Commonwealth Ins. Co. v. GRAYS HARBOR, 28922-9-II.

CourtCourt of Appeals of Washington
Writing for the CourtARMSTRONG, J.
Citation120 Wash. App. 232,84 P.3d 304
PartiesCOMMONWEALTH INSURANCE COMPANY OF AMERICA, Appellant/Cross-Respondent, v. GRAYS HARBOR COUNTY, Respondent/Cross-Appellant.
Docket NumberNo. 28922-9-II.,28922-9-II.
Decision Date18 February 2004

84 P.3d 304
120 Wash.
App. 232

GRAYS HARBOR COUNTY, Respondent/Cross-Appellant

No. 28922-9-II.

Court of Appeals of Washington, Division 2.

February 18, 2004.

As Amended on Reconsideration April 13, 2004.

John Paul Zahner, Foster, Pepper & Shefelman, PLLC, Thomas Fitzgerald Ahearne, Seattle, WA, for respondent.

Mark Preston Scheer, Scheer & Sotirhos, LLP, Jerret E. Sale, Maria Elias Sotirhos, Bullivant, Houser, Bailey, PC, Seattle, WA, Douglas G. Houser, Bullivant, Houser, Bailey, Portland, OR, for appellant.

84 P.3d 305

This action arises out of a dispute between Grays Harbor County and its property insurer, Commonwealth Insurance, and concerns the extent of coverage for earthquake damage to the Grays Harbor County Courthouse in July 1999. Both parties submitted cost of repairs estimates to the city building official who was responsible for issuing the necessary building permit. But the County's estimate was much higher than Commonwealth's because the County included alterations that the city building official required to correct certain non-conforming conditions in the building. When the parties could not agree on Commonwealth's coverage, Commonwealth sued for declaratory relief. The trial court granted partial summary judgment in favor of Grays Harbor; both parties have appealed. We affirm that part of the summary judgment establishing that the alterations are covered if the earthquake damage caused the code enforcement resulting in the alterations. But we also hold that an issue of material fact exists as to whether the building official required the upgrades because of the earthquake damage. We remand for further proceedings.


I. Damage

The July 1999 Satsop earthquake seriously damaged the Grays Harbor County Courthouse. Both Grays Harbor County and its property insurer, Commonwealth Insurance Company, hired engineering firms to investigate the earthquake damage and prepare repair proposals. The parties agreed that the earthquake's major structural damage was limited to the courthouse's clock, tower, dome, cupola, and one interior wall. But the engineering firms prepared repair proposals with very different scopes.

Commonwealth's engineer estimated the cost of repair at $1.2 million; the County's engineer estimated the cost at $7.2 million. Both proposals covered structural damage repairs. But only the County's proposal included upgrades to six aspects of the courthouse that were legal nonconforming conditions: egress, accessibility, fire alarm, fire protection, ventilation, and seismic systems. These upgrades account for some of the disparity in estimates. In addition, the County proposed to replace the original copper cupola, which had been painted white, with a new copper cupola. Commonwealth wanted to substitute a painted fiberglass cupola.

The City of Montesano building official decided to require the six upgrades as conditions of issuing a construction permit allowing repairs. The official required the upgrades even though the existing systems were legal nonconforming conditions undamaged by the earthquake.

Commonwealth's insurance contract provides in part:


In the event of loss or damage under this Policy that causes the enforcement of any law or ordinance regulating the construction or repair of damaged facilities, this Company shall be liable for:
. . .

C. Increased cost of repair or reconstruction of the damaged and undamaged facility on same or another site and limited to the minimum requirements of such law or ordinance regulating the repair of [sic] reconstruction of the damaged property on the same site. However, the Company shall not be liable for any increased cost of construction loss unless the damaged facility is actually rebuilt or replaced.

Clerk's Papers (CP) at 75.

