Big Constr., Inc. v. Gemini Ins. Co.

• Decision Date: 22 May 2012
• Docket Number: CASE NO. C12-5015 RJB
• Court: U.S. District Court — Western District of Washington
• Parties: BIG CONSTRUCTION, INC., DANNY KIM, Plaintiffs, v. GEMINI INSURANCE COMPANY, JOHN and JANE DOES 1-15, Defendants.

BIG CONSTRUCTION, INC., DANNY KIM, Plaintiffs,

v.GEMINI INSURANCE COMPANY, JOHN and JANE DOES 1-15, Defendants.

CASE NO. C12-5015 RJB

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT TACOMA

Dated: May 22, 2012

ORDER DENYING PLAINTIFFS' MOTION FOR PARTIAL

SUMMARY JUDGMENT AND GRANTING DEFENDANT

GEMINI'S CROSS-MOTION FOR PARTIAL SUMMARY JUDGMENT

This matter comes before the Court on cross-motions for summary judgment. Plaintiffs, Big Construction, Inc., and Danny Kim (Big Construction), move for partial summary judgment seeking to establish that Defendant Gemini Insurance Company (Gemini) breached a duty to defend the Plaintiffs from claims asserted against them in Wayne Kim v. Big Construction, Inc. et.al., Pierce County Cause No. 08-2-10705-7 (underlying Wayne Kim Complaint). Dkt. 15. Defendant Gemini moves for partial summary judgment requesting a finding that Gemini had no duty to defend or cover the claims in the underlying lawsuit. Dkt. 25. The Court has consideredthe pleadings in support of and in opposition to the cross-motions for summary judgment and the record herein.

INTRODUCTION AND BACKGROUND

The material facts are undisputed. The underlying Wayne Kim Complaint makes the following allegations:

III. FACTS

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3.2 On or about April 17, 2007, Defendant Danny Kim, as a general contractor and owner of Big Construction, entered into an agreement with Plaintiff Wayne Kim for services involving the demolition and new construction of the residence located at 3530 Soundview Drive West, University Place, Washington. This contract estimated the total price for the work completed to be $889,000.00 including options and all construction work.

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3.4 Defendant Big Construction failed to complete the construction work to the satisfaction of Plaintiff in a timely manner or in a manner at or above industry standards for quality for this type of construction as required by contract.

3.5 An independent inspection completed by structural engineers, Wang Engineers, discovered a failure in the steel framing and construction of the home[.] This failure will require large amounts to repair. This incomplete framing of the steal [sic] structure was completed by Big Construction.

3.6 Defendants Big Construction caused residence . . . to be over excavated by more than twelve inches, thus causing the failure of the steel framing. Big Construction had been advised of the impropriety of overexcavating by structural engineers but failed to adhere to the advice and

continued construction resulting in the unsoundness of the residence.

3.7 Plaintiff Kim has paid Big Construction more than 1.2 million dollars for construction work on [the residence]. Due to the failure of Big Construction and its subcontractors, more than $500,000.00 is needed for repairs and completion of the house, as estimated by independent general contractors.

3.8 Defendant Big Construction fraudulently charged Plaintiff Kim $138,099.63 for removal of a heating oil tank, representing charges over and above industry accepted standards.

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3.10 Defendant[] Big Construction caused to be removed eighty yards of contaminated dirt from the property and ha[s] no record of the location to which the dirt was taken in violation of MTCA[.]

3.12 Defendant Big Construction failed to repair substandard and below Pierce County Code construction after being informed by Pierce County Inspectors of the violations. This failure resulted in an additional expense for a re-inspection which also resulted in many violations.

3.13 Incomplete and below industry standard work has caused Plaintiff to incur over $750,000.00 in additional construction expense anddiminution of property value on the home[.]

Dkt. 26-1 pp. 25-27.

The underlying complaint sets forth the following causes of action:

BREACH OF CONTRACT

4.2 Defendant Big Construction, breached its contract for the remodeling of Plaintiff's home when it failed to complete the construction work in a timely manner and to the satisfaction of Plaintiff as required by the contract. Plaintiff has had no option but to hire other contractors to complete the project. Plaintiff is damaged in a principal amount of $750,000 or such greater amount as may be proven at trial[.]

