JME Investments, LLC et al v. Westfield Insurance Company

1
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Charlotte N. Sweeney
Civil Action No. 1:22-cv-01012-CNS-JPO
JME INVESTMENTS, LLC, a Colorado Limited Liability Company, and HIWAY BAR, LLC,
a Colorado Limited Liability Company,
Plaintiffs,
v.
WESTFIELD INSURANCE COMPANY, an Ohio Corporation,
Defendant.
ORDER
This order addresses three pending motions before the Court. The first two are
competing summary judgment motions. Defendant and Counterclaim Plaintiff Westfield
Insurance Company moves for summary judgment on its three counterclaims: breach of
contract, declaratory judgment, and recoupment, and for summary judgment on Plaintiffs’
three affirmative claims: breach of contract, statutory delay/denial, and common law bad
faith. ECF No. 114. Plaintiffs and Counterclaim Defendants JME Investments, LLC and
Hiway Bar, LLC move for summary judgment on Westfield’s counterclaims. ECF No. 117.
As discussed below, the Court concludes that these competing motions are laden with
genuine factual disputes, rendering summary judgment inappropriate.
The third pending motion is Westfield’s Motion to Exclude Opinions and Testimony
of Damian J. Arguello, Plaintiffs’ claims-handling expert. ECF No. 116. After analyzing the
Case No. 1:22-cv-01012-CNS-TPO Document 139 filed 01/30/25 USDC Colorado
pg 1 of 26

2
parties’ positions and Mr. Arguello’s expert reports, the Court grants in part and denies in
part Westfield’s motion to exclude.
I. 	BACKGROUND
This case arises from a July 12, 2020 kitchen fire in Hayden, Colorado. ECF No.
126, ¶ 137. The fire burned a building owned by JME that was constructed in the 1890s.
ECF No. 117, ¶¶ 3–4. Beginning in 2018, JME leased the entire building to Hiway Bar for
$4,000 per month. Id., ¶ 8. Hiway Bar operated a restaurant and bar on the ground floor
and leased the three residential apartments on the second floor to tourists and visitors,
particularly to hunters during hunting season. Id. Westfield insured the building for
$625,500. ECF No. 114, ¶ 5. JME admits that it “woefully” underinsured the building. ECF
No. 117 at 24. Still, the parties agree that Westfield has paid Plaintiffs over $900,000 on
their claims arising from the fire loss. ECF No. 114, ¶ 134.
A. The Parties and the Insurance Policies
JME is a Colorado limited liability company jointly owned by two brothers, John
and Matt Elam. Id., ¶ 1. Hiway Bar is also a Colorado limited liability company, but it is
owned solely by Matt Elam; John Elam has no interest in this entity. Id., ¶ 2. Westfield
issued commercial insurance policies to Plaintiffs for the period December 3, 2019,
through December 3, 2020. ECF No. 114, ¶ 4. The JME policy provided commercial
property coverage, including building loss coverage, up to $625,500. Id., ¶ 5. The JME
policy provides that “[w]e will not pay for any loss or damage in any case of . . .
concealment or misrepresentation of a material fact committed by you . . . and relating to
coverage under this policy.” ECF No. 117, ¶ 11. Separately, Hiway Bar insured its
Case No. 1:22-cv-01012-CNS-TPO Document 139 filed 01/30/25 USDC Colorado
pg 2 of 26

3
“business personal property and tenant improvements” with Westfield under a separate
Westfield policy. Id. ¶ 14. 1
B. July 12, 2020 Fire and Westfield’s Investigation
The fire that burned JME’s building occurred on July 12, 2020. ECF No. 126, ¶
137. The day after the fire, Westfield assigned Meghan Schmidt as the adjuster on the
claim. ECF No. 114, ¶ 9. Schmidt hired Crawford & Company—an independent adjuster—
to inspect and adjust the claim on behalf of Westfield. ECF No. 117, ¶ 22. Lucinda Miller
of Crawford & Company inspected the building on July 15, 2020. Id. Miller reported that
the building “did not appear to be a total gut” and that it did not appear that “all walls would
need to be removed.” ECF No. 114, ¶ 11. Plaintiffs contend that Miller’s evaluation was
“highly suspect.” ECF No. 126, ¶ 11. Plaintiffs does not say why, but the Court assumes
that it is because her estimate of $56,000 for replacement cost value (RCV) and $29,000
1 The Court finds it helpful to outline the key players involved in the fire investigation, organized by party:
Westfield:
x 	Meghan Schmidt: Senior Property Claim Representative for Westfield; Westfield assigned Schmidt
to adjust the fire loss.
x 	Lucinda Miller: Adjuster with Crawford & Company, Westfield’s local independent adjuster.
x 	Michael McCormack: Regional Consultant with Grecco Building Consultants; Westfield hired
Grecco to further investigate the building loss.
Plaintiffs:
x 	Michael Stoycheff: National General Adjuster with Adjusters International-MBC, LLC (Adjusters
International); Plaintiffs retained Adjusters International as their public adjuster.
x 	Scott deLuise: Chief Executive Officer of Adjusters International.
x 	Kalon deLuise: Chief Operating Officer of Adjusters International.
x 	Derek Pumphrey: Engineer with New Rome Engineering; Plaintiffs hired Pumphrey.
x 	ServiceMaster Cleaning & Restoration: Plaintiffs’ remediation contractor.
x 	HLCC Construction Company: JME’s general contractor to rebuild the building.
Case No. 1:22-cv-01012-CNS-TPO Document 139 filed 01/30/25 USDC Colorado
pg 3 of 26

