Church et al v. American Family Mutual Insurance Company, SI

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Nina Y. Wang
Civil Action No. 23-cv-02524-NYW-TPO
PAUL CHURCH, and
ZAREEN CHURCH,
Plaintiffs/Counterclaim Defendants,
v.
AMERICAN FAMILY MUTUAL INSURANCE COMPANY, S.I.,
Defendant/Counterclaim Plaintiff.
ORDER
This matter comes before the Court on Counterclaim Defendants’ Motion to
Dismiss Count III of Counterclaim Plaintiff’s Counterclaims (“Motion to Dismiss”), [Doc.
37], filed by Plaintiffs and Counterclaim Defendants Paul and Zareen Church (“Plaintiffs”
or “the Churches”). 	Defendant and Counterclaim Plaintiff American Family Mutual
Insurance 	Company, 	S.I. 	(“Defendant” 	or 	“American 	Family”) 	has 	responded 	in
opposition, [Doc. 41], and Plaintiffs have replied, [Doc. 42]. 	The Court finds that oral
argument would not materially assist in the disposition of the Motion to Dismiss.
Upon review of the Parties’ briefing, the entire docket, and the applicable case law,
this Court respectfully GRANTS in part and DENIES in part the Churches’ Motion to
Dismiss.
Case No. 1:23-cv-02524-NYW-TPO Document 51 filed 02/11/25 USDC Colorado
pg 1 of 10

2
BACKGROUND
I. 	Procedural History
This case arises out of a dispute between an insurer (American Family) and its
insureds (the Churches). 	The Churches originally filed their Complaint in Arapahoe
County District Court on August 25, 2023, alleging three state law causes of action against
American Family for breach of contract, common law bad faith breach of an insurance
contract (“common law bad faith”), and a violation of Colo. Rev. Stat. § 10-3-1115
(“statutory bad faith”). See [Doc. 4 at 4–6]. American Family later removed the case to
this Court based on diversity of citizenship pursuant to 28 U.S.C. § 1332. [Doc. 1]. On
October 24, 2023, the Churches filed an Amended Complaint, their operative complaint
in this matter. 	[Doc. 14]. 	In the Amended Complaint, Plaintiffs assert the same three
causes of action. [Id. at 3–5]. American Family moved to dismiss the Amended Complaint
in its entirety based on statute of limitations. [Doc. 17].
On May 24, 2024, this Court denied American Family’s motion to dismiss. 	[Doc.
32]. 	On June 7, 2024, American Family filed its Answer and Jury Demand and
Counterclaim (“Answer and Counterclaims”), [Doc. 33], asserting three counterclaims
against the Churches: a declaratory judgment claim seeking to vacate and set aside an
appraisal award (“Counterclaim I”); a declaratory judgment claim seeking a declaration
with respect to a “depreciation holdback” (“Counterclaim II”); and a misrepresentation
claim (“Counterclaim III”), [id. at 21–25]. 	Only Counterclaim III is at issue in the instant
Motion.
Case No. 1:23-cv-02524-NYW-TPO Document 51 filed 02/11/25 USDC Colorado
pg 2 of 10

3
II. 	Factual Background
The following allegations are drawn from the Answer and Counterclaims and taken
as true for purposes of this Order.
In 2017, American Family issued a Homeowners Policy (the “Policy”) for the
Churches’ property located in Aurora, Colorado (the “Property”). [Id. at 11 ¶ 7]. In June
2018, the Property sustained damage due to a hailstorm, and the Churches subsequently
filed a claim with American Family in connection with resulting damage to the Property’s
roof tiles (the “Claim”). [Id. at ¶ 6].
On July 28, 2019, the Churches represented to American Family in writing that the
original roof tiles were “no longer manufactured” and “no longer available.” 	[Id. at 16
¶ 25]. The following month, American Family obtained a tile from the Property’s roof and
submitted it to “ITEL”1 for identification. 	[Id. at ¶ 26]. 	ITEL subsequently identified the
sample as a tile manufactured by Eagle in an August 2019 report (the “August 2019 ITEL
Report”). 	[Id. at 17 ¶ 27]. 	The August 2019 ITEL Report also states that Eagle still
manufactures the tiles and that the tiles were available for purchase from a variety of
sources. [Id. at ¶ 28].2
However, in an ITEL report from Masterpiece Roofing LLC dated April 24, 2020
(the “April 2020 ITEL Report”), Monier was identified as the manufacturer of the Property’s
roof tiles. 	[Id. at ¶ 31]. 	The Churches, their contractors, their public adjuster, and their
appraiser relied on the April 2020 ITEL Report, [id.], and “ignored the [August] 2019 [ITEL]
1 Although both Parties rely on “ITEL” reports generated in connection with the Property,
neither Party provides additional context.
2 A second report prepared by a “Haag Engineer” who inspected the Property on May 12,
2020 also confirmed that the tiles were manufactured by Eagle (the “Haag Report”). [Doc.
33 at 17 at ¶ 33].
Case No. 1:23-cv-02524-NYW-TPO Document 51 filed 02/11/25 USDC Colorado
pg 3 of 10

