Marianne Montler v. Belfor USA Group, Inc.

• Court: Court of Appeals of Washington
• Decided: August 31, 2023
• Docket: 39497-2
• Status: Unpublished

Opinion

FILED AUGUST 31, 2023 In the Office of the Clerk of Court WA State Court of Appeals, Division III

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION THREE

MARIANNE MONTLER, an individual; ) LIAM HOLBROOK, a minor, by and ) No. 39497-2-III through his Guardian ad Litem, ) MARIANNE MONTLER; and ) MADELEINE HOLBROOK, a minor, by ) and through her Guardian ad Litem, ) MARIANNE MONTLER, ) UNPUBLISHED OPINION ) Respondents, ) ) v. ) ) BELFOR USA GROUP, INC.; FIRST ) AMERICAN PROPERTY & ) CASUALTY INSURANCE CO.; ) CHINOOK RESTORATION, INC., dba ) PAUL DAVIS RESTORATION; ) HARTFORD FIRE INSURANCE ) COMPANY, ) ) Appellants. )

STAAB, J. — Shortly after Marianne Montler purchased her home, she discovered

mold on the main floor and submitted a claim to her insurer, First American Property &

Casualty Insurance Co. (First American). First American denied the claim after

concluding that the damages pre-dated Montler’s homeowner’s “Policy.” Approximately

two years later the upstairs bathroom overflowed (2017 flood). First American agreed No. 39497-2-III Montler v. Belfor USA Group, Inc., et al.

that damages caused by the 2017 flood were covered under the Policy. When repair work

started, the contractor found mold damage on the home’s main floor. First American

took the position that the mold on the first floor was not caused by the 2017 flood and

was not covered by the policy. After First American refused to participate in appraisal,

citing disagreement on the cause and coverage of the mold damage, Montler sued,

asserting several claims including breach of contract and breach of the Insurance Fair

Conduct Act (IFCA), chapter 48.30 RCW.

Following an appraisal and a bench trial, the court entered a judgment primarily in

First American’s favor. The court found that Montler had proved breach of contract but

failed to demonstrate any damages. The court denied attorney fees for both parties, but

did impose CR 37 discovery sanctions against Montler and her attorney. On

reconsideration, the court awarded Montler some of her attorney fees on her breach of

contract claims.

First American appealed, and Montler cross-appealed. First American raises four

issues on appeal and contends the superior court erred by: (i) finding it breached the

policy, (ii) awarding Montler attorney fees pursuant to Olympic Steamship Co. v.

Centennial Insurance Co., 117 Wn.2d 37, 53, 811 P.2d 673 (1991), (iii) concluding First

American failed to demonstrate material misrepresentation by Montler, and (iv) denying

First American’s motion for CR 11 sanctions.

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Montler cross-appeals, raising three primary issues with several sub-issues,

contending the superior court erred by: (i) determining the mold damage was not

attributable to the 2017 flood based on a number of erroneous factual findings and failing

to enforce the appraisal awards, (ii) failing to give proper effect to the pre-trial rulings of

Judge Veljacic with respect to Montler’s claims for breach of contract and breach of

IFCA, and failing to award Montler any damages, and (iii) failing to award Montler all of

her attorney fees. Montler further contends she is entitled to attorney fees on appeal.

We affirm the trial court’s ruling with respect to the issues raised by Montler, deny

or decline to address some of the issues raised by First American, but reverse the trial

court’s award of attorney fees to Montler under Olympic Steamship. Finally, we deny

Montler’s request for attorney fees on appeal.

BACKGROUND

A. DAMAGES TO MONTLER’S HOME

Marianne Montler purchased a home in Camas, Washington, and a homeowner’s

policy from First American with an effective date of June 17, 2015. At the time she

purchased the home, there was evidence of past water damage and mold on the first floor.

Within weeks of purchasing the home, Montler became aware of mold in the

downstairs bathroom of the home and submitted a claim to First American for water and

mold damage. First American assigned American Leak Detection and American

Environmental Group to inspect the bathroom. American Leak Detection inspected the

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downstairs bathroom and reported that it had been improperly repaired or remodeled, and

that the improper repair resulted in damage to the bathroom. American Leak Detection

reported an elevated moisture level near the toilet, but found no moisture in the sub-

flooring, no standing water in the crawl space, no mold growth, and no active plumbing

leaks.

American Environmental Group also inspected the home’s downstairs bathroom.

Although the inspection found evidence of a prior water leak and water damage,

American Environmental Group did not find any evidence of mold growth in the

downstairs bathroom, which was the only room it inspected.1 First American denied the

2015 claim as the damages pre-dated the Policy, noting that the previous tenants of the

home had complained of mold in 2014 and there was no evidence the home was

professionally remediated prior to Montler moving into the home in 2015.

Montler also contacted the prior owners of the home. The parties hired Mold

Investigations, LLC, who conducted an inspection in July 2015 and identified past

moisture intrusion and the presence of mold in air samples. It is not clear what work, if

any, was done on the home after these inspections.

American Environmental Group’s report noted that it did not conduct intrusive 1

sampling and that potential for mold growth in hidden areas such as behind walls and cabinets could not be discounted.

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Two years later, “on October 17, 2017, the upstairs master bathroom toilet

overflowed. The water flooded the bathroom floor and into the master bedroom,” but

“did not flow into the upstairs hallway or inside the master bedroom closet. Some of the

water flowed through the ceiling to the entryway” on the main level of the home. Clerk’s

Papers (CP) at 2339.

Montler reported the 2017 flood to First American, who retained Josh Peters as its

independent field adjuster. First American again hired American Leak Detection to

investigate. American Leak Detection found high moisture readings on the engineered

wood floor and in the coat closet on the main level, as well as in the master bedroom and

bathroom where the toilet overflowed, but did not find elevated readings or anomalies in

the living room ceilings or drywall. “First American also hired Belfor [USA Group, Inc.

(Belfor)] to perform emergency remediation work,” which included “removing all

impacted sheetrock, insulation, cabinets, fixtures, flooring and carpet. Belfor then set up”

and operated “drying equipment until its testing confirmed the impacted area was dry.”

CP at 2339.

Belfor provided the parties an estimate for repairing the home of $20,788.10. “On

November 6, 2017, First American paid Montler for Belfor’s remediation work.” CP at

2339. Based on the Belfor estimate, First American issued payments to Montler and her

home mortgage bank on November 13 for $18,684.79 to cover the estimated cost of

repairs.