4
for actual cash value (ACV) was significantly less than the eventual appraisal award of
$875,000 for RCV. Id., ¶¶ 11–12. 2
On July 28, 2020, Plaintiffs retained Adjusters International-MBC, LLC (Adjusters
International) as their public adjuster. ECF No. 114, ¶ 14. On August 3, 2020, Westfield
sent Crawford & Company’s “initial estimate” to Adjusters International. Id., ¶ 14. Plaintiffs
do not dispute that Schmidt characterized the independent adjuster’s report as an initial
estimate, but they dispute that it was, in fact, the initial, as opposed to final, estimate. ECF
No. 126, ¶ 15. The next day, Westfield issued a $24,149.79 payment to Plaintiffs based
on Crawford & Company’s ACV estimate of the documented loss to date less a $5,000
deductible. ECF No. 114, ¶ 16.
On August 6, 2020, Westfield hired Grecco Building Consultants to further
investigate the building loss. Id., ¶ 17. On August 12, 2020, Michael McCormack of
Grecco inspected the building with Michael Stoycheff (the Adjusters International adjuster
handling the building loss), Derek Pumphrey (Plaintiffs’ engineer from New Rome
Engineering), and Scott deLuise of Adjusters International. Id., ¶ 19. Stoycheff informed
Plaintiffs’ remediation contractor, ServiceMaster Cleaning & Restoration, that he wanted
to “get on record a demolition scope of work approved by the adjuster” and obtain
Westfield’s “full buy in on the cleaning scope as well.” Id., ¶ 21. The parties agree that
Stoycheff understood that Westfield’s approval and full buy in for the demolition and
cleaning scope were important to ensure that Westfield “would pay for it.” Id., ¶ 22.
2 The Court explains the parties’ competing positions here merely to highlight the numerous genuine
material fact disputes that make summary judgment unwarranted.
Case No. 1:22-cv-01012-CNS-TPO Document 139 filed 01/30/25 USDC Colorado
pg 4 of 26

5
Stoycheff told Plaintiffs and deLuise that he and Schmidt “agreed to take a slow approach
with ServiceMaster on both the building demo and BPP processing.” Id., ¶ 24.
McCormack prepared a “preliminary estimate” of the Building loss using software
called Xactimate and sent it to Stoycheff on September 16, 2020. Id., ¶ 30. McCormack
estimated the RCV cost of the repairs to be $170,610.31. ECF No. 117, ¶ 32. McCormack
stated that he would “close [his] file unless further considerations are requested and
approved by” Schmidt. ECF No. 125, ¶ 32. Plaintiffs contend that “McCormack issued a
woefully inadequate repair estimate.” ECF No. 126, ¶ 30 (no record citation). The parties
again dispute whether McCormack’s estimate was an initial or final estimate. ECF No.
114, ¶ 31; ECF No. 126, ¶ 31. At Westfield’s direction, McCormack sent a revised
estimate with depreciation applied on October 5, 2020, which (again) estimated the RCV
of the building loss at $170,610.31 with $20,441.20 in recoverable depreciation. ECF No.
114, ¶ 32. The same day, Westfield issued a $121,019.32 ACV payment based on
McCormack’s estimate. Id., ¶ 33.
The next inspection of the building occurred on November 4, 2020. ECF No. 117,
¶ 34. McCormack, Stoycheff, Pumphrey, and a representative from ServiceMaster
attended. Id. Following the inspection, McCormack and Stoycheff did not reach a full
agreement on the extent of smoke damage or the scope and price of repairs. ECF No.
114, ¶ 34. McCormack reported potential areas of disagreement to Westfield and
informed Westfield that he would await receipt of Pumphrey’s engineer’s report and
ServiceMaster’s “demo/mitigation” estimate before revising his loss estimate. Id., ¶ 35.
Case No. 1:22-cv-01012-CNS-TPO Document 139 filed 01/30/25 USDC Colorado
pg 5 of 26

6
The parties dispute whether McCormack knew that Plaintiffs intended to demolish the
building interior after the reinspection. ECF No. 114, ¶ 36; ECF No. 126, ¶ 36.
On November 10, 2020, six days after the second joint inspection, Stoycheff
confirmed to Westfield by email that the next steps were ServiceMaster’s preparation of
a demo/mitigation estimate and Pumphrey’s preparation of an engineer’s report to enable
McCormack to “complete his repair estimate.” ECF No. 114, ¶ 37.
C. 	Plaintiffs’ “Gutting” of the Building
The parties do not dispute that Plaintiffs’ remediation contractor, ServiceMaster,
gutted the building and brought the building “down to the studs.” ECF No. 114, ¶¶ 38–45.
But they vigorously dispute when Westfield knew about the gutting. See id. The primary
dispute boils down to Stoycheff’s December 10, 2020 email to McCormack and Schmidt.
ECF No. 126-3. Plaintiffs point to a single sentence in his email stating that “[d]emo and
mitigation should be completed by the end of January.” Id. McCormack responded that
same day, suggesting that he would review the demolition and mitigation estimate and
“bold the items I have issues with, [t]hen we can review over the phone.” ECF No. 114, ¶
60 (quoting ECF No. 114-40). Westfield argues that it understood that McCormack would
review Stoycheff’s estimate and Pumphrey’s engineer’s report, update his estimate, do a
final walk-thru, and seek agreement on scope and price. Id., ¶ 62. Moreover, on
December 29, 2020, Stoycheff sought an update from Westfield without informing
Case No. 1:22-cv-01012-CNS-TPO Document 139 filed 01/30/25 USDC Colorado
pg 6 of 26

7
Westfield that the building demolition would be complete by the following week. Id., ¶ 63
(citing ECF No. 114-42). 3
Plaintiffs take issue with McCormack’s acknowledgement that he had received
Stoycheff’s December 10 email, arguing that “McCormack never reached back out to
Stoycheff. And he never objected to the plan of action set forth by Stoycheff in the
December 10 email, nor did Schmidt object.” ECF No. 126, ¶ 60; id., ¶ 62. The parties
also quibble over the meaning of Stoycheff’s testimony, when Westfield pressed him on
why he “didn’t just write [that Plaintiffs] are proceeding with the mitigation of the structure
as per my estimate sent to [Westfield’s representatives] on December 10, 2020.” ECF
No. 126, ¶ 67. In response, he said, “I don’t know why I didn’t say that, but, you know,
shame on me I suppose.” Id. (emphasis added).
The parties also dispute whether Plaintiffs should have hired an industrial hygienist
to test for smoke before gutting. To expand, Pumphrey recommended that the second
floor be fully investigated to determine the extent of smoke infiltration. Id., ¶ 55.
Pumphrey’s recommendation was for an industrial hygienist to test smoke samples, and,
according to Westfield, not to demolish or gut the entire second floor. Id., ¶ 56. Contrary
to Pumphrey’s recommendation, Plaintiffs did not hire an industrial hygienist to test for
3 Plaintiffs dispute this fact, stating that “Stoycheff had already told Westfield the second-floor demo would
begin after December 10 and would be completed by the end of January. Ex. 4, December 10 email.” The
Court observes that Plaintiffs failed to provide a pincite to the 54-page email sent on December 10, 2020.
The Court assumes that Plaintiffs reference is to Stoycheff’s statement that “[d]emo and mitigation should
be completed by the end of January.” ECF No. 126-3 at 1. This statement, of course, could mean that the
demo and mitigation has begun, or will begin shortly, and should be done by the end of the January based
on the estimate. It could also mean that, because the fire occurred in July, the parties should work toward
a goal to complete the demolition and mitigation by the end of January, but not that the work had already
begun, or that will begin without Westfield’s express approval. It is for the jury to weigh the credibility of the
witnesses and decide this issue.
Case No. 1:22-cv-01012-CNS-TPO Document 139 filed 01/30/25 USDC Colorado
pg 7 of 26

