Abk, LLC v. Mid-Century Ins. Co.
| Decision Date | 23 December 2019 |
| Docket Number | Docket No. 46430 |
| Citation | 166 Idaho 92,454 P.3d 1175 |
| Court | Idaho Supreme Court |
| Parties | ABK, LLC, a limited liability company, Plaintiff-Appellant, v. MID-CENTURY INSURANCE COMPANY, a foreign insurer, Defendant-Respondent. |
166 Idaho 92
454 P.3d 1175
ABK, LLC, a limited liability company, Plaintiff-Appellant,
v.
MID-CENTURY INSURANCE COMPANY, a foreign insurer, Defendant-Respondent.
Docket No. 46430
Supreme Court of Idaho, Boise, September 2019 Term.
Opinion Filed: December 23, 2019
Phillabaum, Ledlin, Matthews & Sheldon PLLC, Spokane, Washington, attorneys for Appellant. Douglas R. Dick argued.
Elam & Burke, P.A., Boise, attorneys for Respondent. Jaclyn T. Gans argued.
BEVAN, Justice
I. NATURE OF THE CASE
ABK, LLC, owns and operates a gas station in Post Falls, Idaho where underground storage tanks were damaged due to water infiltration into the gas stored in the tanks. After the damage occurred, ABK submitted a claim to its insurer, Mid-Century Insurance Company ("Mid-Century"). Mid-Century denied the claim. ABK then sued Mid-Century alleging breach of contract and bad faith. Mid-Century moved for summary judgment on both claims. The district court granted summary judgment for Mid-Century on ABK's breach of contract claim finding ABK failed to raise a genuine dispute as to the fact the underground storage tanks were damaged by water, an excluded peril. The district court also granted summary judgment for Mid-Century on ABK's bad faith claim finding ABK failed to establish coverage. ABK appeals the district court's grant of summary judgment in favor of Mid-Century on both claims. We affirm.
II. FACTUAL AND PROCEDURAL BACKGROUND
ABK owns and operates a gas and convenience store doing business as Jones Chevron and Deli in Post Falls, Idaho. When the described events occurred, ABK was insured by Mid-Century under a Business Owners Special Property Coverage Form ("the Policy"). The all-risk policy covered any physical loss or damage, other than losses or damages specifically excluded such as water damage, or damages caused by negligent maintenance, wear and tear, or weather conditions. Specifically, the Policy provides:
B. Exclusions
1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.
...
g. Water
(1) Flood, surface water, waves, tides, tidal waves, overflow of any body of water, or their spray, all whether driven by wind or not;
...
(4) Water under the ground surface pressing on, or flowing or seeping through:
(a) Foundations, walls, floors or paved surfaces;
(b) Basements, whether paved or not; or
(c) Doors, windows or other openings.
...
2. We will not pay for loss or damage caused by or resulting from any of the following:
...
k. Other Types of Loss
(1) Wear and tear;
...
3. We will not pay for loss or damage caused by or resulting from any of the following B.3.a. through B.3.c. But if an excluded cause of loss that is listed in B.3.a. through B.3.c. results in a Covered Cause of Loss, we will pay for the loss or damage caused by that Covered Cause of Loss.
a. Weather conditions
Weather conditions. But this exclusion only applies if weather conditions contribute in any way with a cause or event excluded in Paragraph 1. above to produce the loss or damage.
...
c. Negligent Work
Faulty, inadequate or defective:
...
(4) Maintenance; of part or all of any property on or off the described premises.