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“On March 6, 2018, Montler retained Paul Davis [Restoration] to repair the home.

First American and Montler agreed on the scope and cost of repairs.” CP at 2340.

“Davis discovered evidence of prior water damage and some possible mold near the

kitchen and downstairs bathroom” after removing the living room flooring. CP at 2340.

The bamboo flooring on the first floor had been installed by the prior owners. “Davis

offered to clean the area and continue with the repairs,” but “Montler refused.” CP at

2340. Montler contacted First American to request a mold inspection and stated that she

and her family needed to move into a hotel.” CP at 2340. “First American agreed to pay

for the hotel until it could determine the cause of the mold.” CP at 2340.

In May 2018, American Leak Detection performed another inspection of the

home. The May 2018 report indicated that repairs of the damage from the 2017 flood

had uncovered prior damage. Specifically, the report noted, “[a] full inspection of the

home’s ground floor found multiple signs of previous water damage most likely from

both upstairs bathrooms and kitchen,” and “[t]he damage in the kitchen is from a

previous leak near/at the kitchen sink area. No leak is present now.” CP at 963-64.

“First American retained Nancy Lee [ ], a Certified Industrial Hygienist for

Rimkus Consulting Group, to determine the location and source of the water and mold

spores. Ms. Lee inspected the home on May 18, 2018.” CP at 2340. Her report, dated

June 6, (hygienist report) “indicated that the total airborne concentration of fungal spores

[in the home] was at least 1.6 times higher outdoors than indoors” and that “indoor levels

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of [certain types of] fungal spores were above outdoor levels at the time of sampling.”

Ex. 150 at 5. She concluded that these results suggested “the presence of active and/or

historical fungal growth within the residence likely related to the mold growth observed

within the walls of bathroom 1 as well as throughout the first-floor underlayment.” Ex.

150 at 5. Lee reported “multiple areas of prior water intrusion and evidence of inactive

mold growth.” CP at 2340. She concluded there were four possible moisture/water

sources: one being the 2017 flood and the other three sources pre-dating the effective date

of the policy. She also identified six areas in the home with indicators of water and/or

mold damage. Only one of the six observations of water and/or mold identify the 2017

flood as the source of damage, with three moisture sources pertaining to the dining room

and family room attributed, designated as unknown.

On May 22, “Montler retained Adam Blagg as her appraiser” and he “developed

an estimate of costs to repair the home and an estimate to remediate/replace the

contents.” CP at 2341. He valued the “property damage to the Home at $187,247.79 and

the damage to the contents of the Home at $138,753.10 for replacement cost value and

$118,552.91 as actual cash value.” CP at 2341. He estimated $31,557.62 in repairs to

the upper level, and $110,628.38 to the main level. Although Blagg’s estimate did not

indicate a cause of the damages, the court found that he “should have known through his

inspection of the Home and its contents that his appraisals included damages to the Home

and contents that were not attributable to the [2017 flood].” CP at 2341.

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Montler also retained Jason Kester of Mold Investigations, LLC, who conducted a

mold inspection of the home on June 9. Kester reported the presence of microbial

growth, water damage, and water stains in the kitchen, dining room, and living room, and

reported the presence of various fungal strains in each room. Kester’s report “did not

address causation of the mold he found in the Home.” CP 2340, 2761.

In June 2018, Montler contacted First American and demanded an appraisal of the

2017 flood and submitted the Blagg estimate. The various representatives from both

parties continued to meet and communicate, but were unable to agree on the cause of the

additional mold damage found on the first floor. Ultimately, First American refused to

name an appraiser because it disputed the cause and coverage of the mold damage.

B. PRE-TRIAL PROCEEDINGS

In July 2018 Montler filed a lawsuit against First American and other parties who

are not the subject of this appeal. As to First American, she asserted claims for violation

of the Consumer Protection Act (CPA), ch. 19.86 RCW, Breach of Contract, Violation of

the Insurance Fair Conduct Act (IFCA), RCW 48.30.010-.015, and declaratory relief in

the form of an order requiring First American to submit to appraisal. First American’s

Answer asserted a number of affirmative defenses, including: (i) the “claimed damages or

losses were in whole or in part the result of the conduct of plaintiffs,” and (ii) any claims

are “subject to the limits of liability, and all of the terms, conditions, exclusions and

limitations of the Policy, as it was in effect at the time of this loss.” CP at 29.

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One of the other defendants, Belfor, unsuccessfully moved to consolidate the

matter with another action filed by Montler in Clark County superior court, Montler et al.

v. Julie Yang, et al., No. 18-2-05333-5. The Yangs were the previous owners of the

home, and Montler filed an action against them in May 2018 for fraudulent concealment,

violations of the CPA, and negligence, and claimed damages associated with mold

exposure in the home. Montler asked the court to deny the motion to consolidate as moot

because the Yang case had been settled, and settlement documents were in the process of

being finalized. The court apparently denied the motion.

On February 20, 2019, Montler filed a motion to compel First American to submit

to mandatory appraisal, to appoint an umpire, and for partial summary judgment.

Montler asserted that she had made a timely demand for appraisal under the policy but

First America refused to proceed even though submission was mandatory under the

policy’s appraisal provision. Montler also asked for a partial summary judgment order

that she was entitled to continued loss of use benefits until the house was repaired and fit

to live in.

First American claimed appraisal was premature where the parties disputed

whether all the claimed damages were caused by the 2017 flood, and the question of

causation and coverage was outside the scope of appraisal. First American noted that the

Yang litigation raised the same factual questions relevant in this lawsuit, namely the

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cause and extent of the mold in the home, the date it began, and what attempts at

remediation had been made.

In Montler’s reply brief, she asserted that her claims in the Yang lawsuit were for

personal injury from undisclosed mold at the time of the sale, and had nothing to do with

the mold in the home caused by the 2017 flood.