8
smoke before gutting the second floor of the building. Id., ¶ 57. Plaintiffs admit these facts
but argue that hiring an “industrial hygienist . . . would have added a cost and the damages
were clear.” ECF No. 126, ¶ 56. They also argue that the smoke testing was in addition
to, not in lieu of, gutting. Id., ¶ 57.
Westfield states that it learned the full extent of the gutting on February 2, 2021.
ECF No. 114, ¶¶ 70–72. On February 4 and 8, 2021, Westfield sent Stoycheff letters
memorializing its claim position, its decision to have a structural engineer inspect the
property, and its request for the actual invoices of demo work performed by ServiceMaster
for evaluation. Id., ¶ 74. McCormack and Westfield’s retained engineer, Brent Cornelison
of 	BC 	Engineering, 	reinspected 	the 	Building 	with 	Stoycheff, 	Pumphrey, 	and
ServiceMaster on February 22, 2021. Id., ¶ 75. Upon observing the condition of the
Building firsthand, McCormack objected to the extent of the demolition, particularly as to
the second floor, and reminded Stoycheff that he had never approved of any further
demolition following the November 4, 2020 reinspection, which Stoycheff acknowledged
was “true.” Id., ¶ 76. 4 McCormack posited that there was no reason to demolish the
building to that extent. Id., ¶ 77; ECF No. 126, ¶ 77 (disputing “as to the accuracy” without
citing to any record evidence).
Plaintiffs argue that “Stoycheff repeatedly advised McCormack and Schmidt that
Plaintiffs were continuing to demo the Building, in emails dated December 10, January
19, and February 2, all without objection from Westfield or McCormack. Exs. 3, 13, 14.”
4 Plaintiffs dispute this fact, but they do so with no record evidence, arguing that “Westfield’s position is that
Plaintiffs were to do nothing for the three and a half months between McCormack’s inspections (Nov. 4,
2020 and Feb. 22, 2021), although Stoycheff’s December 10 email clearly stated that demo would
continue.” ECF No. 126, ¶ 76. This response does not dispute the fact set forth in Westfield’s motion.
Case No. 1:22-cv-01012-CNS-TPO Document 139 filed 01/30/25 USDC Colorado
pg 8 of 26

9
ECF No. 126, ¶ 78. The Court has already explained why it is not persuaded that the
December 10 email unequivocally notified Westfield that Plaintiffs were demolishing the
building. The January 19 email is even less persuasive. There, Stoycheff stated that
“[t]hey are proceeding with the proper mitigation of the structure and should be done with
that by the end of January.” ECF No. 126-13 at 1 (emphasis added). Stoycheff does not
clarify what he meant by proper mitigation. And although Stoycheff does clearly reference
the demolition in his February 2, 2021 email—stating that the “insured’s have completed
the demo and should be done with mitigation soon,” ECF No. 126-14 at 1–2—it is a stretch
to say that Westfield did not object to that email. See ECF No. 114, ¶ 74.
D. 	The Parties’ Various Invoices and Payments
In March 2021, Stoycheff sent Westfield a new demo/mitigation estimate prepared
by ServiceMaster using Xactimate, which Stoycheff labelled an “Xactimate invoice.” ECF
No. 114, ¶ 79. Plaintiffs admit that he referred to the document as an invoice but argue
that it was self-evident that it was an estimate. ECF No. 126, ¶ 79. The parties agree that
the invoice, or estimate, contained errors, such as “double billing on interior walls.” ECF
No. 114, ¶ 83. But they dispute who caused the errors: Westfield points to ServiceMaster;
Plaintiffs point to McCormack. ECF No. 114, ¶ 83; ECF No. 126, ¶ 83.
On April 5, 2021, McCormack sent Westfield a supplemental report with a revised
RCV loss estimate of $196,456.95 and $25,102.68 in recoverable depreciation. ECF No.
114, ¶ 84; see also ECF No. 117, ¶ 61 (stating that McCormack sent his updated estimate
on April 6, 2021, not April 5); id. (stating that his estimate for ACV was $171,354).
McCormack also stated that Stoycheff’s demo/mitigation estimate “include[d] items not
Case No. 1:22-cv-01012-CNS-TPO Document 139 filed 01/30/25 USDC Colorado
pg 9 of 26

10
damaged by the fire” and was “not a fair representation of the work required to prepare
the loss for fire damaged repairs.” ECF No. 114, ¶ 86. McCormack noted that Pumphrey’s
engineer’s report did not mention “stripping the building to the studs to facilitate the
repairs.” Id., ¶ 87. Plaintiffs do not dispute that Pumphrey’s engineer’s report omitted this,
but they argue that McCormack was fully aware that a full gut based on the December 10
email. ECF No. 126, ¶ 87.
On April 19, 2021, Stoycheff sent Westfield a $1.196 million Conceptual Estimate
“to repair the building to pre-loss conditions” and requested “the policy limits in full based
off the facts and documentation that we have provided previously.” ECF No. 114, ¶ 94.
Plaintiffs admit that they hired HLCC Construction Company as their general contractor
and requested that HLCC prepare the Conceptual Estimate in January 2021, which
included two exterior items unaffected by the fire. ECF No. 126, ¶ 95. Plaintiffs argue,
however, that these items were clearly identifiable in the estimate and de minimis in value
($76,559). Id.
McCormack submitted a revised estimate on June 2, 2021. ECF No. 114, ¶ 106.
He estimated the RCV of building loss as $273,115.32 with $29,616.81 in recoverable
depreciation. Id. The same day, Westfield issued an additional $72,144.24 ACV payment
on the building loss based on McCormack’s revised estimate—which Plaintiffs note was
eleven months after the fire. ECF No. 126, ¶ 107.
E. 	Plaintiffs’ Loss of Rents Claim
While Stoycheff pursued JME’s building loss claim, Kalon deLuise of Adjusters
International pursued a claim for JME’s loss of monthly rental income from Hiway Bar’s
Case No. 1:22-cv-01012-CNS-TPO Document 139 filed 01/30/25 USDC Colorado
pg 10 of 26

