by sohalang | Apr 15, 2010 | Blog News, Uncategorized
In
Certain Underwriters at Lloyd’s London v. Valiant Ins. Co., 2010 WL 1427571, 5 (April 12, 2010) (published) the Washington Court of Appeals held that an anti-stacking provision applied to limit affiliated insurers’ exposures to the limits of one insurance policy.
Two affiliated insurers, Valiant Insurance Company (“Valiant”) and Northern Insurance Company of New York (“Northern”), insured Stratford Construction, LLC (“Stratford”) under three successive primary policies. Valiant and Northern are both Zurich-affiliated companies. Certain Underwriters at Lloyd’s London (“Underwriters”) insured Stratford during two subsequent policy periods, and Great American provided excess coverage for several policy periods. The Valiant and Northern policies limit recovery to one policy limit per “occurrence” when the insured holds two or more policies issued by companies affiliated with Zurich.
GCG Associates, LP (“GCG”), hired Stratford to construct a four-story retirement center in Lynnwood, Washington. Stratford completed construction in 2000. In 2006, GCG filed two suits against Stratford related to the construction, which were later consolidated. Expert reports indicated that water damage resulted from a variety of construction defects including improper installation of roofing or stucco by one subcontractor and improper installation of windows by another.
Stratford settled the consolidated construction defect lawsuit for $5 million. Valiant contributed the $1 million limits of its policy, but Northern did not contribute to the settlement. Underwriters, Great American, and subcontractors apparently made up the difference. Underwriters sued Valiant and Northern for contribution and subrogation.
The Court of Appeals agreed with the trial court’s determination that the continuing water intrusion damage to the building was caused by one “occurrence” even though the damage occurred at different locations and at different times. The Court of Appeals found that the “key to the present case is the Zurich policy definition of ‘occurrence’ as an ‘accident, including continuous and repeated exposure to substantially the same general harmful conditions.’ The continuous and repeated exposure of Chateau Pacific to harmful moisture that gradually intruded through the building envelope over a five year period from different sources fits this definition.” The Court of Appeals also held that the anti-stacking provision did not conflict with the stated policy limits and did not violate public policy. The Court then concluded that “[b]ecause the policies issued by Zurich’s affiliated companies all applied to the same occurrence, the anti-stacking provision limited coverage to the highest applicable policy limit under any one of those policies.”
by sohalang | Mar 19, 2010 | Blog News, Uncategorized
On March 18, 2010, the Washington Supreme Court held that an “assault and battery” exclusion did not apply to allegations that post-assault negligence enhanced a claimant’s injuries.
Am. Best Food, Inc. v. Alea London, Ltd. (Wash. S. Ct., March 18, 2010). Moreover, the insurer’s refusal to defend “based upon an arguable interpretation of its policy was unreasonable and therefore in bad faith.”
American Best Food, Inc. operates Cafe Arizona, a Federal Way nightclub. Michael Dorsey was shot outside the club. After he was shot, the club’s security guards carried him inside. The club owner, however, instructed the security guards to remove Dorsey from the club. Dorsey sued Cafe Arizona alleging that security guards “dumped him on the sidewalk.” In an amended complaint, he contended that they exacerbated his injuries by dumping him on the sidewalk after he was shot.
Cafe Arizona tendered defense to its insurance carrier, Alea London, LTD (“Alea”). Alea declined the tender, citing an exclusion in its policy for injuries or damages “arising out of” assault or battery. Cafe Arizona then sued Alea for breach of contract, bad faith, and violation of the Washington Consumer Protection Act. The trial court dismissed Cafe Arizona’s claims on summary judgment. The Court of Appeals partially reversed, holding that Alea breached its duty to defend and that summary dismissal of the bad faith and indemnification claims was inappropriate. Our Supreme Court accepted review.
After distinguishing Washington precedent regarding the meaning of “arising out of,” and considering out of state authority, the Washington Supreme Court held that “arising out of” did not include the alleged post-assault negligence:
We find persuasive precedent from other states that have found claims that the insured acted negligently after an excluded event are covered. Further, a balanced analysis of the case law should have revealed at least a legal ambiguity as to the application of an “assault and battery” clause with regard to post-assault negligence at the time Cafe Arizona sought the protection of its insurer, and ambiguities in insurance policies are resolved in favor of the insured.
