Alaska Airlines Inc v. Endurance American Insurance Co

District Court, W.D. Washington·Decided September 3, 2021·No. 2:20-cv-01444·Unknown

Opinion

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE ALASKA AIRLINES, INC., Plaintiff, v. C20-1444 TSZ ENDURANCE AMERICAN ORDER Defendant. INSURANCE CO., Counterclaimant and Third-Party Plaintiff, v. Counter Defendant, and UNITED STATES AIRCRAFT INSURANCE GROUP; UNITED STATES AVIATION UNDERWRITERS, INC.; and UNITED STATES AIRCRAFT DOE ENTITIES 1 THROUGH 10, Third-Party Defendants. THIS MATTER comes before the Court on the Motion for Partial Summary Judgment (“MPSJ”), docket no. 27, filed by Plaintiff Alaska Airlines, Inc. (“Alaska Airlines”), the Motion to Dismiss, docket no. 29, filed by Third-Party Defendants United States Aircraft Insurance Group and United States Aviation Underwriters, Inc. (collectively “USAIG”), and the Cross-Motion for Partial Summary Judgment (“CMPSJ”), docket no. 30, filed by Defendant Endurance American Insurance Co. (“Endurance”). Having reviewed all papers filed in support of, and in opposition to, the motions, the Court enters the following Order. Background In November 2007, a Service Agreement between Alaska Airlines and Huntleigh USA Corporation (“Huntleigh”) took effect in which Huntleigh agreed to provide wheelchair escort services to Alaska Airlines passengers at the Portland International Airport (“PDX”). Service Agreement, Ex. 1 to Newsom Decl. (docket no. 31-1 at 1). The Service Agreement included an indemnification provision: To the fullest extent permitted by law, Contractor shall indemnify, defend and hold harmless Alaska Airlines, its directors, officers, employees and agents from and against any and all claims, damages, losses, fines, civil penalties, liabilities, judgments, costs and expenses of any kind or nature whatsoever, including, but not limited to, interest, court costs and attorney’s fees, which in any way arise out of or result from any act(s) or omission(s) by Contractor (or anyone directly or indirectly employed by Contractor or anyone for whose acts Contractor may be liable) in the performance or nonperformance of services under this Agreement, including but not limited  Death of or injury to any person or persons; . . . However, nothing contained in this section shall be construed as an indemnity by Contractor against any loss, liability or claim caused solely by the acts or omissions of Company, its directors, officers, employees and agents, unless caused by the negligence or misconduct of Contractor, its directors, officers, employees or agents. Id. at 3. The Service Agreement further stated that it was to be governed by and construed in accordance with Oregon law. Id. at 4. On June 7, 2017, Bernice Kekona, who required wheelchair assistance, flew on an Alaska Airlines flight from Maui, Hawaii to Portland, Oregon. Kekona Compl. Ex. A to Fetters Decl. (docket no. 28 at ¶¶ 32 & 48). Kekona alleged that although she was supposed to receive gate-to-gate escort services at PDX, Huntleigh employees only assisted her to outside the airplane door. Id. at ¶¶ 47, 53, & 55. While Kekona attempted to find the gate for her connecting flight on her own, she fell down an escalator in her wheelchair and sustained several injuries, including lacerations to her right leg that later went septic. Id. at ¶¶ 60, 78, & 106. As a result, her right leg was amputated. Id. at

¶ 109. On September 20, 2017, Kekona died from complications following the amputation surgery. Id. at ¶ 111. Kekona’s estate filed a survival and wrongful death action against Alaska Airlines and Huntleigh1 in King County Superior Court in December 2017 (“Kekona Lawsuit”). See Kekona Lawsuit Compl., Ex. A to Fetters Decl. (docket no. 28). By letter dated

August 21, 2018, Alaska Airlines, for the third time, tendered the Kekona Lawsuit to 1 Huntleigh was later dismissed from the action for lack of personal jurisdiction. Order Granting Huntleigh’s Motion to Dismiss (docket no. 28), Estate of Bernice Kekona v. Alaska Airlines, Inc. et al., Case No. 2:18-cv-00116-JCC (W.D. Wash.). Huntleigh and Endurance, Huntleigh’s insurer, for handling, defense, and indemnification. August 2018 Tender Letter, Ex. B to Fetters Decl. (docket no. 28 at 28–

31). The letter asserted that Oregon law applied. Id. at 29. Huntleigh denied Alaska Airlines’ tender on October 18, 2018. October 2018 Tender Response Letter, Ex. C to Fetters Decl. (docket no. 28 at 42–43). Huntleigh denied tender purportedly because “the accident, which is the subject of the Kekona Lawsuit, did not arise out of the performance or nonperformance of Huntleigh under the Agreement.” Id.

Pursuant to the arbitration clause in the Service Agreement, Alaska Airlines demanded arbitration of Huntleigh’s duty to defend and indemnify Alaska Airlines in the Kekona Lawsuit on July 19, 2019. Demand for Arbitration, Ex. 2 to Newsom Decl. (docket no. 31-2); Fetters Decl. at ¶ 5. As part of the arbitration process, Huntleigh produced to Alaska Airlines a liability insurance policy issued by Endurance (“Endurance

Policy”). Fetters Decl. at ¶ 6. The Endurance Policy provides coverage for bodily injury as follows: SECTION I – COVERAGES LIABILITY 1. Insuring Agreement. (a) We will pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies resulting from your aviation operations. We will have the right and duty to defend any suit seeking those damages. We may at our discretion investigate any occurrence and settle any claim or suit that may result. Endurance Policy, Ex. D to Fetters Decl. (docket no. 28 at 59) (emphasis in original). The Endurance Policy defined “aviation operations” as “all operations arising from the ownership, maintenance or use of locations for aviation activities” including “all operations necessary or incidental to aviation activities.” Id. at 71. The Endurance Policy further provided additional insured coverage under Endorsement 13: In consideration of the premium paid and notwithstanding anything in the policy to the contrary, this endorsement amends the policy as shown below: IT IS HEREBY UNDERSTOOD AND AGREED THAT: With respect to operations performed by the Named Insured on behalf of any person or organization to whom the Named Insured has provided a service the company agrees to: Include that person or organization as an Additional Insured under Liability Coverages Id. at 90. The Endurance Policy expressly applied “[s]eparately to each insured against whom claim is made or suit is brought.” Id. at 70 (emphasis in original). After receiving the Endurance Policy, Alaska Airlines once again tendered the Kekona Lawsuit to Endurance, which Endurance ultimately denied. Tender Letters, Exs. E & F to Fetters Decl. (docket no. 28). In April 2020, based on the parties’ written submissions, the Seattle-based arbitrator, applied Oregon law and ruled that, as a matter of law, Huntleigh had materially breached its contractual duties to defend Alaska Airlines with respect to the Kekona Lawsuit. Ex. 4 to Newsom Decl. (docket no. 31-4 at 11–12). In September 2020, Alaska Airlines filed this action against Endurance alleging breach of contract, bad faith, and violations of Washington’s Insurance Fair Conduct Act

(“IFCA”) and Consumer Protection Act (“CPA”). Compl. (docket no. 1 at 20–23). In March 2021, Endurance filed its Answer and a Third-Party Complaint asserting a claim for declaratory judgment and claims against USAIG for equitable contribution, statutory contribution, and subrogation. Answer (docket no. 11 at 21 & 35–40). Alaska Airlines has now filed a Motion for Partial Summary Judgment on the issue of whether Endurance breached its duty to defend. Alaska Airlines MPSJ (docket

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