11
lease of the first floor. ECF No. 114, ¶ 108. On July 26, 2020, two weeks after the fire,
Matthew Elam informed Scott deLuise of Adjusters International that “[t]here isn’t a formal
lease due to the common ownership but we are talking to our attorneys about how to
draw one up.” Id., ¶ 109. A few weeks later, Kalon deLuise asked John Elam to send him
the JME–Hiway Bar lease to support the Loss of Rents Claim. Id., ¶ 110. John Elam
responded by sending an unsigned version of a document titled “Commercial Lease”
between the Hiway Bar and JME. Id., ¶ 111. On August 20, 2020, five weeks after the
fire, Matthew Elam emailed John Elam a partially executed signature page for the
Commercial Lease. Id., ¶ 112. And on October 6, 2020, Kalon deLuise sent Westfield a
“Lost Rent Package” in support of JME’s Loss of Rents Claim that included a signed
version of the Commercial Lease. Id., ¶ 113. Plaintiffs admit that Kalon deLuise did not
disclose that the lease had been prepared after the fire, but they note that it is undisputed
that “Westfield paid the exact amount of the lost rents claim and not a penny more.” ECF
No. 126, ¶ 113.
The parties agree that the Commercial Lease stated that it was “entered into this
1st day of January, 2020,” and that it was dated January 1, 2020. ECF No. 114, ¶ 114.
Matthew Elam admitted that the Commercial Lease was drafted and signed after the fire
occurred, but he explained that he did that merely “to show the start of the year.” ECF No.
126, ¶ 115. He testified that the lease was not “backdated,” as Westfield argues, but rather
dated January 1, 2020 “to memorialize the verbal agreement that we always had.” Id.
Case No. 1:22-cv-01012-CNS-TPO Document 139 filed 01/30/25 USDC Colorado
pg 11 of 26

12
Westfield paid the Loss of Rents claim at a rate of $4,000 per month for a period
of 12 months from the date of loss, for a total of $48,000.00—reflecting the maximum
allowed under JME’s Policy. ECF No. 114, ¶ 118.
F. 	Loss Appraisal and Westfield Total Payments
After issuing the June 2, 2021 ACV payment on the building loss, Westfield did not
hear from Plaintiffs or their representatives until September 3, 2021, when Plaintiffs’
counsel sent a letter to Westfield demanding payment of over $800,000 for the building
loss and other previously unasserted claims. ECF No. 114, ¶ 120. Following exchanges
of correspondence regarding settlement of this matter, in September of 2021, Westfield
requested binding appraisal. ECF No. 117, ¶ 66. Under this process, which is part of the
JME policy, both JME and Westfield select an appraiser, and a third appraiser (referred
to as an umpire) could also be selected if the two party-appointed appraisers could not
agree on a value. Id., ¶ 67. Here, on January 31, 2022, roughly one and a half years after
the fire, the two party-appointed appraisers agreed on the value of the loss, negating the
need for an umpire. Id., ¶ 68. The appraisers agreed that the RCV repair value for the
building was $875,000 and the ACV repair value was $612,500. Id. As the parties point
out, this value exceeded the $625,500 building limit in the JME policy but was $627,000
less than Plaintiffs’ estimate of the loss.
Westfield argues that Plaintiffs’ appraiser Richard Glavich improperly relied on
documents from Plaintiffs estimating the building loss at $1,501,783. Id., ¶ 130. On
February 18, 2022, Westfield issued a $369,001.49 ACV payment pursuant to the
appraisal award, bringing its total payment on JME’s building loss claim to $607,500
Case No. 1:22-cv-01012-CNS-TPO Document 139 filed 01/30/25 USDC Colorado
pg 12 of 26

13
($612,500 less a $5,000 deductible). 5 Id., ¶ 133. Including amounts paid to Hiway Bar,
Westfield has paid Plaintiffs a total of $917,037.24 on their claims arising from the fire
loss. Id., ¶ 134.
II. 	LEGAL STANDARDS
A. Federal Rule of Civil Procedure 56
Summary 	judgment 	is 	warranted 	“if 	the 	pleadings, 	depositions, 	answers 	to
interrogatories, and admissions on file, together with the affidavits, if any, show that there
is no genuine issue as to any material fact and that the moving party is entitled to
judgment as a matter of law.” Ledbetter v. City of Topeka, 318 F.3d 1183, 1187 (10th Cir.
2003) (internal quotations and citation omitted); Fed. R. Civ. P. 56. The factual record and
reasonable inferences must be construed in the light most favorable to the nonmoving
party. Self v. Crum, 439 F.3d 1227, 1230 (10th Cir. 2006). The moving party bears the
initial burden, but once met, the burden shifts to the nonmoving party to “set forth specific
facts showing that there is a genuine issue for trial.” Anderson v. Liberty Lobby Inc., 477
U.S. 242, 256 (1986). Ultimately, the Court’s inquiry on summary judgment is whether the
facts and evidence identified by the parties present “a sufficient disagreement to require
submission to a jury or whether it is so one-sided that one party must prevail as a matter
of law.” Id. at 251–52.
5 Westfield provides an itemized breakdown of the payments it made to JME and Hiway Bar, totaling
$917,037.24. See ECF No. 114, ¶ 134.
Case No. 1:22-cv-01012-CNS-TPO Document 139 filed 01/30/25 USDC Colorado
pg 13 of 26