The Washington Supreme Court concluded that Alea had breached its duty to defend. Moreover, by a five-to-four majority, the court held that Alea acted in bad faith as a matter of law when it declined to defend. Writing for the majority, Justice Tom Chambers explained, “if there is any reasonable interpretation of the facts or the law that could result in coverage, the insurer must defend.” Moreover, Alea “put its own interest ahead of its insured when it denied a defense based on an arguable legal interpretation of its own policy.” Accordingly, “Alea’ s failure to defend based upon a questionable interpretation of law was unreasonable and Alea acted in bad faith as a matter of law.”
by sohalang | Dec 28, 2009 | Blog News, Uncategorized
On December 24, 2009, the Washington Supreme Court held that the Washington Condominium Act’s judicial enforcement provision was preempted by the Federal Arbitration Act (“FAA”). Satomi Owners Ass’n v. Satomi, LLC, _Wn.2d_, _P.3d_, 2009 WL 4985689, 1 (2009). In three consolidated construction defect cases brought by homeowners associations, condominium developers sought to enforce arbitration clauses incorporated into unit owner purchase and sale agreements. The court held that the FAA requires it to enforce such arbitration agreements, including the terms providing for binding arbitration.
The court rejected arguments by one of the homeowners associations that it was not bound by the arbitration provision because the unit owners rather than the association had signed the purchase and sale agreements. The court stated that the property in question, the condominium project’s units, common elements, and limited common elements are owned by the unit owners, not the homeowners association.
The court explained that where the arbitration clause provides that disputes regarding the arbitrability of particular claims must be arbitrated, it is for the arbitrator, rather than the courts, to decide whether a particular claim is subject to arbitration. Accordingly, the court did not determine which of the homeowners associations’ claims were subject to arbitration.
by sohalang | Nov 4, 2009 | Blog News, Uncategorized
Association of Unit Owners of Nestani, a Grecian Villa v. State Farm Fire and Casualty Company, District of Or, Dkt No. 6:08-cv-00790-AA, Opinion and Order Dated November 2, 2009, Judge Ann Aiken
The insured Association alleged that the loss was covered under the Policy as a collapse caused by hidden decay of weight-bearing structural members and sought benefits of $5,078,320.25, costs and disbursements, and attorneys’ fees. State Farm denied that the Policy covered the alleged conditions at Nestani and moved for summary judgment on the grounds that the claimed loss did not occur during the Policy period, and that any loss did not arise from a collapse caused by hidden decay as defined in the Policy.
The court reasoned that under Oregon law, the insured had the initial burden of establishing conditions of coverage, then the insurer has the burden of proving that the policy excludes coverage, and finally the burden to show an exception to an exclusion falls back upon the insured. The court found that the Association failed to establish that it met the conditions of coverage under the Policy, or that its loss was covered as an exception to the exclusion for decay.
The court found that the term “commencing” during the policy period in relation to collapse coverage was ambiguous, finding that “”commencing” may be reasonably read to include each identifiable instance of collapse, regardless of whether similar loss occurred prior to the Policy period. However, plaintiff fails to prove that any identifiable loss commenced during the effective Policy period, January 1, 2005 through January 1, 2007. Repeatedly, plaintiff’s experts denied that it was possible to prove when the purported collapse of structural members occurred.”
The court stressed further:
Here, plaintiff has the burden to set forth specific facts to show loss commencing during the Policy period. Plaintiff does not, and, according to its own experts, cannot identify a specific instance of collapse that occurred during the Policy period; thus, I would have to assume, based on speculative probability, that a structural member fell into pieces during the Policy period. The court cannot take such a leap. For the same reasons, plaintiff fails to show that it brought legal action within two years after the date on which the property loss occurred. Under the statutorily mandated language of the Policy, actions brought more than two years after occurrence of the loss are barred. . . . Defendant argues that any loss was caused by severe decay that began decades ago, and that plaintiff cannot prove that the loss occurred after June 4, 2006. Plaintiff again maintains that the inception of loss is each instance of collapse, and that Perrault’s testimony creates a genuine issue of fact that instances of collapse occurred after June 4, 2006. Plaintiff is correct that the inception of loss begins at the point of collapse, not the point of decay, . . . However, Perrault’s speculative deposition testimony does not create a genuine issue of fact for summary judgment. Plaintiff fails to present specific facts showing that an instance of loss occurred after June 4, 2006. Accordingly, plaintiff cannot show that it brought suit within two years after occurrence of the loss to meet that condition of coverage.
