Olympic Vista Homeowners Ass'n v. State Farm Fire & Cas. Co.

• Docket Number: C22-0683 TSZ
• Decision Date: 25 August 2023
• Parties: OLYMPIC VISTA HOMEOWNERS ASSOCIATION, Plaintiff, v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant
• Court: U.S. District Court — Western District of Washington

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OLYMPIC VISTA HOMEOWNERS ASSOCIATION, Plaintiff, v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant

No. C22-0683 TSZ

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

August 25, 2023

ORDER

Thomas S. Zilly United States District Judge

THIS MATTER comes before the Court on a motion, docket no. 28, for partial summary judgment brought by defendant State Farm Fire and Casualty Company (“State Farm”). Having reviewed all papers filed in support of, and in opposition to, the motion, the Court enters the following order.

Background

In this action, plaintiff Olympic Vista Homeowners Association (“Olympic Vista”) asserts two claims against State Farm: (i) breach of the insurance contract between the parties; and (ii) bad faith in violation of Washington's Consumer Protection Act (“CPA”). See Am Compl. at ¶¶ 17-28 (docket no. 16). In its motion for partial summary judgment, State Farm seeks dismissal of only the first claim for breach of contract. State Farm asserts three separate grounds for relief: (i) Olympic Vista failed to commence suit within the contractual two-year-limitation period; (ii) the loss at issue, allegedly caused by rain, was not “accidental” within the meaning of the coverage provision of the insurance policy; and (iii) the causes of the loss at issue are expressly excluded from coverage.^[1]Because the Court concludes that the breach-of-contract claim was not timely filed, it need not address whether the loss at issue was “accidental” or whether State Farm is justified in invoking the exclusions for defective construction repeated seepage or leakage of water, or wear and tear.

The Olympic Vista condominium was built in 1966. Centolanza Dep at 26:1011, Ex. A to Rogers Decl. (docket no. 30). It has eight units, two on each of four levels, including the basement. Id. at 26:14-19. State Farm insured the property from September 30, 1976, until October 31, 2003. Am. Compl. at ¶ 18 (docket no. 16); Answer at ¶ 18 (docket no. 21) (indicating that coverage was renewed annually until it was cancelled in October 2003 for non-payment of the premium). The policy that was in effect from September 30, 2002, until September 30, 2003, contained the following provisions:

6. Legal Action Against Us. No one may bring legal action against us under this insurance unless:

a. there has been full compliance with all of the terms of this insurance; and

b. the action is brought within two years after the date on which the accidental direct physical loss occurred. But if the law of the state in which this policy is issued allows more than two years to bring legal action against us, that longer period of time will apply.

14. Policy Period, Coverage Territory. We cover loss commencing during the policy period and within or between the coverage territory. The coverage territory is the United States of America (including its territories and possessions), Puerto Rico and Canada.

Condominium/Association Policy [hereinafter, the “Policy”], Section I (Conditions) at ¶¶ 6 & 14, Ex. C to Rogers Decl. (docket no. 30 at 224-25); see also Renewal Certificate (docket no. 30 at 191). Olympic Vista initiated this litigation on May 20, 2022, over 181/2 years after State Farm ceased insuring the property. See Compl. (docket no. 1).

Olympic Vista asserts that the loss at issue did not occur, and the suit-limitation period did not begin running, until February 19, 2021, when J2 Building Consultants, Inc. (“J2BC”), which had been retained by Olympic Vista, performed a preliminary invasive investigation and discovered “hidden water damage.” See J2BC Report at 3, Ex. 4 to Johanson Dep., Ex. B to Rogers Decl. (docket no. 30 at 136). A subsequent examination of the exterior of the condominium, during which insurance company representatives were present, was conducted on August 9, 2021.^[2] Id. State Farm argues that this lawsuit needed to be filed within two years after the loss commenced or within two years after the policy period ended, i.e., by October 31, 2005.^[3]For the reasons discussed below, the Court agrees with State Farm.

Discussion

Under Washington law,^[4] the parties to an insurance contract may agree to limit the amount of time during which an insured may sue the insurer, but for property-insurance policies, the period must be at least one year. See RCW 48.18.200(1)(c). State Farm's two-year suit-limitation provision comports with Washington's durational requirement. Olympic Vista does not suggest that State Farm waived or should be equitably estopped from invoking the contractual limitation period, or that the clause is somehow ambiguous or does not mean what it says. Rather, Olympic Vista relies on cases interpreting policies that, unlike the one issued by State Farm, provided coverage for “collapse” caused by “hidden decay.” See Panorama Vill. Condo. Owners Ass'n Bd. of Dir. v. Allstate Ins. Co., 144 Wn.2d 130, 134-35, 26 P.3d 910 (2001); Eagle Harbour Condo. Ass'n v. Allstate Ins. Co., No. C15-5312, 2016 WL 499301, at *2 (W.D. Wash. Feb. 9, 2016); Greenlake Condo. Ass'n v. Allstate Ins. Co., No. C14-1860, 2015 WL 11988945, at *2 n.4 (W.D. Wash. Dec. 23, 2015);.