14
B. Federal Rule of Evidence 702
The recently amended Rule 702 of the Federal Rules of Evidence, which governs
the testimony of expert witnesses, provides that:
A witness who is qualified as an expert by knowledge, skill,
experience, training, or education may testify in the form of an
opinion or otherwise if the proponent demonstrates to the
court that it is more likely than not that: (a) the expert’s
scientific, technical, or other specialized knowledge will help
the trier of fact to understand the evidence or to determine a
fact in issue; (b) the testimony is based on sufficient facts or
data; (c) the testimony is the product of reliable principles and
methods; and (d) the expert’s opinion reflects a reliable
application of the principles and methods to the facts of the
case.
Fed. R. Evid. 702 (as amended on Dec. 1, 2023). Where, as here, a party challenges the
admissibility of an expert witness, Rule “702 imposes upon the trial judge an important
gate-keeping function with regard to the admissibility of expert opinions.” Mathis v. Huff
& Puff Trucking, Inc., 787 F.3d 1297, 1307 (10th Cir. 2015) (citation and quotation
omitted). The proponent of expert testimony bears the burden—by a preponderance of
evidence—of showing admissibility. Fed. R. Evid. 702; United States v. Nacchio, 555 F.3d
1234, 1241 (10th Cir. 2009).
To evaluate admissibility, the Court engages in a “two-step analysis.” Roe v. FCA
US LLC, 42 F.4th 1175, 1180 (10th Cir. 2022). First, the Court must decide whether the
proffered expert is qualified “by knowledge, skill, experience, training, or education” to
render the opinion. Fed. R. Evid. 702; see also Roe, 42 F.4th at 1180. Second, if the
expert is sufficiently qualified, the Court must determine whether the proffered opinions
Case No. 1:22-cv-01012-CNS-TPO Document 139 filed 01/30/25 USDC Colorado
pg 14 of 26

15
are 	reliable. 	Roe, 	42 	F.4th 	at 	1180–81. 	“The 	reliability 	inquiry 	asks 	whether 	the
methodology employed by an expert is valid—that is, whether it is based on sufficient
data, sound methods, and the facts of the case.” Id. at 1181 (citing Kumho Tire Co., Ltd.
v. Carmichael, 526 U.S. 137, 152 (1999)). The Court also evaluates whether the expert
reliably applied the methodology to the facts of the case. Id.
Experience alone may provide a sufficient foundation for expert testimony, but a
witness relying solely on experience must “explain how that experience leads to the
conclusion reached, why that experience is a sufficient basis for the opinion, and how that
experience is reliably applied to the facts.” Fed. R. Evid. 702 advisory committee’s notes
to 2000 amendment. The Court’s “gatekeeping function requires more than simply taking
the expert’s word for it.” Id. (citation and quotation omitted). The Court has substantial
discretion to determine “how to perform its gatekeeping function under Daubert.” Bill
Barrett Corp. v. YMC Royalty Co., LP, 918 F.3d 760, 770 (10th Cir. 2019) (emphasis in
original); see also Roe, 42 F.4th at 1180.
III. 	ANALYSIS & ORDER
The Court will address Westfield’s motion for summary judgment, Plaintiffs’ motion
for summary judgment, and Westfield’s motion to exclude in turn.
A. 	Westfield’s Motion for Summary Judgment
Westfield argues that Plaintiffs violated the cooperation and fraud clauses of their
insurance policies and thus coverage is voided. ECF No. 114 at 24–28. Westfield points
to three examples. First, Westfield argues that Plaintiffs and their public adjuster,
Stoycheff, concealed from Westfield that Stoycheff gave Plaintiffs and their vendors the
Case No. 1:22-cv-01012-CNS-TPO Document 139 filed 01/30/25 USDC Colorado
pg 15 of 26

16
approval to fully gut the building after the November 4, 2020 reinspection. Id. at 25.
Second, Westfield argues that, rather than cooperate with Westfield’s multiple requests
for invoices reflecting the actual work performed, Stoycheff had ServiceMaster prepare a
new estimate, which he inaccurately called an “invoice.” Id. at 27. Westfield contends that
the ServiceMaster estimate included work not performed, double-billed certain items, and
reflected different pricing than ServiceMaster’s actual invoices. Id. Third, Westfield points
to the Commercial Lease that was drafted and signed after the fire, which Adjusters
International submitted to Westfield to substantiate JME’s Loss of Rents Claim. Id. at 28.
Westfield argues that these “concealments and misrepresentations” advance
Plaintiffs’ goal of recovering as much as possible from Westfield. Id. It goes on to argue
that, because of Plaintiffs’ alleged breaches, there can be no finding that Westfield acted
in bad faith. Id. at 30. Thus, according to Westfield, Plaintiffs’ affirmative claims fail as a
matter of law, and Plaintiffs’ violations of the policies’ cooperation and fraud clauses
entitle Westfield to judgment on its counterclaims for declaratory judgment, breach of
contract, and recoupment. The Court is not persuaded.
The three material facts outlined above are not undisputed as Westfield contends;
instead, Plaintiffs refute each one. First, rather than conceal the gut job on the building,
Plaintiffs argue that Stoycheff told Westfield about Plaintiffs’ intention in his December 10,
2020 email to McCormack and Schmidt. See, e.g., ECF No. 126, ¶¶ 36, 38, 42–43, 46.
Second, whether ServiceMaster prepared an invoice or an estimate, and which party is
to blame for the inaccurate items in the invoice, is plainly disputed. See, e.g., ECF No.
126, ¶ 83. Finally, whether Plaintiffs backdated the Commercial Lease or merely
Case No. 1:22-cv-01012-CNS-TPO Document 139 filed 01/30/25 USDC Colorado
pg 16 of 26

