## Facts

- Protectors Insurance Service, Inc. (Protectors), a Colorado insurance agency formed in 1979, operated under a written agency agreement with United States Fidelity & Guaranty Company (USF&G). ()  
- Under the agreement, Protectors solicited and submitted applications for USF&G policies and was paid commissions on accepted applications; more than 80 percent of Protectors’ business from 1979–1992 was placed with USF&G. ()  
- The contract’s termination provision required the parties to “make a good faith effort to provide for rehabilitation and thereby avoid termination of this Agreement.” ()  
- In March 1992, citing profitability concerns, USF&G placed Protectors into a formal rehabilitation program setting required “earned loss ratios” for Protectors’ personal and commercial lines. ()  
- In October 1992, USF&G notified Protectors that it would terminate the personal‑lines portion of the agency contract in 180 days unless Protectors met the rehabilitation goals by year’s end. ()  
- Protectors’ owner, Earl Colglazier, informed USF&G that its personal and commercial lines were intertwined and that termination of personal lines would effectively put the agency out of business. ()  
- Facing the threatened termination, Colglazier sold all of Protectors’ assets for approximately $148,000—allegedly a distressed, below‑market price caused by USF&G’s breach. ()  
- Protectors sued USF&G in federal district court in Colorado for breach of contract, alleging that USF&G failed to make the contractually required good‑faith effort at rehabilitation before termination. ()  
- At trial, Protectors presented expert testimony that the assets were sold for less than their fair market value because of USF&G’s conduct, and Colglazier testified that he would have continued to operate the business for another 10 years but for the breach. ()  
- The jury found for Protectors and awarded:  
  - $35,000 for the difference between the asset sale price and its fair market value absent breach; and  
  - $809,650 in lost future profits, for a total of $844,650. ()  
- On appeal, USF&G conceded liability for breach but argued that the lost‑profits award was (1) an impermissible double recovery on top of the going‑concern value reflected in the sale‑price damages and (2) unsupported by sufficient evidence. ()  

## Issues

1. Whether a plaintiff whose business was sold at a distressed price due to the defendant’s breach may recover both (a) damages for the difference between the distress‑sale price and fair market value and (b) additional damages for lost future profits without obtaining a prohibited double recovery. ()  

2. Whether the evidence of Protectors’ projected future profits—based on expert testimony and the owner’s testimony that he would have continued operating for 10 years—was sufficiently certain to support the jury’s award of lost‑profits damages under Colorado law. ()  

## Decision

- The Tenth Circuit held that, under Colorado law, a plaintiff whose business has been destroyed by a defendant’s wrongful conduct must choose between two mutually exclusive measures of damages:  
  - (1) the going‑concern (or fair‑market‑value) measure; or  
  - (2) lost future profits. ()  
- The court concluded that allowing Protectors to recover both the $35,000 diminution‑in‑sale‑price award and the separate $809,650 lost‑profits award would constitute an impermissible double recovery for the same loss. ()  
- The court vacated the lost‑profits portion of the verdict and remanded with instructions to enter judgment for Protectors in the amount of $35,000 (plus any appropriate interest and costs), effectively limiting recovery to the diminution‑in‑value damages. ()  
- In light of its double‑recovery holding, the court did not need to fully resolve USF&G’s alternative argument that the evidence of future profits was insufficient, but it discussed the evidence and clarified Colorado’s proof requirements for business‑loss cases. ()  

## Legal Principles

- When a defendant’s wrongful conduct destroys or compels the sale of a business, Colorado law recognizes two alternative measures of damages:  
  - **Going‑concern (fair‑market‑value) damages**: the present value of the business as a going concern at the time of the wrongful act, which already incorporates its future profit‑earning potential; or  
  - **Lost future profits**: net profits the business would have earned in the future, discounted to present value. ()  
- A plaintiff may not recover both going‑concern value and separate lost‑profits damages for the same business loss because that would double‑count the value of expected future earnings already embedded in the going‑concern valuation. ()  
- To recover lost profits under Colorado law, the plaintiff must present:  
  - competent, non‑speculative evidence of the amount of lost net profits; and  
  - “clear proof in the record of the value of plaintiff’s business as a going concern,” where that value necessarily takes into account future profit‑earning potential. ()  
- Jury damage awards will be set aside where, as a matter of law, the legal theory allows only one of two mutually exclusive measures of recovery and the verdict improperly grants both. ()  

## Conclusion

- Protectors established that USF&G breached the agency agreement and caused the distressed sale of its business.  
- However, Colorado damages law required Protectors to elect between recovery based on going‑concern value (reflected in the reduced sale price) and recovery based on lost future profits.  
- Because the jury awarded both types of damages, the Tenth Circuit held that the lost‑profits award constituted a double recovery, vacated that portion of the judgment, and limited Protectors’ recovery to the diminution‑in‑value damages arising from the distressed sale. ()


Protectors Insurance Service, Inc. v. United States Fidelity & Guaranty Co., 132 F.3d 612 (10th Cir. 1998)