New Hampshire Insurance Company v. TSG Ski & Golf

128 F.4th 1337

• Court: Court of Appeals for the Tenth Circuit
• Decided: February 24, 2025
• Docket: 23-1248
• Status: Published

Opinion

Appellate Case: 23-1248 Document: 64-1 Date Filed: 02/24/2025 Page: 1 FILED United States Court of Appeals PUBLISH Tenth Circuit

UNITED STATES COURT OF APPEALS February 24, 2025 Christopher M. Wolpert FOR THE TENTH CIRCUIT Clerk of Court _________________________________

NEW HAMPSHIRE INSURANCE COMPANY; NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA,

Plaintiffs-Counter-Defendants- Appellees,

v. No. 23-1248

TSG SKI & GOLF, LLC; THE PEAKS OWNERS ASSOCIATION, INC.; PEAKS HOTEL, LLC; H. CURTIS BRUNJES,

Defendants-Counterclaimants- Appellants. _________________________________

Appeal from the United States District Court for the District of Colorado (D.C. No. 1:21-CV-01873-CMA-SBP) _________________________________

Bradley A. Levin (Kerri J. Anderson with him on the briefs) of Levin Sitcoff Waneka PC, Denver, Colorado, for Defendants-Counterclaimants-Appellants.

Agelo L. Reppas (Mark A. Deptula with her on the brief) of BatesCarey LLP, Chicago, Illinois, for Plaintiffs-Counter-Defendants-Appellees. _________________________________

Before HARTZ, KELLY, and FEDERICO, Circuit Judges. _________________________________

HARTZ, Circuit Judge. _________________________________ Appellate Case: 23-1248 Document: 64-1 Date Filed: 02/24/2025 Page: 2

This appeal presents a dispute over liability-insurance coverage. The issues

arise from exclusions in the insurance policies that foreclose both providing a defense

and indemnity coverage if the insureds are sued for defamatory or disparaging

statements when the insureds have knowledge of the falsity of the statements.

Following Colorado precedent, we hold that even though the claims against the

insureds did not require proof that the alleged false statements were made knowingly,

the knowledge-of-falsity exclusions preclude defense coverage because the

underlying complaint alleged that the insureds knowingly published the false

statements. And we hold that the exclusions preclude indemnity coverage because the

evidence at the underlying trial established that the insureds knowingly published the

false statements.

I. BACKGROUND

A. The Policies

TSG Ski & Golf, LLC (TSG) was insured under commercial general-liability

insurance policies issued by New Hampshire Insurance Company (New Hampshire),

its primary liability insurer, and National Union Fire Insurance Company of

Pittsburgh, P.A. (National Union), its excess-liability insurer (together the Insurers). 1

Both policies included The Peaks Owners Association, Inc. (the POA) and Peaks

Hotel, LLC as named insureds by endorsement.

1 The Insurers each issued an initial policy for 2017–2018 and then renewed the policies with no relevant changes for the following two years. In this opinion we reference only the initial policies. 2 Appellate Case: 23-1248 Document: 64-1 Date Filed: 02/24/2025 Page: 3

The policies provided coverage for sums the insureds became obligated to pay

as damages because of personal and advertising injury, which both policies defined

as:

[I]njury . . . arising out of one or more of the following offenses:

Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services[.]

Aplt. App., Vol. VII at 1955 (emphasis added); see Vol. IX at 2514.

But both policies excluded coverage for personal and advertising injury

arising out of the publication of material the insureds knew to be false. The New

Hampshire policy barred coverage for “‘Personal and advertising injury’ arising out

of oral or written publication, in any manner, of material, if done by or at the

direction of the insured with knowledge of its falsity.” Aplt. App., Vol. VII at 1946

(emphasis added). And, in almost identical language, the National Union policy did

not apply to “‘Personal Injury and Advertising Injury’ . . . arising out of oral, written

or electronic publication, in any manner, of material if done by or at the direction of

any Insured with knowledge of its falsity[.]” Aplt. App., Vol. IX at 2504 (emphasis

added).

The New Hampshire policy included a “duty to defend” the insureds against

any lawsuit seeking damages for personal and advertising injury. Aplt. App., Vol. VII

at 1946. The National Union policy also imposed a duty to defend the insureds

against these suits, but only upon exhaustion of the New Hampshire policy limits.

Under both policies, however, there was no duty to defend the insureds against a suit

3 Appellate Case: 23-1248 Document: 64-1 Date Filed: 02/24/2025 Page: 4

seeking damages for personal and advertising injury “to which this insurance does

not apply.” Aplt. App., Vol. VII at 1946; Vol. IX at 2495.

B. The Underlying Lawsuit

In February 2020 Telluride Resort & Spa, LLC (Telluride) and its principals

Ted and Todd Herrick (collectively the Underlying Plaintiffs) sued TSG, Peaks

Hotel, the POA, and H. Curtis Brunjes (collectively the TSG Parties) in Colorado

state court. The fifth amended complaint alleged the following: 2

The Peaks is a mixed-use condominium building operated as a ski-in/ski-out

resort in Mountain Village, Colorado. The building is comprised of about 177

residential condo units, 14 commercial units, and 26 penthouse units. The residential

condo units were typically rented out to visitors through The Peaks’ rental program,

operating like a hotel. Between 2009 and mid-2015 Telluride was the sole owner of

all residential and commercial units in The Peaks. The penthouse units were owned

by private parties unaffiliated with Telluride.