4.3 Defendant Big Construction failed to complete construction in a manner at or above industry standard. This failure resulted in the continued failure of inspections and the eventual uninhabitibility of the residence[.]

CONSUMER PROTECTION ACT

5.2 Defendant Big Construction violated the Consumer Protection Act . . . by using its superior knowledge of construction and associated costs to overcharge, deceive and fraud, Plaintiff Kim throughout the demolition and construction process.

5.3 Defendants Big Construction ... engaged in unfair and deceptive actions. The acts and practices occurred in the conduct of Defendants' trade as a contractor ... The act or practice affected the public interest and caused Plaintiff injury in his property. Defendants' actions caused Plaintiffs injury.

MODEL TOXICS CONTROL ACT (MTCA)

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6.5 Defendant Big Construction, in violation of RCW 70.105D.040, arranged by contract for the removal and disposal of the potentially hazardous waste identified at the time of the tank removal.

6.6 Defendants Big Construction ... caused Plaintiff, through their acts of fraudulent and negligent removal of the heating oil tank and surrounding potentially hazardous soil, to be potentially liable [under MTCA] as an owner of the residence.

Dkt. 26-1 pp. 27-29.

Plaintiffs in the underlying Wayne Kim Complaint also seek to quiet title to the property and to recover on the contractor's bond. Dkt. 26-1 pp. 29-31.

Gemini Insurance Company issued general liability insurance to Plaintiff Big Construction, Inc. under policy No. VIGP 008421, which was in effect from August 22, 2007 to August 22, 2008, and is the policy at issue in this action. Dkt. 11 pp. 19; Dkt 26-1 pp. 2-4. The policy's coverage is provided in Commercial General Liability Coverage Form No. CG 00 01 07 98, which contains the following insuring clause and definitions:

SECTION I - COVERAGES

COVERAGE A BODILY INJURY AND PROPERTY DAMAGE LIABILITY

1. Insuring Agreement

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we willhave no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply. We may, at our discretion, investigate any "occurrence" and settle any claim or "suit" that may result. . . .

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No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under Supplementary Payments -Coverages A and B.

b. This insurance applies to "bodily injury" and "property damage" only if:

(1) The "bodily injury" or "property damage" is caused by an "occurrence" that takes place in the "coverage territory"; and

(2) The "bodily injury" or "property damage" occurs during the policy period.

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2. Exclusions

This insurance does not apply to:

j. Damage To Property

"Property damage" to:

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(5) That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the "property damage" arises out of those operations; or

(6) That particular part of any property that must be restored, repaired, or replaced because "your work" was incorrectly performed on it.

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m. Damage To Impaired Property Or Property Not Physically Injured

"Property damage" to "impaired property" or property that has not been physically injured, arising out of:

(1) A defect, deficiency, inadequacy or dangerous conditionin "your product" or "your work"; or

(2) A delay or failure by you or anyone acting on your behalf to perform a contract or agreement in accordance with its terms.

This exclusion does not apply to the loss of use of other property arising out of sudden and accidental physical injury to "your product" or "your work" after it has been put to its intended use.

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SECTION V - DEFINITIONS

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13. "Occurrence" means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

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17. "Property damage" means:

a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or

b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the "occurrence" that caused it.

Dkt. 26-1 pp. 7-10, 16-19

On September 29, 2008, Gemini informed Big Construction by fax that it was declining to defend or provide coverage to Big Construction for the underlying Kim lawsuit. Dkt. 11 pp. 16-17. On October 1, 2008, Gemini sent a certified declination letter to Big Construction setting for the reasons for denial:

In review of the above-quoted policy, for there to be coverage under the same subject policy, there must be "property damage" and/or "bodily injury" which occurs during the policy period and is caused by an "occurrence". Since the project was not completed at the time your policy with Gemini Insurance Company expired, August 27, 2008, there is no occurrence during your policy period and coverage does not apply to this loss.

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There is no coverage under the policy for any damages claimed as a result of your failing to fulfill the terms of a contract or agreement if such damages do not constitute "property damage" and/or "bodily injury" from an "occurrence" as defined in the policy.

The Gemini Insurance Company policy are subject to a variety of terms and conditions as set forth in the captioned policy and to other legal and equitable defenses, including but not limited to, the denial of coverages

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