Motorsports, Ltd. v. Mid-Century Insurance Company, No. 56213-4-I (WA 5/1/2006)
| Decision Date | 01 May 2006 |
| Docket Number | No. 56213-4-I,56213-4-I |
| Parties | MOTORSPORTS, LTD., a Washington corporation, Appellant, v. MID-CENTURY INSURANCE COMPANY, a member of Farmers Insurance Group, a foreign corporation, Respondent. |
| Court | Washington Supreme Court |
Appeal from Superior Court of King County. Docket No: 04-2-13024-7. Judgment or order under review. Date filed: 04/19/2005. Judge signing: Hon. Nicole K MacInnes.
Counsel for Appellant(s), Steven Neil Driggers, The Harper Firm, PLLC, City Centre, 1420 Fifth Ave Ste 2670, Seattle, WA 98101.
Gregory Louis Harper, The Harper Firm PLLC, City Center, 1420 Fifth Ave Ste 2670, Seattle, WA 98101.
Counsel for Respondent(s), Rick J. Wathen, Cole Lether Wathen & Leid PC, 1000 2nd Ave Ste 1300, Seattle, WA 98104-1082.
In a case concerning an issue of insurance coverage, resort to the exclusions and definitions contained in the insurance policy precludes coverage as a matter of law. The summary judgment is affirmed.
In January 2000, a 1998 BMW M3 sustained severe damage in an auto accident. The damaged car was purchased at an insurance auction by Bernard Import Bodyworks, Inc. (Bodyworks). Bodyworks allegedly repaired the vehicle before giving it to Motorsports, Ltd. (Motorsports) to sell on consignment; however, the car was not properly repaired.
Cidrick and Sara Mann (Mann) purchased the BMW from Motorsports on January 21, 2001 for $31,900.00 plus sales tax, or a total of $34,643.40. Mann claims that when they inquired whether the car had been in an accident, a Motorsports representative told them that it had not. Further, when Mann asked about the continued viability of the BMW warranty, they were told the warranty was still intact. But the warranty was void due to the earlier accident. After the purchase, Mann discovered the car had been severely damaged in an auto accident and that there was no valid BMW warranty. The value of the car was estimated to be a maximum of $23,292.50. Mann sued Bodyworks and Motorsports seeking damages for the diminution in value of the car. Mann claims Bodyworks negligently repaired the car. The complaint does not allege that Motorsports performed any work on the car or caused any negligent repair or other physical damage to it. Mann claimed damages for a loss of value between what they paid and what the car was worth, an amount of $11,350.09. Mann claimed that Motorsports intentionally or negligently misrepresented that the car had not been in an accident, which led them to purchasing the car. Mann also claimed that by selling an unsafe vehicle, Motorsports committed the tort of outrage, causing personal injuries in an amount to be proved at trial. Mann also claimed a violation of Washington's Consumer Protection Act.
Motorsports reported the lawsuit to its insurer, Mid-Century Insurance Company, seeking coverage. Motorsports sought defense and indemnification, if necessary. Mid-Century investigated and declined to defend or indemnify due to a lack of covered loss. Mid-Century sent a denial letter to Motorsports denying coverage. In response, Motorsports asked Mid-Century to reconsider, but the insurer denied a duty to defend under the policy.
Mid-Century insured Motorsports under a Garage Coverage Form, containing liability insurance. Motorsports is engaged in the sale of used automobiles. As noted above, after selling a car to Mann, Motorsports was sued by Mann, primarily for the loss of value of a defective 1998 BMW M3 that Motorsports sold to them. The pleading also contained additional claims alleging intentional and negligent misrepresentation for the failure to disclose that the vehicle had been in a serious accident and alleged an intentional or negligent misrepresentation by Motorsports that the car would be covered by a manufacturer's warranty. There were also claims of negligence due to Motorsports failure to notice that the vehicle sustained damage, and further that Motorsports breached an express warranty when it told the buyer that the car was never in an accident.
Mid-Century's policy insuring Motorsports provided liability coverage for "Garage Operations" — in Section II — Liability Coverage. The policy covered Garage Operations for "covered autos" and for "other than covered autos." In pertinent part, the policy provides:
We will pay all sums an "insured" legally must pay as damages because of "bodily injury" or "property damage" to which this insurance applies, caused by an "accident" and resulting from "garage operations" involving the ownership, maintenance or use of covered "autos."
. . . .
We have the right and duty to defend any "insured" against a "suit" asking for such damages. . . . However, we have no duty to defend any "insured" against a "suit" seeking damages for "bodily injury" or "property damage" .. . to which this insurance does not apply.
(Emphasis added.)
Mid-Century claims the policy is triggered only by an "accident." In denying the existence of a duty to defend, the company determined that the allegations made in the complaint are not within the definition of "accident." Further, it indicated that the damages alleged do not fall within the definition of covered "bodily injury" or "property damage."
Alternatively, Mid-Century argued that even if the allegations against Motorsports fall within the definition of an "accident," "bodily injury," or "property damage," there are a number of exclusions in the policy that support its determination that there is no coverage and therefore no duty to defend is warranted. Primarily Mid-Century claims an exclusion for defective products.
The policy's exclusions section states in relevant part:
This insurance does not apply to any of the following:
12. DEFECTIVE PRODUCTS
"Property damage" to any of your "products", if caused by a defect existing in your "products" or any part of your "products", at the time it was transferred to another.
Additionally, "products" is set forth in the definitions section of the policy as follows:
J. "Products" includes:
(a) The goods or products you made or sold in a garage business; and
(b) The providing of or failure to provide warnings or instructions.
Motorsports settled the action with Mann, but in doing so paid the settlement amount as well as its own costs and fees. It continued to seek coverage from Mid-Century to cover these amounts. Motorsports filed a declaratory judgment action against its insurer seeking a ruling that Mid-Century breached its policy by refusing to defend Motorsports against the allegations contained in Mann's complaint. The parties transferred the case to arbitration, but under the mandatory arbitration rules (MAR), motions for summary judgment are to be decided by the court and not the arbitrator.1 Mid-Century and Motorsports filed cross-motions for summary judgment on Mid-Century's duty to defend. The trial court granted Mid-Century's motion, denying the one filed by Motorsports. The trial court held that under the policy, Mid-Century had no duty to defend Motorsports. The parties stipulated to entry of a final judgment and Motorsports appeals.
Motorsports seeks the reversal of the grant of summary judgment in Mid-Century's favor and asks for a determination that Mid-Century is obligated to defend Motorsports from Mann's tort claims.
Motorsports contends the trial court erred in granting summary judgment to Mid-Century determining that the insurer had no duty to defend. This court conducts de novo review of summary judgment, viewing the facts and all reasonable inferences in the light most favorable to the non-moving party.2 The court determines whether any genuine issue of material fact is in dispute that prevents the moving party from obtaining judgment as a matter of law.3 We review de novo the interpretation of an insurance policy, performing the same inquiry as the trial court.4
An insurer's duty to defend is broader...
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