The building’s business and affairs were governed by the POA, its

homeowners’ association. The POA’s elected board of directors, which included Mr.

2 Because “[a]n amended complaint supersedes the original complaint and becomes the sole statement of the plaintiff’s cause of action,” In re Marriage of Lockwood, 857 P.2d 557, 561 (Colo. App. 1993), we confine our review of the allegations in the underlying lawsuit to those contained in the fifth amended complaint, which was the final version of the complaint. See Cyprus Amax Min. Co. v. Lexington Ins. Co., 74 P.3d 294, 298 n.2 (Colo. 2003) (reviewing the allegations in the “Second Amended Complaint” filed against the insured to determine whether the insured’s loss was covered because that complaint “form[ed] the basis of argument in the case at hand”). 4 Appellate Case: 23-1248 Document: 64-1 Date Filed: 02/24/2025 Page: 5

Brunjes, managed and oversaw the expenses incurred to maintain and operate The

Peaks’ common elements (owned as tenants in common by the owners of the

residential, commercial, and penthouse units). The owners were subject to annual

homeowners’ assessments from the POA to pay these expenses.

Telluride paid all these assessments on its residential and commercial

condominium units through what was known as the “True-Up Process.” Under this

process, each year the POA allocated 80% of the budgeted common-area

maintenance and operating expenses to Telluride, which owned roughly 80% of the

building based on unit square footage, with the remaining 20% allocated to the

penthouse owners. The POA would remit to Telluride the assessments collected from

the penthouse owners (20% of the budgeted expenses). Telluride would then pay The

Peaks’ expenses as they were incurred throughout the year. At the end of each year

the POA board would credit Telluride’s expense payments against the total

assessments owed by Telluride. If the POA expenses paid by Telluride exceeded the

amount of budgeted expenses previously allocated to it, the penthouse owners would

pay their share of the difference to Telluride. On the other hand, if the POA expenses

paid by Telluride were less than the amount of budgeted expenses previously

allocated to it, Telluride would pay its share of the difference to the penthouse

owners. The True-Up Process referred to this entire sequence, from Telluride paying

all the expenses incurred on the building’s common elements to the settling of

accounts at the end of the year. Notably, Telluride would never pay any of these

assessments directly to the POA. (It is unclear from the record whether there were

5 Appellate Case: 23-1248 Document: 64-1 Date Filed: 02/24/2025 Page: 6

“spa” assessments imposed on the owners of the residential and penthouse units that

were paid through a different process.)

In July 2015 TSG purchased from Telluride all but one of the commercial units

in The Peaks. During the due-diligence period leading up to the acquisition, TSG

officers and accountants learned about and examined the True-Up Process. Through

its wholly-owned subsidiary Peaks Hotel, TSG assumed control over The Peaks

property, the rental program for the residential condo units, and the POA’s board of

directors. After the purchase an entity related to TSG also acquired a number of

penthouse and residential condo units in the building.

Peaks Capital Partners, the sole manager and member of Telluride, then

distributed its remaining residential condo units to its investors. Through this

transaction, Highlands Resorts at the Peaks, LLC (Highlands), another entity

managed by Todd Herrick, became the owner of 47 residential condo units that were

formerly owned by Telluride. Telluride kept one residential condo unit and Ted

Herrick personally obtained ownership of another.

In late 2018 the TSG Parties began implementing a three-part scheme to

coerce the Underlying Plaintiffs into paying annual assessments that the TSG Parties

knew were not owed. First, the TSG Parties commissioned a “sham” audit of the

annual assessments paid by Telluride between 2009 and mid-2015. Aplt. App., Vol.

III at 572–73. They manipulated the audit to overlook payments made by Telluride

through the True-Up Process, guaranteeing that TSG’s accountant would erroneously

6 Appellate Case: 23-1248 Document: 64-1 Date Filed: 02/24/2025 Page: 7

conclude that Telluride had failed to pay any assessments during the relevant time

period.

Second, the TSG Parties retained an accounting firm to examine Telluride’s

payment of assessments. But the TSG Parties intentionally limited the scope of the

accounting firm’s evaluation to include only those assessments, if any, that were paid

via direct deposits to the POA’s bank accounts; as a result, the firm failed to identify

any payment of assessments by Telluride accomplished through the True-Up Process.

Finally, TSG and the POA, through the POA’s outside legal counsel,

circulated to Telluride, the Herricks, all individual members of the POA, and

numerous third parties (including leaders of the local business community) a debt-

collection letter. The letter falsely stated that “[Telluride] and the individuals and

entities associated with it” failed to pay any annual assessments on their residential

condo and commercial units from 2010 to mid-2015, owing more than $15.5 million

in unpaid assessments. Aplt. App., Vol. III at 606 (internal quotation marks omitted).

The letter demanded payment and threatened legal action to collect the amounts due.

It contained no acknowledgement that Telluride had paid assessments through the

True-Up Process and claimed there was no “evidence that [Telluride] ever was

assessed and/or paid operating dues” on the units it owned. Aplt. App., Vol. III at

606–07 (internal quotation marks omitted and emphasis added). Knowing that the

representations in the debt-collection letter were false, the TSG Parties circulated the

letter in an effort to coerce the Underlying Plaintiffs into making payments they did

not owe.

