Allstate Ins. Co. v. Forest Lynn Homeowners Ass'n

• Citation: 892 F. Supp. 1310
• Decision Date: 06 July 1995
• Docket Number: No. C94-1111R.,C94-1111R.
• Parties: ALLSTATE INSURANCE COMPANY, Plaintiff, v. FOREST LYNN HOMEOWNERS ASSOCIATION, Defendant.
• Court: U.S. District Court — Western District of Washington

892 F. Supp. 1310

ALLSTATE INSURANCE COMPANY, Plaintiff, v. FOREST LYNN HOMEOWNERS ASSOCIATION, Defendant.

No. C94-1111R.

United States District Court, W.D. Washington at Seattle.

July 6, 1995.

Craig Bennion, Cozen & O'Connor, Seattle, WA, for plaintiff.

Robert A. Medved, Linda L. Foreman, Foster Pepper & Shefelman, Seattle, WA, for defendant.

ORDER RE MOTIONS FOR PARTIAL SUMMARY JUDGMENT

ROTHSTEIN, District Judge.

THIS MATTER comes before the court on motions by plaintiff and defendant for partial summary judgment. Having considered the pleadings filed in support and in opposition to the motions, the court finds and rules as follows:

I. BACKGROUND

Plaintiff Allstate Insurance Company ("Allstate") filed this declaratory judgment action for a determination of coverage under a property insurance policy issued by Allstate to defendant Forest Lynn Homeowners Association ("the Association"). The Association seeks coverage under the property insurance policy for damage to the exterior elevated walkway system at the Forest Lynn Condominiums ("Forest Lynn").

A. The Walkways at the Forest Lynn Condominiums

Built in 1976, the Forest Lynn Condominiums consist of 14 wood-framed buildings, three stories in height. The only access to and from the units on the second and third levels is by the exterior elevated walkway system, made up of a series of elevated decks. These walkways also connect the buildings with each other. The exterior walkway system is made of vertical wood posts supporting horizontal glu-lam beams. The glu-lam beams support horizontal wood joists which are covered by wood decking floors with a concrete topping slab.

Although they emphasize different conditions, both parties agree that there is no factual dispute as to the condition of the walkways at Forest Lynn. See pp. 3—5, Allstate Memo. in Support of Summ. Judg.; pp. 3—5, Association Memo. in Support of Summ. Judg. The walkways are damaged. The parties agree that at least some of the posts supporting the walkways are experiencing rot and hidden decay. Some of the glu-lam beams have rot damage as well. Some beams are deformed and have crushed or compressed. The concrete topping is cracked and uneven in places, and the wood decking under the concrete is probably rotted in places. The parties agree that the rot was caused by water damage of some form.

The parties also agree that at least portions of the walkways need to be replaced and that some structural supports have lost at least some of their load-bearing capacity. The walkways have been "shored up" on an ongoing basis since November 1993.

B. The Allstate Property Insurance Policy

The Association has purchased property insurance from Allstate since 1986. On May 28, 1993 the Association submitted a written claim to Allstate for the rot and deterioration of the walkways and their supporting beams and posts. The policy in effect at the time the Association submitted its claim, No. 050 707962, was effective January 23, 1993 to January 23, 1994. The policy contained two separate provisions which are relevant to the Association's claim, referred to by the parties as the Collapse provision and the Coverage A provision. The relevant portions of these provisions are set out in the Appendix to this order.

On July 23, 1993 Allstate denied coverage of the Association's claim under the Coverage A provision of the Policy. At that time, Allstate did not consider the Collapse provision of the Allstate policy. In October, 1993 Allstate refused to renew the Allstate Policy. On February 2, 1994 the Association requested that Allstate reconsider its denial and that Allstate review the separate Collapse provision of the policy. On June 23, 1994 Allstate denied coverage under the Collapse provision of the policy.

The Association has moved for partial summary judgment, arguing that the Collapse provision of the policy provides coverage for the damage to the walkways at Forest Lynn. Allstate has moved for partial summary judgment, arguing that the policy does not provide coverage for the claimed damage.

II. DISCUSSION

A. Legal Standards

A grant of summary judgment is appropriate if it appears, after viewing the evidence in the light most favorable to the opposing party, that there are no genuine issues of material fact and that the moving party is entitled to judgment as a matter of law. T.W. Electrical Service, Inc. v. Pacific Electrical Contractors Assn., 809 F.2d 626, 630-631 (9th Cir.1987); Lew v. Kona Hospital, 754 F.2d 1420, 1423 (9th Cir.1985). Summary judgment is not appropriate if "a result other than that proposed by the moving party is possible under the facts and applicable law." Aronsen v. Crown Zellerbach, 662 F.2d 584, 591 (9th Cir.1981). Additionally, "under Washington law, the interpretation of an insurance contract is a matter of law." American Home Assurance Co. v. Cohen, 815 F.Supp. 365, 368 (W.D.Wash.1993), citing McDonald v. State Farm Fire and Cas. Co., 119 Wash.2d 724, 730, 837 P.2d 1000 (1992).

