Home Loan Investment Co. v. St. Paul Mercury Insurance Co.

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Home Loan Investment Company, a financial institution, held a deed of trust on a property in Grand Junction, Colorado, known as White Hall. The owner had stopped making payments on the loan and offered Home Loan a deed to White Hall in lieu of foreclosure. Home Loan opted instead to work with the owner in selling the property, with the hope of being paid out of the proceeds of the sale. Because the owner indicated she could no longer pay insurance premiums on White Hall, Home Loan contacted St. Paul Mercury Insurance Company to obtain coverage for the value of its loan. On September 15, 2011, White Hall was nearly destroyed in a fire. Home Loan tendered a claim to St. Paul for the loss, equal to the outstanding loan balance. St. Paul denied Home Loan’s claim because White Hall did not meet the definition of “foreclosed property” in Home Loan’s policy. St. Paul determined Home Loan had never been a mortgagee in possession of the property and therefore White Hall did not qualify as a Foreclosed Property. Home Loan filed suit in Colorado state court, alleging claims for common-law breach of contract and violations of sections 10-3-1115 and 10-3-1116 of the Colorado Code, which provided a statutory remedy for unreasonable delay or denial of insurance benefits. St. Paul removed the action to federal court, invoking diversity jurisdiction. Prior to trial, St. Paul moved for summary judgment, but the district court denied the motion. At trial, St. Paul argued Home Loan never had “possession” or “care, custody, or control” of White Hall sufficient to trigger coverage under the policy. St. Paul further maintained that, because its coverage decision was “fairly debatable,” it could not have acted unreasonably for purposes of the Colorado statutes. The jury returned a verdict in favor of Home Loan and against St. Paul on both the common-law breach of contract claim and the statutory claim. St. Paul did not challenge the jury’s verdict on Home Loan’s breach of contract claim; the only questions before the Tenth Circuit concerned Home Loan’s statutory bad faith claim under Colorado law. Finding no reversible error, the Tenth Circuit affirmed the district court on all issues. View "Home Loan Investment Co. v. St. Paul Mercury Insurance Co." on Justia Law