7 Appellate Case: 23-1248 Document: 64-1 Date Filed: 02/24/2025 Page: 8

The Underlying Plaintiffs all asserted claims for relief against the TSG Parties

for (1) violating the Colorado Common Interest Ownership Act (CCIOA), Colo. Rev.

Stat. § 38-33.3-209.5 (against the POA); (2) breach of fiduciary duty (against all

defendants); (3) aiding and abetting breach of fiduciary duty (against TSG); (4) civil

conspiracy (against all defendants); and (5) negligence (against all defendants). In

addition to compensatory damages, the Underlying Plaintiffs sought punitive

damages, attorney fees, and costs.

The underlying lawsuit proceeded to trial in June 2022. 3 The testimony of

several POA board members who approved the debt-collection letter established that

they knew the Underlying Plaintiffs did not owe $15.5 million in unpaid assessments.

Board members Mr. Brunjes, William Jensen (who was also the chief executive

officer of TSG), and James Richards (who was also TSG’s chief financial officer) all

testified that when the letter was circulated, they knew Telluride had paid

assessments through the True-Up Process and that the $15.5-million demand failed to

account for those payments.

The jury returned a verdict for the Underlying Plaintiffs on all claims that

proceeded to trial. It awarded the Underlying Plaintiffs $225,000 in compensatory

damages but declined to award punitive damages. The court awarded the Underlying

Plaintiffs $2,298,225 in statutory attorney fees and $328,510.53 in costs.

3 The claims against Peaks Hotel were dismissed by the Underlying Plaintiffs before trial. 8 Appellate Case: 23-1248 Document: 64-1 Date Filed: 02/24/2025 Page: 9

C. The Present Litigation

The TSG Parties requested defense and indemnification coverage for the

claims filed against them, but the Insurers disclaimed coverage for all claims based

on the policies’ knowledge-of-falsity exclusions. 4 New Hampshire nevertheless

agreed to defend the TSG Parties subject to a “full reservation of rights,” which

included the right to withdraw the defense, the right to seek reimbursement for

defense expenses, and the right to seek declaratory relief. Aplt. App., Vol. X at 2707.

The Insurers then filed this action in the United States District Court for the

District of Colorado, seeking a declaratory judgment that they had no duty to defend

or indemnify the TSG Parties in the underlying litigation. New Hampshire also

sought reimbursement for the amounts it had spent on representing the insureds in the

underlying litigation. The TSG Parties responded with counterclaims for breach of

contract, common-law bad faith, and statutory bad faith against the Insurers. The

counterclaims were premised on, among other things, the Insurers’ allegedly

wrongful repudiation of their duty to provide a defense, failure to take action to settle

the claims, and refusal to indemnify the TSG Parties in the underlying lawsuit.

The Insurers moved for summary judgment. The district court granted their

motion on all claims, concluding that they had no duty to defend or indemnify the

TSG Parties because the knowledge-of-falsity exclusions “expressly preclude

4 Although Mr. Brunjes was not a named insured, he claimed coverage under the policies “as a member, officer, and director of the POA.” Aplt. App., Vol. I at 248. 9 Appellate Case: 23-1248 Document: 64-1 Date Filed: 02/24/2025 Page: 10

coverage for loss relating to [the] Underlying Plaintiffs’ claims and damages.” N.H.

Ins. Co. v. TSG Ski & Golf, LLC, 673 F. Supp. 3d 1191, 1203 (D. Colo. 2023). And

the court determined that the Insurers were entitled to summary judgment on the TSG

Parties’ counterclaims for breach of contract and common-law and statutory bad faith

because coverage was properly denied.

The TSG Parties appeal. Exercising jurisdiction under 28 U.S.C. § 1291, we

affirm.

II. DISCUSSION

A. Standard of Review

We review the district court’s grant of summary judgment de novo, applying

the same legal standard that the district court is to apply. See Pompa v. Am. Fam.

Mut. Ins. Co., 520 F.3d 1139, 1142 (10th Cir. 2008). Summary judgment is

appropriate when “there is no genuine issue as to any material fact and the movant is

entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).

“When, as here, a federal court is exercising diversity jurisdiction, it must

apply the substantive law of the forum state.” Blackhawk-Central City Sanitation

Dist. v. Am. Guar. & Liab. Ins. Co., 214 F.3d 1183, 1188 (10th Cir. 2000). The

parties agree that Colorado law governs our interpretation of the insurance policies.

Our review of the district court’s interpretation of Colorado law is de novo. See

Chavez v. Ariz. Auto. Ins. Co., 947 F.3d 642, 645 (10th Cir. 2020). Ordinarily, our

task is to predict how the Colorado Supreme Court would rule on the legal issues

after examining other authority, such as its rulings on similar issues, rulings by the

10 Appellate Case: 23-1248 Document: 64-1 Date Filed: 02/24/2025 Page: 11

State’s lower courts, the law in other jurisdictions, and relevant treatises. See Bertels

v. Farm Bureau Prop. & Cas. Ins. Co., 123 F.4th 1068, 1078 (10th Cir. 2024). But

that enterprise is not necessary when, as here, the State’s highest court has already

provided an answer to the legal questions before us. In that situation, we simply

“apply the most recent statement of Colorado law by the Colorado Supreme Court.”