17
memorialized a verbal agreement is a genuine fact dispute that cannot be decided at this
stage. See, e.g., ECF No. 126, ¶ 115.
In sum, whether Plaintiffs perpetrated a fraud or cooperated with Westfield in its
investigation of the fire is a question of fact for the jury to determine. Accordingly, the
Court denies Westfield’s motion for summary judgment in its entirety. 6
B. 	Plaintiffs’ Motion for Summary Judgment
At the highest level, Plaintiffs argue that Westfield’s counterclaims fail as a matter
of law because “the record reflects that there was never any intent to induce Westfield to
pay more than the loss sustained,” and thus, Westfield cannot prove that Plaintiffs
breached the fraud clause provision. ECF No. 117 at 1. The Court disagrees with Plaintiffs
at this stage of litigation.
Plaintiffs first argue that Westfield’s counterclaims are barred by the doctrine of
laches. 7 “The elements of laches are: (1) full knowledge of the facts; (2) unreasonable
6 Westfield goes on to argue that summary judgment is warranted “as to certain insurance benefits that
Plaintiffs cannot establish are owed.” ECF No. 114 at 31. Each of these brief arguments are undeveloped
and concern material facts that are in dispute. Westfield also argues that judgment on Counts II and III are
warranted in addition to the cooperation and fraud arguments. ECF No. 114 at 34–40. Westfield’s argument
is that Plaintiffs cannot show that Westfield engaged in unreasonable delay or unreasonably denied
payment—essentially arguing that it acted reasonably. Id. Whether Westfield acted reasonably under the
facts presented is a question for the jury to decide.
7 Neither party addresses whether the Court should apply federal or state law when analyzing Plaintiffs’
laches argument. Plaintiffs rely on a single case—Biodiversity Conservation All. v. Jiron, 762 F.3d 1036
(10th Cir. 2014). That case, however, concerned two federal statutes and thus did not invoke diversity
jurisdiction. Id. at 1049 (“Two sources of statutory and regulatory law govern this case: (1) the National
Forest Management Act of 1976 (‘NFMA’); (2) the National Environmental Protection Act of 1969 (‘NEPA’);
and both acts' implementing regulations.”). For its part, Westfield relies on Ute Indian Tribe of Uintah &
Ouray Rsrv. v. Probst, 428 F.2d 491 (10th Cir. 1970)—a case involving 28 U.S.C § 1362 and 25 U.S.C §
677. The Tenth Circuit has determined that state substantive law governs the defenses of laches. Bechler
v. Kaye, 222 F.2d 216, 219 (10th Cir. 1955); see also Sumrall v. LeSea, Inc., 104 F.4th 622, 629 (7th Cir.
2024) (“This difference between state and federal laches law implicates the Erie doctrine, which calls on
federal courts applying state law to use state substantive law and federal procedural rules. See Shady
Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393, 398 (2010). Laches—just like a statute
of limitations—is substantive.”). Thus, in its limited analysis, the Court will apply Colorado substantive law.
Case No. 1:22-cv-01012-CNS-TPO Document 139 filed 01/30/25 USDC Colorado
pg 17 of 26

18
delay in the assertion of available remedy; and (3) intervening reliance by and prejudice
to another.” Gen. Elec. Co. v. Galbiati, No. 13-cv-02053-RPM, 2015 WL 1186438, at *5
(D. Colo. Mar. 12, 2015) (quoting Hickerson v. Vessels, 316 P.3d 620, 623 (Colo. 2014)).
“Whether the elements of laches have been established is a question of fact.” Keller Cattle
Co. v. Allison, 55 P.3d 257, 260 (Colo. App. 2002). “A party asserting laches as a basis
for summary judgment must establish that no genuine issue of material fact remains, that
the other party unreasonably delayed the proceedings, and that such delay caused
substantial prejudice.” Id. Plaintiffs cannot make this showing.
To start, Plaintiffs essentially rehash the arguments they presented in their
opposition to Westfield’s motion for leave to amend to file an amended answer. The Court
granted Westfield’s motion for leave over Plaintiffs’ objections, finding that Westfield’s
request for leave was appropriate. ECF No. 88. More fundamental are the various fact
disputes outlined above concerning when Westfield learned of the purported fraud. Courts
in this District have permitted insurers to assert counterclaims midway through litigation
to avoid allegations from insureds concerning “overly aggressive litigation tactics by an
insurance company.” Wheatridge Off., LLC v. Auto-Owners Ins. Co., No. 19-CV-00487-
RM-MEH, 2020 WL 1433502, at *4 (D. Colo. Mar. 24, 2020) (despite the record
establishing that the defendant had some knowledge of the issues with damage estimates
and preexisting damage early in the case, not “fault[ing] Defendant for proceeding
cautiously in asserting counterclaims until sufficient evidence is generated in discovery to
justify such claims”).
Case No. 1:22-cv-01012-CNS-TPO Document 139 filed 01/30/25 USDC Colorado
pg 18 of 26

19
The Court cannot conclude as a matter of law that “Westfield knew all of the facts
underlying its counterclaims well before this case began,” as Plaintiffs contend. ECF No.
117 at 25. The Court therefore denies Plaintiffs’ request to bar Westfield’s counterclaims
on laches grounds.
Plaintiffs next argue that Westfield’s counterclaims premised on the fraud clause
fail as a matter of law. ECF No. 117 at 26. They attack six alleged misrepresentations. Id.
at 26–33. For the reasons already stated, the Court finds genuine fact disputes prohibit
the granting of summary judgment on this issue. The Court highlights three of these
alleged misrepresentations. First, Plaintiffs contend that they neither misrepresented nor
concealed the “full gut” demolition. Id. at 27. Plaintiffs point to Stoycheff’s December 10,
2020 email as evidence. Setting aside that the December 10 email did not unequivocally
notifiy Westfield that Plaintiffs were demolishing the building, Westfield points out that the
evidence shows that the full gut demolition actually began five weeks before Stoycheff
sent the December 10 email. ECF No. 125 at 28. Plaintiffs, without citing any support,
argue that this is “untrue.” ECF No. 124 at 12; see also id. at 12 n.3 (distinguishing
Westfield’s “sole factual source,” arguing that there is no mention of a “full gut” job but
rather mentioning the “demolition”). The parties’ argument displays the factual disputes
concerning this issue.
Second, 	Plaintiffs 	contend 	that 	the 	alleged 	“backdated” 	lease 	was 	not 	a
misrepresentation or concealment. ECF No. 117 at 28–29. The Court rejects Plaintiffs’
argument on this issue for the same reason it denied Westfield’s: whether Plaintiffs
improperly backdated the Commercial Lease or merely memorialized a verbal agreement
Case No. 1:22-cv-01012-CNS-TPO Document 139 filed 01/30/25 USDC Colorado
pg 19 of 26

