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

                           FOR THE TENTH CIRCUIT                      February 25, 2013

                                                                     Elisabeth A. Shumaker
                                                                         Clerk of Court
LLOYD LAND; EILEEN LAND,

             Plaintiffs-Appellants.

and                                                       No. 12-1186
                                             (D.C. No. 1:11-CV-01920-WJM-MJW)
RIVERDALE PEAKS HOMEOWNERS                                 (D. Colo.)
ASSOCIATION, a Colorado Nonprofit
Corporation,

             Plaintiff,

v.

AUTO-OWNERS INSURANCE
COMPANY, a Michigan Company,

             Defendant-Appellee.


                            ORDER AND JUDGMENT*


Before KELLY, McKAY, and O’BRIEN, Circuit Judges.




*
      After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of this
appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral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.
      Plaintiffs Lloyd and Eileen Land appeal from the district court’s grant of

summary judgment to defendant Auto-Owners Insurance Company (AIC) on their

claim that AIC, as a matter of law, had a duty under an insurance policy to defend

them in a federal lawsuit filed against them. Applying Colorado law in this diversity

case, we affirm the district court’s decision as to Eileen Land, but we reverse it as to

Lloyd Land.

                                     I. Background

                                     a. The Parties

      Plaintiff Riverdale Peaks Homeowners Association (HOA) is a Colorado

nonprofit corporation governed by the Colorado Common Interest Ownership Act

(CCIOA), Colo. Rev. Stat. §§ 38-33.3-101 to -401. It is undisputed that at the times

relevant to this suit, plaintiffs-appellants Lloyd and Eileen Land were members of the

HOA; Lloyd Land was a director and/or officer of the HOA; and Eileen Land, as the

declarant for Riverdale, had appointed Lloyd Land president of the HOA.

Defendant-appellee AIC is a Michigan insurance company with a branch office in

Colorado.

                                b. The Insurance Policy

      AIC issued a Commercial General Liability (CGL) insurance policy to the

HOA as the named insured, effective March 20, 2008. See Aplt. App., Vol. 2,

at 144-86. The HOA renewed the policy annually through March 20, 2011. The

basic policy provided that AIC would pay for “those sums that the insured becomes


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legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’

to which this insurance applies. We will have the right and duty to defend the

insured against any ‘suit’ seeking those damages.” Id. at 241. “Bodily injury” and

“property damage” were covered “only if . . . caused by an ‘occurrence’ that takes

place” at Riverdale. Id. “Property damage” was defined in the policy to mean

“[p]hysical injury to tangible property . . .,” or “[l]oss of use of tangible property that

is not physically injured,” id. at 260. An “occurrence” was defined as “an accident,

including continuous or repeated exposure to substantially the same general harmful

conditions.” Id. at 259.

       Two endorsements to the CGL policy are relevant to this appeal. The

Members Endorsement extended coverage under the CGL policy to members of the

HOA as additional insureds, “but only with respect to their liability for [the HOA’s]

activities or activities they perform on [the HOA’s] behalf.” Id. at 147. The

Members Endorsement did not otherwise change the insurance coverage.

       The Habitational Association Directors and Officers Liability Endorsement

(D&O Endorsement) added coverage for “those sums the insured becomes legally

obligated to pay as ‘damages’ because of any negligent act, error, omission or breach

of duty directly related to the management of the premises” and to “settle or defend,

as we consider appropriate, any claim or ‘suit’ for damages covered by this policy.

We will do this at our expense, using attorneys of our choice.” Id. at 234. The D&O

Endorsement extended this additional coverage only to the HOA’s “directors and


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officers, [and] only while acting within the scope of their duties.” Id. at 235. The

term “damages” was defined to mean “only actual compensatory damages for loss

suffered but does not include fines, taxes, or any other cost or expense assessed

against any insured.” Id. at 236. Exclusions 2.a., e., and f. to the D&O Endorsement

expressly excluded liability coverage for: “a. ‘Bodily injury’, ‘property damage’,

‘personal injury’ or ‘advertising injury’. . . .[,] e. Any criminal act or malicious

act. . . . [and] f. Liability based upon any intentionally dishonest or fraudulent act, or

any judgment based upon any intentionally dishonest or fraudulent act.” Id. at 234.

