his

contractual duty to demonstrate an “expense.”

      On appeal, Bethel expressly does not contest the district court’s definitions of

“expense” or “bid.” Instead, he argues that the term “expense,” as used in the Policy,

does not require him to have already made a payment. But this is neither what

Berkshire Hathaway required nor what the district court concluded. After Bethel

submitted the estimate, Berkshire Hathaway asked him to submit “invoices, evidence

of payment, and any other applicable documentation for the debris removal expense

associated with [his] Claim.” Evidence of payment would prove he had incurred an

“expense,” but so would evidence of an incurred financial burden—e.g., an invoice or

contract with an agreed-upon price, even one contingent on receipt of insurance

                                            14
coverage. This observation is consistent with the district court’s decision, which held

that “expense” commonly meant a “financial burden or outlay.” Contrary to Bethel’s

characterization, the district court did not require him to have already made the

payment.

      Bethel makes no argument, either before the district court or on appeal, that he

incurred a financial burden, either through accepting the estimate he presented or

otherwise. His proffered bid only states that “John Cordova propose[s] a bid of

$36,700 for the demolition, haul off and backfill of” the property. This proposal on

its own does not demonstrate a “financial burden or outlay” and is therefore not an

“expense.” 6 Without any evidence that Bethel incurred this—or any—expense, we

agree with the district court that he has not made the requisite showing of compliance

with his contractual burdens. See W. Distrib. Co. v. Diodosio, 841 P.2d 1053, 1058

(Colo. 1992) (“[A] party attempting to recover on a claim for breach of contract must

prove . . . performance by the plaintiff.”). Accordingly, the district court did not err

in granting summary judgment to Berkshire Hathaway on this claim.

                                           IV

      For the forgoing reasons, we REVERSE the district court’s grant of summary

judgment favoring Berkshire Hathaway on Bethel’s claims for breach of contract,

common law bad faith, and unreasonable delay or denial of benefits. We AFFIRM


      6
       Bethel argues that Berkshire Hathaway “approved” this estimate because its
independent adjustor included a different estimated cost for debris removal on a
document discussing Bethel’s claim. We disagree that the document demonstrates
Berkshire Hathaway’s approval of Bethel’s estimate.
                                           15
the district court’s grant of summary judgment to Berkshire Hathaway on Bethel’s

claim regarding his debris removal benefit. This case is REMANDED for further

proceedings consistent with this opinion.



                                             Entered for the Court


                                             Carlos F. Lucero
                                             Circuit Judge




                                            16
