Margitan v. Risk Management Inc.

• Decision Date: 03 March 2020
• Docket Number: 36517-4-III
• Parties: ALLAN MARGITAN, GINA MARGITAN, husband and wife, Appellants, v. RISK MANAGEMENT INC., a Washington corporation and ALLSTATE PROPERTY AND CASUALTY INSURANCE COMPANY, Respondents.
• Court: Washington Court of Appeals

ALLAN MARGITAN, GINA MARGITAN, husband and wife, Appellants, v. RISK MANAGEMENT INC., a Washington corporation and ALLSTATE PROPERTY AND CASUALTY INSURANCE COMPANY, Respondents.

No. 36517-4-III

Court of Appeals of Washington, Division 3

March 3, 2020

UNPUBLISHED OPINION

LAWRENCE-BERREY, C.J.

Allan and Gina Margitan brought a lawsuit against Risk Management Inc.(RMI) and Allstate Property and Casualty Insurance Company(Allstate) for breach of contract, breach of insurance policy, and bad faith under RCW 48.01.030, the Consumer Protection Act (CPA) chapter 19.86 RCW, andWAC 284-30-330.RMI and Allstate successfully moved for summary judgment dismissal of the claims.We affirm.

FACTS

The Margitans are homeowners.Cliff Walton operates and partly owns RMI.RMI sells insurance for Allstate as its "captive agency," which means Allstate has the right to prevent RMI from selling policies for other insurers.

In June 2010, Mr. Walton advised the Margitans to purchase homeowners' insurance offered by Allstate that would provide legal representation in the event they were sued provided it did not involve business, criminal issues, or fraud.The Margitans decided to purchase this recommended insurance.

The terms of the policy include the following provisions ....

Section II-Family Liability and Guest Medical Protection

Coverage X

Family Liability Protection

Losses We Cover Under Coverage X:

Subject to the terms, conditions and limitation of this policy, we will pay damages which an insured person becomes legally obligated to pay because of bodily injury or property damage arising from an occurrence to which this policy applies, and is covered by this part of the policy.

8.Occurrence-means an accident, including continuous or repeated exposure to substantially the same general harmful conditions during the policy period, resulting in bodily injury or property damage.

9.Property damage-means physical injury to or destruction of tangible property, including loss of its use resulting from such physical injury or destruction.

Additional Protection

We will pay, in addition to the limits of liability:

1.Claim Expense

We will pay:

a) All costs we incur in the settlement of any claim or the defense of any suit against an insured person;

Clerk's Papers(CP)at 262, 242, 263(underlining added).

In 2012, the Margitans' neighbors, Mark and Jennifer Hanna brought a quiet title action to resolve an easement dispute.The Hannas sought a declaratory judgment that two access easements across their property in favor of the Margitans were invalid.The Margitans advised Mr. Walton of the lawsuit and asked him to contact Allstate to provide a defense.

When deposed, Mr. Walton recalled meeting Mr. Margitan in 2012 and Mr. Margitan asking if his policy covered the Hannas' claim.Mr. Walton did not recall what he told Mr. Margitan or whether he called Allstate.Instead, he testified about his practice: If he cannot answer an insured's coverage question, he calls an Allstate claims advocate.If the advocate says there is coverage, he opens a file.He testified he did not open a file for the Margitans.So either he did not call Allstate in 2012 or the claim advocate said there was no coverage.

In 2013, the Hannas amended their complaint to allege the Margitans' rental house on their property violated a building restriction and should be torn down.The Margitans advised Mr. Walton about the amended claim and again asked him to contact Allstate to provide a defense.

When deposed, Mr. Walton recalled meeting Mr. Margitan at some point and discussing coverage for the tear-down claim.Mr. Walton did not recall what he told Mr. Margitan.Mr. Walton explained that a tear-down claim is not something he would consider the policy to cover.He said he probably would not have called Allstate to ask about coverage, but he"may have."CPat 1115.

The Margitans successfully defended against the Hannas' claims and recovered a sizeable judgment against them.

In 2016, the Hannas filed an action in bankruptcy court to remove the Margitans' judgment lien against them.In 2017, the Margitans called Allstate from Mr. Walton's office.The Margitans then informed Allstate about the Hannas' 2012 lawsuit to declare their two access easements invalid and the 2014 tear-down claim.

Allstate responded promptly with two letters.The first denied it had a duty to defend any of the claims under the homeowners' policy.The second, sent five days later, explained why none of the claims were covered under the "Additional Protection"section of the policy.CPat 263.

The Margitans brought suit against RMI and Allstate.They alleged the same causes of actions against both defendants: breach of contract, breach of insurance policy, and bad faith pursuant to RCW 48.01.030, the CPA, andWAC 284-30-330.About one year later, RMI and Allstate moved for summary judgment.The trial court reviewed the submitted materials and granted the defendants' motions.The Margitans moved for reconsideration, and the trial court denied their motion.

