by Soha Lang | Mar 27, 2024 | Blog News, Publications
On March, 14 2024, the Washington Supreme Court held, in Gardens Condo. v. Farmers Ins. Exch., 2024 Wash. LEXIS 165 (2024), that a resulting loss exception to a faulty workmanship exclusion preserved coverage under the insured’s all-risk policy because the workmanship resulted in a covered loss.
In that case, the insured had discovered water damage to the roof of its 26-unit condominium building, caused by insufficient interior vents and design issues preventing needed ventilation. The insured had the roof assembly redesigned and repaired in attempts to increase ventilation and eliminate condensation. However, the improvements still did not provide sufficient ventilation causing the accumulation of water vapor and condensation in the space between the roof surface and ceiling. The insured sought coverage for this loss, and the insurer denied coverage under the policy’s faulty workmanship exclusion, which contained a resulting loss exception and which the Court interpreted to mean, “if faulty workmanship causes a covered peril to occur and that covered peril results in loss or damage, the loss or damage will be covered.”
Relying on the holdings in Vision One LLC v. Philadelphia Indemnity Insurance Co., 174 Wn.2d 501, 276 P.3d 300 (2012), and Sprague v. Safeco Insurance Co. of America, 174 Wn.2d 524, 276 P.3d 1270 (2012), both involving faulty workmanship exclusions and resulting loss exceptions, the court held that the resulting loss exception preserved coverage because, although faulty workmanship existed, the faulty workmanship resulted in a covered loss caused by water vapor and condensation. If the insurer had desired, it could have drafted the policy differently by omitting the resulting loss exception entirely or, if included, by limiting the exception to “ensure that the entire causal chain resulting from an excluded peril would [have been] excluded.”
The Court affirmed the ruling in favor of the insured.
Disclaimer: The opinions expressed in this blog are those of the author and do not necessarily reflect those of Soha and Lang, P.S. or its clients.
by Soha Lang | Mar 19, 2024 | Publications
In a recent opinion, Great Lakes Insurance SE v. Raiders Retreat Realty Co., LLC, the Supreme Court of the United States considered the validity of a choice-of-law provision in maritime insurance policies. Great Lakes Insurance insured Raiders Retreat Realty with a maritime insurance policy that included a choice-of-law provision which selected New York law to govern future disputes between the parties. A boat insured under the Great Lakes policy ran aground, and Great Lakes denied the claim. Great Lakes based the decision on the allegation that Raiders breached the insurance contract by failing to maintain the boat’s fire-suppression system. Under New York law, this would void the contract in its entirety.
Great Lakes filed a declaratory action to deny coverage in the Eastern District of Pennsylvania. Raiders responded making contract claims under Pennsylvania law, claiming that Pennsylvania law should be used because, as the location of the trial, it was the jurisdiction that had the most interest in the dispute. The court determined that the choice-of-law provision was enforceable under federal maritime law.
First, the court considered the initial question of whether there were already any federal maritime rules regarding whether choice-of-law provisions in maritime contracts were enforceable. The court noted that it and Courts of Appeals have enforced choice-of-law provisions in maritime contracts. The court compared the choice-of-law provisions in insurance policies to forum selection provisions, which it has upheld in maritime contracts. Ultimately, the court stated it will uphold choice-of-law provisions because they reduce legal uncertainty for the parties and discourages forum shopping.
Next, the court considered whether the choice-of-law provisions should be considered under state law. The court confirmed that there is no state law which will override a choice-of-law provision in a maritime contract. The court reiterated that there is a federal rule that governs whether choice-of-law clauses in maritime contracts are enforceable and refused to create a new rule. Further, the court noted that it will consider whether there is an equitable result when applying maritime rules. Here, the court held that its decision to uphold these clauses was equitable because it will prevent legal uncertainty to parties entering into similar agreements.
The court looked at whether there are any exceptions to this rule as it allowed some in the past. However, the court refused to create a new exception as requested by Raiders because there is no public policy interest in substituting one state’s law for another’s.
Disclaimer: The opinions expressed in this blog are those of the author and do not necessarily reflect those of Soha & Lang, P.S., or its clients.
by Brad Hudson | Nov 2, 2022 | Publications
Supreme Court Says Occurrence Policies and Non-Retroactive Claims Made and Reported Requirements Don’t Mix
The Washington Supreme Court has held that an occurrence-based policy endorsed with a non-retroactive claims made and reported endorsement issued to a contractor violates Washington’s public policy as expressed in RCW 18.27.050 and 18.27.140. The case arose out of the death of a subcontractor’s employee. The employee’s spouse filed a wrongful death claim against the general contractor. Preferred Contractors, the general contractor’s insurer, filed a declaratory judgment action in federal court seeking a ruling that it had no duty to defend or indemnify because the injury had occurred during one policy period, while the claim was first made during the next policy period.