Blackhawk, 214 F.3d at 1188.

B. Duty to Defend

We begin by examining whether the Insurers had a duty to defend the TSG

Parties in the underlying lawsuit. We conclude they did not because the policies’

knowledge-of-falsity exclusions bar coverage.

1. Principles of Colorado Insurance Law

Colorado courts “construe an insurance policy’s terms according to principles

of contract interpretation.” Thompson v. Md. Cas. Co., 84 P.3d 496, 501 (Colo.

2004). “The words of the contract should be given their plain meaning according to

common usage, and strained constructions should be avoided.” Allstate Ins. Co. v.

Huizar, 52 P.3d 816, 819 (Colo. 2002).

“The duty to defend pertains to the insurance company’s duty to affirmatively

defend its insured against pending claims.” Const. Assocs. v. N.H. Ins. Co., 930 P.2d

556, 563 (Colo. 1996). Whether this duty exists is determined by application of the

“complaint rule.” Cyprus Amax Min. Co. v. Lexington Ins. Co., 74 P.3d 294, 301

(Colo. 2003) (internal quotation marks omitted). Under this rule, courts compare the

factual allegations in the underlying complaint to the terms of the insurance policy.

11 Appellate Case: 23-1248 Document: 64-1 Date Filed: 02/24/2025 Page: 12

See Hecla Min. Co. v. N.H. Ins. Co., 811 P.2d 1083, 1089–90 (Colo. 1991). When the

complaint “alleges any facts that might fall within the coverage of the policy,” the

duty to defend arises. Id. at 1089; accord Thompson, 84 P.3d at 502.

But an insurer need not defend its insured when “an exclusion in the insurance

policy precludes coverage.” Thompson, 84 P.3d at 502. To avoid the duty to defend,

the insurer must establish “that the allegations in the complaint are solely and

entirely within the exclusions in the insurance policy”; that is, “that there is no

factual or legal basis” on which the insurer might eventually owe coverage. Cotter

Corp. v. Am. Empire Surplus Lines Ins. Co., 90 P.3d 814, 829 (Colo. 2004) (internal

quotation marks omitted). The insurer must also show that the exclusions actually

“appl[y] in the particular case, and that the exclusions are not subject to any other

reasonable interpretations.” Compass Ins. Co. v. City of Littleton, 984 P.2d 606, 619

(Colo. 1999) (internal quotation marks omitted).

2. Application

The definition in the policies of personal and advertising injury includes

“[o]ral or written publication . . . of material that slanders or libels a person or

organization or disparages a person’s or organization’s goods, products or services.”

Aplt. App., Vol. VII at 1955; Vol. IX at 2514 (comma omitted). Although the fifth

amended complaint does not bring a claim for libel, slander, or disparagement, the

parties have agreed that the allegations in the complaint fell within the scope of

coverage for suits seeking damages for personal and advertising injury. See

Thompson, 84 P.3d at 502 (A duty to defend may arise “[w]hen all the elements of a

12 Appellate Case: 23-1248 Document: 64-1 Date Filed: 02/24/2025 Page: 13

claim covered by a policy are alleged, . . . even if a claim is not labeled according to

the terms used in an insurance policy.”). Namely, the complaint alleged the elements

of libel and disparagement, including: the debt-collection letter contained false

statements, was circulated to third parties, and caused the Underlying Plaintiffs to

suffer significant financial harm and reputational damage. 5

By the same token, however, the allegations in the complaint triggered the

policies’ knowledge-of-falsity exclusions. The exclusions barred coverage for

personal and advertising injury “arising out of oral or written publication . . . of

material, if done by or at the direction of the insured with knowledge of its falsity.”

Aplt. App., Vol. VII at 1946 (emphasis added); see Aplt. App., Vol. IX at 2504.

Each element of the exclusions was alleged. First, the Underlying Plaintiffs

repeatedly alleged that their injuries arose out of, or were caused by, the publication

of false statements in the debt-collection letter. See N. Ins. Co. of N.Y. v. Ekstrom,

784 P.2d 320, 323 (Colo. 1989) (explaining that arising out of is “construed to bar

5 See L.S.S. v. S.A.P., 523 P.3d 1280, 1287 (Colo. App. 2022) (“The elements of a defamation [or libel] claim are: (1) a defamatory statement concerning another; (2) published to a third party; (3) with fault amounting to at least negligence on the part of the publisher; and (4) either actionability of the statement irrespective of special damages or the existence of special damages to the plaintiff caused by the publication.” (internal quotation marks omitted)); Thompson, 84 P.3d at 507 n.16 (“The tort of disparagement consists of the following elements: (1) a false statement; (2) published to a third party; (3) derogatory to the plaintiff’s title to his property or its quality, to his business in general or to some element of his personal affairs; (4) through which defendant intended to cause harm to the plaintiff’s pecuniary interest or either recognized or should have recognized that it was likely to do so; (5) malice; and (6) special damages.”).