In Panorama Village, the Washington Supreme Court held:

Where a policy protects against risk of direct physical loss from hidden decay and requires the insured to bring suit within one year after a loss occurs, the date of loss is the earlier of either (1) the date of actual collapse or (2) the date when the decay which poses the risk of collapse is no longer obscured from view.

144 Wn.2d at 133-34 (emphasis added). The policy at issue in Panorama Village required the insurer, Allstate Insurance Company (“Allstate”), to “pay for risk of direct physical loss involving collapse of a covered building . . . caused . . . by . . . hidden decay.” Id. at 134-35 (emphasis added). The policy further defined the suit-limitation period as being one year “after a loss occurs.” Id. at 138-39. Based on the language of the insurance contract, the Washington Supreme Court reasoned that the insured peril (i.e., the risk of direct physical loss involving collapse) “continues to exist until at least the earlier of either (a) actual collapse or (b) the end of ‘hidden decay.'” Id. at 140. Subsequent decisions by other judges in this district have concerned similar provisions in policies also issued by Allstate. In Greenlake Condominium, the policy covered “hidden decay leading to risk of collapse.” 2015 WL 11988945, at *2 n.4. The policy in Eagle Harbour contained exactly the same language as the clause at issue in Panorama Village. 2016 WL 499301, at *2.

None of these cases support the result that Olympic Vista seeks because, in this case, the Policy does not insure against either collapse caused by hidden decay or risk of collapse. See Policy at Amendatory Collapse Endorsement (docket no. 30 at 205). Unlike Allstate's policies, State Farm's Policy insures “only for direct physical loss to covered property involving the sudden, entire collapse of a building or any part of a building.” Id. Collapse is defined as “actually fallen down or fallen into pieces”^[5]and, to be covered, it must be “directly and immediately caused only by one or more” of the enumerated causes, none of which are hidden decay. See id. (emphasis added).^[6]Indeed, the Policy excludes loss caused by “decay, deterioration, [or] hidden or latent defect.” See id. at Section I (Losses Not Insured) at ¶ 2(d) (docket no. 30 at 213). Thus, unlike in Panorama Village and the decisions of this district that rely on it, in this matter, the insured (Olympic Vista) cannot identify the requisite covered peril (for example, the risk of collapse caused by hidden decay for which the condominiums in the previously mentioned cases were insured) that continued to exist until it was revealed within the two-year period prior to filing suit. See Hill & Stout, PLLC v. Mut. of Enumclaw Ins. Co., 200 Wn.2d 208, 218, 515 P.3d 525 (2022) (“The insured bears the burden of showing that coverage exists . . . .”); see also Seattle Tunnel Partners v. Great Lakes Reins. (UK) PLC, 200 Wn.2d 315, 321, 516 P.3d 796 (2022) (“Once the insured shows the loss falls within the scope of the policy's coverage, the burden shifts to the insurer to show ‘the loss is excluded by specific policy language' in order to avoid coverage.”).

Olympic Vista's reliance on Holden Manor Homeowners Ass'n v. Safeco Insurance Co. of America, No. C15-1676, 2016 WL 3349339 (W.D. Wash. June 16, 2016), is also misplaced. In Holden Manor, the court explicitly declined to rule that the holding of Panorama Village applies regardless of whether the “hidden nature” of the damage is “a prerequisite to coverage,” stating that it “need not go that far to deny” the defendants' motion for summary judgment. id. at *2-3. In Holden Manor, the defendants asserted that the policy at issue did not cover the risks of loss resulting from hidden damage or decay, but they did not establish that the policy expressly excluded those risks. id. at *3. Because the policy was an all-risk policy, as opposed to a named-peril policy, and did not exclude loss caused by hidden damage or decay, any such loss was covered, and the plaintiff's suit was not time-barred. id.; see also Vision One, 174 Wn.2d at 513-14 (explaining that named-peril policies cover only the specific risks enumerated in the policy, while all-risk policies provide coverage for all risks except the specific risks that are excluded). Unlike in Holden Manor, in this matter, decay and hidden or latent defect are explicitly excluded.^[7]

The Policy required Olympic Vista to commence litigation within two years after the “accidental direct physical loss occurred,” and it covered only “loss commencing during the policy period.” Policy,...