Becker v. TIG Ins. Co.

• Decision Date: 28 December 2022
• Docket Number: 3:21-cv-05185-JHC
• Parties: MATTHEW BECKER, et al., Plaintiffs, v. TIG INSURANCE CO., et al., Defendants.
• Court: U.S. District Court — Western District of Washington

MATTHEW BECKER, et al., Plaintiffs,
v.
TIG INSURANCE CO., et al., Defendants.

No. 3:21-cv-05185-JHC

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

December 28, 2022

ORDER RE: MOTIONS FOR SUMMARY JUDGMENT

John H. Chun United States District Judge

I

Introduction

This matter comes before the Court on: (1) Plaintiffs' First Motion for Partial Summary Judgment, Dkt. # 59, and (2) Defendant TIG Insurance Company's (“TIG”) Motion for Summary Judgment, Dkt. # 95. The Court has considered the motions filed in support of, and in opposition to, the motions, and the balance of the case file. Being fully advised, and for the reasons below, the Court DENIES Plaintiffs' motion and GRANTS in part and DENIES in part TIG's motion.

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II

Background

This case concerns an insurance coverage dispute in which Plaintiffs, assignees of Highmark Homes LLC, assert claims for relief against a group of insurance carrier defendants. Dkt. # 2 at 2-3. Plaintiffs are 45 owners of 30 homes in the East Park housing development in Bremerton, Washington. Id. at 5-8. Highmark was a general contractor for the construction of homes in the development. Id. at 1457.

TIG, as successor by merger to American Safety Indemnity Company (“ASIC”),^[1]issued three general commercial liability policies to Highmark. Id. at 2-3, 8. These policies covered the three-year period from July 17, 2010, to July 17, 2013. Id. at 8, 149-228, 249-335; Dkt. # 45-70 at 32-97. HDI Global Specialty SE, f/k/a International Insurance Company of Hannover SE (“Hannover”), another insurer, issued two general commercial liability policies to Highmark, covering the two-year period from July 17, 2013, to July 17, 2015. Dkt. # 2 at 1654-55. TIG's policies cover “sums that the insured becomes legally obligated to pay as damages because of . . . ‘property damage.'” Dkt. # 2 at 53, 252; Dkt. # 45-70 at 35. Notably, they exclude coverage for property damage to any “tract housing project or development” of 25 or more homes. Dkt. # 2 at 217, 316; Dkt. # 45-70 at 95.

On November 28, 2016, 46 East Park homeowners filed a construction defect suit against Highmark in Kitsap County Superior Court (“East Park Suit”), bringing claims for breach of contract, breach of the implied warranty of habitability, violation of the Washington Consumer

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Protection Act (“CPA”), and negligent misrepresentation.^[2] Dkt # 2 at 646-55. See Matthew Becker et al. v. Highmark Homes LLC et al., Kitsap County, Washington, Superior Court cause number 16-2-02165. On July 21, 2017, Highmark tendered its defense to TIG through Highmark's attorney, Patrick McKenna at the law firm of Gillaspy & Rhode.^[3]Dkt. # 50-23 at 2. Within days, TIG acknowledged receipt of the claim and began its investigation.^[4] Id. at 2-10; Dkt. # 45-70 at 275-76. On August 16, 2017, TIG sent Highmark a letter summarizing the claim and informing that it would “investigate this claim under a full reservation of rights.” Dkt. # 4516 at 2-3, 21. TIG identified various exclusions contained in its policies that might exclude coverage. Id. at 7-21. One exclusion, the Condominium, Apartment, Townhouse or Tract Housing Coverage Limitation Endorsement (“CATT exclusion”), states:

This insurance does not apply to

Condominium, Apartment and Townhouse

“Bodily injury”, “property damage” or “personal and advertising injury” however caused arising, directly or indirectly, out of, or related to an insured's or an insured's subcontractors' operations, “your work”, or “your product” that are incorporated into a condominium, apartment or townhouse project. This exclusion applies only to projects that exceed 25 units....

Tract Housing

“Bodily injury”, “property damage” or “personal and advertising injury” however caused, arising, directly or indirectly, out of, or related to an insured's or an insured's subcontractors' operations, “your work”, or “your product” that are incorporated into a “tract housing project or development”....

“Tract housing” or “tract housing project or development” means any housing project or development that includes the construction, repair or remodel of twenty-five (25)

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or more residential buildings by our insured in any or all phases of the project or development.

Id. at 11-12; Dkt. # 2 at 217, 316; Dkt. # 45-70 at 95. Although TIG's letter did not expressly accept or deny Highmark's tender of defense, it identifies itself as a “Reservation of Rights and Denial.” Dkt. # 45-16 at 22-23.

