West Coast Pizza Co. v. United Nat'l Ins. Co. Re: Policy No. XTP0079005

• Court: Washington Court of Appeals
• Writing for the Court: DWYER
• Citation: West Coast Pizza Co. v. United Nat'l Ins. Co. Re: Policy No. XTP0079005, 166 Wash.App. 33, 271 P.3d 894 (Wash. App. 2012)
• Decision Date: 30 January 2012
• Docket Number: No. 65946–4–I.
• Parties: WEST COAST PIZZA COMPANY, INC. dba Domino's Pizza, a Washington corporation, and all covered locations, Appellant/Cross–Respondent, v. UNITED NATIONAL INSURANCE COMPANY RE: POLICY NO. XTP0079005, Defendant,National Continental Insurance Company Re: Policy No. CP7063115–6, Respondent/Cross–Appellant.

166 Wash.App. 33

271 P.3d 894

WEST COAST PIZZA COMPANY, INC. dba Domino's Pizza, a Washington corporation, and all covered locations, Appellant/Cross–Respondent,

v.UNITED NATIONAL INSURANCE COMPANY RE: POLICY NO. XTP0079005, Defendant,National Continental Insurance Company Re: Policy No. CP7063115–6, Respondent/Cross–Appellant.

No. 65946–4–I.

Court of Appeals of Washington, Division 1.

Dec. 12, 2011.Publication Ordered Jan. 30, 2012.

James H. Clark Jr. Oseran Hahn Spring Straight & Watts, P.S. Bellevue, WA, for Appellant.

Jeffory Emerson Adams, Murray Dunham & Murphy, Seattle, WA, for Respondent.

DWYER, C.J.

[166 Wash.App. 34] ¶ 1 West Coast Pizza Company, Inc. appeals from the trial court's summary judgment ruling that the insurance policy issued by National Continental Insurance Company—which names West Coast Pizza as the only insured—does not provide liability coverage for Mad Pizza Company, Inc. Because Mad Pizza was not an insured pursuant to the policy, and because West Coast Pizza has demonstrated no mutual mistake justifying reformation of the policy, we affirm.

I

¶ 2 West Coast Pizza and Mad Pizza are separate Washington entities that operate Domino's Pizza franchises in our state. West Coast Pizza is owned by Bryan Dobb, Kevin Dobb, and Dean Brandt. Bryan Dobb is the sole owner of Mad Pizza. During the period of time relevant here, West Coast Pizza operated two Domino's franchises, and Mad Pizza operated 11 such franchises. The Dobb brothers additionally operated Domino's franchises owned by three other Washington entities. Collectively, these five entities operated 21 Domino's franchises and employed approximately 100 pizza delivery drivers.

¶ 3 In August 2006, the Dobbs employed the services of an insurance agent to obtain liability insurance coverage related to pizza delivery. The application submitted by the insurance agent listed West Coast Pizza, “dba Domino's Pizza,” as the sole applicant. Although the application did not mention the other entities operating Domino's franchises, it did indicate the total number of delivery drivers to be 100.

¶ 4 Based upon that application, National Continental issued an insurance policy to West Coast Pizza for the period from September 1, 2006 to September 1, 2007. The insurance agent thereafter faxed to National Continental a schedule of locations, identifying the 21 franchise locations. The schedule of locations was entitled “Location Schedule—West Coast Pizza.” The schedule did not identify the other corporate entities, even though those corporations operated a majority of the listed locations.

¶ 5 On May 29, 2007, Mad Pizza delivery driver Solomon Quito was involved in an automobile collision resulting in injuries to Joy Tschernega. Tschernega thereafter filed a negligence lawsuit in Snohomish County Superior Court against Quito and Mad Pizza, alleging that Quito was acting as an agent of Mad Pizza at the time of the collision. West Coast Pizza is not named as a defendant in Tschernega's complaint.

¶ 6 National Continental refused to provide a defense against the Tschernega lawsuit, contending that, because West Coast Pizza had failed to complete requested audit information, the policy had been cancelled prior to the automobile collision. West Coast Pizza thereafter filed a complaint for declaratory judgment, seeking a declaration that the National Continental policy was in effect on the date that the collision occurred. National Continental moved for summary judgment, contending that it had the right to cancel the policy because West Coast Pizza had failed to complete and return audit questionnaires and that, in any event, the policy did not insure the vehicle involved in the collision. The trial court denied National Continental's motion for summary judgment.

¶ 7 National Continental thereafter filed an additional motion for summary judgment, this time asserting that it had no duty to defend or indemnify Mad Pizza or Quito in the Tschernega lawsuit because neither Mad Pizza nor Quito was insured by the policy and because Quito's vehicle was not a “covered auto” pursuant to that policy. On this basis, the trial court granted National Continental's motion for summary judgment.

¶ 8 West Coast Pizza appeals.¹

II

¶ 9 West Coast Pizza first contends that the National Continental insurance policy obligates National Continental to defend and indemnify Mad Pizza against the Tschernega lawsuit.² We disagree.

