NCF Financial, Inc. v. St. Paul Fire & Marine Insurance Company, No. 56761-6-I (Wash. App. 2/20/2007)
| Decision Date | 20 February 2007 |
| Docket Number | No. 56761-6-I,56761-6-I |
| Court | Washington Court of Appeals |
| Parties | NCF FINANCIAL, INC., a Washington corporation, Appellant, v. ST. PAUL FIRE & MARINE INSURANCE COMPANY, a Minnesota corporation, Respondent. |
Appeal from King County Superior Court. Docket No. 03-2-41520-1. Judgment or order under review. Date filed: 08/18/2005. Judge signing: Honorable Michael J Fox.
Counsel for Appellant(s), David Michael Tall, Attorney at Law, 850 Skyline Twr, 10900 Ne 4th St, Bellevue, WA, 98004-5873.
Counsel for Respondent(s), Lawrence Gottlieb, Betts Patterson Mines, P.S., 701 Pike St Ste 1400 Seattle, WA, 98101-3927.
Catherine Elaine Pruett, Betts, Patterson & Mines, P.S., One Convention Place, Suite 1400, 701 Pike St, Seattle, WA, 98101-3924.
Counsel for Other Parties, Dale Lawrence Kingman Kingman, Peabody, Fitzharris, & Ringer P, 505 Madison St Ste 300, Seattle, WA, 98104-1123
This is a property insurance coverage dispute between Northwest Computer Financial, Inc. (NCF) and St. Paul Fire and Marine Insurance Company (St. Paul). NCF leased computer equipment to Emerald Solutions, Inc. (Emerald). Under the terms of the lease, Emerald agreed to insure the computer equipment and name NCF as an additional insured on the property insurance policy. After filing for bankruptcy, Emerald returned the leased equipment to NCF. St. Paul denied NCF's claim for missing and damaged computer equipment. NCF sued Emerald; Emerald Delaware, Inc.; St. Paul; and the insurance agent, Marsh USA, Inc. (Marsh), alleging breach of contract, negligence, and damages. On summary judgment, the trial court dismissed NCF's lawsuit against St. Paul. NCF contends it is entitled to coverage for the missing and damaged equipment as an additional insured under Emerald's policy with St. Paul. We conclude there are material issues of fact about whether NCF is an additional insured. Even if NCF is an additional insured, we conclude the unambiguous terms of the "Disappearance — inventory loss" exclusion preclude coverage for NCF's claim for missing computer equipment. But there are material questions of fact concerning coverage for NCF's claim for damaged computer equipment. We affirm in part, reverse in part, and remand.
Emerald is a wholly owned subsidiary of Emerald-Delaware. Emerald leased computer equipment from NCF for its internet consulting, design, and technology operations at thirteen locations nationwide. Under the "Master Lease Agreement," Emerald agreed to obtain property insurance for the leased equipment, name NCF as an additional insured, and provide 30 days notice if the policy was "cancelled or altered."
Emerald obtained property protection insurance from St. Paul through an insurance agent, Marsh. The first policy was in effect from May 11, 1999 to May 11, 2000 (First Policy).1 "Emerald Solutions, Inc." was the named insured on the First Policy. The policy states that mortgagees and loss payees are identified "[p]er certificates on file with the company." On December 16, 1999, Marsh issued an Evidence of Property Insurance Certificate (EPI) and a Certificate of Liability Insurance (CLI). The EPI and the CLI state that NCF is named as an additional insured on the First Policy for the leased computer equipment.
The second policy St. Paul issued to Emerald (Second Policy)2 states it is in effect beginning May 11, 2000 until terminated. There is no reference to mortgagees and loss payees or certificates in the Second Policy. But on June 22, 2000, Marsh issued an EPI and a CLI stating that NCF was an additional insured on the Second Policy for the leased computer equipment.
In 2001, Emerald experienced financial difficulties and its parent corporation, Emerald-Delaware, Inc., assumed Emerald's assets and liabilities. On October 16, 2001, Emerald-Delaware filed for bankruptcy. While in bankruptcy, Emerald-Delaware obtained a third policy through Marsh for the leased computer equipment (Third Policy).3 The Third Policy states it is in effect from November 11, 2001 to February 11, 2002. The Third Policy also states it is a "renewal." The record does not show that NCF received notice of the Third Policy. There is also no indication that an EPI or a CLI was issued for the Third Policy.
In October, Emerald-Delaware paid NCF the amount due to lease the equipment through November 2001. But in December, Emerald-Delaware rejected the Master Lease effective December 31, 2001. After rejecting the Master Lease, Emerald-Delaware began returning the leased computer equipment to NCF. In January 2002, an NCF employee, Steve White, prepared an inventory identifying unreturned equipment and documenting the condition of the returned equipment. When NCF demanded that Emerald-Delaware return all the leased equipment in late January 2002, Emerald-Delaware stated all the leased computer equipment was returned.