Judge Veljacic2 heard the motion to compel appraisal on June 7, 2019. First

American acknowledged that it accepted coverage subject to exclusions, including

damage by other parties and damage that predated the policy. It disagreed that an

appraisal could resolve issues of causation, coverage, and allocation of fault. Ultimately,

Judge Veljacic ruled the parties should submit to an appraisal and named retired Judge

Roger Bennett as the umpire. With respect to Montler’s motion to continue loss of use

benefits, Judge Veljacic held:

So I’m going to order the benefits continue because there appears to be, at this point, a material breach with regard to the appraisal provision. And I can't in good conscience let the—what appears to be dilatory behavior on the part of [First American] then benefit [First American] in terms of being able to cut off benefits to Ms. Montler. I don't—that would be unconscionable.

Rep. of Proc. (RP) at 39-40.

2 Judge Veljacic was the Clark County Superior Court judge originally assigned to this case. He was appointed to Division Two of this court prior to trial. Many of Montler’s claims assert that the trial judge did not give proper deference or effect to Judge Veljacic’s prior rulings, and therefore we distinguish between those rulings made by Judge Veljacic and those made by Judge Sheldrick.

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Judge Bennett submitted two agreed appraisal awards. One appraisal provided a

damage amount for the mold appraisal and the other provided a damage amount of the

water damage. Both appraisal awards state, “The Appraisers have reached agreement of

the property value. The Appraisal does not address policy coverage, policy limits, prior

payments by Insurer, and all terms and conditions of the insurance policy remain in

force.” CP at 333-34.

Montler moved to confirm the appraisal award. She argued that First American

was required to pay the full appraisal award within 30 days of its entry pursuant to the

“Loss Payment” provision in the Policy. First American objected.

At a hearing on Montler’s motion to confirm the appraisal Montler’s attorney,

Vance, acknowledged that the appraisal awards “say that they don't deal with coverage or

policy limits or these other things.” RP at 52. With this limitation in mind, the court

instructed the parties to prepare a stipulated order. Despite their agreement at the

hearing, the parties were apparently unable to agree to a stipulated order.3

Montler subsequently filed a motion for partial summary judgment, asking the

court to: (i) hold that First American breached the Policy and the IFCA by refusing to

submit to appraisal and failing to pay the full appraisal awards within 30 days of entry of

3 The record indicates that First American wished to include a provision that confirmation of the awards did not trigger the 30-day loss payment provision, and Montler refused to agree to the addition of that language.

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the agreed awards, (ii) confirm the appraisal awards and award prejudgment interest

commencing 31 days after they were filed, and (iii) issue partial summary judgment that

Montler’s claims are covered under the Policy.

When Judge Veljacic addressed Montler’s motion for partial summary judgment

and an order confirming the appraisal awards, he stated:

And so I believe I’m on firm ground in confirming that those are the values. So that document speaks for itself. I’m confirming it today. I’ll entertain an order to that effect. I will not speak as to the legal effect of this confirmation. I understand that to be in dispute. So—and I don’t know that I’m required to speak to the legal effect of that at this point. That’s simply what’s required by the contract.

RP at 78. He denied First American’s motion to enter its proposed order. Judge Veljacic

subsequently entered an order on June 3 denying Montler’s summary judgment motion as

well as a motion for partial summary judgment filed by First American.

First American moved for leave to amend its answer to the amended complaint to

add an affirmative defense of misrepresentation and concealment. First American

asserted it had recently discovered that Montler represented to the former owner of the

house (the Yangs) that the mold damage identified by Kester was present in 2015 when

she purchased the house. First American filed a declaration from Steven Turner, the

attorney for the Yangs, stating that: (i) “[a]mong the damages sought by plaintiff

Marianne Montler [in that case] was the cost to remediate and repair mold damage Ms.

Montler alleged was present in 2015” when she purchased the property, and (ii) the

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Montlers submitted two key documents with a September 2018 settlement demand letter

in the Yang matter: the June 2018 Blagg estimate for $153,898.66 in repair costs and the

May 2018 Kester report. CP at 1904. First American also filed a copy of the demand

letter, which detailed the various health symptoms Montler and her children experienced

after moving into the home in 2015. The letter offered to settle the case for $185,000.00

total, and noted:

It should not be lost on the Yangs that this settlement offer does not include the cost of repairs, hotel expenses or reimbursement for contaminated personal property, which is also inching upwards into the six figures. This reduction is for this offer only and only if accepted in full. We have an appraiser evaluating the contents claim now. But make no mistake, the Yangs are responsible for these damages, even the ones not mentioned in this offer . . . For the purpose of this offer only, my clients will seek repair costs and contents reimbursement from their insurer, but this is no guarantee that the insurer will not seek to pursue subrogation rights against the Yangs, once it pays off. The Yangs assume that risk…. And if this settlement offer is rejected, we will pursue cost of repair and contents and hotel expenses from the Defendants in this case, as well as potential additional damages for toxic exposure.

CP at 1812 (emphasis added).

First American noted that Montler’s discovery responses repeatedly asserted that

the damages sought in the Yang matter were separate and distinct from the damages

sought in this matter, and she failed to produce the 2018 settlement letter in response to

First American’s discovery request for documents related to her claim for property

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damage in the Yang matter. The court granted the motion to amend over Montler’s

objection.

C. TRIAL

A four-day bench trial occurred before Judge Sheldrick starting in August 2021.

Montler testified that she knew there was an issue with the home in 2015 shortly after

moving in because her children started experiencing medical issues, that she had an

environmental assessment done after the 2015 repairs were completed, and her family

was able to live in the home from 2015 until 2017 without further health issues. She

testified that she believed Mold Investigations, LLC found mold in the air, and so she

paid for PuroClean to remediate the air. With respect to the Yang litigation, she testified

that her case against the Yangs sought damages related to medical expenses and the cost

to remediate the property in 2015. She also stated that her settlement demand letter to the

Yangs was not a claim for the damages sought in this case but instead a communication

that the Yangs potentially risked a bigger lawsuit from the insurance company.

Blagg testified that he had experience as a certified mold inspector and a public

adjuster but was hired only as an appraiser in this matter. With respect to the damage, he

testified that it was easy for him to track water staining from the upstairs to where it ran

down the walls, ceiling and traveled downstairs through capillary action, which caused

the spread of the water to the main level. He also testified that American Leak

Detection’s 2015 report finding no mold and First American’s 2015 letter denying

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coverage operated as an admission from First American that the water damage and mold

were not prior conditions. Blagg acknowledged that his opinion of the cause of the mold

differed from the 2018 American Leak Detection Report, the Hygienist report, and Josh

Peters.