13 Appellate Case: 23-1248 Document: 64-1 Date Filed: 02/24/2025 Page: 14

coverage where, but for the [excluded] cause of loss, the injury would not have

occurred”). Second, the complaint alleged that the false statements in the debt-

collection letter were published to “numerous third parties and prominent members of

the [town of] Telluride business community.” Aplt. App., Vol. III at 622. And third,

the complaint was replete with allegations that the false statements were published by

the TSG Parties with knowledge of their falsity. The relevant allegations were as

follows:

1. This action arises out of Defendants’ conduct in designing and then implementing a coordinated scheme intended to unlawfully coerce Plaintiffs into paying money to the POA and TSG that Defendants knew was not owed. Aplt. App., Vol. III at 571 (emphasis added).

11. . . . At the time the POA, TSG, and Brunjes broadly published the Debt Collection Letter, they knew that the letter’s calculation of allegedly unpaid assessments was false and misleading. Id. at 574–75 (emphasis added).

156. In the Debt Collection Letter, the POA, TSG, and Brunjes intentionally misrepresented the scope and reliability of the “internal audit” performed by TSG and Peaks Hotel, LLC. Id. at 609 (emphasis added).

157. In the Debt Collection Letter, the POA, TSG, and Brunjes also blatantly misrepresented the nature and scope of [the accounting firm’s] engagement. Id. (emphasis added).

158. The POA, TSG, and Brunjes knowingly and intentionally circulated these false statements through the publication of the Debt Collection Letter. Id. (emphasis added).

159. The POA, TSG, and Brunjes authorized the publication of the Debt Collection Letter despite knowing that the statements and positions set forth in the letter were false and misleading. Id. at 610 (emphasis added).

160. The POA, TSG, and Brunjes’ conduct in knowingly publishing false and misleading statements was an egregious breach of the fiduciary

14 Appellate Case: 23-1248 Document: 64-1 Date Filed: 02/24/2025 Page: 15

obligations of care, loyalty, and good faith they owed to Plaintiffs. Id. (emphasis added).

161. The POA, TSG, and Brunjes’ conduct in knowingly publishing false and misleading statements through the Debt Collection Letter was reckless, intentional, and performed with malice and in bad faith. Id. (emphasis added).

213. Defendants’ conduct . . . has directly and proximately caused Plaintiffs to experience significant monetary harm. These actions by Defendants include . . . knowingly publishing a series of false and misleading statements regarding Plaintiffs to be published to numerous third parties through the Debt Collection Letter . . . . Id. at 622 (emphasis added).

236. The POA breached its fiduciary duties . . . by . . . knowingly approving the publication of false and misleading statements through the Debt Collection Letter . . . . Id. at 627 (emphasis added).

241. Brunjes breached his fiduciary duties . . . by . . . knowingly authorizing a series of false and misleading statements regarding Plaintiffs to be circulated to numerous third parties through the Debt Collection Letter . . . . Id. at 628 (emphasis added).

255. Acting as the de facto manager of the POA and The Peaks, TSG . . . enabled knowingly false and misleading statements to be widely circulated through the Debt Collection Letter. Id. at 631 (emphasis added).

261. . . . [T]hrough publishing the Debt Collection Letter TSG knowingly participated in and encouraged the POA’s publication of false and misleading information. Id. at 632 (emphasis added).

267. As alleged in this Complaint, Defendants acted in a willful and wanton manner through their conduct in . . . knowingly publishing a false and misleading Debt Collection Letter in order to advance Defendants’ improper and unlawful objectives. Id. at 633 (emphasis added).

Because the allegations in the complaint fell entirely within the knowledge-of-

falsity exclusions, the Insurers did not have a duty to defend the TSG Parties in the

underlying lawsuit.

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3. Counterarguments

The TSG Parties raise several arguments why the knowledge-of-falsity

exclusions did not preclude coverage. We are not persuaded.

To begin with, the TSG Parties contend that the allegations of knowing falsity

in the complaint may not be considered in evaluating the Insurers’ duty to defend

because proving them was not required to impose liability. True, as reflected in the

jury instructions, none of the claims for relief asserted in the fifth amended

complaint—which included claims for violation of the CCIOA, breach of fiduciary

duty, aiding and abetting breach of fiduciary duty, civil conspiracy, and negligence—

contained knowledge of falsity as an element. But this argument is squarely

foreclosed by Colorado law.

In Thompson the Colorado Supreme Court considered a quite similar situation.

See 84 P.3d at 499–503, 505–08. In that case, the insurance policies provided

coverage against liability on claims of disparagement. See id. at 499. Although the

complaint against the insured did not include a claim for disparagement, the

complaint fell within the coverage of the policies because the allegations in the

complaint stated the elements of a disparagement claim. See id. at 505–07. But the

policies contained a knowledge-of-falsity exclusion identical to the one in the

policies here. See id. at 499 n.2. Therefore, the court examined whether the

allegations involving disparagement stated that the disparagement was knowingly

false. See id. at 507–08. Determining that they did, the court held that the exclusion

applied and there was no duty to defend. See id. at 508.

