Panorama Village v. Allstate Ins. Co.

Decision Date12 July 2001
Docket NumberNo. 69696-9.,69696-9.
Citation26 P.3d 910,144 Wash.2d 130
PartiesPANORAMA VILLAGE CONDOMINIUM OWNERS ASSOCIATION BOARD OF DIRECTORS, Petitioner, v. ALLSTATE INSURANCE COMPANY, Respondent.
CourtWashington Supreme Court

Reed, McClure, Pamela A. Okano, Seattle, Amicus Curiae on Behalf of State Farm Fire & Casualty Co.

Stanislaw & Ashbaugh, John Stephen Riper, Todd Christopher Hayes, Seattle, for Petitioner.

Bullivant, Houser, Bailey, Jerret E. Sale, Seattle, Bullivant, Houser, Bailey, Lisa E. Lear, Douglas G. Houser, Portland, for Respondent.

SANDERS, J.

This appeal presents two issues: (1) In a case of progressive "hidden decay" which risks direct physical loss involving the collapse of an insured building, at what point is an insured's suit against an insurer barred by a policy provision which limits such suits to those commenced "within one year after a loss occurs," and (2) When a plaintiff is entitled to an award of reasonable attorney fees pursuant to Olympic Steamship,1 are costs limited to those expenses enumerated in the cost recovery statute?

We construe this insurance contract to mean exactly what it says. 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. We also conclude an award of reasonable attorney fees made pursuant to Olympic Steamship necessarily includes all expenses incurred to establish coverage under an insurance policy and is not limited to those expenses enumerated as recoverable statutory costs in RCW 4.84.010. We therefore reverse the Court of Appeals and reinstate the trial court's judgment in favor of Panorama Village.

FACTS

Panorama Village is a four building condominium complex consisting of 54 units located in Redmond, Washington. The buildings were all constructed at the same time during the late 1970s. Throughout its existence the property has demonstrated a history of maintenance problems. During late 1995 and early 1996 Panorama experienced an increase in maintenance problem reports.

In May 1996 a team of investigators headed by architect Norman Sandler conducted a walk-through investigation at the Panorama Village complex. Sandler was unable to determine on the basis of the walk-through the presence of hidden decay. Consequently he recommended a program of selective demolition be conducted later that summer.

This selective demolition required the team to remove exterior siding from the complex. With the siding removed, Sandler was able to examine the structural support of the building which he had been unable to see during the walk-through investigation. Sandler then determined the complex was at risk of collapse due to dry rot.

On July 3, 1996, Panorama submitted a claim to Allstate Insurance Company for coverage under its policy. Allstate did not pay the claim. Relevant provisions of the Allstate policy provide as follows:

Collapse—Parts One and Two
We will pay for risk of direct physical loss involving collapse of a covered building or any part of a covered building caused only by one or more of the following:
b. hidden decay;
. . . .

Clerk's Papers (CP) at 821.

Losses Covered Under Coverage A.
This policy insures your covered property for loss or damage resulting from direct physical loss, except for those Losses We Do Not Cover listed below.

CP at 825.

12. Legal Action Against Us
Persons insured agree not to take any legal action against us in connection with your policy unless you have first complied with all of its terms. Persons insured also agree to bring any action against us that relates to Coverage A within one year after a loss occurs.

CP at 855.

Panorama filed suit on August 5, 1996, one month after it reported its loss to Allstate. Allstate defended on a number of grounds, raising the one-year limitation of suit clause as an affirmative defense.

The trial court rendered declaratory judgment that:

1. Plaintiff's property is at risk of direct physical loss involving collapse.

2. The predominant cause of the risk of collapse at plaintiff's property is decay.

3. The decay that is the predominant cause of the risk of collapse at plaintiff's property is, as a matter of law, "hidden."

This relief disposes of Allstate's Second, Third, and Fifth Affirmative defenses as they relate to the risk of collapse claim. Those defenses are therefore dismissed as to plaintiff's risk of collapse claim.

CP at 1944-45 (footnotes omitted). Allstate's 10th affirmative defense, the one-year suit limitation clause, was also dismissed by Judge Richard D. Eadie on summary judgment.

The parties then reached a partial settlement. The stipulation reflects an agreement that the only matters left to be resolved at trial involved the scope of repair, relocation costs, and attorney fees.

A bench trial proceeded on these issues. The court ruled in favor of Panorama and ordered Allstate to fund the repair of Panorama's property. The court also awarded reasonable attorney fees including expert witness fees to Panorama pursuant to Olympic Steamship.