20
is a genuine fact dispute for the jury to decide. And third, Plaintiffs argue that the rebuild
estimate, although it may have contained inaccuracies or line items not damaged by the
fire, was not a misrepresentation. ECF No. 117 at 20–30. This issue too is rife with fact
disputes. As Westfield notes, even Plaintiffs’ claims-handling expert admitted that it
“would certainly [have been] better to disclose” that the estimate included items not
directly related to the loss. ECF No. 125 at 32. For these reasons, the existence of
genuine fact disputes concerning the fraud clause make summary judgment inappropriate
on Westfield’s counterclaims.
Plaintiffs next argue that Westfield can present no evidence that Plaintiffs failed to
cooperate with Westfield. ECF No. 117 at 33–35. Plaintiffs continue to argue that they
told Westfield all along that they were demolishing the building, concluding that “Plaintiffs
did not materially conceal anything.” Id. at 35 (emphasis added). Westfield argues that
Plaintiffs’ cooperation clause argument requires ignoring the evidence establishing that
Plaintiffs proceeded with the full gut weeks before informing Westfield, and thus, there is
evidence that Plaintiffs failed to cooperate. ECF No. 125 at 36–37. Like all the issues
before, whether Plaintiffs cooperated with Westfield in its investigation is a factual issue
the jury must decide.
Plaintiffs’ 	final 	argument 	is 	that 	Westfield 	is 	precluded 	from 	making 	any
counterclaim relating to the amount of damages or the need for a “full gut” demotion of
the building because the insurance appraisal is binding on the parties. ECF No. 117 at
35–37. 	Stated 	differently, 	Plaintiffs 	contend 	that 	the 	appraisers’ 	determination 	is
preclusive of the amount or value of the Plaintiffs’ loss ($875,000 in RCV). Id. at 36.
Case No. 1:22-cv-01012-CNS-TPO Document 139 filed 01/30/25 USDC Colorado
pg 20 of 26

21
Plaintiffs further argue that the appraisers necessarily resolved the “full gut” issue. Id. at
37 (“Due to the size of their award, the appraisers necessarily understood that a ‘full gut’—
full demolition—had been necessary to establish the extent of the fire damage.”).
In response, Westfield argues that appraisal awards “are not as preclusive as
arbitration.” ECF No. 125 at 38. Westfield relies Andres Trucking Co. v. United Fire &
Cas. Co., 488 P.3d 425 (Colo. App. 2018). There, the Colorado Court of Appeals noted
that an appraisal provision, which the parties agree is identical to the one in the JME
policy, “did not purport to be a mechanism for resolving other disagreements between the
parties” 	and 	“expressly 	preserved 	to 	[the 	insurer] 	the 	right 	to 	contest 	liability,
notwithstanding the parties’ participation in the appraisal process.” Id. at 430. Andres
distinguished between appraisal and arbitration: “Judgment does not follow directly from
an appraisal because, unlike arbitration, the function of an appraisal award is not to
determine the merits of any claim.” Id. Westfield explains that it does not seek to overturn
the appraisal award. ECF No. 125 at 39. Rather, Westfield asserts that Plaintiffs breached
the policies’ fraud and cooperation clauses before the building loss was submitted to
appraisal, and these breaches—particularly the concealment of the full gut—enabled
Plaintiffs to gain an advantage in the appraisal. Id.
Based on the facts presented to the Court, the Court cannot conclude as a matter
of law that the appraisal award precludes Westfield’s counterclaims. The Court further
observes that Plaintiffs failed to reply to Westfield’s arguments, thus waiving the issue.
Est. of Burnett v. City of Colorado Springs, No. 21-CV-1708-WJM-MDB, 2025 WL 71660,
at *11 (D. Colo. Jan. 10, 2025) (“[T]he Court finds the Officers have abandoned the
Case No. 1:22-cv-01012-CNS-TPO Document 139 filed 01/30/25 USDC Colorado
pg 21 of 26

22
argument by failing to address the Estate’s arguments in reply.”); see also Bonte v. U.S.
Bank, N.A., 624 F.3d 461, 466 (7th Cir. 2010) (failure to respond to an argument in a
response brief results in waiver).
Accordingly, the Court denies Plaintiffs’ motion for summary judgment in its
entirety.
C. 	Westfield’s Motion to Exclude Opinions and Testimony of Damian
Arguello
Plaintiffs retained Arguello to evaluate and opine as to whether Westfield’s
handling of Plaintiffs’ insurance claims was consistent with industry standards. ECF No.
124 at 1. Arguello, an attorney, submitted two expert reports in this matter. On March 10,
2023, he submitted his initial, affirmative report. ECF No. 116-1. Over a year later, on May
15, 2024, Arguello submitted a supplemental expert report to address certain issues
raised in Westfield’s counterclaims. ECF No. 116-2.
Westfield contends that Arguello’s initial report, submitted in connection with
Plaintiffs’ common law bad faith claim, is littered with factual inaccuracies and improper
legal conclusions. Westfield argues that various opinions in his report are highly
unreliable, prejudicial, and unhelpful to the jury. Westfield also takes issue with Arguello’s
supplemental report in which, according to Westfield, Arguello improperly speculates
about Westfield’s motivation for asserting its counterclaims, including that Westfield filed
the counterclaims to “distract the factfinder’s attention from Westfield’s deficient claim
handling,” 	and 	that 	Westfield 	sought 	to 	“perpetuate[] 	this 	litigation 	by 	raising 	its
counterclaims extremely late in the litigation[.]” ECF No. 116 at 9 (quoting ECF No. 116-
2).
Case No. 1:22-cv-01012-CNS-TPO Document 139 filed 01/30/25 USDC Colorado
pg 22 of 26

23
As required by the Court’s Uniform Practice Standards, 8 Westfield recites the 10
opinions in Arguello’s affirmative report that Westfield contends are improper due in part
to the “litany of factual errors” predicating these opinions. See ECF No. 116 at 7–8. Having
analyzed these 10 opinions, the Court declines to exclude them at this time. The Court
has already outlined the numerous factual disputes in this matters. Westfield can
challenge any perceived factual errors that Arguello relied on during its cross examination
of the expert. The Court’s role as a gatekeeper under Daubert “is not intended to serve
as a replacement for the adversary system.” Fed. R. Evid. 702 advisory committee’s
notes to 2000 amendment (quoting United States v. 14.38 Acres of Land Situated in
Leflore Cnty., Miss., 80 F.3d 1074, 1078 (5th Cir. 1996)). Rather, “[v]igorous cross-
examination, presentation of contrary evidence, and careful instruction on burden of proof
are 	the 	traditional 	and 	appropriate 	means 	of 	attacking 	shaky 	but 	admissible
evidence.” Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 596 (1993).
Westfield next challenges Arguello’s claims-handling opinion in which he states,
“[i]n my opinion, Westfield’s handling of JME’s and Hiway’s claims failed to meet
applicable standards of care for a reasonable insurer under the facts and circumstances
of this loss.” ECF No. 116 at 8 (quoting ECF No. 116-1 at 23). The Court counseled the
parties at the Final Pretrial Conference on January 17, 2025, that it will permit Arguello to
testify, consistent with his expertise in the insurance industry, about the relevant
insurance industry standards concerning an insurer’s duty to investigate claims, including
8 “All motions filed under Rule 702 shall include the expert witness’s report as an exhibit and specify, with
particularity, the opinion(s) that the moving party seeks to exclude and the specific ground(s) on which each
opinion is challenged, e.g., relevancy, sufficiency, or methodology.” CNS Civ. Practice Standard 7.1C(b).
Case No. 1:22-cv-01012-CNS-TPO Document 139 filed 01/30/25 USDC Colorado
pg 23 of 26