Kester testified that he observed signs of water damage and mold in the kitchen and

underneath the dining room and living room as well as around the upstairs toilet, and that

he found various mycotoxins present in the home. He testified that he found multiple types

of mold, and that at least two of the types he found required the area to be actively wet to

grow, indicating an active moisture source. However, he also acknowledged that he did

not find any areas of elevated moisture in the house and there was not sufficient moisture

content for mold to grow at the time of his inspection. He acknowledged that he previously

inspected the home in 2015 and that he remembered mold being present at that inspection,

but stated he did not put anything about the prior mold damage in his report because it was

not relevant as he was not there to determine causation but instead merely there to

determine what was actively going on. He also testified that he was not able to determine

whether the water from upstairs tracked down through the walls, that the water tracking

determination was “Mr. Blagg’s part,” but that he agreed with Blagg’s assessment and

determinations. When asked directly whether his report specifically attributed the mold

found at the Montler house to the October 2017 event, he stated it did not.

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First American presented testimony from Steven Turner, the attorney who

represented the defendants in the Yang litigation, as well as Joshua Peters, Nancy Lee,

and Roger Howson. Peters, First American’s adjuster, testified in part that he did not

observe the type of damage to the ceiling and walls that he would have expected to see if

Blagg’s theory that the October 2017 event caused all the damage was correct.

Lee’s testimony was generally consistent with the Hygienist report she prepared.

She testified that she was hired “to determine the cause and origin of the moisture

intrusion and to determine the presence of the fungal growth and recommendations.” RP

at 991. She testified in part that: (i) the home had sustained damage from numerous

sources of water intrusion, (ii) although some of the moisture sources were undetermined,

there was documentation of other water sources and remediation from 2014 and 2015 of

the kitchen and downstairs bathroom, and (iii) although several moisture sources on the

main floor were undetermined, she did not believe they were caused by the October 2017

event. She did not detect elevated moisture in the home but did identify visible fungal

growth on numerous locations of the main floor underlayment. She also testified that it

was “possible for mold to become dormant after being covered” in flooring, and that in

this instance, it was “possible that the mold becomes sealed and undetectable” once the

bamboo flooring was placed over it by the prior owners, and that removal of the bamboo

flooring in 2018 caused mold spores to be released into the air. RP at 1014-15. Contrary

to Blagg, she testified that she observed different water trails throughout the house but

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not one specific line. She also testified that nothing in the home made her concerned

about the health, safety, or livability of the home due to mold.

With respect to the appraisal process, First American’s appraiser, Roger Howson,

testified that the appraisal panel does not address causation or whether something is

covered and that if causation is in dispute at the time of appraisal, the disputed amount

would be included in the appraisal award. He also testified that the panel in this instance

did not address causation but reserved that issue for the court. He noted that it was

important to bring the Hygienist report to Judge Bennett’s attention because he wanted it

to be clear to him as the appraisal umpire that the panel was just determining loss

damage, i.e., determining what it would cost to put the home in the same condition pre-

loss, but that they were not confining themselves to saying the damage was from one

occurrence. He further testified that even when causation is in dispute, the parties can

still go to appraisal because the appraisers are just determining loss damage evaluation,

and that in such instances, the causations dispute is either resolved at the front end by the

court setting the scope of appraisal or it gets resolved at the back end where the court

interprets the law and applies the policy to the appraisal award.

On August 30, 2021, the superior court entered findings of fact, conclusions of law

and order. Relevant to the appeal here, the court found that:

21. On June 9, 2018, Jason Kester of Mold Investigations, LLC conducted a mold inspection of the Home. Mr. Kester did not address causation of the mold he found in the Home.

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22. By a preponderance of the evidence, the Court finds that the mold located in the Home is not attributable to the October 17, 2017 water loss event.

....

26. As an appraiser, Blagg did not make a conclusion as to causation for the mold and water damage to the Home or its contents. However, Blagg should have known through his inspection of the Home and its contents that his appraisals included damages to the Home and contents that were not attributable to the water loss event.

29. By a preponderance of the evidence, Montler knew Adam Blagg’s estimates for his appraisal to repair the Home and replace/remediate its contents were used to leverage potential settlement in her claims against the prior owners.

30. By a preponderance of the evidence, Montler knew that Jason Kester's mold investigation report was used to leverage potential settlement in her claims against the owners.

31. By a preponderance of the evidence, Montler knew or should have known that Adam Blagg's appraisal of the Home and contents included damages that were potentially attributable to water damage that pre-dated Montler's purchase of the Home.

32. On September 9, 2019, the parties submitted an Agreed Appraisal of Loss (“Appraisal”) (Ex. 162). The Appraisal did not assign causation but did bifurcate the appraisal award as follows: “Mold Appraisal Award” and Water Damage[sic] Appraisal Award.”

33. The Court finds by a preponderance of the evidence that the Mold Appraisal Award is not attributable to the water loss event.

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34. The Court finds by a preponderance of the evidence that the Water Damage Appraisal Award is attributable to the water loss event.

35. First American paid Montler in excess of the Water Damage Appraisal Award.

CP at 2341-42.

The court concluded that First American’s delay in appointing an appraiser did not

violate the IFCA but did breach the parties’ policy. Nevertheless, the court found that the

delay did not cause Montler any damages because ultimately the mold damage was not

covered by the policy with First American. The court concluded that “First American did

not breach the policy by refusing to compensate Montler for the damages associated with

the Mold Appraisal Award.” CP at 2343. “Since First American is not liable for the

‘Mold Appraisal Award’ and has fully compensated Montler for the ‘Water Loss Damage

Award,’ First American is no longer responsible for continuation of Loss of Use”

benefits. CP at 2343.

The court also concluded that First American failed to satisfy its burden to

demonstrate “Montler intentionally or materially misrepresented or concealed material

information in her insurance claim for the water loss event to First American.” CP at

2344. The court accordingly granted Montler’s claim for breach of contract for failure to

submit to appraisal, denied Montler’s remaining claims, denied First American’s

affirmative defense of misrepresentation and denied both parties demands for damages,

ordering that any requests for attorney fees or costs be submitted pursuant to CR 54(d).

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D. POST-TRIAL PROCEEDINGS

On September 10, 2021, Montler filed a petition for attorney fees. Despite Judge

Sheldrick’s conclusions, Montler argued that Judge Veljacic had previously held that

First American had breached the policy and the IFCA, and Montler was entitled to her

attorney fees. She also sought fees under Olympic Steamship4 for having to bring a

lawsuit and move to compel appraisal and the continuation of her loss of use benefits.

