Wright v. Safeco Ins. Co. of America
| Decision Date | 20 September 2004 |
| Docket Number | No. 52434-8-I.,52434-8-I. |
| Citation | 109 P.3d 1,124 Wash.App. 263 |
| Court | Washington Court of Appeals |
| Parties | Arlene A. WRIGHT, Appellant/Cross-Respondent, v. SAFECO INSURANCE COMPANY OF AMERICA, Respondent/Cross-Appellant. |
Thomas F. Ahearne, John P. Zahner, Foster Pepper & Shefelman, Seattle, for Appellant.
Rory W. Leid, Ryan J. Hall, Clarke Bovingdon Cole Mills & Lether, Seattle, for Respondent.
¶ 1 Arlene Wright appeals the trial court's order dismissing her coverage claims against her insurer, Safeco Insurance Company of America (Safeco). Safeco provided coverage under Wright's policy for losses caused by water overflowing from an interior fountain but denied coverage for water and mold damages to the fountain and laundry areas and exterior walls caused by construction defects. Wright contends Safeco incorrectly concluded that the policy exclusions for construction defects and mold prevent recovery for those losses. Wright also argues coverage is available for the fountain and laundry area losses under an exception for water damage and an additional coverage provision. Safeco appeals the trial court's decision denying its summary judgment motion on Wright's bad faith and Consumer Protection Act (CPA) claims. Safeco contends it did not act in bad faith and Wright cannot establish the requirements for a CPA claim. We affirm the trial court's dismissal of Wright's coverage claims and reverse the trial court's denial of Safeco's motion to dismiss Wright's bad faith and CPA claims.
¶ 2 Arlene Wright insured her $8 million lakefront Carillon Point condominium with an all-risk Quality Crest Homeowner's Policy from Safeco. The Carillon Point Condominium complex was constructed in 1990-91. In June 1994, Wright purchased two adjoining ground floor units. When Wright purchased her units, they were empty shells consisting of steel-stud framing, exterior sheathing and siding. Wright hired Jerry Fulks & Co. (Fulks) to build-out and construct the interior of her unit. Construction took place between 1994 and 1996 and included installation of electric and plumbing components, interior walls and fiberglass insulation.
¶ 3 During construction, Fulks discovered water leaks in some exterior walls and around some windows. Fulks contacted Building Envelope Consulting Services to investigate the leaks. According to Building Envelope's December 1994 report, there were numerous leaks in exterior walls and around windows, and mildew on the inside wall surfaces of some of the areas affected by the leaks.
¶ 4 Wright then hired Healthy Buildings Associates, an indoor air quality consultant, in January 1995 to make recommendations about how to address the mildew in Wright's unit. Healthy Buildings identified several sources of moisture in the unit, including leaks in exterior walls and around windows, and water infiltrating through the concrete slab under the unit. Healthy Buildings recommended Wright repair the exterior wall and window leaks, and replace portions of exterior drywall sheathing where mold was present. Healthy Buildings also recommended thoroughly drying the unit.
¶ 5 When Wright moved into the condominium in 1996, she noticed certain exterior walls and windows had water leaks and there was mildew in some areas. Wright notified Fulks and her condominium homeowner's association about the leaks. At her request, Healthy Buildings conducted another inspection of the mildew in her unit. Healthy Buildings' September 1996 report stated that moisture and mold in the walls was still a problem and again recommended repairs and strategies.1
¶ 6 Sometime between August 1996 and January 1997, Fulks installed an indoor fountain in Wright's condominium. From the first time the fountain was used in May 1997, it leaked. The leaks from the fountain caused the marble floor tiles surrounding it to become degraded and discolored. From November 1997 through April 1998, Fulks looked into solutions to the fountain leaks and replacing the crumbling and discolored marble tiles.
¶ 7 On May 17, 1999, the fountain overflowed, flooding the living room, part of the dining room, and the master bedroom. Wright said a cat toy plugged one of the fountain drains.2 The flood damage to rugs and furniture was reported to Safeco the same day. Safeco visited the condominium to investigate the reported damage.
¶ 8 When the rugs and furniture were removed for cleaning, extensive crumbling and deterioration of the marble floor was discovered around the fountain. Wright contacted Safeco to inform them that the carpets would have to be replaced. On June 14, Burt Lockhart, a project manager for Fulks, told Safeco the damage from the flood was extensive and its scope would not be known for some time. On June 16, Safeco prepared an initial estimate of $49,424.95 for the fountain flood damage.3 On June 29, Lockhart informed Safeco that it would be approximately three months before the replacement floor tiles could be delivered. In August 1999, Safeco paid Wright approximately $90,000 for the flood damage.