Between August and October 2017, TIG communicated with McKenna about the status of Highmark's defense in the East Park Suit. Dkt. # 45-70 at 318-20; Dkt. # 68-5 at 2. In November, TIG retained the law firm Morrow & White to assist Gillaspy & Rhode in the defense of Highmark. Dkt. # 45-71 at 79-82. Over the next six months, TIG communicated with its counsel about the status of Highmark's defense, including confirming that McKenna would attend a July 2018 mediation on Highmark's behalf. Dkt. # 68-1 at 2-4.

During the East Park Suit litigation, a separate group of homeowners in another Washington housing development sued Highmark in Pierce County Superior Court. See Hay v. Highmark, et al., Pierce County, Washington, Superior Court cause number 14-2-08793-0. Those plaintiffs then filed an action in this district against ASIC, TIG's predecessor, bringing claims for breach of contract, bad faith, and violations of the Insurance Fair Conduct Act (“IFCA”) and CPA. See Hay v. Am. Safety Indem. Co., 270 F.Supp.3d 1252, 1255 (W.D. Wash. 2017), aff'd, 752 Fed.Appx. 460 (9th Cir. 2018). On September 19, 2017, the court granted summary judgment in ASIC's favor, focusing on the same CATT exclusion at issue here. Id. at 1258-60. The court held that the CATT exclusion applied because it “clearly and unambiguously excludes a housing project or development of 25 homes or more,” and the plaintiffs owned 29 homes in the development. Id. at 1260. With respect to the East Park Suit, TIG's internal notes from July 2018 state: “Based on the identification of 26 Plaintiffs in this Complaint, and the CATT limiting endorsement (excluding coverage for projects of 25 or more residential buildings)

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in all 3 policies, [it] appears we may have been erroneously defending Insured in [this] action.” Dkt. # 45-71 at 114.

On November 15, 2018, the Ninth Circuit affirmed the lower court's decision in Hay. Hay v. Am. Safety Indem. Co., 752 Fed.Appx. 460, 462 (9th Cir. 2018). The same day, in connection with the East Park Suit, TIG sent Highmark a letter denying coverage:

While [TIG] previously agreed to provide a defense to Highmark under the Policies, . . . we must now advise you that [TIG] has determined there is no potential for coverage in this matter for Highmark for the above-referenced loss and [TIG] will therefore be withdrawing its defense of Highmark effective 30 days from the date of this letter. This is based on all Policies containing the [CATT exclusion]. It is our understanding that Highmark's insurance carrier, Han[n]over, is continuing to provide a defense to Highmark in this matter.

Dkt. # 2 at 1594. TIG's subsequent withdrawal letter states, “Withdrawal of the defense of Highmark in this matter by [TIG] is further supported by the recent Appellate decision in Maureen Hay v. [ASIC]. Id. at 1624-25.

On November 19, 2018, Plaintiffs and Highmark entered into a settlement agreement to resolve cases against Highmark, including the East Park Suit, contingent on funding provided by Highmark's insurers. Id. at 1606-07. Hannover later agreed to pay part of the settlement; TIG apparently refused to contribute. Id. at 1655. On April 24, 2019, as consideration for Hannover's payment, Plaintiffs, Highmark, Highmark's owner, Hannover, and a subcontractor entered into a settlement agreement in which Plaintiffs released all claims against the other settling parties. Id. at 1654-56, 1693. Under the 2019 settlement agreement, Highmark assigned to Plaintiffs “any and all insurance claims Highmark . . . ha[s] or may acquire in the future against insurers other than Hannover related to the claims in the East Park Suit.” Id. at 1655.

On March 12, 2021, Plaintiffs filed their complaint in this case. On March 23, Plaintiffs filed their amended complaint. Dkt. # 2 at 64. Plaintiffs bring claims against TIG in their

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capacities as assignees of Highmark.^[5]Id. at 2, 1654. As to TIG, Plaintiffs seek declaratory relief and assert claims for breach of contract, bad faith, negligent misrepresentation, negligence, estoppel,^[6] and violations of the Washington Administrative Code (“WAC”), CPA, and IFCA. Id. at 43-61. The parties now cross-move for summary judgment. Dkts. ## 59, 95. TIG seeks dismissal of all claims, while Plaintiffs' motion concerns their claims for breach of contract, bad faith, and estoppel. Id.

III

Discussion

A. Summary Judgment Standard

Summary judgment is appropriate if the evidence, when viewed in the light most favorable to the non-moving party, shows “that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A fact is “material” if it could affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A factual dispute is “genuine” if a reasonable jury could disagree about whether the facts claimed by the moving party are true. Aydin Corp. v. Loral Corp., 718 F.2d 897, 902 (9th Cir. 1983).

When cross motions are at issue, the court must “evaluate each motion separately, giving the nonmoving party in each instance the benefit of all reasonable inferences.” ACLU of Nev. V. City of Las Vegas,

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466 F.3d 784, 790-91 (9th Cir. 2006) (internal citations omitted). If the moving party bears the burden of proof on a claim, it “must show that the undisputed facts...