Eagle W. Ins. Co. v. SAT, 2400, LLC

• Decision Date: 19 May 2016
• Docket Number: Case No. C15-1098RSL
• Citation: 187 F.Supp.3d 1231
• Parties: Eagle West Insurance Company, Plaintiff, v. SAT, 2400, LLC, et al., Defendants.
• Court: U.S. District Court — Western District of Washington

187 F.Supp.3d 1231

Eagle West Insurance Company, Plaintiff,

v.SAT, 2400, LLC, et al., Defendants.

Case No. C15-1098RSL

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

Signed May 19, 2016

Filed May 20, 2016

John A. Bennett, Bullivant Houser Bailey PC, Portland, OR, Owen R. Mooney, Bullivant Houser Bailey, Seattle, WA, for Plaintiff.

Todd Christopher Hayes, Harper Hayes PLLC, Seattle, WA, for Defendants.

Robert S. Lasnik, United States District Judge

This matter comes before the Court on defendant's "Motion for Partial Summary Judgment." Dkt. # 14. Plaintiff, Eagle West Insurance Company ("Eagle West"), brought this action seeking a declaratory judgment that it is not liable to defendant, SAT 2400, LLC ("SAT"), under the insurance policy ("the Policy") held by SAT. In its motion, defendant asks this Court to hold that the Policy's coverage exclusions for water damage, negligent work, and interior damage do not apply in this case. In response, plaintiff filed a cross-motion for partial summary judgment in which it asserts that its denial of coverage was proper and asks this Court to further hold that the Policy's wear and tear exclusion applies. Dkt. # 17. Having reviewed the memoranda, declarations, and exhibits submitted by the parties, the Court finds as follows:

BACKGROUND

Early in September 2013, the Seattle area experienced a significant amount of rainfall. In the 24 hour period ending on the morning of September 6th, a total of 1.73 inches of rainfall was recorded at SeaTac International Airport. Dkt. # 15 at 1. On the 6th, the property manager at the Stanford Apartments, owned by defendant SAT, noticed that water had begun to leak through to the building's interior. The manager went to the roof to find that the rain had overwhelmed the apartment's rooftop drainage system, in part because the roof's drain was clogged with dirt and debris. As a result, pooling water had started to leak through plumbing vent pipes at their joint collars, which stood about four inches above the roof level. Id. at 5. After the manager removed the debris, water began to flow off of the roof. Id. That day, a representative of the Stanford Apartments reported the damage to SAT's insurer, Eagle West. Dkt. # 1 at 3.

In the course of investigating SAT's claim, Eagle West hired several independent parties, including consultant Independent Roof Inspection, Inc. ("IRI"), to evaluate the damage and determine its cause. During its evaluation, IRI inspected the apartment's roof, including the roof's construction and maintenance as well as its drainage system. Dkt. # 18 at 6-7. In its report, IRI concluded that water had seeped through the building's roof in areas near the roof's drain. The report further mentioned problems with both the roof and its drain. First, IRI believed that the roof had outlived its normal useful life and had begun to show signs of age-related wear. Second, although the roof's drainage system was considered sufficient when the building was constructed in the early 1900's, IRI thought it was undersized by modern standards and lacked an ancillary drain to allow water discharge in the event the primary drain becomes clogged. Id. at 7. On October 28, 2013, Eagle West denied SAT's insurance claim, citing its investigation, drainage issues, and exclusions included in SAT's Policy. Dkt # 15 at 15. After SAT disputed Eagle West's denial of coverage, Eagle West filed this action seeking a declaratory judgment that it was not obligated to cover damage from the September 6th claim.

The Policy at issue in this case is an "all-risk" policy, under which "recovery is allowed for all fortuitous losses unless a specific exclusion applies." City of Oak Harbor v. St. Paul Mercury Ins. Co., 139 Wash.App. 68, 73, 159 P.3d 422 (2007) (quotation marks and citation omitted). Under the terms of SAT's Policy, Eagle West will cover property damaged by any Covered Cause of Loss. A loss is a Covered Cause of Loss unless the cause is specifically limited or excluded by the Policy. SAT asserts in its motion that Eagle West improperly denied its claim for three reasons¹ : first, that exclusions for water-and weather condition-related causes of damage do not apply to the cause of loss—excessive rainfall—at issue; second, that the Policy's exclusion for inadequate maintenance does not bar coverage; and third, that the clause limiting coverage to interior damage to situations where the exterior is first damaged is ambiguous and thus does not apply. Dkt. # 14 at 8-9. In its cross-motion, Eagle West claims its denial was proper because damage to the apartment's roof was a result of wear and tear and that, regardless, both the roof and drain were improperly maintained and thus are not covered by the Policy. Dkt. # 17 at 6. Eagle West also asserts that the exterior-damage-first clause applies and that it prevents coverage for damage to the apartment building's interior.