                         c. The Underlying Federal Complaint

      On March 22, 2011, a complaint naming the Lands as defendants was filed in

the District of Colorado by Stephanie Diette, a Riverdale homeowner, and Western

State Enterprises, Inc. (WSE), a company that built homes at Riverdale, and of which

Ms. Diette was a principal. See Aplt. App., Vol. 2, at 274-81 (complaint,

Western States Enterprises, Inc., and Stephanie Diette v. Lloyd & Eileen Land,

No. 11-cv-00719-MSK-KML (D. Colo. Mar. 22, 2011)). The suit alleged that Eileen

Land had appointed Lloyd Land president of the HOA, and that his actions on behalf

of the HOA in seeking to collect payment of various assessments on four WSE-built

properties at Riverdale had violated the federal Racketeering Influenced and Corrupt

Organizations Act (RICO), 18 U.S.C. §§ 1961-68, and Colorado’s analog to RICO,

the Colorado Organized Crime and Control Act (COCCA), Colo. Rev. Stat.

§§ 18-17-101 to -109. The plaintiffs alleged that due to Lloyd Land’s illegal


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debt-collection efforts, they had “suffered damage to property in excess of

$250,000.” Aplt. App., Vol. 2, at 279 ¶ 36, 280 ¶ 43. The Lands tendered the

defense of the suit against them to AIC, which denied coverage and a defense.

      On November 22, 2011, the district court to which the underlying suit was

assigned dismissed the complaint for failure to state a claim under RICO or COCCA.

Id., Vol. 5, at 627-33.1 That court decided that the complaint’s allegations of fraud

and conspiracy were conclusory or otherwise insufficient to establish the elements of

a RICO/COCCA claim. Id. at 631-33. The court noted that the complaint “does not

contend that there were no assessments, penalties, costs, or other amounts owed to

the HOA, [but] only that there were discrepancies as to the amounts and interest rates

claimed and that the property owners received insufficient notice” under the CCIOA.

Id. at 629-30. The court concluded that the plaintiffs’ allegations showed their “mere

disagreement about the amount due.” Id. at 632.

                                     d. This Suit

      On July 22, 2011, the Lands and the HOA filed this suit against AIC, alleging

claims for breach of contract, bad faith breach of insurance contract, and a statutory

claim for unreasonable denial of benefits under Colo. Rev. Stat. § 10-3-1116.

See generally Aplt. App., Vol. 1, at 7-15. They alleged that Lloyd Land “was a
1
       AIC argues that the analysis provided by the district court that dismissed the
underlying federal complaint is extrinsic evidence upon which the Lands improperly
rely. See Aplee. Br. at 9-11. We need not delve into that argument in this case. As
our analysis will show, we have independently reviewed the underlying federal
complaint.


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director and/or officer of Riverdale” and was covered by the D&O Endorsement. Id.

at 8 ¶¶ 9-10, 9 ¶ 11, 13 ¶ 42. They further alleged that “Eileen Land was joined as a

nominal party to the Federal Lawsuit” because she had appointed her husband

president of the HOA pursuant to her authority as the declarant for Riverdale. Id.

at 10 ¶¶ 21-22.

      AIC filed an answer and a counterclaim for a declaratory judgment seeking a

determination of its rights and obligations under the HOA’s policy and endorsements.