4
report,” [id. at ¶ 29]. 	The Churches submitted the April 2020 ITEL Report to American
Family via email on June 20, 2020. [Id. at ¶ 32].
On July 10, 2020, the Churches demanded appraisal and alleged that the roof had
to be replaced because the tiles were no longer manufactured or available for repairs.
[Id. at 18 ¶ 36]. 	On July 29, 2022, the Churches’ designated appraiser and the umpire
signed an appraisal award (the “Appraisal Award”) based on the “incorrect assumption
that the roof tiles were manufactured by Monier and unavailable for repairs.” [Id. at 18–
20 ¶¶ 40–42, 48–49]. In fact, the tiles were manufactured by Eagle and still available for
repairs. [Id. at 19–20 ¶ 49].
On August 18, 2022, American Family requested additional information from the
umpire, including clarification on the Appraisal Award’s references to “clay tiles.” 	[Id. at
20 ¶ 50]. In so doing, American Family also referred the umpire to the Haag Report and
the August 2019 ITEL Report. 	[Id.]. 	The next day, American Family contacted the
Churches’ public adjuster, requesting, among other things, “[i]nformation from the
[appraisal] panel on the tiles included . . . so coverage could be applied.” 	[Id. at ¶ 52].
American Family “specifically referenced” the Haag Report in this communication. 	[Id.].
Ultimately, the appraisal panel did not amend the Appraisal Award “based on the
information provided.” [Id. at ¶ 53]. American Family asserts that the Appraisal Award is
“not consistent with the Policy” and “not based on the correct roof tiles or availability of
those tiles for repairs.” [Id. at 21 ¶¶ 58–59].
Based on the foregoing allegations, American Family claims that the Churches
“concealed and/or omitted information relating to . . . the manufacturer of their roof tiles,
and the estimated costs to repair the . . . Eagle tiles on their roof.” 	[Id. at 23 ¶ 84].
Case No. 1:23-cv-02524-NYW-TPO Document 51 filed 02/11/25 USDC Colorado
pg 4 of 10

5
Relevant here, the Policy provides that coverage will not apply in the event the insured
conceals or misrepresents any material facts or circumstances:
3. Concealment Or Fraud.
…
b. Coverage under Section I of this policy is not provided for any insured
if, before or after a loss, any insured has:
(1) concealed or misrepresented any material fact or circumstance;
(2) presented any altered or falsified document or receipt;
(3) engaged in fraudulent conduct; or
(4) made false statements;
relating to this insurance or any claim under this policy.
[Id. at 15 ¶ 21].
The Churches filed the instant Motion to Dismiss on July 12, 2024. 	[Doc. 37].
Counterclaim 	Defendants 	seek 	dismissal 	of 	American 	Family’s 	misrepresentation
counterclaim under Rule 12(b)(6) of the Federal Rules of Civil Procedure. See generally
[id.]. 	American Family has responded to the Motion to Dismiss, [Doc. 41], and the
Churches have filed a reply, [Doc. 42]. 	Thus, this matter is ripe for disposition and the
Court considers the Parties’ arguments below.
LEGAL STANDARD
Under Rule 12(b)(6), a court may dismiss a complaint for “failure to state a claim
upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). In deciding a motion under
Rule 12(b)(6), the court must “accept as true all well-pleaded factual allegations . . . and
view these allegations in the light most favorable to the plaintiff.” 	Casanova v. Ulibarri,
595 F.3d 1120, 1124 (10th Cir. 2010) (quoting Smith v. United States, 561 F.3d 1090,
1098 (10th Cir. 2009)). 	Nevertheless, a plaintiff may not rely on mere labels or
conclusions “and a formulaic recitation of the elements of a cause of action will not do.”
Case No. 1:23-cv-02524-NYW-TPO Document 51 filed 02/11/25 USDC Colorado
pg 5 of 10