¶ 9 In October 1999, Wright's personal advisor, Bill Clancy, told Safeco that repairs had stopped to allow further testing to determine whether the water and mold damage was caused by the fountain flood or by water leaks from the exterior walls and windows and the fountain plumbing connection.
¶ 10 In October 2000, Safeco made additional payments of over $175,000 to Wright for damage to her home, personal property and loss of use.
¶ 11 In January 2001, a Safeco representative met with the president of Wright's condominium homeowner's association, the association's insurer, the insurer's agent, Clancy and Lockhart. The homeowner's association had submitted a claim to its insurer for the water damage to the exterior walls of Wright's unit. Safeco took the position that it was responsible only for the repairs associated with the fountain flood damage.
¶ 12 In early 2001, Safeco made an additional payment of approximately $130,000 for flood damage to Wright's condominium unit and personal property.
¶ 13 In April 2001, Wright hired the engineering firm Wiss, Janney, Elstner Associates, Inc. (WJE) to investigate the water and mold problems at her condominium. Over the next several months, WJE conducted a comprehensive investigation into the causes of the water and mold damage. WJE, in its November 2001 final report, concluded the water and mold damages to Wright's condominium unit were caused by construction defects.
¶ 14 Based on the WJE report, in December 2001 Safeco asked Wright to provide a formal proof of loss in support of her damage claims. On March 26, 2002, Wright submitted three claims for (1) the fountain leaks and flooding; (2) water and mold damage in the laundry room walls; and (3) water and mold damage to the exterior walls.
¶ 15 Safeco agreed Wright's policy provided coverage for the losses from the fountain flood, including drywall, marble tiles, flooring and personal property damages. But based on WJE's report, Safeco denied coverage for water and mold damages to the fountain and laundry areas caused by defective construction. Wright's policy excludes coverage for loss from defective construction. Additionally, Safeco denied coverage for mold in the fountain and laundry areas because mold is expressly excluded under the policy. Safeco also denied coverage for water and mold damage to the exterior walls under the construction defect exclusion.4 ¶ 16 On July 17, 2002, Safeco sent Wright a check for $60,000 for loss of use and informed Wright of its decision to deny any further coverage on her three submitted claims.5
¶ 17 In September 2002, Wright sued Safeco alleging breach of her insurance contract, bad faith and violation of the Consumer Protection Act. Wright filed a motion for summary judgment asking the court to rule as a matter of law that her insurance policy provided coverage for her claims for water and mold damage. Safeco filed a motion for summary judgment on Wright's bad faith and CPA claims. The trial court ruled the Safeco insurance policy did not provide coverage for Wright's claims for water and mold damages caused by construction defects.6 The trial court denied Safeco's motion for summary judgment on Wright's bad faith and CPA claims.
¶ 18 Wright appeals the trial court's decision to dismiss her coverage claims. Safeco appeals the trial court's decision to deny its motion for summary judgment on Wright's bad faith and CPA claims.
¶ 19 On review of summary judgment, this court engages in the same inquiry as the trial court. Reynolds v. Hicks, 134 Wash.2d 491, 495, 951 P.2d 761 (1998). We review questions of law de novo. Mains Farm Homeowners Ass'n v. Worthington, 121 Wash.2d 810, 813, 854 P.2d 1072 (1993). Summary judgment is properly granted when the pleadings and affidavits show there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. CR 56(c). The court must view the facts and all reasonable inferences in the light most favorable to the nonmoving party. Right-Price Recreation, L.L.C. v. Connells Prairie Com. Council, 146 Wash.2d 370, 381, 46 P.3d 789 (2002). Only when reasonable minds could reach but one conclusion on the evidence should the court grant summary judgment. Smith v. Safeco Ins. Co., 150 Wash.2d 478, 485, 78 P.3d 1274 (2003).
¶ 20 Wright argues the trial court erred in dismissing her coverage claims for water damage to the fountain area, laundry room and exterior walls. Interpretation of an insurance policy is a question of law. McDonald v. State Farm Fire & Cas. Co., 119 Wash.2d 724, 730, 837 P.2d 1000 (1992). The determination of whether coverage exists is a two-step process: first, the insured must show the policy covers his loss; second, to avoid coverage, the insurer must show specific policy language excludes the insured's loss. McDonald, 119 Wash.2d at...
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