First American filed a motion for CR 11 sanctions, seeking fees in the amount of

$193,577.50. First American argued that Montler, Blagg, and Montler’s counsel, Vance,

made repeated misrepresentations to the court where: (i) they repeatedly asserted that

Kester determined the mold damage identified in his report was caused by the 2017 flood

even though he testified that he never drew a causal connection between the mold and the

October 2017 event, (ii) they used the same Kester report and Blagg estimate to leverage

a settlement from the Yang defendants despite repeatedly claiming the Yang litigation did

not concern the same damages as those claimed in the present action, and (iii) in

discovery they responded that the Yang lawsuit merely sought reimbursement for what

Montler spent in 2015 to remove the mold and did not allege a need for future repairs, in

contradiction of the Yang demand letter.

4 Olympic S.S. Co. v. Centennial Ins. Co., 117 Wn.2d 37, 53, 811 P.2d 673 (1991).

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In her response to the CR 11 motion, Montler included a motion to stay

termination of loss of use benefits, claiming the court decided to do what Judge Veljacic

previously described as “unconscionable,” and tried to “negate the decisions of two long

time and respected judges with the mere stroke of a pen.” CP at 2435. She also asserted

a number of arguments challenging the court’s findings and conclusions.

The court considered all three motions together. With respect to the CR 11

motion, the court noted there had been problematic conduct on the part of Montler’s

attorney, especially with respect to his assertions regarding the scope of the issues before

the court at trial and representations as to Judge Veljacic’s earlier rulings. The court later

entered an order denying all three motions. The court found Montler was not entitled to

attorney fees because she failed to demonstrate a violation of IFCA and “she did not

substantially prevail in her claim for breach of contract,” and that she was “not entitled to

continuation of her Loss of Use Benefits since this Court found that [First American had]

fully compensated [Montler] for her claim.” CP at 2524. The court denied the CR 11

motion, but requested briefing to evaluate potential CR 37 sanctions. The court

subsequently found that Montler violated CR 37 and imposed a sanction of $2,500.00

against Montler and her attorney.

Montler filed a motion for new trial, reconsideration and to amend the judgment.

After a hearing on this motion, the court entered an order on reconsideration along with

amended findings of fact, conclusions of law and judgment. The court amended finding

21 No. 39497-2-III Montler v. Belfor USA Group, Inc., et al.

of fact 21 to include that: “‘On June 9, 2018, Jason Kester of Mold Investigations, LLC

conducted a mold inspection of the Home. Mr. Kester’s Report (Exhibit 5) did not

address causation of the mold he found in the Home.’” CP at 2761.

The court also entered supplemental findings of fact and conclusions of law. The

court found that First American did not submit to appraisal because it disputed causation

and Montler received loss of use benefits after the court ordered the benefits to continue.

The court concluded that confirmation of the appraisal was subject to a determination of

causation. First American did not delay the appraisal in violation of the IFCA and thus,

Montler was not entitled to attorney fees under RCW 48.30.015. “Since the Court found

that First American has fully compensated [Montler] for the [damages]” coverage by her

policy, “First American was not obligated to continue paying Loss of Use” benefits. CP

at 2762. However, the court concluded that Montler was entitled to attorney fees in the

amount of $18,771.00 under Olympic Steamship for bringing the motion to compel

appraisal. “The Court denies all other requests by Montler for a new trial,

reconsideration or amendment of judgment.” CP at 2763.

Both parties appealed to Division Two of the Court of Appeals. Division Two

subsequently transferred the case to this court.

22 No. 39497-2-III Montler v. Belfor USA Group, Inc., et al.

ANALYSIS:

Collectively, the parties raise seven issues on appeal with several sub-issues. For

purposes of clarity, we consolidate and rearrange the issues. We affirm the trial court in

all respects save for the award of fees to Montler, which we reverse.

A. STANDARD OF REVIEW:

“[F]ollowing a bench trial, appellate review is limited to determining whether

substantial evidence supports the findings of fact and, if so, whether the findings support

the conclusions of law.” State v. Homan, 181 Wn.2d 102, 105-06, 330 P.3d 182 (2014).

Evidence is substantial if it is “sufficient to persuade a fair-minded person of the truth of

the asserted premise.” Id. at 106. Substantial evidence review requires the court to view

the evidence and all reasonable inferences in the light most favorable to the prevailing

party. Korst v. McMahon, 136 Wn. App. 202, 206, 148 P.3d 1081 (2006). This court

defers to the trial court's advantage in viewing the proceedings and does not reweigh

evidence or determine the credibility of witnesses. In the Matter of A.W., 182 Wn.2d

689, 711, 344 P.3d 1186 (2015). Unchallenged findings of facts, along with findings of

fact supported by substantial evidence, are verities on appeal. Homan, 181 Wn.2d at 106.

This court reviews conclusions of law de novo. Id.

23 No. 39497-2-III Montler v. Belfor USA Group, Inc., et al.

B. MONTLER’S CHALLENGE TO THE TRIAL COURT’S FINDING THAT THE MOLD DAMAGE WAS NOT ATTRIBUTABLE TO THE 2017 FLOOD

In Montler’s first issue on cross-appeal, she contends that the trial court’s finding,

that the mold found in the home during the spring of 2018 was not attributable to the

2017 flood, was not supported by substantial evidence. More specifically, she contends

that (i) neither causation nor coverage were in dispute and the court mischaracterized the

testimony of Montler’s witnesses, (ii) the trial court incorrectly found that the appraisal

panel did not address causation, and (iii) the court erred by failing to apply the “Efficient

Proximate Cause Rule.” Each of these arguments fails.

Contrary to Montler’s argument, First American has disputed causation for the

mold damage since it was first discovered. In June 2018, First American’s adjuster,

Peters, and Jason Beaudoin from Belfor met with Montler’s appraiser, Blagg to inspect

the damage. Peters and Beaudoin disagreed with Blagg’s conclusion that all the damage

identified in his estimate was caused by the 2017 flood. In response to the motion to

compel appraisal, First American expressly argued that appraisal was premature under

the Policy because there was a causation dispute, noting that there was damage that pre-

dated the Policy and that Montler had filed an action against the Yangs that presumedly

related to that damage. At the hearing on the motion to compel appraisal, First American

noted that the appraisal award should not trigger the Policy obligation to pay the full

24 No. 39497-2-III Montler v. Belfor USA Group, Inc., et al.

awards within 30 days because there were still issues regarding whether all claimed

damages were a covered loss.