On appeal Allstate challenged the summary judgment orders and the award of reasonable attorney fees, specifically referencing inclusion of expert witness fees. By published opinion Division One of the Court of Appeals reversed and remanded. Panorama Vill. Condo. Owners Ass'n v. Allstate Ins. Co., 99 Wash.App. 271, 992 P.2d 1047 (2000).

Chief Judge Susan R. Agid of the Court of Appeals found the suit limitation provision of the contract began to run when Panorama knew or reasonably should have known that the loss was occurring and remanded for fact finding. Panorama Village, 99 Wash.App. at 280-81, 992 P.2d 1047. The court also held the trial court had erred when it determined the term "`hidden'" meant "`out of sight'" or "`concealed'" rather than "`known.'" Id. at 281, 992 P.2d 1047 (quoting Webster's Third New International Dictionary 1065 (1966)). Finally the court held while Panorama was properly awarded attorney fees it was error for the trial court to include additional expenses not enumerated in RCW 4.84.010. Id. at 286, 992 P.2d 1047. Panorama sought, and we granted, review.

ANALYSIS

Issue I—One-year suit limitation clause

The first issue turns on the language of the insurance contract. We recently reiterated the criteria for interpreting an insurance contract in Weyerhaeuser Co. v. Commercial Union Insurance Co.:

"In Washington, insurance polices are construed as contracts. An insurance policy is construed as a whole, with the policy being given a `fair, reasonable, and sensible construction as would be given to the contract by the average person purchasing insurance.' If the language is clear and unambiguous, the court must enforce it as written and may not modify it or create ambiguity where none exists. If the clause is ambiguous, however, extrinsic evidence of intent of the parties may be relied upon to resolve the ambiguity. Any ambiguities remaining after examining applicable extrinsic evidence are resolved against the drafter-insurer and in favor of the insured. A clause is ambiguous when, on its face, it is fairly susceptible to two different interpretations, both of which are reasonable."

142 Wash.2d 654, 665-66, 15 P.3d 115 (2000) (quoting Am. Nat'l Fire Ins. Co. v. B & L Trucking & Constr. Co., 134 Wash.2d 413, 427-28, 951 P.2d 250 (1998)).

We recognize we must be guarded in our interpretation of an insurance contract as "[i]t is elementary law, universally accepted, that the courts do not have the power, under the guise of interpretation, to rewrite contracts which the parties have deliberately made for themselves." Chaffee v. Chaffee, 19 Wash.2d 607, 625, 145 P.2d 244 (1943) (citing 12 Am.Jur. Contracts § 228, at 749).

Panorama asserts the Court of Appeals improperly, in effect, added language to the contract when it applied a "discovery rule" to the suit limitation provision. The suit limitation provision of the policy simply requires the insured to bring suit within one year "after a loss occurs" without reference to discovery or knowledge. The Court of Appeals opinion concludes the policy provisions which limit suit to those commenced within "one year after a loss occurs" mean up to one year after the insured first "knew or should have known of a `risk of direct physical loss involving collapse' caused by hidden decay in a specific part of the complex." Panorama Village, 99 Wash.App. at 280, 992 P.2d 1047 (quoting policy). Finding this to be a fact issue inappropriately resolved by summary judgment the Court of Appeals remanded for fact finding.

As previously noted, however, our construction of an insurance contract must be a "`fair, reasonable, and sensible construction as would be given to the contract by the average person purchasing insurance.'" Weyerhaeuser Co., 142 Wash.2d at 666, 15 P.3d 115 (quoting B & L Trucking & Constr. Co., 134 Wash.2d at 427-28, 951 P.2d 250). "`[T]he proper inquiry is not whether a learned judge or scholar can, with study, comprehend the meaning of an insurance contract' but instead `whether the insurance policy contract would be meaningful to the layman ...'." Boeing Co. v. Aetna Cas. & Sur. Co., 113 Wash.2d 869, 881, 784 P.2d 507 (1990) (quoting Dairyland Ins. Co. v. Ward, 83 Wash.2d 353, 358, 517 P.2d 966 (1974)).

Panorama argues a lay person would not read "after a loss occurs" to mean "during a loss" or "after the beginning of a loss" and therefore the provision permits an insured to pursue coverage rights within one year after a loss is over rather than merely within one year after a loss begins. The Court of Appeals rejected Panorama's argument holding public policy, common sense, and case law all require imposition of a discovery rule.

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