Queen Anne Park Homeowners Ass'n v. State Farm Fire & Cas. Co.
| Decision Date | 08 November 2012 |
| Docket Number | C11-1579 TSZ |
| Court | U.S. District Court — Western District of Washington |
| Parties | QUEEN ANNE PARK HOMEOWNERS ASSOCIATION, Plaintiff, v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant. |
THIS MATTER comes before the Court on plaintiff's renewed motion for partial summary judgment, docket no. 54. Having reviewed the parties' briefs, as well as papers filed in connection with the parties' previous cross-motions for summary judgment, the Court enters the following Order.
The Queen Anne Park Condominium, which consists of two buildings located at 19 and 20 Eturia Street in Seattle, was constructed sometime between 1984 and 1987. See Somers Decl. at ¶ 2 (docket no. 17); Perrault Report at 2, Ex. A to Harper Decl. (docket no. 11); see also Ex. A to Shrout Decl. (docket no. 12 at 5); compare Ex. C toDibble Decl. (docket no. 41 at 11-12) (indicating construction in 1985). Defendant State Farm Fire and Casualty Company ("State Farm") annually issued policies insuring the condominium buildings from 1992 to 1998. The parties do not indicate what insurance, if any, was in effect prior to 1992 or after 1998. No dispute exists, however, that the policies at issue expired thirteen (13) years before this litigation commenced.
The State Farm condominium policy covered "accidental direct physical loss" to covered property unless the loss was limited or excluded. Ex. A to Shrout Decl. (docket no. 12 at 10). Among the exclusions enumerated in the policy was "loss either consisting of, or directly and immediately caused by . . . smog, wear, tear, rust, corrosion, fungus, mold, decay, deterioration, hidden or latent defect or any quality in property that causes it to damage or destroy itself." Id. at ¶ 2.d (docket no. 12 at 11).1 The condominium policy also contained an extension of coverage for "collapse of a building or any part of a building caused only by one or more" of six listed perils, including "hidden decay." Id. at ¶ 4.a(2) (docket no. 12 at 13). "Collapse" was defined as excluding "settling, cracking, shrinking, bulging or expansion." Id. at ¶ 4.c (docket no. 12 at 14).
In 2009, plaintiff Queen Anne Park Homeowners Association (the "HOA") discovered that the siding on the condominium buildings was leaking. State Farm's investigator, James Perrault, a professional and structural engineer, visited the site inOctober 2010. In June 2011, Perrault supervised the removal of siding and trim at certain locations on the exterior of the buildings. Also present for these "exploratory openings" was Robb Dibble, a professional engineer retained by the HOA. Based on their respective observations during this inspection, Perrault and Dibble reached opposite conclusions concerning whether the decay, which had been hidden by the siding, had reached a state of "substantial structural impairment." See Perrault Report, Ex. A to Harper Decl. (docket no. 11); Dibble Decl. at ¶ 11 (docket no. 13).
Relying on Perrault's opinion, in August 2011, State Farm denied coverage. The HOA filed this declaratory judgment and breach of contract action in September 2011. See Complaint (docket no. 1). Before conducting any discovery, the parties filed cross-motions for summary judgment. Those motions were denied via Minute Order entered on April 27, 2012, docket no. 48. With regard to the HOA's motion concerning the meaning of "collapse" for purposes of the policy at issue, the Court's denial was without prejudice to raising the issue after the Washington Supreme Court decided two then-pending cases. Decisions have since been issued in Vision One, LLC v. Phila. Indem. Ins. Co., 174 Wn.2d 501, 276 P.3d 300 (2012), and Sprague v. Safeco Ins. Co. of Am., 174 Wn.2d 524, 276 P.3d 1270 (2012), and the HOA has renewed its motion for partial summary judgment.
The Court shall grant summary judgment if no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a).The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). A fact is material if it might affect the outcome of the suit under the governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). To survive a motion for summary judgment, the adverse party must present affirmative evidence, which "is to be believed" and from which all "justifiable inferences" are to be favorably drawn. Id. at 255, 257. When the record, however, taken as a whole, could not lead a rational trier of fact to find for the non-moving party, summary judgment is warranted. See Beard v. Banks, 548 U.S. 521, 529 (2006) .