On January 18, 2017, ABK discovered water infiltrating multiple underground storage tanks ("USTs") on its property. ABK contacted its servicer, Coeur d'Alene Service Station Equipment, Incorporated ("CDASSE"), to remediate the damage. At the initial visit, CDASSE noted: "the ATG [(automatic tank gauging)] probe manholes on each UST were full of ice and water." That same day CDASSE replaced the seal caps located on the top of the riser for the ATG probe on the diesel and premium unleaded USTs. A few days later CDASSE observed that the "vapor recovery manholes were full of ice" and that "[t]he seal cap on the regular unleaded vapor recovery riser was cracked and the plunger on the adaptor was not sealing." Phase separation1 was detected in both the regular unleaded and premium unleaded USTs on January 23, 2017. CDASSE purged the product lines, removed the vapor recovery adapters from the USTs and installed new cap seals on the risers. The phase separated regular unleaded and premium unleaded gasoline was pumped out of the USTs and disposed of. Despite these repairs and the purging of the tainted gas, phase separated gasoline was again discovered two days later. On January 31, 2017, Northwest Environmental Solutions Incorporated performed leak testing on the tanks and ultimately determined there were no leaks in the USTs. Even so, ABK reported two additional instances of water infiltration on February 10, 2017, and February 17, 2017.
After the initial water infiltration, ABK submitted a claim to Mid-Century for the cost of repairing the USTs and for the loss of business during the time the USTs were inoperative. Mid-Century enlisted Envista Forensics to complete a desk review of the claim. Timothy Hurley, the engineer assigned, reviewed the multiple pressure and leak tests completed after water infiltrated the USTs and reviewed the invoices from CDASSE detailing the work that had been performed to date. In a report dated February 20, 2017, Hurley concluded that water likely infiltrated the system because of "multiple maintenance related issues with the regular unleaded and premium unleaded riser cap seals and vapor adapters. ..." Relying on Hurley's review, Mid-Century denied ABK's claim finding the Policy excluded coverage for damage caused by or resulting from wear and tear or faulty or inadequate maintenance. The denial letter also stated "though only parts of your policy are mentioned and quoted in th[e] letter, additional portions may apply. If they are found to be relevant and applicable, they will be applied."
On April 11, 2017, Don Boyd, an estimator with CDASSE, sent a letter to ABK detailing his review of the incident. Boyd assumed "water entered the Unlead and Premium tanks when the area over the fill buckets, stage one vapor caps and ATG caps [were] flooded with surface water." He explained further how "the stage one vapor adaptors were compromised by the force of the ice that was still in place during the first initial good thaw of 2017." Boyd continued:
After the first round of phase separated fuel was removed and water continued to enter the system without surface water and the stage one vapor lines being capped off it is a possible combination of below surface runoff water during excessive thawing and abnormal moisture content in the ground running into the below grade portion of the Unlead spill bucket. ...
Boyd also explained that after the second purging of the contaminated gasoline, the premium unleaded UST settled and stayed water free, but the unlead UST continued to take on water. The unlead spill bucket was then replaced and it was Boyd's understanding that the unlead tank stayed water free after this repair—leading Boyd to conclude "water was entering the tank from below grade of the spill bucket, 3" vapor line quit burping static water and ground water from run off had about run its course."
After ABK's claim was denied, ABK filed a complaint alleging breach of contract and bad faith against Mid-Century. Mid-Century filed a motion for summary judgment requesting the district court dismiss ABK's claims. According to Mid-Century, there was no breach of contract because ABK's damages were excluded from coverage under the Policy. Mid-Century argued the damages were excluded under the negligent maintenance, wear and tear, water, and weather conditions exclusions. Mid-Century then argued the bad faith claim should also be dismissed because without coverage there can be no bad faith. The district court found a genuine dispute existed over whether the damage stemmed from inadequate maintenance or wear and tear. But the district court granted summary judgment for Mid-Century finding no breach of contract because ABK's damages were barred from coverage under the Policy's water and weather conditions exclusions. The district court also granted summary judgment for Mid-Century on ABK's bad faith claim finding ABK failed to establish coverage. ABK filed a motion for reconsideration which the district court denied. This appeal followed.
III. ISSUES ON APPEAL
1. Whether the district court's grant of summary judgment for Mid-Century on ABK's breach of contract claim was erroneous.
a. Whether the district court erred in determining that ABK's damages were excluded under the water exclusion.
b. Whether the district court erred in determining that ABK's damages were excluded under the weather conditions exclusion.
c. Whether the district court erred in declining to perform an efficient proximate cause analysis.
2. Whether the district court's grant of summary judgment for Mid-Century on ABK's bad faith claim was erroneous.
IV. STANDARD OF REVIEW ...
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