II. Trial Court's Ruling

The trial court ruled that Commonwealth's coverage included what the building code "might reasonably require." CP at 918. The court also concluded that under building code sections 102 and 103, the building official could refuse to allow the courthouse to be occupied until the safety improvements had been made. Finally, the court ruled that some of the improvements were authorized, including egress facilities, the fire alarm and fire protection system, ventilation, some of the accessibility improvements, seismic improvements, and the heating system improvements. But the court refused to rule

84 P.3d 306
on the remaining upgrades and further concluded that "whether the actual expenditures were reasonable to meet the minimum requirements of a Section 102 directive remains to be determined." CP at 1101

III. The Dispute

Commonwealth contends that its scope of repair addresses all repairs required by the code and the trial court erred in extending coverage to all upgrades in the building permit. Commonwealth argues that its policy covers only the "minimum requirements" of the code, not the "substantial alteration" the County proposed. App. Br. at 14. Commonwealth urges us to hold that the building official lacked legal authority to require the upgrades under building code section 102 because the courthouse was not a public nuisance and did not qualify for abatement either before or after the earthquake. In addition, Commonwealth maintains that an issue of material fact exists as to whether the earthquake damage caused the building official to enforce the code. Finally, Commonwealth asks us to craft an instruction defining its "like kind and quality" language to mean the "functional equivalents." App. Br. at 40.

The County argues that it is entitled to summary judgment for all the upgrades because the code required it to apply for a building permit, the building official conditioned the permit on doing all the upgrades, and Commonwealth's policy can reasonably be read to cover all required upgrades.


We review a summary judgment by considering anew the motion documents submitted to the trial judge. Wilson v. Steinbach, 98 Wash.2d 434, 437, 656 P.2d 1030 (1982). Summary judgment is appropriate only if the submitted documents demonstrate the absence of any genuine issues of material fact and that the moving party is entitled to judgment as a matter of law. CR 56(c). We consider all facts with their reasonable inferences in the light most favorable to the nonmoving party. Wilson, 98 Wash.2d at 437, 656 P.2d 1030.

We interpret insurance contracts as a matter of law. McDonald v. State Farm Fire & Cas. Co., 119 Wash.2d 724, 730, 837 P.2d 1000 (1992) (citing Roller v. Stonewall Ins. Co., 115 Wash.2d 679, 682, 801 P.2d 207 (1990)). And we construe the policy language as an average person would understand it. Boeing Co. v. Aetna Cas. & Sur. Co., 113 Wash.2d 869, 881, 784 P.2d 507 (1990) (quoting Dairyland Ins. Co. v. Ward, 83 Wash.2d 353, 358, 517 P.2d 966 (1974)). But we construe ambiguities in the contract language in favor of coverage. Shotwell v. Transamerica Title Ins. Co., 91 Wash.2d 161, 167, 588 P.2d 208 (1978). A contract is ambiguous if we can fairly read it in two ways. City of Yakima v. Int'l Ass'n of Fire Fighters, AFL-CIO, Local 469, 117 Wash.2d 655, 669-70, 818 P.2d 1076 (1991) (citing Dep't of Transp. v. State Employees' Ins. Bd., 97 Wash.2d 454, 458, 645 P.2d 1076 (1982)).

I. Policy Coverage

Commonwealth reasons that we must measure its coverage by what the building code legally requires, not simply what the building official believed he had authority to enforce under the code. Commonwealth cites Graff v. Allstate Ins. Co., 113 Wash.App. 799, 804, 54 P.3d 1266 (2002), review denied, 149 Wash.2d 1013, 70 P.3d 964 (2003), for the proposition that the court, not the building official, "characterizes the peril causing the loss." App. Br. at 17. Commonwealth then engages in a legal analysis of the Uniform Building Code, particularly section 102, to show that the official exceeded his authority.

Graff does not help Commonwealth. In Graff, the insured owner of a rental house claimed a vandalism loss under his Allstate property insurance. Allstate's policy covered vandalism but not contamination damage. Because the insured's tenant operated a methamphetamine lab on the property that caused the damage, Allstate rejected the claim as contamination. We affirmed the trial's ruling that the loss was covered as vandalism. In support of its argument for contamination loss, Allstate pointed to the city inspector's finding of "contamination," "contamination" cleanup by an environmental firm, and the health department's finding

84 P.3d 307
that the "contamination" had been cleaned up. Graff, 113 Wash.App. at 804, 54 P.3d 1266. In answering Allstate's argument, we explained that loss characterization was for the court to determine, not the city, the private firm, or the health department. Graff, 113 Wash.App. at 804, 54 P.3d 1266. We do the same here. The building official does not determine the insured risk. We do...

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