The Margitans timely appealed.

ANALYSIS

A.Standard of Review

On review of a summary judgment order, we engage in the same inquiry as the trial court.Wash. State Major League Baseball Stadium Pub. Facilities Dist. v. Huber, Hunt & Nichols-Kiewit Constr. Co.,165 Wn.2d 679, 685, 202 P.3d 924(2009).All facts and reasonable inferences are considered in a light most favorable to the nonmoving party.Berger v. Sonneland, HA Wn.2d 91, 102-03, 26 P.3d 257(2001).Summary judgment is appropriate only when there are no disputed issues of material fact and the prevailing party is entitled to judgment as a matter of law.CR56(c).A fact is material when the outcome of the litigation depends on it, in whole or in part.Atherton Condo. Apt-Owners Ass 'n Bd. of Dirs. v. Blume Dev. Co.,115 Wn.2d 506, 516, 799 P.2d 250(1990).Summary judgment is appropriate if reasonable persons could reach but one conclusion from all the evidence.SentinelC3, Inc. v. Hunt,181 Wn.2d 127, 140, 331 P.3d40(2014).

This court"may affirm summary judgment on any grounds supported by the record."Blue Diamond Grp., Inc. v. KB Seattle 1, Inc.,163 Wn.App. 449, 453, 266 P.3d 881(2011).However, "[a]n argument that was neither pleaded nor argued to the superior court on summary judgment cannot be raised for the first time on appeal."Johnson v. Lake Cushman Maint. Co., 5 Wn. App. 2d 765, 780, 425 P.3d 560(2018) (citing Sourakli v. Kyriakos, Inc.,144 Wn.App. 501, 509, 182 P.3d 985(2008);see alsoRAP 2.5(a)(appellate courts generally will not review a claim of error not raised in the trial court).

B.Breach of Contract/Insurance Policy

The Margitans argue that Allstate is required to pay its defense costs under the terms of the insurance policy.^[1]We disagree.

Interpretation and construction of an insurance policy, which is a contract, is a question of law.N. Pac. Ins. Co. v. Christensen,143 Wn.2d 43, 48, 17 P.3d 596(2001).Interpretation "' is giving meaning to the symbols of expression used by another person.'"Int'l Marine Underwriters v. ABCD Marine, LLC,179 Wn.2d 274, 281-82, 313 P.3d 395(2013)(internal quotation marks omitted)(quotingBerg v. Hudesman,115 Wn.2d 657, 663, 801 P.2d 222(1990))."The contract will be given a practical and reasonable interpretation that fulfills the object and purpose of the contract rather than a strained or forced construction that leads to an absurd conclusion, or that renders the contract nonsensical or ineffective."Wash. Pub. Util. Dists.' Utils. Sys. v. Pub. Util. Dist. No. 1 of Clallam County,112 Wn.2d 1, 11, 771 P.2d 701(1989).Any undefined terms will be given their plain, ordinary, and popular meaning.Int'lMarine Underwriters, 179 Wn.2d at 284.

Here, the "Additional Protection"section requires Allstate to pay for costs "we incur in the . . . defense of any suit against an insured person."CPat 263(underline added).The language is clear.It obligates Allstate to pay only its legal costs, not the Margitans'.

Allstate acknowledges it could be required to pay the Margitans' legal costs if it had a duty to defend.The Margitans argue that Allstate had such a duty.We disagree.

"' The duty to defend arises when a complaint against the insured, construed liberally, alleges facts which could, if proven, impose liability upon the insured within the policy's coverage.'"Expedia, Inc. v. Steadfast Ins. Co.,180 Wn.2d 793, 802-03, 329 P.3d 59(2014)(internal quotation marks omitted)(quotingAm. Best Food, Inc. v. Alea London, Ltd.,168 Wn.2d 398, 404-05, 229 P.3d 693(2010)).This duty is determined from the "eight corners" of the insurance contract and the underlying complaint.Id. at 803.

Allstate was not obligated to provide a defense.Even construed liberally, none of the claims asserted by the Hannas were covered under the insurance policy.Under the policy, Allstate promised to pay damages that the Margitans become legally obligated to pay because of bodily injury or property damage arising from an occurrence.The simplest reason the Hannas' claims never invoked policy coverage is because the claims did not seek damages.Rather, the claims sought a declaration of easement rights, injunctive relief to tear-down a rental building, and removal of a lien.An additional reason why the Hannas' claims never invoked policy coverage is because the claims did not describe "property damage" arising from an "occurrence," within the policy definitions of those terms.

C.Bad Faith (under RCW 48.01.030, the CPA, andWAC 284-30-330)

1.RMI

The Margitans argue RMI is liable for bad faith under RCW 48.01.030, the CPA, andWAC 284.30.330.They argue RMI is liable for failing to promptly notify Allstate...