AIC asserted several reasons for why no coverage existed for the Lands. First, AIC

asserted that Eileen Land was not covered by the D&O Endorsement because she was

not alleged to be an officer or director of Riverdale, and she was therefore not an

insured as defined by that endorsement. Id. at 117 ¶ 13. Next, AIC asserted that the

Lands were not covered under the policy because the federal suit filed against them

“contains no averments of ‘bodily injury’ or ‘property damage’ caused by an

‘occurrence’ that occurred during the policy period, or alternatively, any coverage

was clearly and unequivocally excluded by Exclusion 2.a.” in the D&O Endorsement,

which excluded coverage for claims of bodily injury or property damage arising from

the negligence of directors and officers. Id. ¶ 14 (bold typeface omitted). AIC

further asserted that Lloyd Land was not covered under the D&O Endorsement

because the federal suit filed against him contained “no allegations of ‘any negligent

act, error, omission or breach of duty directly related to the management of

[Riverdale],’ which occurred during the policy period.” Id. ¶ 15. Finally, AIC


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asserted that Lloyd Land was not covered “even if there were any allegations in the

Federal Lawsuit that fell within the Insuring Agreement,” because “any coverage

under the D & O Endorsement was clearly and unequivocally excluded pursuant to

Exclusion 2.e. and 2.f.,” which excluded coverage for criminal and intentionally

dishonest acts. Id. ¶ 16 (bold typeface omitted).

                          e. Summary Judgment Proceedings

      The Lands and the HOA filed a motion for partial summary judgment

regarding AIC’s duty to defend the Lands against the underlying federal suit. Id.,

Vol. 2, at 124. They asserted that Lloyd Land was covered by the D&O Endorsement

because the underlying complaint alleged negligence and the policy exclusions did

not apply, id. at 134-39, and that Eileen Land was covered by the Members

Endorsement because the underlying complaint alleged damages covered by the

policy, id. at 139-40. AIC filed a response in opposition to the motion, as well as its

own motion for summary judgment denying any liability to the Lands under the

insurance policy. See generally id., Vol. 3, at 287-305, Vol. 4, at 451-68.

      The district court granted AIC’s motion for summary judgment and denied as

moot the motion for partial summary judgment filed by the HOA and the Lands

regarding AIC’s duty to defend. Id., Vol. 5, at 691-701. The court held that the

underlying federal complaint brought claims against the Lands under RICO and the

COCCA, id. at 694, and “does not contain claims or allegations relating to Plaintiffs’

failure to exercise due care, errors, omissions, breach of duty or negligent acts,” id.


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at 698. The court held, rather, that the federal complaint alleged the Lands’

“deceptive or criminal intent.” Id. The court concluded as a result that the

allegations were “plainly within the Policy’s D&O Endorsement exclusions, and

[AIC] has no legal duty to defend [the Lands] in the Underlying Action.” Id. The

court added that AIC had no duty to defend Eileen Land “because the allegations [of]

the Underlying Action Complaint do not fall within the scope of the CGL Coverage

form” because the federal complaint did not allege “‘bodily injury’ or ‘property

damage’ caused by an ‘occurrence,’ . . . as defined in the CGL Coverage Form.” Id.

at 699. Having concluded that AIC had no duty to defend the Lands, the court also

concluded that AIC had no duty to indemnify them, id., and that AIC had not

breached the common law duty of good faith and fair dealing or state statutory law

when it denied coverage, id. at 700. The Lands appeal.

                               II. Standards of Review

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

standard as the district court. Apartment Inv. & Mgmt. Co. (AIMCO) v. Nutmeg Ins.

Co., 593 F.3d 1188, 1192 (10th Cir. 2010). Summary judgment is appropriate when

“there is no genuine dispute as to any material fact and the movant is entitled to

judgment as a matter of law.” Fed. R. Civ. P. 56(a). “Colorado law governs this

action, and we review de novo the district court’s interpretation of Colorado law.”

AIMCO, 593 F.3d at 1192. “The existence of a duty to defend against a particular

claim is a question of law.” Id. at 1193.