The parties do not dispute that Washington law governs the insurance contracts at issue. Indeed, the policy at issue indicates that, when a provision "is in conflict with the applicable law of the state in which this policy is issued, the law of the state will apply. Ex. A to Shrout Decl. (docket no. 12 at 41). Washington courts construe insurance policies as a whole, giving the policy the "fair, reasonable, and sensible construction" that an average person purchasing insurance would. Vision One, 174 Wn.2d at 512; see also Panorama Vill. Condo. Owners Ass'n Bd. of Dirs. v. Allstate Ins. Co., 144 Wn.2d 130, 137, 26 P.3d 910 (2001). Inclusionary clauses are liberally construed in favor of coverage, while exclusionary provisions are interpreted strictly against the insurer.Assurance Co. of Am. v. Wall & Assocs. LLC of Olympia ("Wall"), 379 F.3d 557, 560 (9th Cir. 2004) (summarizing Washington law).
If the language of a policy is "clear and unambiguous," the Court must "enforce it as written and may not modify it or create ambiguity where none exists." Weyerhaeuser Co. v. Commercial Union Ins. Co., 142 Wn.2d 654, 665-66, 15 P.3d 115 (2000). On the other hand, if a provision is ambiguous, the Court may rely on extrinsic evidence of the parties' intent to interpret the clause, and may resolve any remaining ambiguities against the insurer as drafter of the policy. Id. A term of an insurance contract is ambiguous when it is "fairly susceptible to two different interpretations, both of which are reasonable." Id.
The question before the Court involves the meaning of the term "collapse" as used in the extensions of coverage in the policy at issue. The extent to which similar insurance contracts provide coverage has long been the subject of debate. See Annotation, What constitutes "collapse" of a building within coverage of property insurance policy, 71 A.L.R.3d 1072 (originally published 1976). The question was apparently first addressed in 1959. See Travelers Fire Ins. Co. v. Whaley, 272 F.2d 288 (10th Cir. 1959). In Travelers, the policy insured against loss resulting from "[c]ollapse of building(s) or any part thereof." Id. at 289. The Tenth Circuit, applying Kansas law, concluded that the term "collapse" was "susceptible of being construed, without violence, as having more than one meaning." Id. at 290. Rejecting the insurer's suggested dictionary definition, namely "to break down, to fall in irregular mass, or a flattened form through loss of rigidity of support," id. at 289-90, in essence, "to crash[] down in a heap of rubble," id. at290, the Tenth Circuit ascribed to the word a meaning favorable to the insured, namely as "connoting a sinking, bulging, cracking, pulling away of the [basement] wall so as to impair its function of supporting the superstructure and destroying its efficiency as a habitation." Id. at 290-91.
Subsequent cases fall into two categories. The majority of courts have followed the Tenth Circuit's lead and held that, in addition to actual collapse, imminent collapse is covered.2 In contrast, a minority of courts have used a strict "rubble-on-the-ground" standard.3 See KAAPA, 660 F.3d at 305 (). Washington courts have not yet directly addressed the issue. See Thomas V. Harris, Wash. Ins. Law at § 48.06 (3d ed. 2010 & Supp. 2011).4 Recently, in Sprague, the Washington Supreme Court explicitly recognized the question, while declining to answer it. 174 Wn.2d at 529 ().
The Ninth Circuit and two judges of this district have predicted that Washington will adopt the imminent collapse, as opposed to the rubble-on-the-ground, standard. See Wall, 379 F.3d at 562-63; Dally Props., LLC v. Truck Ins. Exch., 2006 WL 1041985 (W.D. Wash. Apr. 5, 2006); Allstate Ins. Co. v. Forest Lynn Homeowners Ass'n, 892 F. Supp. 1310 (W.D. Wash. 1995), withdrawn from publication, 914 F. Supp. 408 (W.D. Wash. 1996). Sprague raises doubt about the accuracy of this prediction. In Sprague, the insureds had installed a deck system, the supports for which were not adequately flashed, causing them to rot. 174 Wn.2d at 526-27. Experts declared the deck system to be in a state of imminent collapse due to the impairment of its structural integrity. Id. at 527. The insureds made a claim under their homeowners policy; the insurer denied coverage. The policy excluded losses caused by wet or dry rot and by construction defects. Id. Both of these exclusions, however, contained ensuing loss provisions, pursuant to which the insureds argued the "imminent collapse" should be covered. The majority in Sprague disagreed, holding that "[a]dvanced deterioration does not transmute the rotting process in some sort of alchemical fashion to a new...
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