DISCUSSION

I. Standard for a Rule 56 Motion

Summary judgment is appropriate if, viewing the evidence in the light most favorable to the nonmoving party, "the movant 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) ; L.A. Printex Indus., Inc. v. Aeropostale, Inc., 676 F.3d 841, 846 (9th Cir.2012). The moving party "bears the initial responsibility of informing the district court of the basis for its motion." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Where the nonmoving party will bear the burden of proof at trial, the moving party need not "produce evidence showing the absence of a genuine issue of material fact," but instead may discharge its burden under Rule 56 by "pointing out...that there is an absence of evidence to support the nonmoving party's case." Id. at 325, 106 S.Ct. 2548.

Once the moving party has satisfied its burden, it is entitled to summary judgment if the non-moving party fails to designate "specific facts showing that there is a genuine issue for trial." Id. at 324, 106 S.Ct. 2548. "The mere existence of a scintilla of evidence in support of the non-moving party's position is not sufficient"; the opposing party must present probative evidence in support of its claim or defense. Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 919 (9th Cir.2001). "An issue is ‘genuine’ only if there is a sufficient evidentiary basis on which a reasonable fact finder could find for the nonmoving party."

In re Barboza, 545 F.3d 702, 707 (9th Cir.2008) (internal citations omitted). On cross motions for summary judgment, the Court evaluates the motions separately, "giving the nonmoving party in each instance the benefit of all reasonable inferences." Lenz v. Universal Music Corp., 801 F.3d 1126, 1130–31 (9th Cir.2015) (internal quotation marks and citation omitted).

II. Coverage Under the Insurance Policy

Coverage under insurance policies, particularly all-risk policies, is interpreted broadly. Commonwealth Ins. Co. of Am. v. Grays Harbor Cty., 120 Wash.App. 232, 239, 84 P.3d 304 (2004). When determining coverage, the initial burden of proof is on the insured to show that a loss falls within the terms of the policy. Wright v. Safeco Ins. Co. of Am., 124 Wash.App. 263, 271, 109 P.3d 1 (2004). The burden then shifts to the insurer to prove that the loss is not covered because of exclusionary provisions within the policy. Id.

The parties dispute the effect of four of the Policy's provisions: three exclusions and one limitation. The Policy's water exclusion is the broadest: if the rain event at issue is excluded, SAT cannot recover for any damage it claims occurred to the apartment building's interior or exterior. The Policy's exclusion of damage that results from "faulty, inadequate or defective" ("negligent") types of work may exclude damage to the building's exterior as a result of maintenance work on the building's roof or rooftop drainage system. The negligent work exclusion, however, contains an ensuing loss clause. Pursuant to this clause, if the rain event qualifies as a Covered Cause of Loss, then the resulting damage is covered by the Policy regardless of any inadequate maintenance. The third exclusion prevents recovery for damage that results from ongoing wear and tear and in this case would apply only to the building's exterior. The fourth and final provision limits coverage for damage to the building's interior unless a Covered Cause of Loss first damages, and then enters through, the exterior. Under this limitation, damage to the building's interior is covered only if the rain event is both a Covered Cause of Loss and if it reached the interior due to exterior damage caused by the rain event. If rain water reached the interior due to exterior damage that resulted from inadequate maintenance or wear and tear, the interior damage is not covered.

A. The Water Exclusion

The broadest exclusion at issue excludes coverage for "damage caused by or resulting from" any "water that backs up or overflows from a sewer, drain or sump."² The parties agree that the operative exclusionary term is "overflows." See Dkt. # 26 at 14. Eagle West contends that "[t]he evidence here indicates an overflow situation" because water pooled on the apartment's roof as a result of a debris blocking its drain. Dkt. # 17 at 20. The interpretive question is whether the water that collected on the apartment's roof "overflow [ed] from" the rooftop drain and is thus an excluded cause of loss. This term is undefined by the Policy and should be given a "plain, ordinary, and popular meaning." Int'l Marine Underwriters v. ABCD Marine, LLC, 179 Wash.2d 274, 284, 313 P.3d 395 (2013).

One place to look to determine a word's plain meaning is a standard English dictionary. Id. The dictionary definition of "overflow"—"to flow over the edge or top of (something)," Overflow , Webster's Third New International Dictionary 1607 (1981)—is not, however, particularly helpful. For example,...