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                         III. Issues on Appeal and Discussion

                                  a. Issues on Appeal

      The Lands argue that: (1) Lloyd Land was covered by the D&O Endorsement

because the underlying federal complaint alleged that he committed negligent acts,

errors, omissions, or breach of duty directly related to the management of Riverdale,

and the factual allegations did not solely and entirely fall within the policy’s

exclusions for intentionally fraudulent or criminal acts; and (2) Eileen Land was

covered by both the Members Endorsement and the D&O Endorsement because the

underlying complaint alleged that she appointed Lloyd Land president of the HOA,

resulting in unspecified property damage arising from his negligent acts, errors,

omissions, or breach of duty directly related to the management of Riverdale. The

Lands acknowledge that “[t]here is no question that the Complaint in the Underlying

Lawsuit does not contain claims for relief labeled as negligence, breach of fiduciary

duty, or breach of duties owed under CCIOA,” Aplt. Opening Br. at 23, but they

assert that the district court improperly focused on the labels placed on the legal

claims for relief, instead of examining the complaint for factual allegations that could

lead to the imposition of liability for negligence, errors, omissions, or breach of duty

covered by the AIC policy, id. at 2, 21-25.

                                b. The Duty to Defend

      “Under Colorado law, ‘when an insurer refuses to defend and the insured

brings an action for defense costs,’ the duty to defend is determined by application of


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the complaint rule.” AIMCO, 593 F.3d at 1192 (quoting Cotter Corp. v. Am. Empire

Surplus Lines Ins. Co., 90 P.3d 814, 828 (Colo. 2004)). That is, “[a]s a general rule

under Colorado law, an insurer’s duty to defend an insured is triggered solely on the

basis of the allegations made within the four corners of the complaint, read against

the insurance policy.” United Fire & Cas. Co. v. Boulder Plaza Residential, LLC,

633 F.3d 951, 960 (10th Cir. 2011).

      “Under Colorado law, ‘[a]n insurer seeking to avoid its duty to defend an

insured bears a heavy burden.’” Greystone Constr., Inc. v. Nat’l Fire & Marine Ins.

Co., 661 F.3d 1272, 1284 (10th Cir. 2011) (quoting Compass Ins. Co. v. City of

Littleton, 984 P.2d 606, 613–14 (Colo. 1999)). “An insurer’s duty to defend arises

when the underlying complaint against the insurer alleges any facts that might fall

within the coverage of the policy. . . .” Id. (emphasis added). “Where the insurer’s

duty to defend is not apparent from the pleadings in the case against the insured, but

the allegations do state a claim which is potentially or arguably within the policy

coverage, or there is some doubt as to whether a theory of recovery within the policy

coverage has been pleaded, the insurer must accept the defense of the claim.” Id.

(emphasis added). “The insurer has a duty to defend unless the insurer can establish

that the allegations in the complaint are solely and entirely within the exclusions in

the insurance policy.” United Fire & Cas. Co., 633 F.3d at 957 (quoting Hecla

Mining Co. v. N.H. Ins. Co., 811 P.2d 1083, 1090 (Colo.1991) (emphasis added).




                                         - 10 -
                                    c. Eileen Land

      First, we consider the Lands’ arguments that the policy provided coverage for

Eileen Land. On appeal, the Lands argue that Eileen Land was covered by both the

Members Endorsement and the D&O Endorsement. However, their argument that

she was covered by the D&O Endorsement is deemed waived. They did not allege in

their complaint that Eileen Land was a director or officer of the HOA, and they did

not argue in their motion for partial summary judgment that she was covered by the

D&O Endorsement, so the district court did not address such an argument. “It is the

general rule, of course, that a federal appellate court does not consider an issue not

passed upon below.” Singleton v. Wulff, 428 U.S. 106, 120 (1976). The argument is

without merit in any event. The underlying complaint alleged that Eileen Land

appointed her husband president of the HOA in her role as the declarant for

Riverdale, not as an officer or director of the HOA. See Aplt. App., Vol. 1, at 10

¶¶ 21-22. Even on appeal, the Lands have not shown that the declarant is an officer

or director of the HOA.

