Vision One, LLC v. Phila. Indem. Ins. Co.
| Decision Date | 17 May 2012 |
| Docket Number | No. 85350–9.,85350–9. |
| Citation | 174 Wash.2d 501,276 P.3d 300 |
| Court | Washington Supreme Court |
| Parties | VISION ONE, LLC; and Vision Tacoma, Inc., Petitioners, v. PHILADELPHIA INDEMNITY INSURANCE COMPANY, and RSUI, Respondents, and D & D Construction, Inc., Respondent. D & D Construction, Inc., Respondent, v. Berg Equipment and Scaffolding Co., INC., Respondent. Matthew Thompson, Respondent, v. D & D, Inc., a Washington corporation; Berg Equipment and Scaffolding Co., Inc., a Washington corporation, Respondents, Vision One, LLC, a Washington limited liability corporation; and Vision Tacoma, Inc., a Washington corporation, Petitioners. |
OPINION TEXT STARTS HERE
Jerry Bruce Edmonds, Daniel W. Ferm, Williams Kastner & Gibbs, PLLC, Seattle, WA, Teena M. Killian, Teena M. Killian, LLC, Eugene, OR, for Petitioners.
Thomas Dean Adams, Celeste Mountain Monroe, Jose Dino Vasquez, Karr Tuttle Campbell, Michael David Helgren, Barbara Himes Schuknecht, David Andrew Linehan, McNaul Ebel Nawrot & Helgren, PLLC, Tracy A. Duany, Daniel F. Mullin, Mullin Law Group PLLC, Seattle, WA, Kenneth Wendell Masters, Shelby R. Frost Lemmel, Masters Law Group PLLC, Bainbridge Island, WA, Dennis J. Perkins, Attorney at Law, Bellevue, WA, D. Michael Shipley, Shipley Law Office, Tacoma, WA, for Respondents.
Joseph E. Lynam, Lane Powell PC, Abraham K. Lorber, Attorney at Law, Seattle, WA, amicus counsel for Building Owners and Managers Association.
John Stephen Riper, Ashbaugh Beal LLP, John P. Ahlers, Ahlers & Cressman PLLC, Seattle, WA, amicus counsel for Construction Contractor Industry, Associated General Contractors of Washington, National Electrical Contractors Association, National Utility Contractors Association of Washington, Mechanical Contractor's Association of Western Washington, Associated Builders & Contractors of Western Washington.
[174 Wash.2d 505]¶ 1 This case involves the proper interpretation of a “resulting loss” clause in an all-risk insurance policy. It also provides an opportunity to clarify application of the efficient proximate cause rule. The Court of Appeals overturned a jury verdict in favor of the insured, reasoning that the resulting loss clause did not apply in the absence of a secondary covered peril that proximately caused the loss. The court remanded for a jury determination as to the efficient proximate cause of the insured's loss, holding that if the efficient proximate cause was not itself a covered peril, then the policy did not provide coverage. We reverse the Court of Appeals. Because the loss at issue was not excluded under the policy, coverage exists under the ensuing loss provision. And, because there is no rule of law excluding coverage under an efficient proximate cause analysis, and the insurer is precluded from changing the ground for its denial of coverage, there is no basis for a jury to determine the efficient proximate cause of the loss. Accordingly, we reinstate the judgment of the trial court.
¶ 2 Vision One and Vision Tacoma (collectively Vision) joined forces to develop a condominium project in downtown Tacoma. Vision contracted with D & D Construction to pour concrete for the building. D & D in turn subcontracted with Berg Equipment and Scaffolding Company to supply the shoring that would temporarily support the poured concrete slabs.
[174 Wash.2d 506]¶ 3 Several weeks after the shoring was installed, D & D began pouring concrete for the first floor. Shortly after finishing the first section of the floor, the shoring underneath the concrete gave way. The framing, rebar, and newly poured concrete came crashing down onto the lower level parking area, where the wet concrete eventually hardened. It took several weeks to clean up the debris, repair the damage, and reconstruct the collapsed floor.
¶ 4 Vision timely submitted a claim to Philadelphia Indemnity Insurance Company. Philadelphia hired BT & Associates, an independent engineering firm, to investigate the cause of the collapse. Following its investigation, BT & Associates concluded it was “more likely than not” that the collapse resulted from “[a] marginal shoring design” and “[s]everal problems with the shoring installation.” Clerk's Papers (CP) at 6118. Its report noted that while “[t]he marginal shoring design alone may not have caused the shoring to collapse,” the “[marginal shoring design] in combination with various shoring installation problems ... on a more likely than not basis, caused the shoring to collapse.” Id.