24
whether Westfield’s conduct was consistent with that of a reasonable insurer. Such
testimony is common in this District. Masters v. Safeco Ins. Co. of Am., No. 20-CV-00631-
PAB-NRN, 2021 WL 4317112, at *7 (D. Colo. Sept. 23, 2021); O’Sullivan v. Geico Cas.
Co., 233 F. Supp. 3d 917, 929 (D. Colo. 2017) (“Mr. Torres may testify as to insurance
industry standards, which may include his testimony and opinions explaining how he
believes Geico’s conduct differed from the conduct of other insurers or fell short of
industry standards. Mr. Torres may not, however, offer ultimate legal opinions. . . . The
Court 	will 	therefore 	exclude 	opinions 	of 	Mr. 	Torres 	that 	Geico’s 	conduct 	was
unreasonable or insufficient as a matter of law, or was in violation of any statute.”); see
also Peden v. State Farm Mut. Auto. Ins. Co., 841 F.3d 887, 890 (10th Cir. 2016) (the
reasonableness of an insurer’s investigation of a claim may be determined by expert
opinion); Goodson v. Am. Standard Ins. Co. of Wisconsin, 89 P.3d 409, 415 (Colo. 2004).
But Arguello may not go any further by testifying that Westfield’s handling of
Plaintiffs’ claim was unreasonable. Expert testimony must be helpful to the jury. Fed. R.
Evid. 702(a). To ensure testimony is helpful, “[a]n expert may not state legal conclusions
drawn by applying the law to the facts, but an expert may refer to the law in expressing
his or her opinion.” United States v. Richter, 796 F.3d 1173, 1195 (10th Cir. 2015) (quoting
United States v. Bedford, 536 F.3d 1148, 1158 (10th Cir. 2008)). “The line between a
permissible opinion on an ultimate issue and an impermissible legal conclusion is not
always easy to discern.” Id. (quoting United States v. McIver, 470 F.3d 550, 562 (4th Cir.
2006)). Here, the Court finds that the challenged opinion goes right up to, but does not
cross, that thin line. Plaintiffs are warned, however, to stay clear of this line during trial.
Case No. 1:22-cv-01012-CNS-TPO Document 139 filed 01/30/25 USDC Colorado
pg 24 of 26

25
Westfield then challenges seven opinions from Arguello’s supplemental report that
Westfield argues constitute improper legal conclusions. Id. at 11–12. For example,
Arguello stated, “[i]n my opinion, the available evidence doesn’t support Westfield’s
counterclaims.” ECF No. 116-2 at 2 (emphasis added). Another example is his statement
that, “in my opinion, Plaintiffs provided ample cooperation with Westfield’s investigation[.]”
Id. at 9.
Unlike the 10 opinions challenged on factual grounds, Plaintiffs do not address any
of these seven opinions with specificity in their response. Plaintiffs instead assert high-
level arguments that Arguello’s opinions are “properly grounded in the standard of care
for insurance claims handlers and are relevant to the determination of materiality.” ECF
No. 124 at 12. Plaintiffs argue that this post-litigation conduct is relevant to Westfield’s
on-going duty of good faith and fair dealing. The Court is not persuaded.
True, an insurer’s “duty of good faith and fair dealing continues unabated during
the life of the insurer-insured relationship, including through a lawsuit or arbitration
between an insured and the insurer.” Masters, 2021 WL 4317112, at *7 (quoting
Sanderson v. Am. Fam. Mut. Ins. Co., 251 P.3d 1213, 1217 (Colo. App. 2010)); see also
Parsons, 165 P.3d at 815 (“[T]he tort of bad faith breach of an insurance contract
encompasses all of the dealings between the parties, including conduct occurring after
the arbitration procedure.” (citation and quotations omitted)). But Arguello’s opinions,
especially his opinion that the evidence does not support Westfield’s counterclaims,
clearly are improper. This type of testimony will invade the province of the jurors, who will
be tasked with evaluating whether the evidence supports Westfield’s counterclaims.
Case No. 1:22-cv-01012-CNS-TPO Document 139 filed 01/30/25 USDC Colorado
pg 25 of 26

26
See O'Sullivan, 233 F. Supp. 3d at 928 (an “expert witness’s testimony may not usurp the
jury’s fact-finding function”).
Finally, the Court questions how Arguello could speculate as to Westfield’s
rationale and motivation for filing its Counterclaims. Such testimony would be inherently
unreliable. Further, as Westfield explains, the Court was well-informed of the timing of
Westfield’s counterclaims when it determined that good cause existed to permit Westfield
leave to amend its answer to bring the counterclaims. ECF No. 88. Arguello’s opinion
appears to question the Court’s ruling, which is another reason his counterclaims
opinions are impermissible.
V. 	CONCLUSION
Consistent with the above analysis, the Court DENIES the parties competing
motions for summary judgment, ECF Nos. 114, 117, and GRANTS in part and DENIES
in part Westfield’s Motion to Exclude Opinions and Testimony of Damian J. Arguello, ECF
No. 116.
DATED this 30th day of January 2025.
BY THE COURT:
________________________________
Charlotte N. Sweeney
United States District Judge
BY THE	E	E	E	E C	C	C	C	C	COU	O	O	O	O 	RT:
_______	__	__	________	__	__	____	__	__	____	__	_________________
Ch	Ch	Ch	Ch	C	C	C	C	C ar	aaa lotte N.	N.	N.	N.	N	N.	N	N	N	N	N	N S	S	S	Sweeeeeen	ee ey
United Sta	ta	taatesssss Di	D	D	D strict Jud	ud	ud	uddge
Case No. 1:22-cv-01012-CNS-TPO Document 139 filed 01/30/25 USDC Colorado
pg 26 of 26