Seattle Tunnel Partners v. Great Lakes Reinsurance (U.K.) PLC
| Decision Date | 10 April 2023 |
| Docket Number | 79460-4-I |
| Parties | SEATTLE TUNNEL PARTNERS, a Washington joint venture, and HITACHI ZOSEN U.S.A. LTD., Petitioners, v. GREAT LAKES REINSURANCE (UK) PLC, a foreign insurance company; SURICH INSURANCE PLC, a foreign insurance company; STARR SURPLUS LINES INSURANCE COMPANY, an Illinois corporation; INDIAN HARBOR INSURANCE COMPANY, a Delaware corporation; ALLIANZ GLOBAL CORPORATE &SPECIALTY AG, a foreign insurance company; TORUS INSURANCE (UK) LIMITED, a foreign insurance company; PARTNER RE IRELAND INSURANCE LIMITED, a foreign insurance company; DOES 1- 100, individual and/or corporate members of SYNDICATE 382 AT LLOYD''S, LONDON; and DOES 101- 200, individual and/or corporate members of SYNDICATE 1882 AT LLOYD'S LONDON, Respondents. WASHINGTON STATE DEPARTMENT OF TRANSPORTATION, Respondent, SEATTLE TUNNEL PARTNERS, a Washington joint venture, and HITACHI ZOSEN U.S.A. LTD., Petitioners, WASHINGTON STATE DEPARTMENT OF TRANSPORTATION, Respondent, v. GREAT LAKES REINSURANCE (UK) PLC, a foreign insurance company; SURICH INSURANCE PLC, a foreign insurance company; STARR SURPLUS LINES INSURANCE COMPANY, an Illinois corporation; INDIAN HARBOR INSURANCE COMPANY, a Delaware corporation; ALLIANZ GLOBAL CORPORATE &SPECIALTY AG, a foreign insurance company; TORUS INSURANCE (UK) LIMITED, a foreign insurance company; PARTNER RE IRELAND INSURANCE LIMITED, a foreign insurance company; DOES 1-100, individual and/or corporate members of SYNDICATE 382 AT LLOYD''S, LONDON; and DOES 101-200, individual and/or corporate members of SYNDICATE 1882 AT LLOYD'S LONDON, Respondents. |
| Court | Court of Appeals of Washington |
The court has determined that the opinion in the above-entitled case filed on March 27, 2023 shall be modified as follows The words "acted in bad faith and" are deleted from the second sentence of the first paragraph on page 9 of the opinion.
Now therefore, it is hereby
ORDERED that the opinion filed on March 27, 2023 is withdrawn and a substitute published opinion reflecting this modification shall be filed.
Seattle Tunnel Partners (STP) and Hitachi Zosen U.S.A., Ltd. (Hitachi) appeal an order imposing spoliation sanctions in this insurance coverage lawsuit. STP contends the trial court erred in concluding it committed spoliation and erred in ruling that the Washington Department of Transportation (WSDOT) and STP's builders risk insurance providers (Insurers) were entitled to an adverse inference jury instruction as a sanction. Hitachi argues that even if STP engaged in spoliation, the trial court erred in imposing an adverse inference jury instruction because such a sanction would unfairly prejudice Hitachi, an innocent party.
We reverse. First, we conclude that our spoliation case law requires, as a threshold showing, that the alleged spoliating party owes a duty to the party seeking sanctions to preserve the missing, lost, or destroyed evidence. We conclude that STP owed a contractual duty to WSDOT to preserve evidence relating to its change order request and it foresaw the materiality of this evidence to that claim. But we conclude STP had no duty to the Insurers by contract or otherwise and as a result, the Insurers are not entitled to a spoliation remedy.
Second we conclude that an adverse inference jury instruction is only appropriate as a sanction for the intentional destruction of evidence or the willful failure to preserve evidence with an improper motive (i.e., bad faith). The trial court's findings do not support this level of culpability, making an adverse inference instruction inappropriate.
Third, we alternatively conclude that the trial court erred in concluding that the lost evidence was sufficiently important to WSDOT to justify such a harsh sanction in this case. While some sanction may be appropriate, we conclude an adverse inference instruction is not. Because we reverse the spoliation sanction, we need not reach Hitachi's appeal.
In 2011, WSDOT contracted with STP to construct an underground tunnel to replace the Alaskan Way Viaduct in Seattle. STP procured a tunnel boring machine (TBM) designed and manufactured by Hitachi. The TBM cutterhead was 57.5 feet in diameter and contained approximately 700 cutting tools. As the TBM advanced, the machine forced excavated material through the TBM to a conveyor belt for disposal.