The trial court found that the “mold located in the Home is not attributable to the

October 17, 2017 water loss event.” Montler contends that the trial court incorrectly

portrayed the testimony of her witnesses Kester and Blagg as not reaching a conclusion

on the cause of the mold damage. The court’s findings relate to the reports submitted by

Kester and Blagg, not necessarily their trial testimony. When asked at trial, Kester

expressly stated that his report did not attribute the mold found at the home to the

October 2017 event. Likewise, Blagg’s 2018 report did not indicate the cause of the

mold damage found on the first floor. The court’s characterizations of these reports was

supported by substantial evidence.

In challenging the court’s finding that the mold damage was not caused by the

2017 flood, Montler focuses on the testimony of her own witnesses at trial. However, the

testimony of Kester and Blagg was contradicted by the 2018 American Leak Detection

report, as well as the testimony of Peters, First American’s claims adjuster, and Nancy

Lee, the certified industrial hygienist.5 Both the 2018 American Leak Detection report

and Lee’s Hygienist report agreed that the majority of the mold damage was not caused

by the 2017 flood, and Lee testified that the home had sustained damage from numerous

5 In her brief, Montler asserts that Kester is an industrial hygienist, but Kester testified that he not an industrial hygienist, but rather an environmental professional.

25 No. 39497-2-III Montler v. Belfor USA Group, Inc., et al.

sources of water intrusion and that she believed the majority of the moisture sources on

the main floor were not caused by the October 2017 event. Peters testified that he did not

observe the type of damage to the ceiling and walls that he would have expected to see if

Blagg’s theory that the 2017 flood caused all the damage was correct. On appeal,

Montler does not acknowledge the testimony of Lee.

The evidence was sufficient to support the trial court’s finding that the mold was

not caused by the 2017 flood. We defer to the trier of fact on issues of witness

credibility, conflicting testimony, and the persuasiveness of the evidence. State v.

Thomas, 150 Wn.2d 821, 874-75, 83 P.3d 970 (2004), abrogated on other grounds by

Crawford v. Washington, 541 U.S. 36, 124 S. Ct. 1354, 158 L. Ed. 2d 177 (2004).

“Credibility determinations cannot be reviewed on appeal,” as they “are solely for the

trier of fact.” Morse v. Antonellis, 149 Wn.2d 572, 574, 70 P.3d 125 (2003).

Next, Montler challenges the trial court’s conclusion that the appraisal report did

not establish causation. While both the mold and water appraisal reports indicated that

the date of loss is the date the toilet overflowed, October 17, 2017, the reports also make

clear that they are not deciding issues of coverage. The appraisal umpire, retired Judge

Bennett, made it clear to both appraisers that the appraisal reports did not decide when

the damage occurred or issues of causation. Instead, Judge Bennett noted, “My belief is

that we are presented with a damaged house, and the court and parties need to know how

much it will cost to fix it. Then, if they choose to do so, they get to fight about how much

26 No. 39497-2-III Montler v. Belfor USA Group, Inc., et al.

of that cost is attributable to different events.” CP at 786. The trial court’s finding that

the appraisal did not decide causation is supported by substantial evidence.

Montler also contends the trial court failed to apply the efficient proximate cause

rule. Under Washington law, the rule of efficient proximate cause provides coverage

“‘where a covered peril sets in motion a causal chain[,] the last link of which is an

uncovered peril.’” Xia v. ProBuilders Specialty Ins. Co., 188 Wn.2d 171, 182-83, 400

P.3d 1234 (2017), (alteration in original) (quoting Key Tronic Corp. v. Aetna (CIGNA)

Fire Underwriters Ins. Co., 124 Wn.2d 618, 625, 881 P.2d 201 (1994)). “If the initial

event . . . is a covered peril, then there is coverage under the policy regardless [of]

whether subsequent events within the chain, which may be causes-in-fact of the loss, are

excluded by the policy.” Safeco Ins. Co. of Am. v. Hirschmann, 112 Wn.2d 621, 628,

773 P.2d 413 (1989) (emphasis added).

Montler contends that the toilet overflow was a covered event and thus, any

damages proximately caused by this event were covered by the policy. The trial court

found otherwise: that the toilet overflow was not the cause of mold damage.

Consequently, the court did not error in failing to apply the efficient proximate cause

rule.

27 No. 39497-2-III Montler v. Belfor USA Group, Inc., et al.

C. MONTLER’S CLAIM THAT THE TRIAL COURT’S FINDINGS AND CONCLUSIONS CONFLICTED WITH THOSE MADE BY JUDGE VELJACIC

In her second issue on appeal, Montler contends that Judge Sheldrick erroneously

failed to enforce the appraisal award previously confirmed by Judge Veljacic and failed

to respect Judge Veljacic’s prior decisions on disputed issues. Additionally, Montler

contends that Judge Sheldrick’s conclusions, that First American promptly investigated

the water loss damage and did not delay the appraisal in violation of the policy and the

IFCA, were not supported by substantial evidence. Montler’s arguments are not

supported by the law or the record.

Montler contends that Judge Sheldrick was required to respect the appraisal award

and Judge Veljacic’s confirmation of that award, and was required to award Montler the

full amount of the mold appraisal and the water appraisal unless First American proved

bias or prejudice in the appraisal process. We disagree.

The appraisal panel bifurcated the appraisal award into two awards, one for water

damage and one for mold damage. Judge Veljacic did not decide causation and coverage

when he entered a limited confirmation of the appraisal awards. Although Judge Veljacic

confirmed the valuation of all the identified damage, he clearly indicated he was not

deciding the legal effect of the confirmation as there were still issues in dispute. Judge

Sheldrick found that the appraisal awards did not decide issues of causation or coverage

and, as we noted above, this finding is supported by substantial evidence. Regardless of

28 No. 39497-2-III Montler v. Belfor USA Group, Inc., et al.

whether it was legally correct for the appraisers to decide causation, they did not in fact

decide this issue.