¶ 10 “In reviewing a summary judgment order, the appellate court evaluates the matter de novo, performing the same inquiry as the trial court.” Snohomish County v. Rugg, 115 Wash.App. 218, 224, 61 P.3d 1184 (2002). Summary judgment is appropriate where “there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law.” CR 56(c).

¶ 11 Similarly, interpretation of an insurance contract is a question of law that is reviewed de novo by this court. Bushnell v. Medico Ins. Co., 159 Wash.App. 874, 881, 246 P.3d 856, review denied, 172 Wash.2d 1005, 257 P.3d 665 (2011). “If a policy is clear and unambiguous, the court must enforce it as written.” Bushnell, 159 Wash.App. at 882, 246 P.3d 856. In such circumstances, the court may not modify the contract or “create ambiguity where none exists.” Bushnell, 159 Wash.App. at 882, 246 P.3d 856. Ambiguity exists only where the policy language is susceptible to different interpretations, each of which is reasonable. Bushnell, 159 Wash.App. at 882, 246 P.3d 856. Where the policy language is ambiguous, “the language of the policy must be construed in favor of the insured.” Bushnell, 159 Wash.App. at 882, 246 P.3d 856.

¶ 12 Insurance policies are contracts, and, thus, the principles of contract interpretation apply. See, e.g., Quadrant Corp. v. Am. States Ins. Co., 154 Wash.2d 165, 171, 110 P.3d 733 (2005). “ ‘The cardinal rule with which all interpretation begins is that its purpose is to ascertain the intention of the parties.’ ” Berg v. Hudesman, 115 Wash.2d 657, 663, 801 P.2d 222 (1990) (quoting Corbin, The Interpretation of Words and the Parol Evidence Rule, 50 Cornell L.Quar. 161, 162 (1965)). In Washington, “extrinsic evidence is admissible as to the entire circumstances under which the contract was made, as an aid in ascertaining the parties' intent.” Berg, 115 Wash.2d at 667, 801 P.2d 222. However, such extrinsic evidence is admitted only “ ‘for the purpose of aiding in the interpretation of what is in the instrument, and not for the purpose of showing intention independent of the instrument.’ ” Berg, 115 Wash.2d at 669, 801 P.2d 222 (quoting J.W. Seavey Hop Corp. v. Pollock, 20 Wash.2d 337, 348–49, 147 P.2d 310 (1944)).

¶ 13 Here, the policy's liability coverage provision provided that National Continental “will pay all sums an ‘insured’ legally must pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies, caused by an ‘accident’ and resulting from the ownership, maintenance or use of a covered ‘auto.’ ” Clerk's Papers (CP) at 424. The policy further stated that National Continental had “the right and duty to defend any ‘insured’ against a ‘suit’ asking for such damages.” CP at 424. An “insured” included “[y]ou for any covered ‘auto’,” where “you” referred to the named insured—here, solely West Coast Pizza, “dba Domino's Pizza.” CP at 424, 409. The policy further provided that the covered autos were “those ‘autos' you do not own, lease, hire, rent or borrow that are used in connection with your business” and included “ ‘autos' owned by your ‘employees.’ ” CP at 423; see also CP at 409. Again, “your” was defined within the policy as the named insured. CP at 423.

¶ 14 The National Continental policy language clearly indicates that West Coast Pizza was the only named insured; Mad Pizza was named nowhere within the policy. Accordingly, pursuant to the unambiguous policy language, National Continental was obligated to pay only those sums legally owed by West Coast Pizza. Similarly, the policy clearly indicated that National Continental's duty to defend and indemnify was owed solely to the named insured—here, West Coast Pizza. Moreover, the only “autos” covered by the policy were those used in connection with West Coast Pizza's business and owned by West Coast Pizza's employees. Thus, both the liability coverage provision and the description of automobiles covered by the policy unambiguously indicate that the National Continental policy did not provide coverage to Mad Pizza with regard to the Tschernega lawsuit. Neither Mad Pizza nor Quito was a named insured within the policy, and the automobile driven by Quito when the collision occurred was not a “covered auto.”

¶ 15 Nevertheless, West Coast Pizza contends that extrinsic evidence demonstrates that the parties intended the National Continental insurance policy to provide coverage for the Domino's franchise location—operated by Mad Pizza—where Quito was employed.³ Specifically, West Coast Pizza points to the insurance application, the schedule of locations provided to National Continental, the number of delivery drivers indicated within the insurance policy, and the premium paid for the policy. Although we may consider such extrinsic evidence, we may do so only in order to resolve the determinative issue—the intention of the parties. Berg, 115 Wash.2d at 667–69, 801 P.2d 222. Here, none of the evidence cited by West Coast Pizza indicates that National Continental intended to insure Mad Pizza and its delivery drivers.

¶ 16 First, the insurance application, although stating the number of delivery drivers to be 100, listed West Coast Pizza as the only applicant. Mad Pizza was named nowhere within the application. Moreover, the schedule of locations provided to National Continental indicated that all 21 locations were operated by West Coast Pizza, as the list was entitled “Location Schedule—West Coast Pizza.” CP at 279. Although the insurance policy indicated...