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We fail to see how to distinguish Thompson from this case. The effort by the

TSG Parties misses the mark. First, they argue that Thompson did not decide whether

courts evaluating the duty to defend may rely on allegations of knowing falsity that

were unnecessary to establish any claims in the complaint. We do not agree. In

determining the applicability of the knowledge-of-falsity exclusion, Thompson did

not even consider the elements of the claims set forth in the complaint. It looked only

at the allegations involving disparagement, which, although not alleged as a claim,

were essential to the initial determination that there was potentially coverage under

the policies. See id. at 505–07. The approach of the Colorado Supreme Court was

totally inconsistent with the view of the TSG Parties that the exclusion applies only if

willful falsehood was an element of the claims in the complaint. See Bryan A. Garner

et al., The Law of Judicial Precedent § 10 at 120 (2016) (“[I]f a proposition’s validity

is logically necessary to the result of a given case, the case will generally be treated

as standing for that proposition even if the point wasn’t explicitly stated by the

court.”).

Next, the TSG Parties appear to argue that Thompson was wrongly decided,

asserting that “most” of the jurisdictions that have considered this question do not

consider extraneous allegations of knowing falsity when evaluating the duty to

defend. Aplt. Br. at 32. For support, they direct us to seven federal district court cases

applying the law of other states. Such contrary authority could be persuasive if we

were trying to predict how the Colorado Supreme Court would rule on this issue. But

here we already have a ruling by the state high court that is as close as it gets to a

17 Appellate Case: 23-1248 Document: 64-1 Date Filed: 02/24/2025 Page: 18

ruling on the identical issue. Our task is not to reach our “own judgment” on

Colorado law but rather to “ascertain and apply the state law.” Wade v. EMCASCO

Ins. Co., 483 F.3d 657, 665 (10th Cir. 2007) (internal quotation marks omitted).

Because we are bound by the most recent decisions of the Colorado Supreme Court,

Thompson controls. 6 See Kokins v. Teleflex, Inc., 621 F.3d 1290, 1295 (10th Cir.

2010).

The TSG Parties then try to distinguish Thompson on the facts. They argue that

there were conflicting allegations in the Underlying Plaintiffs’ complaint about

whether the TSG Parties knew the statements in the debt-collection letter were false

before the letter was circulated. The complaint alleged that the TSG Parties admitted

the $15.5-million figure was incorrect after the debt-collection letter was published.

The TSG Parties assert that these allegations “stand in contrast” to the allegations of

prepublication knowledge of falsity elsewhere in the complaint. Aplt. Reply Br. at 9.

And any doubts in the underlying pleadings about whether an exclusion applies, they

contend, must be resolved in favor of a duty to defend.

But the allegations created no ambiguity on when the TSG Parties knew the

statements in the debt-collection letter were false. The complaint unmistakably

alleged that the TSG Parties knew the statements in the debt-collection letter were

false “[a]t the time” the letter was published. Aplt. App., Vol. III at 574–75 (“At the

time the POA, TSG, and Brunjes broadly published the Debt Collection Letter, they

We note that neither party has asked us to certify a question of state law to 6

the Colorado Supreme Court. 18 Appellate Case: 23-1248 Document: 64-1 Date Filed: 02/24/2025 Page: 19

knew that the letter’s calculation of allegedly unpaid assessments was false and

misleading.”). That they later admitted that they knew the statements were false is

not in the least inconsistent with their earlier knowledge of falsity.

Not relenting, the TSG Parties parse the claims of the Underlying Plaintiffs,

arguing that at least the claims of Telluride’s principals, the Herricks, triggered a

duty to defend. They argue that the allegations of knowing falsity in the complaint

were premised on allegations that the TSG Parties knew Telluride had used the True-

Up Process to pay its annual assessments; but they point out that the complaint did

not allege that the Herricks themselves had ever used the True-Up Process to pay the

assessments for the units in The Peaks that they personally owned. Thus, they say,

the claims of the Herricks were not anchored in any allegations of knowing falsity

and did not trigger the coverage exclusions.

This argument fails because it misstates the claims made by the Herricks. The

Herricks did not allege that they personally owned any units or that they were

personally responsible for paying assessments for any units during the 2010–2015

period of nonpayment alleged in the debt-collection letter. Nor did the Herricks

complain that the debt-collection letter accused them of personally failing to pay

assessments during that period for any units that they individually owned. Instead,

the Herricks alleged (1) that Telluride owned all the residential condo and

commercial units in The Peaks during the relevant 2010–2015 period; (2) that

Telluride paid assessments for these units using the True-Up Process; and (3) that the

TSG Parties knew their demand for $15.5 million in unpaid assessments did not

19 Appellate Case: 23-1248 Document: 64-1 Date Filed: 02/24/2025 Page: 20

account for any payments of assessments by Telluride that were accomplished

through this process. The claims of the Herricks were based on the same allegations

of knowing falsity as the claims of Telluride and fell entirely within the exclusions.

The TSG Parties point to language in the underlying complaint alleging that

the debt-collection letter accused the Herricks of failing to pay assessments. But in

light of the other allegations in the complaint, that failure could have arisen in only

two ways. First, the allegations may refer to the Herricks in their capacity as

principals of Telluride. In other words, the alleged failure of Telluride to pay

assessments may have been attributed to them. But the Herricks alleged that any

claim that Telluride had failed to pay assessments was knowingly false because the

TSG Parties knew that Telluride had paid its assessments using the True-Up Process.

Second, the allegations may refer to the Herricks in their capacity as owners of

residential condo units in The Peaks. But they did not personally own any units

before TSG acquired its interest in The Peaks in 2015. Therefore, any debt attributed

to the Herricks could only have arisen from their acquisition of units on which

assessments had allegedly not been paid by Telluride during the 2010–2015 period.