6
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Rather, “a complaint must contain
sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its
face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quotation omitted); see also Robbins
v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008) (explaining that plausibility refers “to
the scope of the allegations in a complaint,” and that the allegations must be sufficient to
nudge a plaintiff’s claims “across the line from conceivable to plausible”). 	The ultimate
duty of the court is to “determine whether the complaint sufficiently alleges facts
supporting all the elements necessary to establish an entitlement to relief under the legal
theory proposed.” Forest Guardians v. Forsgren, 478 F.3d 1149, 1160 (10th Cir. 2007).
ANALYSIS
In the Motion to Dismiss, the Churches ask the Court to dismiss American Family’s
misrepresentation counterclaim with prejudice on two grounds. 	First, the Churches
contend that American Family has waived its misrepresentation counterclaim through its
course of conduct. [Doc. 37 at 4–7]. Second, the Churches argue that American Family
fails to state a claim under Rule 12(b)(6). [Id. at 7–9]. The Court’s analysis begins and
ends with the latter because American Family has failed to state a counterclaim for
misrepresentation under Colorado law.
I. 	Failure to State a Claim
To state a misrepresentation claim under Colorado law, a plaintiff must allege facts
establishing “(1) the insured misrepresented or omitted a fact; (2) the misrepresentations
or omissions were material; and (3) the insured intended to deceive the insurer.”
Wheatridge Off., LLC v. Auto-Owners Ins. Co., 578 F. Supp. 3d 1187, 1202 (D. Colo.
Case No. 1:23-cv-02524-NYW-TPO Document 51 filed 02/11/25 USDC Colorado
pg 6 of 10

7
2022).3 To show that “an insured intended to deceive an insurer,” the insurer must show
that the insured made the misrepresentation knowingly and deliberately. Id.
In its Answer and Counterclaims, American Family alleges that the Churches and
the Churches’ contractors, public adjuster, and appraiser misrepresented that (a) tiles on
the Property’s roof were made by Monier, (b) these tiles were no longer manufactured
and no longer available, and (c) a full roof replacement was required. 	[Doc. 33 at 24
¶¶ 88, 92–93]. The Churches argue that American Family fails to adequately allege the
second and third elements of its misrepresentation counterclaim. [Doc. 37 at 7–9]. With
respect to the latter, the Churches contend that American Family fails to allege facts
sufficient to establish that the misrepresentations were made knowingly and deliberately.
[Id. at 7–8]. Specifically, the Churches assert that Counterclaim III should be dismissed
for failure to allege that the Churches, their contractors, or their public adjuster knew that
the tiles on the roof of the Property were manufactured by Eagle and not Monier. 	[Id.].
The Court respectfully agrees.
In its Response, American Family focuses on whether it “properly identified” the
misrepresentations “at issue” and the “materiality” of those misrepresentations. [Doc. 41
at 7–8]. 	But American Family fails to direct this Court to any allegations to support a
finding that these misrepresentations were made knowingly. See Wheatridge Off., LLC,
578 F. Supp. 3d at 1202.
3 While neither Party identifies a choice of law provision in the Policy, both Parties assume
that Colorado law—and specifically, the standard articulated in Wheatridge Office LLC v.
Auto-Owners Insurance Company, 578 F. Supp. 3d at 1201—governs the counterclaim.
See [Doc. 37 at 8; Doc. 41 at 6]. 	The Court will likewise assume that Colorado law
governs American Family’s misrepresentation counterclaim. Cf. Grynberg v. Total S.A.,
538 F.3d 1336, 1346 (10th Cir. 2008) (“Because the parties’ arguments assume that
Colorado law applies, we will proceed under the same assumption.”).
Case No. 1:23-cv-02524-NYW-TPO Document 51 filed 02/11/25 USDC Colorado
pg 7 of 10