Judge Sheldrick was not required to enforce the appraisal awards when disputed

issues of causation and coverage remained undecided. Under Washington law, appraisal

provisions are “universally held to be valid and enforceable.” Goldstein v. Nat’l Fire Ins.

Co. of Hartford, Conn., 106 Wash. 346, 353, 180 P. 409 (1919). Our courts have

recognized that appraisal provisions are justified in the expectation that they will

“provide a plain, inexpensive and speedy determination of the extent of the loss.”

Keesling v. W. Fire Ins. Co. of Fort Scott, Kansas, 10 Wn. App. 841, 845, 520 P.2d 622

(1974). The general rule is that appraisal awards made pursuant to an insurance policy

are binding and conclusive as to the amount of loss, absent proof by the challenging party

of bias or prejudice in the appraisal process. See, e.g., Bainter v. United Pac. Ins. Co., 50

Wn. App. 242, 245-48, 748 P.2d 260 (1988).

However, an appraisal provision is “not self-executing; and, if the company does

not pay the damages fixed by the appraisers, an insured must commence legal action, the

appraisal must be confirmed by the court and judgment entered for the insured.” Keesling

v. W. Fire Ins. Co. of Fort Scott, Kansas, 10 Wn. App. 841, 845, 520 P.2d 622 (1974).

“The authority and control over the ultimate disposition of the subject matter remains

with the courts.” Id. Here, Judge Sheldrick correctly decided that unresolved issues of

29 No. 39497-2-III Montler v. Belfor USA Group, Inc., et al.

causation and coverage needed to be decided before the appraisal award could be

enforced.

Montler also contends that Judge Veljacic made final decisions on disputed issues,

including that First American was dilatory in participating in appraisal and this delay was

a breach of the policy and IFCA. Although Judge Veljacic made comments about First

American’s delay and the appearance of a breach, his comments were not reduced to an

order and do not constitute a final decision on these issues. Indeed, after being appointed

to Division Two of this court, Judge Veljacic recognized the distinction between a

comment on the record and a final decision reduced to an order when he wrote:

Washington is a written order state. State v. Molina, 16 Wn. App. 2d 908, 922, 485 P.3d 963, review denied, 198 Wn.2d 1008 (2021). The written order is controlling and the trial court’s oral statements are no more than a verbal expression of its informal opinion at the time.

Landes v. Cuzdey, No. 56419-0-II, slip op. at 17 (Wash. Ct. App. May 16, 2023)

(unpublished), https://courts.wa.gov/opinion/pdf/D2%2056419-0-II%20Unpublished

%20Opinion.pdf. Montler fails to cite any written order signed by Judge Veljacic that

memorializes his verbal comments.

Montler also challenges Judge Sheldrick’s conclusions of law that Montler failed

to demonstrate that First American’s delay in seeking an appraisal violated the policy and

the IFCA. Her argument, that these conclusions are not supported by substantial

evidence, mis-states the applicable standard of review. Conclusions of law are reviewed

30 No. 39497-2-III Montler v. Belfor USA Group, Inc., et al.

on appeal to determine if they correctly apply the law and are supported by the finding of

fact. Homan, 181 Wn.2d at 105-06.

The IFCA gives insureds a cause of action against insurers who “unreasonably

denied a claim for coverage or payment of benefits.” RCW 48.30.015(1). IFCA also

directs courts to award triple damages and attorney fees if the insurer either acts

unreasonably or violates certain insurance regulations, including those set forth in WAC

284-30-330.

The regulations referenced in RCW 48.30.015(5) “broadly address unfair practices

in insurance, not just unreasonable denials of coverage or benefits.” Perez-Crisantos v.

State Farm Fire & Cas. Co., 187 Wn.2d 669, 672, 389 P.3d 476 (2017). WAC 284-30-

330, which defines “[s]pecific unfair claims settlement practices,” provides in part that an

insurer engages in unfair methods of competition and unfair or deceptive acts or practices

in the context of claims settlement by:

(7) Compelling a first party claimant to initiate or submit to litigation, arbitration, or appraisal to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in such actions or proceedings. .... (17) Delaying appraisals or adding to their cost under insurance policy appraisal provisions through the use of appraisers from outside of the loss area.

WAC 284-30-330.

31 No. 39497-2-III Montler v. Belfor USA Group, Inc., et al.

While the regulations define unfair practices, they do not create an independent

cause of action under the IFCA. Perez-Crisantos, 187 Wn.2d at 676-84. Instead, to

prevail on a claim under the IFCA, the insured must demonstrate that “‘the insurer

unreasonably denied a claim for coverage or that the insurer unreasonably denied

payment of benefits. If either or both acts are established, a claim exists under IFCA.’”

Id. at 683 (quoting Ainsworth v. Progressive Cas. Ins. Co., 180 Wn. App. 52, 79, 322

P.3d 6 (2014)); see also W. Beach Condo. v. Commonwealth Ins. Co. of Am., 11 Wn.

App. 2d 791, 805, 455 P.3d 1193 (2020). The regulations identified in WAC 284-30-330

only support imposition of triple damages and attorney fees if the insured demonstrates a

violation under RCW 48.30.015(5).

Here, the trial court’s findings support its conclusions that First American’s delay

did not violate the IFCA. The court found that First American promptly investigated and

paid for the water damage to the home caused by the 2017 flood. The court also found

that the mold damage was not caused by the 2017 flood. The court found that First

American did not submit to appraisal because it disputed the cause of the mold damage.

These findings support the court’s conclusion that the delay in identifying an appraiser

did not violate the IFCA.

32 No. 39497-2-III Montler v. Belfor USA Group, Inc., et al.

D. WHETHER FIRST AMERICAN BREACHED THE INSURANCE POLICY BY FAILING TO NAME AN APPRAISER

In its first issues on appeal, First American claims that the trial court erred in

concluding that it breached the parties’ insurance policy by refusing to participate in

appraisal. First American contends that this conclusion was erroneous for two reasons.

First, First American argues that the policy provision requiring an appraiser to determine

the “amount of loss” does not encompass a finding on the causation of the loss or whether

the loss was covered by the policy. Since causation and coverage were disputed, and

these issues need to be determined by the court, First American argues it cannot be in

breach for failing to participate in the appraisal. Second, First American argues that the

conclusion of breach was error as a matter of law because the trial court did not find the

breach caused Montler any damages and damages are necessary element to any claim of

breach of contract.