Pursuant to its design-build contract with WSDOT, STP obtained a builder's all-risk insurance policy from Great Lakes Reinsurance (UK) PLC and several insurance underwriters[1] (collectively Insurers). The policy insured against damage to both the tunneling works and the TBM. WSDOT and STP are both named insureds under the policy. Hitachi claims to be an insured as well, a claim the Insurers dispute.
STP launched the TBM and began mining in July 2013. Between July 2013 and December 2013, the TBM experienced a variety of problems, including clogging and deformation of the cutterhead, which cracked the machine's center pipe. On December 4, 2013, the TBM encountered the steel casing of an abandoned test well (TW-2). TW-2 was over 100 feet long, consisting of 93 feet of 8-inch diameter steel pipe with 3/8-inch thick walls, and 15 feet of fine steel mesh.
In the days following the encounter with TW-2, the TBM slowed and began making unusual noises and, by December 7, 2013, stopped mining entirely due to damage to the TBM. On December 12, 2013, STP submitted a notice of a proposed change order to WSDOT, asserting that TW-2 constituted a differing site condition under the contract. Because STP considered TW-2, the alleged differing site condition, to be the cause of the TBM's damage, STP argued that it was entitled to a time extension and an increase in compensation. The TBM did not successfully resume full mining operations until December 2015.
STP recovered a total of nine steel pieces, totaling 89 feet, that it believed came from TW-2. When the TBM first hit TW-2, a portion of the pipe was pushed up through the soil and stood proud above the ground. STP cut off this protruding portion of the pipe. On December 5, STP removed two boulders and two pieces of steel from the TBM's conveyor belt. On December 11, STP pulled a 55-foot long piece of TW-2 out of the ground. On January 2, 2014, STP found a large piece of steel and a collection of small metal fragments in the TBM's "muck bin." On January 18, another two steel pieces were extracted from the TBM's spokes. STP found the final piece on January 25 on the conveyor belt. STP documented and photographed each of these pieces.
STP's Deputy Project Manager, Greg Hauser, directed employees to place several of the recovered pipe pieces and the boulders from the conveyor belt on a wooden pallet in STP's construction yard. Hauser ordered several supervisors and crew members to retain all of the recovered pipe pieces and boulders. STP, however, did not employ any systematic way of informing every person with access to the pallet not to disturb it. Nor did STP put a label or sign on or near the pallet. General Superintendent Tom McMahon testified that he intended to move the pallet's contents to STP's storage warehouse, but never did so.
In February 2014, McMahon gave the order for the yard foreman to "clean the yard up." A couple weeks later, McMahon asked the foreman to move the wooden pallet and its contents to STP's storage warehouse. When the foreman and McMahon were unable to locate the pallet or its contents, they discovered that an equipment operator had placed the steel pieces in the dumpster for steel waste disposal while cleaning out the yard. By the time they discovered this fact, the dumpster had been removed and the steel pieces, along with the two boulders, were gone.
Hauser kept handwritten notes in personal journals detailing the project and its progression. His journal covering December 2013 through February 2014, however, also went missing and could not shed light on the TBM's breakdown, or on the loss of the steel pieces.
WSDOT, STP, and Hitachi tendered insurance claims based on the damage to the TBM, losses from the delay in mining, and the cost of construction of an access shaft built to rescue the TBM. The Insurers denied coverage on the basis that the policy excludes coverage for physical damage to the TBM caused by design defects. Following their investigation, the Insurers rejected STP's contention that the encounter with TW-2 had caused any damaged and instead concluded that the
In June 2015, STP initiated this coverage lawsuit against the Insurers in King County Superior Court (King County Coverage Case). WSDOT was joined as a necessary party defendant, but later realigned as a plaintiff. Hitachi joined the action as an intervenor-plaintiff. All three parties sought a declaratory judgment that the policy covers their losses. STP later amended its complaint, alleging the Insurers breached the implied covenant of good faith and violated unfair claims settlement practices regulations, the Consumer Protection Act,[2] and the Insurance Fair Conduct Act.[3]
STP, WSDOT, and Hitachi each dispute the Insurers' contention that design defects caused the TBM's damage. STP and Hitachi both contend that the encounter with TW-2 damaged the TBM. WSDOT, on the other hand, claims that STP operator error, in addition to design defects, damaged the TBM.
After STP initiated the King County Coverage Case, WSDOT filed a separate action against STP in Thurston County Superior Court, alleging that STP had breached the design-build contract when...
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