The parties agree, at least as to the Collapse provision of the policy, that there are no disputes of fact precluding summary judgment. With respect to the Collapse provision, both parties agree that the court should interpret the policy, and determine whether the claimed damage is covered, as a matter of law. See pp. 2, 23 Allstate Memo. in Supp. of Summ. Judg.; p. 7, Association Memo. in Supp. of Summ. Judg. Allstate has also moved for summary judgment on the Coverage A provision of the policy. With respect to coverage under the Coverage A provision, the Association contends there are disputes of fact precluding summary judgment at this time.

B. The Collapse Provision of the Allstate Policy

The parties agree that the threshold issue for the court to decide is whether the damage claimed by the Association constitutes "collapse" in such a manner as to trigger coverage under the Collapse provision of the insurance policy. The parties also agree that the policy does not define the term "collapse" and therefore this court's task is to predict how the Washington State Supreme Court would rule on this issue.¹Westlands Water Dist. v. Amoco Chemical Co., 953 F.2d 1109, 1111 (9th Cir.1991); see also American Home Assurance Co., 815 F.Supp. at 368. In addition to that inquiry, if the court finds that the Collapse provision has been triggered by the damage claimed at Forest Lynn, the court must determine if the specific language of the Collapse provision nevertheless excludes coverage.

1. Interpretation of "Collapse"

Under Washington law, if terms in an insurance policy are ambiguous, those terms are construed against the drafter. McDonald v. State Farm Fire and Cas. Co., 119 Wash.2d at 733. "Where a provision of a policy of insurance is capable of two meanings, or is fairly susceptible of two constructions, the meaning and construction most favorable to the insured must be employed ..." Shotwell v. Transamerica Title Ins. Co., 91 Wash.2d 161, 167-68, 588 P.2d 208 (1978) (citations omitted).

Allstate argues that the Forest Lynn Condominiums have not suffered from collapse and therefore the Collapse provision of the policy is not applicable. Allstate argues that the term "collapse" is defined in part by the policy language stating that "Collapse does not include settling, cracking, shrinkage, bulging or expansion." p. 3, Allstate policy. Additionally, Allstate argues that the damage claimed by the Association does not constitute collapse because the damage suffered by the walkways is not within the plain, ordinary meaning of the term "collapse" as defined in a standard English dictionary.

The Association argues that the structural impairment suffered by the walkways is covered by the Collapse provision and that the term "collapse" has been interpreted by numerous courts to encompass the type of damage the walkways have undergone.

The court finds that the term "collapse" is ambiguous in the policy. If the court were to adopt Allstate's reasoning that the building or parts of the building must actually "fall down" or "fall to pieces" before collapse will be found, insureds would have the incentive to allow the structure to progress to the point of falling down. For example, the policy covers collapse from hidden decay. Were the insured to discover the decay prior to the structure falling down, Allstate's argument would lead to the conclusion that there was no coverage until the structure fell, irrespective of whether repairs could have prevented the fall. This result defies common sense. As the court in Beach v. Middlesex Mut. Assur. Co., 205 Conn. 246, 532 A.2d 1297 (1987), stated:

requiring the insured to await an actual collapse would not only be economically wasteful ... but would also conflict with the insured's contractual and common law duty to mitigate damages.

Id. at nt. 2, p. 1301 (Conn.1987).

The court finds persuasive the reasoning of the numerous courts which have interpreted the term "collapse" in property insurance policies. For example, in Beach the Supreme Court of Connecticut considered a provision with nearly the same language and considered the same argument that Allstate advances here about the standard definition of "collapse." However, as that court noted, "Although `collapse' encompasses a catastrophic breakdown ... it also includes a breakdown or loss of structural strength ..." Id. at 1299-1300. The Beach court also noted that "if the insurer wished to rely on a single facial meaning of the term `collapse' as used in its policy, it had the opportunity expressly to define the term to provide for the limited usage it now claims to have intended." Id. at 1300.

Although there are older cases in which the term "collapse" was interpreted to cover only a sudden falling down or a catastrophic flattening resulting in a structure broken into pieces, see, e.g., Olmstead v. Lumbermens Mutual Ins. Co., 22 Ohio St.2d 212, 216, 259 N.E.2d 123 (1970); Higgins v. Connecticut...