The general contractor had CGL coverage from Preferred Contractors under sequential policies both at the time of death and at the time the claim was first made. The main policy form was written on an occurrence basis. But it was endorsed with a “Claims Made and Reported Limitation,” which required that the claim be first made and reported during the policy period. The endorsement is described as “non-retroactive” because no single policy ever provides coverage for injury that occurred before the policy period. In contrast, claims made policies that provide retroactive coverage cover injuries after a specified “retroactive date,” often the date that the first policy in a continuous series was purchased. The combination of the main form and the endorsement created coverage that would never apply when the injury occurred and the claim was first made in different policy periods.
The insured contractor challenged the combination of the two types of coverage, occurrence and non-retroactive claims made and reported, as violating Washington public policy. The trial court certified the question to the Washington Supreme Court, which agreed with the general contractor. It found that, by enacting RCW 18.27.050 and 18.27.140, the legislature created a public policy that contractors must be financially responsible for injuries they negligently inflict on the public. The Preferred Contractors policy violated that public policy because, by providing neither prospective nor retrospective coverage, its insureds could not have the kind of continuous coverage necessary to protect the public. The court specifically held that a contractor’s CGL policy that requires the loss to occur and be reported to the insurer in the same period and which fails to provide prospective and retroactive coverage is unenforceable.
Preferred Contractors Ins. Co., Risk Retention Grp., LLC v. Baker & Son Constr., Inc., 200 Wn.2d 128, 514 P.3d 1230 (2022).
Disclaimer: the opinions expressed in this blog are those of the author and do not necessarily reflect those of Soha & Lang, P.S. or its clients.
by Jillian Henderson | Jan 28, 2021 | Publications
On January 26, 2021, Senate Bill 5351 was introduced during the State of Washington’s 67th Legislature’s 2021 Regular Session. The bill seeks to change the suit limitations period from one year to two years (RCW 48.18.200), and add the provision that:
“Every property insurance policy containing a grant of coverage for direct physical loss of or damage to property shall be construed to include the deprivation of such property and the loss of the ability to use such property.”
(RCW 48.18.520). The bill would also add two new sections, applying these changes retroactively to February 29, 2020, when Governor Inslee issued Proclamation 20-05, and explaining that the act would take effect immediately.
If you have additional questions on this bill, or would like to receive continuing updates, please feel free to reach out to Soha & Lang.
by Jillian Henderson | Dec 14, 2020 | Publications
McLaughlin v. Travelers Comm. Ins. Co., Wash. Supreme Court (Dec. 10, 2020).
This case deals with whether the plaintiff, while riding his bicycle at the time of the accident, was a “pedestrian” under his California auto insurance policy’s MedPay coverage. “Pedestrian” was not defined by the policy. RCW 48.22.005(11) defines “pedestrian” for purpose of casualty insurance as “a natural person not occupying a motor vehicle as defined in RCW 46.04.320.” Since McLaughlin’s bicycle did not have a motor, he was deemed a “pedestrian.” The Court discussed the Court of Appeals approach to “harmonize” the definition of “pedestrian” in RCW 48.22.005(11) with RCW 46.04.400. The latter statute expressly excludes bicyclists from the definition of “pedestrian.” RCW 48.22.005(11), applies to casualty insurance, however, and RCW 46.04 has limiting language that definitions in that chapter apply to that chapter, “except where otherwise defined,” so RCW 48.22.005(11) was determined to be the appropriate definition to apply in this case.
The Court discussed that even if the definition of “pedestrian” in RCW 48.22.005(11) was not applied, the term “pedestrian” in the policy is ambiguous, and resolved in favor of the insured.
by Sarah Davenport | Jun 3, 2020 | Blog News, Publications
On May 21, 2020, the Washington Supreme Court unanimously held in Plein v. USAA Cas. Ins. Co., 97563-9, 2020 WL 2568541 (Wash. May 21, 2020), that a former client seeking to disqualify the adverse party’s lawyer has the burden of showing that matters were substantially related, and that a matter is not “substantially related” to representation of the former client if it is not factually related to any representation of the former client.
In this case, the law firm Keller Rohrback LLP (“Keller”) represented homeowners in a lawsuit against USAA Casualty Insurance Company (“USAA”) alleging that USAA refused to pay for expenses after a house fire in bad faith. Keller had previously represented USAA for many years in various cases, including a suit with similar allegations involving a house fire. As part of this former representation, Keller had gained information regarding USAA’s policies and practices, thought processes, and business and litigation philosophies and strategies. Keller’s representation had included matters involving allegations similar to those made by the homeowners. On this basis, USAA alleged a conflict of interest disqualifying Keller under Rule of Professional Conduct 1.9, which states that a lawyer may not represent a new client against a former client “in the same or a substantially related matter in which that person’s interests are materially adverse to the interests of the former client.”
The Washington Supreme Court, siding with the majority of jurisdictions, first determined that the burden for showing that matters are “substantially related” rests with the former client. In that context, the court then concluded that the facts of this case and those of prior USAA cases, including the prior house fire case, were distinct and unrelated. Likewise, the court concluded that the information Keller gained when it represented USAA did not preclude Keller’s representation of the homeowners. As such, the court held that Keller was not disqualified from representing the homeowners against USAA.
Disclaimer: The opinions expressed in in this blog are those of the author and do not necessarily reflect those of Soha & Lang, P.S. or its clients.
