PANORAMA VILLAGE v. Allstate Ins. Co.

Decision Date07 February 2000
Docket NumberNo. 43481-1-I.,43481-1-I.
Citation99 Wash.App. 271,992 P.2d 1047
CourtWashington Court of Appeals

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

John S. Riper, Stanislaw Ashbaugh LLP, Seattle, Bo Barker, Bellevue, for Respondent.


In 1996, after investigative demolition at the Panorama Village Condominium Complex revealed extensive structural decay, Panorama's homeowners association sought coverage from Allstate Insurance Company under a policy provision that provides coverage for property in danger of imminent collapse caused by hidden decay. Allstate refused to defend on the theory that its policy's suit limitation provision requires an insured to bring claims "within one year after a loss occurs," and the Association had known about the decay for nearly a decade. Allstate appeals the trial court's summary judgment dismissal of its suit-limitation defense, as well as several other findings and conclusions the trial court made about the nature of the continuing damage at Panorama Village. Because there are material factual questions about when the Association knew or should have known about the damage and whether it was hidden, we reverse and remand.


Panorama Village is a four-building, 54-unit condominium complex built in Redmond in 1979. In late 1995 and early 1996, in response to reports of maintenance problems and "noticeable deterioration" in one of the units, Panorama's homeowners association solicited repair proposals from several contractors who offered widely varying estimates of damage and projected repair costs. In February 1996, a new property manager at Panorama recommended hiring an architect to evaluate the complex and prepare a repair proposal on which each of the contractors could bid. The Association hired architect Norman Sandler to lead a team that included a contractor, a roofing specialist, and a structural engineer on an initial inspection on May 10, 1996. After this inspection, Sandler reported "critical and potentially dangerous problems" resulting from rot and excessive deterioration in five distinct areas. Suspecting "structural failure," the team recommended investigative demolition. The Association agreed, and in late June 1996, the team removed exterior siding and portions of walls. On July 1, 1996, the inspection team reported, severe structural rot at nearly every location opened for inspection and warned of an imminent risk of collapse. The Association claims that "because the structural decay was hidden behind exterior siding and other finishes," this inspection revealed "for the first time" extensive structural decay.

Two days later, the Association sought coverage from Allstate under its policy's "Collapse" provision. That clause insures against the "risk of direct physical loss involving collapse of a covered building or any part of a covered building caused only by ... hidden decay." The Association alleged that the damage to Panorama was both "recently suffered" and "hidden." Allstate initially failed to respond to the Association's coverage request, but after conducting its own investigation, it denied coverage. When the Association brought this action, Allstate responded with several affirmative defenses, one of which contested the Association's definition of collapse and another asserting violation of the policy's one-year suit-limitation provision.

Before trial, both parties moved for partial summary judgment on coverage issues. Allstate advanced a "known risk" theory, arguing that the Association knew or should have known when purchasing insurance from Allstate that it had a loss covered by the policy. The Association's summary judgment motion alleged that Panorama was at risk for direct physical loss involving collapse and that the cause of the imminent collapse was hidden decay. The trial court denied Allstate's motion, granted the Association's motion, and entered a judgment declaring that Panorama "is at risk of direct physical loss involving collapse," that the "predominant cause of the risk of collapse at plaintiff's property is decay," and that the "decay that is the predominant cause of the risk of collapse at plaintiff's property is, as a matter of law, `hidden.'" The court also entered an order dismissing Allstate's one-year suit limitations defense. These summary judgment rulings did not address where or to what extent damage existed at Panorama. After the trial court denied reconsideration, the parties reached a partial settlement under which Panorama dismissed several of its claims and Allstate dismissed its remaining affirmative defenses, including the known risk defense.

Left for resolution at trial were two issues: the scope of Allstate's repair obligation, which the trial court viewed as requiring a determination of "what is subject to collapse and what is hidden," and the cost of these repairs.1 At a pretrial conference, the trial court determined that because the scope of repair determination was equitable in nature, it should be tried before the court, not a jury. As for the damages issue, the court reasoned that it was neither necessary nor possible, in light of the continuing nature of the damage, to "[p]ut a dollar amount" on the damages.

Following the "scope of repair" bench trial, the court issued two orders, one on September 9, 1998, and one on November 23, 1998,2 requiring Allstate to "replace or repair all structural members that are affected by hidden decay to the extent that they are in imminent danger of collapse" and listed specific areas of structural damage. The trial court also granted the Association's request for attorney fees and litigation expenses. Allstate appeals the earlier summary judgment orders, as well as the judgment and the award of attorney fees and costs. It contends that the Association's claim is barred by its policy's one-year suit-limitation provision, the decay was not "hidden" as required by the policy, it was entitled to a jury trial on the scope of repair, the trial court erred in concluding that Panorama was in immediate danger of collapse and in awarding attorney fees for work on dismissed claims and claims not related to the coverage determination, and the Association was not entitled to recover expert witness fees or other costs not included in RCW 4.84.010.

The Policy's Suit-Limitation Provision

The policy contains a suit limitation provision that requires insureds to bring coverage actions within "one year after a loss occurs." Allstate contends that because "there is abundant evidence that [Panorama] suffered substantial decay and structural impairment by the late 1980s, and ... knew about very substantial damage running into the hundreds of thousands of dollars before August 1995," the trial court erred when it dismissed Allstate's suit-limitation defense on summary judgment. The Association responds that a literal reading of the limitation provision reveals that the insured's discovery of the damage is irrelevant. Because the provision requires suit within "one year after a loss occurs," and not within one year of the "inception" or "discovery" of the loss, the Association argues that the provision "permits its insured to pursue coverage rights within one year after a loss is over, not merely within one year after a loss begins." In light of this dispute, before we decide whether Allstate is correct that the Association knew of continuing damage over a year before it brought this claim, we must first decide whether that knowledge is even relevant under Allstate's suit-limitation provision.3

The Association argues that requiring suit within "one year after a loss occurs" is logical when the loss is a one-time catastrophe such as a fire or flood. But because the provision is ambiguous as applied to progressive losses, a reasonable insured would interpret the clause as allowing it to wait until the loss is complete, regardless of when it occurred or when the insured first discovered it. This position is untenable because it would allow an insured who is fully aware of significant continuing property damage to wait until the property actually collapses before making a claim. Allstate is correct that public policy, case law, and common sense dictate that an insured should act with reasonable diligence once an event occurs that puts it on notice of a cognizable coverage claim.

To support its argument that an insured is entitled "to maintain coverage rights throughout the time of a continuing loss," the Association cites three Washington cases, none of which so hold. In Gruol Construction Co. v. Insurance Co. of North America,4 Villella v. Public Employees Mutual Ins. Co.,5 and American National Fire Insurance Co. v. B & L Trucking & Construction Co.,6 the courts recognized that in continuing loss situations, each insurer who provides coverage during the period of loss is obligated to provide full coverage for the damage. These cases do not hold that an insured who knows of continuing damage in each policy period but neglects to inform its insurer can nevertheless seek coverage years later from each insurer when the damage has increased to the point that it is "complete." In Gruol, the insured property sustained an undiscovered, progressively worsening condition of dry rot which started with defective backfilling at the time of construction and continued throughout the time that three insurers provided coverage. The court held all three insurers liable for the damage, but noted that if the trial court found that Gruol knew about the defective backfilling and the possibility of damage, the analysis would be different.7 That the damage Gruol sustained was...

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2 cases
  • Panorama Village v. Allstate Ins. Co.
    • United States
    • Washington Supreme Court
    • July 12, 2001
    ...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 contra......
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    • Washington Court of Appeals
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