      The Lands’ argument that Eileen Land was covered by the Members

Endorsement also has a fatal flaw—they did not challenge the district court’s holding

that there was no “occurrence” at Riverdale, as required by the CGL policy to which

the Members Endorsement was explicitly tied. Aplt. App., Vol. 2, at 241. In the

absence of any argument challenging a necessary and sufficient ground of the district

court’s holding, we affirm the grant of summary judgment to AIC with respect to


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Eileen Land. Moreover, the district court also held that the Lands failed to show that

the underlying suit alleged property damage, as defined in the CGL policy. The suit

against the Lands challenged Lloyd Land’s assessment of, and attempts to collect,

homeowners fees. The Lands have failed to show that the conclusory allegations of

property damage in the underlying complaint alleged a “[p]hysical injury to . . . or

. . . [l]oss of use of tangible property,” as required to support coverage for Eileen

Land under the Members Endorsement to the CGL policy. Id. at 260.

                                     d. Lloyd Land

      Under Colorado law, “a claimant alleging negligence of another party must

establish the existence of a duty, a breach of that duty, causation, and damages.”

Redden v. SCI Colo. Funeral Servs., Inc., 38 P.3d 75, 80 (Colo. 2001) (en banc). The

federal complaint filed against the Lands alleged that:

           Lloyd Land was the president of the HOA and, in that role, he
            filed assessment liens against certain Riverdale properties and
            instructed HOA lawyers to send demand letters regarding the
            assessments to the homeowners. Aplt. App., Vol. 2, at 275 ¶ 8,
            276-77 ¶¶ 13-16.

           Some of the amounts were lawful under the CCIOA, but the
            amounts declared to be past due increased with each successive
            lien or notice, id. at 277-78 ¶¶ 17-29, and interest on the
            outstanding amounts “was calculated differently for each notice
            or letter,” id. at 277 ¶ 17.

           Lloyd Land failed to follow the notice and hearing requirements
            of the CCIOA and the HOA documents, id. at 276 ¶¶ 13-14, 277
            ¶ 18, 278 ¶¶ 22, 26, and “lev[ied] these charges and liens against
            these landowners in violation of the Colorado Common Interest
            Ownership Act,” id. at 279 ¶ 30.

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           Lloyd Land “attempted to collect debts . . . that were not lawfully
            due under Colorado law.” Id. at 279 ¶ 34, 280 ¶ 41. He “used his
            position as President . . . to conduct the unlawful acts mentioned
            above.” Id. at 279 ¶ 33, 280 ¶ 40.

           “As a direct and proximate result of these violations, the Plaintiff
            has suffered damage to property in excess of $250,000.” Id.
            at 279 ¶ 36, 280 ¶ 43.

      Looking beyond the RICO/COCCA labels the plaintiffs in the underlying suit

attached to the claims in their complaint, the underlying complaint clearly alleged

that Lloyd Land committed “negligent act[s], error[s], omission[s] or breach[es] of

duty directly related to the management of the premises” within the meaning of the

D&O Endorsement, see Aplt. App., Vol. 2, at 234, and the complaint sought damages

within the meaning of the policy, see id. at 236. Looking beyond the conclusory

allegations of fraud and conspiracy, the factual allegations of the underlying

complaint did not fall “‘solely and entirely within the exclusions in the insurance

policy’” that excluded coverage for intentionally fraudulent, or criminal acts.

United Fire & Cas. Co., 633 F.3d at 957 (quoting Hecla, 811 P.2d at 1090).

Accordingly, we reverse the grant of summary judgment in favor of AIC with respect

to Lloyd Land.




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      The judgment of the district court is affirmed in part and reversed in part, and

the case is remanded for further proceedings.


                                                 Entered for the Court


                                                 Paul J. Kelly, Jr.
                                                 Circuit Judge




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