8
Indeed, while American Family cites allegations regarding when these alleged
misrepresentations were made, it fails to allege facts that would permit a factfinder to
conclude that the Churches were aware that Eagle—and not Monier—manufactured their
roof tiles when they conveyed the April 2020 ITEL Report to American Family. 	For
example, American Family does not allege that it provided the Churches or their agents
with copies of the August 2019 ITEL Report, see generally [Doc. 33]; instead, American
Family alleges only that the Churches “ignored” the August 2019 ITEL Report, [id. at 17
¶ 29]. 	The face of the August 2019 ITEL Report also does not indicate that it was
conveyed to the Churches or any of their agents; it appears to have been sent to American
Family alone. 	[Doc. 33-4 at 2]. Though American Family alleges that it “specifically
referenced” the Haag Report in a communication to the Churches’ public adjuster in
August 2022, [Doc. 33 at 20 ¶ 52], that was more than two years after the report was
created, [id. at 17 ¶ 33], more than two years after the Churches demanded appraisal, [id.
at 18 ¶ 36], and after the umpire selected by the Parties—including American Family—
signed the appraisal award on July 29, 2022, [id. at 19 ¶ 48; Doc. 33-11]. 	And as the
Churches point out, American Family “makes no factual allegations” that the Churches
“otherwise knew that the tiles on the roof were Eagle tiles and not Monier,” or that
American Family ever “disputed the brand of the tile” after receiving the Churches’ report
identifying Monier as the manufacturer but before the umpire signed the appraisal award.
[Doc. 42 at 6].
Because 	American 	Family 	fails 	to 	adequately 	allege 	that 	the 	Churches’
misrepresentations regarding the brand of the tile or availability of replacements were
made knowingly and deliberately, its counterclaim for misrepresentation cannot survive
Case No. 1:23-cv-02524-NYW-TPO Document 51 filed 02/11/25 USDC Colorado
pg 8 of 10

9
the Churches’ challenge under Rule 12(b)(6). 	Accordingly, the Court grants in part the
Motion to Dismiss and dismisses Counterclaim III without prejudice for failure to state a
claim.
II. 	Dismissal With or Without Prejudice
Finally, the Churches ask that Counterclaim III be dismissed with prejudice under
Rule 12(b)(6), [Doc. 37 at 9], but fail to explain why dismissal with prejudice is appropriate.
The Court respectfully declines to speculate about, or craft, any argument that might
justify 	dismissal 	with 	prejudice, 	particularly 	given 	that 	the 	Churches 	have 	been
represented by able counsel since the inception of this case. See United States v. Davis,
622 F. App’x 758, 759 (10th Cir. 2015) (“[I]t is not this court’s duty, after all, to make
arguments for a litigant that he has not made for himself.”); Phillips v. Hillcrest Med. Ctr.,
244 F.3d 790, 800 n.10 (10th Cir. 2001) (observing that a court has no obligation to make
arguments on behalf of litigants). Nor can this Court conclude that an amendment would
be futile, given the basis for dismissal. Accordingly, the Court denies in part the Motion
to Dismiss insofar as the Churches seek dismissal with prejudice.
CONCLUSION
For the foregoing reasons, it is ORDERED that:
(1) 	Counterclaim Defendants’ Motion to Dismiss Count III of Counterclaim
Plaintiff’s Counterclaims [Doc. 37] is GRANTED in part and DENIED in
part; and
(2) 	American Family’s Counterclaim III is DISMISSED without prejudice for
failure to state a claim.
Case No. 1:23-cv-02524-NYW-TPO Document 51 filed 02/11/25 USDC Colorado
pg 9 of 10

10
DATED: February 11, 2025 	BY THE COURT:
_______________________
Nina Y. Wang
United States District Judge
Case No. 1:23-cv-02524-NYW-TPO Document 51 filed 02/11/25 USDC Colorado
pg 10 of 10