Once again, however, these accusations against the Herricks must have been

knowingly false because they were based on the knowingly false claim that Telluride

had failed to pay its assessments during the relevant period.

Because the knowledge-of-falsity exclusions preclude coverage, the Insurers

had no duty to defend the TSG Parties in the underlying lawsuit.

20 Appellate Case: 23-1248 Document: 64-1 Date Filed: 02/24/2025 Page: 21

C. Duty to Indemnify

We now turn to whether the Insurers had a duty to indemnify the TSG Parties

for the judgment awarded against them in the underlying litigation. 7 We conclude

they did not because testimony in the underlying trial established that the TSG

Parties knew the statements in the debt-collection letter were false when the letter

was published.

“The duty to indemnify relates to the insurer’s duty to satisfy a judgment

entered against the insured.” Cyprus, 74 P.3d at 299. Unlike the duty to defend,

“[t]he duty to indemnify arises only when the policy actually covers the harm and

typically cannot be determined until the resolution of the underlying claims.” Id. at

301. Ordinarily, “where no duty to defend exists, it follows that there can be no duty

to indemnify.” Id. at 300. This proposition generally applies to the situation where

coverage depends on the causes of action alleged against the insured; if none of the

covered causes of action is alleged (so there is no duty to defend), there could be no

duty to indemnify either. But this proposition does not necessarily apply in the

present situation, where the facts on which the exclusions depend are independent of

the elements of the causes of action alleged.

The TSG Parties argue that our duty-to-indemnify review is limited to the

verdict form in the underlying litigation and may not include testimony from trial.

7 For the purposes of our duty-to-indemnify analysis, the “TSG Parties” designation does not include Peaks Hotel because the claims against it were dismissed before trial. 21 Appellate Case: 23-1248 Document: 64-1 Date Filed: 02/24/2025 Page: 22

They contend that only when “the verdict is unclear about whether the basis for the

liability imposed is a covered claim” may we turn to the trial evidence. Aplt. Br. at

38. And they assert that the verdict form was not unclear because it neither expressly

nor impliedly established that the jury made any findings of knowing falsity.

The TSG Parties misconstrue the Colorado Supreme Court’s guidance in

Cyprus. That opinion declares that when, as here, the claims “proceed through the

crucible of trial,” “the court must look to the facts as they developed at trial and the

ultimate judgment” to determine whether an insurer has a duty to indemnify the

insured. Cyprus, 74 P.3d at 301. And as we read Cyprus, when the ultimate judgment

or verdict does not clearly address the coverage issue, a more searching review of the

evidence is required. See id. Here, as previously explained, the exclusions are

independent of the causes of action set forth in the complaint. Looking at the

resolution of those claims does not tell us whether the factual basis for the exclusions

was established at trial. We therefore must examine the evidence.

At trial the uncontroverted testimony of TSG and POA officers (all of whom

sat on the POA board and approved the debt-collection letter) established that the

TSG Parties knew the statements in the debt-collection letter were false when the

letter was published. First, Mr. Brunjes testified that he knew Telluride had paid its

assessments through the True-Up Process, and that he informed the other board

members about the mechanics of this process. He said he was personally familiar

with the True-Up Process because—in his role as an officer and director of the

POA—he prepared and authorized the POA’s budget and approved True-Up

22 Appellate Case: 23-1248 Document: 64-1 Date Filed: 02/24/2025 Page: 23

payments from Telluride between 2009 and 2015. Mr. Brunjes further testified that

he knew “the total amount due [from Telluride] would not be $15 million” because

“there would be an offset.” Aplt. App., Vol. V at 1446. And on redirect examination

he confirmed that before sending the debt-collection letter he knew the Underlying

Plaintiffs did not owe $15.5 million in unpaid assessments.

Mr. Richards also testified that in his role as chief financial officer of TSG he

became aware—before the debt-collection letter was published—that Telluride had

paid its assessments using the True-Up Process. And when he approved the debt-

collection letter he knew it did not account for any assessment payments

accomplished through this process.

Finally, Mr. Jensen, who was chief executive officer of TSG, testified that he

knew Telluride had used the True-Up Process to pay its assessments before he

authorized the publication of the debt-collection letter. He affirmed that the other

board members likewise knew about this process and “were aware that [Telluride]

paid some of the expenses of the POA” before the letter was circulated. Aplt. App.,

Vol. V at 1278. And Mr. Jensen testified that, despite this knowledge, the POA did

nothing to investigate the True-Up payments before publishing the debt-collection

letter—which was “approved” by “[t]he entire [POA] board.” Aplt. App., Vol. V at

1297.

The testimony of these witnesses established that the liability imposed against

the TSG Parties was precluded from indemnification under the knowledge-of-falsity

exclusions. Both Mr. Richards and Mr. Jensen were officers of TSG (an LLC), and

23 Appellate Case: 23-1248 Document: 64-1 Date Filed: 02/24/2025 Page: 24

Mr. Brunjes was an officer of the POA (a corporation); and they were acting in those

capacities when they approved the debt-collection letter. Therefore, their knowledge

was imputed to these business entities. 8 The false statements in the debt-collection

letter were thus knowingly published “by” the insureds within the meaning of the

knowledge-of-falsity exclusions. Aplt. App., Vol. VII at 1946; Vol. IX at 2504.