The court additionally refused to follow the Malbco case regarding the definition of collapse, but instead looked to the express definition of collapse in the policy requiring “actual falling down.” The court further found that the term “sudden” as used in the policy contained a temporal element and refused to follow the reasoning in McCormick and Baxter in this regard.
by Soha Lang | Oct 22, 2009 | Blog News, Uncategorized
In Lease Crutcher Lewis WA LLC v. National Union Fire Co. of Pittsburgh, Western District of WA, Dkt No. 2:08-cv-01862-RSL, Order on Motion to Dismiss dated October 20, 2009, Judge Robert Lasnik ruled that an independent adjuster could be liable for bad faith claim handling, but could not be independently sued under Washington’s Insurance Fair C onduct Act (“IFCA”).
Bad Faith
The independent adjuster filed a motion to dismiss based on the theory that an independent adjuster, hired by an insurance company to handle a claim, owes no duty and has no personal liability to an insured for actions taken on behalf of the insurer. The court found that this proposition was completely unsupported by authority. Citing to agency law Washington’s insurance code, the court found that the independent adjuster “had a statutory duty to act in good faith toward [the insured], [and that] the Court need not determine whether the parties had a fiduciary relationship or whether a common law duty of good faith also existed in these circumstances.”
IFCA
After considering the IFCA statute and legislative history, the Court concluded “that the legislature intended to create a private cause of action for damages and attorney’s fees against only the insurer, not its employees or agents.”
By Misty Edmundson
by Soha Lang | Oct 14, 2009 | Blog News, Uncategorized
Water’s Edge Homeowners Ass’n v. Water’s Edge Associates, Dkt. No. 37415-3-II, __ P.3d __, 2009 WL 3087495 (2009).
Division Two of the Washington Court of Appeals affirmed a Clark County trial court’s ruling that an $8.75 Million stipulated judgment amount was unreasonable, and further found that the trial court did not abuse its discretion when it found that $400,000 would have been a reasonable settlement amount.
This was a construction defect action arising out of a condominium conversion project in Clark County, WA. After a failed mediation, the defendants and the plaintiff in the case stipulated to a covenant judgment and assignment of bad faith claims and then moved for a reasonableness hearing. The defendants’ insurers, Farmer’s Insurance Exchange, Truck Insurance Exchange and Mid-Century Insurance Company then intervened to participate in the reasonableness hearing and to conduct limited discovery.
After hearing a full day of argument at the reasonableness hearing and taking the case under advisement for five months, the trial court ruled that $8.75 million was not a reasonable stipulated judgment amount. Instead, the court found that a $400,000 settlement would have been reasonable.
The court of appeals affirmed and found that the trial court did not abuse its discretion. Additionally the court stressed that the trial court correctly found that expectation or remediation damages were not appropriate because the it had dismissed all the contractual warranty claims and thus, the normal cost of repair damages under the Association’s warranty claims were unavailable.
Furthermore, the court of appeals found that when disputing the reasonableness of a settlement, the insurer does not have the burden to prove fraud or collusion, rather “after the parties establish reasonableness, the Chaussee factor is merely whether there is any evidence of bad faith, collusion, or fraud . . . . Nor does any “evidence of bad faith, collusion, or fraud” appear to invoke the typical standard for proof of fraud, which must be proved by evidence that is clear, cogent, and convincing. The burden here was not on Farmers but, rather, on the HOA to prove its settlement was reasonable.”
Finally, the court also held that the trial court properly dismissed the case, as opposed to entering a final judgment in an amount it had already deemed unreasonable or in an amount that the parties’ had not stipulated to.
Farmers Insurance Exchange, Truck Insurance Exchange and Mid-Century Insurance Company were represented by Tyna Ek and Misty Edmundson of Soha & Lang, P.S.
By Misty Edmundson
by Soha Lang | Oct 14, 2009 | Blog News
In Manufactured Housing Communities v. St. Paul Mercury Ins. Co., 2009 WL 3193157, (W.D.Wash. 2009), Judge Benjamin Settle confirmed that Washington law regarding claims-made policy notice requirements has not changed in 20 years since Safeco Title Ins. Co. v. Gannon, 54 Wn. App. 330, 774 P.2d 30 (1989), review denied, 113 Wn.2d 1026, 782 P.2d 1069 (1989). Judge Settle held that the notice requirement in St. Paul’s policy was not ambiguous and that the “notice prejudice rule” does not apply to claims-made policies. The decision recognizes the distinction between “claims-made” and “occurrence” policies in Washington, and rejects the argument that there has been a shift in Washington regarding the application of the “notice/prejudice rule” since the Gannon decision.
By Paul Rosner