¶ 5 At the time of the collapse, Vision had a builders' risk policy with Philadelphia.1 Under the policy, Philadelphia was required to “pay for direct physical ‘loss' to Covered Property caused by or resulting from any of the Covered Causes of Loss.” CP at 5973. “Covered Property” was defined as “[Vision's] property or the property of others for which [Vision is] liable, consisting of: [m]aterials, supplies, machinery, equipment, or fixtures which will become a permanent part of the building, structure, or project.” Id. The policy defined “Covered Causes of Loss” as “Risks of Direct Physical ‘Loss' to Covered Property unless the ‘loss' is excluded.” CP at 5974.
¶ 6 The policy specifically excluded certain losses, including those “caused by or resulting” from deficient design or faulty workmanship. CP at 5977, 5978. Under the policy, Philadelphia would not pay “for loss or damage caused by” any excluded event. CP at 5971, 5976. The policy explained when a loss was “caused by” an excluded event:
Loss or damage will be considered to have been caused by an excluded event if the occurrence of that event:
(1) Directly and solely results in loss or damage; or
(2) Initiates a sequence of events that results in loss or damage, regardless of the nature of any intermediate or final event in that sequence. [ 2]
Id. at 5971. “Collapse” was not listed as an excluded event.
¶ 7 The exclusion for faulty workmanship contained a resulting loss clause providing that “if loss or damage by a Covered Cause of Loss results, [Philadelphia] will pay for the loss or damage caused by that Covered Cause of Loss.” CP at 5972, 5978. This provision was likewise included in Vision's policy as an endorsement. CP at 5972.
¶ 8 Following BT & Associates' investigation into the cause of the collapse, Philadelphia denied Vision's claim. The denial letter explained:
The damage to the construction project was a sole and direct result of the marginal shoring design and faulty installation of the shoring. The policy excludes loss caused by deficiency in design and loss caused by faulty workmanship. Coverage will exist for any resulting loss caused by another insured event or peril. In this instance, the only peril, which caused the loss, was defective design and faulty workmanship, therefore there is no coverage for Vision One's claims. To the extent any portion of the claim can be considered a resulting loss, other policy exclusions and limitations apply.
¶ 9 Vision asked Philadelphia to reconsider. Philadelphia responded by letter, clarifying its reason for denying the claim:
While the faulty workmanship exclusion contains an exception for resulting loss from a Covered Cause of Loss, in [this] case, the only cause of the loss was defective design and faulty workmanship. There is no separate and independent loss that resulted in the claimed damage. Therefore, the faulty workmanship exclusion bars coverage for this loss, and the ‘resulting loss' provision contained therein does not apply.
CP at 13142 (emphasis omitted).
¶ 10 Vision sued Philadelphia for breach of contract, bad faith, and violations of the Consumer Protection Act, chapter 19.86 RCW.3 As trial approached, the parties thoroughly briefed how they believed various policy provisions applied for purposes of instructing the jury.
¶ 11 One of the parties' points of contention involved causation. Vision claimed the collapse was caused by faulty equipment—a covered peril under the policy—while Philadelphia argued it was caused by faulty workmanship and defective design, which were excluded perils.4 Vision further claimed that if an excluded peril and a covered peril both contributed to the property damage, then the policy would cover the loss. Philadelphia disagreed, arguing that in such a case, coverage follows only if the fact finder first determines that the covered peril was the efficient proximate cause of the loss.
¶ 12 The trial court agreed with Vision and entered the following order: “If it is found that the loss was caused by one or more non-excluded event(s) in combination with one or more excluded event(s); the loss is covered.” CP at 6588; see also Verbatim Report of Proceedings (VRP) (July 18, 2008) at 18. The trial court denied Philadelphia's motion for reconsideration.
¶ 13 Vision and Philadelphia also disputed application of the resulting loss clause under the faulty workmanship exclusion. Because the wet concrete, rebar, and framing were “separate” from the faulty shoring installation, the trial court held that damage to the concrete, rebar, and framing constituted resulting losses. The court entered the following order on the resulting loss clause:
As a matter of law, for purposes of the faulty workmanship resulting loss clause in the contract between Vision One and Philadelphia, the shoring equipment is separate and distinct from the concrete, rebar and wood forms. Thus, any resulting loss or damage caused by the concrete collapse is covered by the policy language.
¶ 14 Philadelphia moved for reconsideration, reiterating its argument that coverage under the resulting loss clause could apply only if the jury decided that faulty workmanship was the efficient proximate cause of the loss. VRP (Sept. 16, 2008) at 10. The trial court and Philadelphia's counsel engaged in the following colloquy:
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