On May 30, 2002, NCF submitted an insurance claim under the Second Policy for approximately $1 million in replacement costs for missing and damaged equipment. At St. Paul's request, NCF submitted a Proof of Loss for the claim. On April 18, 2003, St. Paul denied coverage and rejected NCF's claim.
On November 26, 2003, NCF filed a complaint for damages against Emerald, Emerald-Delaware, and St. Paul for breach of contract and negligence. In March 2005, NCF filed an amended complaint for damages, adding a claim for breach of contract against Marsh and alleging NCF was an assignee of Emerald's rights under the insurance policy. In April 2004, Emerald and Emerald-Delaware assigned their rights under the insurance policies to NCF.
St. Paul filed a motion for summary judgment asserting NCF was not an additional insured under the Third Policy. And even if NCF was an additional insured, St. Paul argued there was no evidence of "direct, physical loss or damage" for covered property and the policy unambiguously excluded coverage for missing property under the "Disappearance — inventory loss" provision. The trial court decided NCF was an additional insured under the Third Policy. But based on the "Disappearance — inventory loss" exclusion, the court dismissed NCF's lawsuit against St. Paul. NCF then stipulated to dismiss Marsh and a default judgment was entered against Emerald-Delaware and Emerald Solutions.
NCF claims it is entitled to coverage and the trial court erred in dismissing its claims as an additional insured for missing and damaged computer equipment under the "Disappearance — inventory loss" exclusion.4 NCF also asserts the trial court erred in not considering its claim for damaged property.
On review of summary judgment, this court engages in the same inquiry as the trial court. Reynolds v. Hicks, 134 Wn.2d 491, 495, 951 P.2d 761 (1998). Summary judgment is proper only if there are no issues of material fact and the moving party is entitled to judgment as a matter of law. CR 56(c); Quadrant Corp. v. Am. States Ins. Co., 154 Wn.2d 165, 171, 110 P.3d 733 (2005); Barrie v. Hosts of Am., Inc., 94 Wn.2d 640, 642, 618 P.2d 96 (1980). "A material fact is one upon which the outcome of the litigation depends, in whole or in part." Barrie at 642. Facts and reasonable inferences are construed in the light most favorable to the nonmoving party. Wolstein v. Yorkshire Ins. Co., 97 Wn. App. 201, 205, 985 P.2d 400 (1999). Only when reasonable minds could reach but one conclusion on the evidence should the court grant summary judgment. Smith v. Safeco, Ins. Co., 150 Wn.2d 478, 485, 78 P.3d 1274 (2003).
The interpretation of an insurance policy is a question of law. Wright v. Safeco Ins. Co. of Am., 124 Wn. App. 263, 271, 109 P.3d 1 (2004). But where coverage turns on the particular fact situation, the issue is a mixed question of law and fact. Estate of Adams v. Great Am. Ins. Cos., 87 Wn. App. 883, 886-887, 942 P.2d 1087 (1997).
The determination of coverage is a two-step process. The insured must first establish that the loss falls within scope of the policy's covered losses. Diamaco, Inc. v. Aetna Cas. & Sur. Co., 97 Wn. App. 335, 337, 983 P.2d 707 (1999). "This includes establishing who is insured, the type of risk insured against, and the existence of an insurance contract." Olivine v. United Capitol Ins. Co., 147 Wn.2d 148, 164, 52 P.3d 494 (2002). To avoid responsibility for the loss, the burden is on the insurer to establish that the loss is excluded by specific language in the policy. Diamaco, 97 Wn. App. at 165.
There is no dispute that Emerald agreed to obtain an insurance policy for the leased computer equipment and name NCF as an additional insured. The Master Lease provides the insurance policy shall:
(i) name Lessor and any Assignee as additional insureds and loss payees as their interests may appear; (ii) provide that such policy may not be cancelled or altered without thirty (30) days prior notice to Lessor and Assignee . . . .
The record shows that Emerald obtained three property insurance policies from St. Paul. The First Policy was in effect from May 11, 1999 to May 11, 2000. The Second Policy states the effective date begins May 11, 2000 and continues until "TERMINATED." And the Third Policy states that the effective date is November 11, 2001 to February 11, 2002. While NCF is not identified as an additional insured in any of the policies, St. Paul concedes Marsh was authorized to issue an EPI and a CLI identifying NCF as an additional insured for the First Policy and for the Second Policy. But there is no evidence in the record that an EPI or a CLI was issued for the Third Policy.
NCF sued St. Paul on November 26, 2003. There is no dispute that all three policies contain a two-year suit limitation provision.
Any lawsuit to recover on a property claim must begin within 2 years after the date on which the direct physical loss or damage occurred. NCF concedes the two-year lawsuit limitation is valid. NCF also concedes its loss occurred during the term of...
To continue reading
Request your trial