The TSG Parties contend that this evidence merely established, “[a]t best,” that

the TSG Parties “knew about the true-up process.” Aplt. Br. at 43. We disagree. The

officers’ testimony was twofold: (1) they knew Telluride had paid its assessments

through the True-Up Process, and (2) they knew, at the time it was published, that the

amount stated in the debt-collection letter failed to account for assessment payments

made using this process. Taken together, the admissions by the officers mandate the

conclusion that they knew their demand for $15.5 million in unpaid assessments was

not true when the letter was published because they knew, at a minimum, that the

factual basis for the purported amount owed was plainly deficient.

The TSG Parties make one last pitch. They argue that the jury’s refusal to

award punitive damages means it found that the debt-collection letter was not

8 See Dall. Creek Water Co. v. Huey, 933 P.2d 27, 41 (Colo. 1997) (“It is familiar law that a corporation can only act through its agents, and their acts within the scope of their authority are the acts of the corporation.” (internal quotation marks omitted)); Weston v. T&T, LLC, 271 P.3d 552, 558 (Colo. App. 2011) (same for an LLC); Mortg. Invs. Corp. v. Battle Mountain Corp., 70 P.3d 1176, 1182 (Colo. 2003) (officers are agents of the corporation and are empowered to act on behalf of the corporation when acting within the proper scope of their authority); Liggett v. People, 529 P.3d 113, 126 (Colo. 2023) (“When an agency relationship exists, knowledge obtained by [agents] within the scope of their agency is imputed to the principal.”). 24 Appellate Case: 23-1248 Document: 64-1 Date Filed: 02/24/2025 Page: 25

published with knowledge of its falsity. They rely on the jury instruction that

punitive damages cannot be awarded unless the jury finds that the defendants acted

“fraudulently, maliciously, or in a willful and wanton manner.” Aplt. Br. at 40; see

Aplt. App., Vol. X at 2794. But the instruction required the jury to find beyond a

reasonable doubt that the TSG Parties acted “fraudulently, maliciously or in a willful

and wanton manner” in order to award punitive damages, as Colorado law demands.

Aplt. App., Vol. X at 2794; see Colo. Rev. Stat. § 13-25-127(2) (requiring that

“[e]xemplary damages” be proved “beyond a reasonable doubt”). That is a much

stricter burden of persuasion than is required to establish that an exclusion from

coverage applies. In Colorado “[t]he insurer bears the burden of establishing that an

exclusion applies.” First Citizens Bank & Tr. Co. v. Stewart Title Guar. Co., 320

P.3d 406, 410 (Colo. 2014). And Colorado law states that the default burden of proof

in any civil action is the preponderance of the evidence. See Colo. Rev. Stat. § 13–

25–127(1); Griffith v. SSC Pueblo Belmont Operating Co., 381 P.3d 308, 313 n.3

(Colo. 2016). That proposition applies to insurance disputes. See, e.g., Sylvester v.

Liberty Life Ins. Co., 42 P.3d 38, 39 (Colo. App. 2001) (“In an accidental death

insurance policy case, . . . [t]he insurance company . . . has the burden of proving the

applicability of any exclusions by a preponderance of the evidence.”); cf. Fought v.

UNUM Life Ins. Co. of Am., 379 F.3d 997, 1007 (10th Cir. 2004) (stating that

“[u]nder ERISA, an insurer bears the burden to prove facts supporting an exclusion

of coverage” and citing authorities requiring proof by a preponderance of the

evidence). Of course, a jury or a court could find by a preponderance of the evidence

25 Appellate Case: 23-1248 Document: 64-1 Date Filed: 02/24/2025 Page: 26

that the requirements of the exclusions were met but that the punitive-damages

standard was still not satisfied beyond a reasonable doubt. See Fireman’s Fund Ins.

Co. v. Stites, 258 F.3d 1016, 1022 (9th Cir. 2001) (“[A] failure to prove a fact beyond

a reasonable doubt does not mean that it cannot be proven by a preponderance of the

evidence.”).

For the foregoing reasons, we hold that the Insurers owed no duty to indemnify

the TSG Parties for their losses in the underlying lawsuit.

D. The TSG Parties’ Counterclaims

Having concluded that the TSG Parties were not entitled to defense or

indemnification coverage under the policies as a matter of law, we also affirm the

district court’s grant of summary judgment in the Insurers’ favor on the TSG Parties’

counterclaims for breach of contract and common-law and statutory bad faith, since

those claims flow from the denial of coverage and “must fail” if coverage was

properly denied. MarkWest Hydrocarbon, Inc. v. Liberty Mut. Ins. Co., 558 F.3d

1184, 1193 (10th Cir. 2009) (“It is settled law in Colorado that a bad faith claim must

fail if . . . coverage was properly denied and the plaintiff’s only claimed damages

flowed from the denial of coverage.”); see Lamb v. GEICO Gen. Ins. Co., 77 P.3d

748, 751 (Colo. App. 2002) (rejecting insured’s breach-of-insurance-contract claim

because coverage was properly denied).

III. CONCLUSION

We AFFIRM the district court’s grant of summary judgment on all claims.