We agree with First American’s second argument, and hold that Montler failed to

prove breach because she failed to prove damages. Because we find no breach of the

policy, we decline to address First American’s first claim on whether an appraisal

provision in an insurance contract decides contested issues of causation and coverage.

In Washington, “[c]ontract damages are ordinarily based on the injured party's

expectation interest and are intended to give the injured party the benefit of its bargain.”

Panorama Vill. Homeowners Ass'n v. Golden Rule Roofing, Inc., 102 Wn. App. 422, 427,

33 No. 39497-2-III Montler v. Belfor USA Group, Inc., et al.

10 P.3d 417 (2000) (citing Eastlake Const. Co. v. Hess, 102 Wn.2d 30, 46, 686 P.2d 465

(1984)). A breach of contract is actionable if the contract “imposes a duty, the duty is

breached, and the breach was a proximate cause of damage to the claimant.” Nw. Indep.

Forest Mfrs. v. Dep’t of Lab. & Indus., 78 Wn. App. 707, 712, 899 P.2d 6 (1995).

However, in a contract action for damages only, a failure to prove damages warrants

dismissal. Ketchum v. Albertson Bulb Gardens, 142 Wash. 134, 139, 252 P. 523 (1927)

(mere proof of contract breach, without more, does not warrant verdict even for nominal

damages), Jacob’s Meadow Owners Ass’n v. Plateau 44 II, LLC, 139 Wn. App. 743, 754,

162 P.3d 1153 (2007) (trial court properly required subcontractor to prove economic

damages in suit seeking damages for breach of contract).

Montler contends that the damages were set by the appraisal, which was

confirmed by Judge Veljacic, but we have rejected this argument above.

The trial court found First American breached the Policy by failing to submit to

appraisal within 20 days of Montler’s demand for appraisal, but that Montler suffered no

damages because by the time of the appraisal she had already been paid the full benefit

that she was entitled to under the Policy. The trial court’s conclusion of breach was

erroneous. With some exceptions that do not apply here, damages are a necessary

element in a claim for breach of contract.

34 No. 39497-2-III Montler v. Belfor USA Group, Inc., et al.

E. ATTORNEY FEES UNDER OLYMPIC STEAMSHIP

Both parties assign error to the trial court’s award of attorney fees to Montler in

the amount of $18,771.00.6 The trial court concluded that under Olympic Steamship a

party is entitled to attorney fees for prevailing on a breach of contract claim. The court

reasoned that since Montler had proved her breach of contract claim, and since the court

had granted Montler’s motion to compel appraisal and continue loss of use benefits,

Montler’s motion was successful and she was entitled to the fees she incurred to pursue

the motion. Otherwise, the court found that Montler was not the prevailing party for

purposes of costs under RCW 4.84.010.

Olympic Steamship held “that an award of fees is required in any legal action

where the insurer compels the insured to assume the burden of legal action, to obtain the

full benefit of his insurance contract, regardless of whether the insurer's duty to defend is

at issue.” 117 Wn.2d at 53. First American argues that the court should not have

awarded any fees because Montler was not compelled to assume the burden of legal

action to obtain the benefit of her insurance contract. Instead, at the time Montler filed

her lawsuit and moved to compel appraisal, First American had already paid for the water

damage caused by the 2017 flood. Since the trial court ultimately concluded that Montler

was not entitled to any benefit beyond what she had already received, she did not obtain a

6 First American’s second issue on appeal and Montler’s third issue on cross- appeal.

35 No. 39497-2-III Montler v. Belfor USA Group, Inc., et al.

benefit of the contract by compelling appraisal or continuing loss of use benefit on the

mold damage. Montler, on the other hand, contends that the trial court did not award

enough attorney fees. We agree with First American and hold that the trial court erred in

holding that Montler was entitled to some fees under Olympic Steamship for having to

file a motion to obtain the benefits of her insurance policy.

Washington generally follows the “American Rule” on attorney fees, providing

that “fees are not recoverable by the prevailing party as costs of litigation unless the

recovery is permitted by contract, statute, or some recognized ground of equity.”

Leingang v. Pierce County Med. Bureau, Inc., 131 Wn.2d 133, 143, 930 P.2d 288 (1997).

The holding in Olympic Steamship, recognized the power disparity between an insurer

and an insured, and provided equitable authority for attorney fees when the insured must

seek legal recourse to ensure coverage rather than simply the value of a claim. Woo v.

Fireman’s Fund Ins. Co., 150 Wn. App. 158, 175-76, 208 P.3d 557 (2009); see also

Dayton v. Farmers Ins. Grp., 124 Wn.2d 277, 279-80, 876 P.2d 896 (1994) (fees not

available under Olympic S.S. where dispute was merely to whether claim should be

valued at $10,000 or $16,000 under UIM policy).

Montler contends that she prevailed on her claim to enforce an appraisal and

continue loss of use benefits. While Olympic Steamship did not address whether an

insured must prevail in order to obtain attorney fees, our Supreme Court recently denied

fees to an insured because he prevailed on only one of his three claims. New York Life

36 No. 39497-2-III Montler v. Belfor USA Group, Inc., et al.

Ins. Co. v. Mitchell, 1 Wn.3d 545, 528 P.3d 1269 (2023). The question raised in this case

is whether Montler prevailed for purposes of fees under Olympic Steamship when her

interlocutory motion was granted but she failed to ultimately prove that the mold damage

was covered by the policy.

The general rule in Washington is that the prevailing party is one who “‘receives

judgment in that party’s favor.’” Sardam v. Morford, 51 Wn. App. 908, 911, 756 P.2d

174 (1988) (quoting Blair v. Washington State Univ., 108 Wn.2d 558, 571, 740 P.2d

1379 (1987)). Under a different statute our Supreme Court has held that, “‘A plaintiff

“prevails” when actual relief on the merits of his claim materially alters the legal

relationship between the parties by modifying the defendant’s behavior in a way that

directly benefits the plaintiff.’” Parmelee v. O'Neel, 168 Wn.2d 515, 522, 229 P.3d 723

(2010), (quoting Farrar v. Hobby, 506 U.S. 103, 111-12, 113 S. Ct. 566, 121 L. Ed. 2d

494 (1992)). While a party is considered “prevailing” when they obtain permanent

injunctive relief, “victory in a preliminary injunction is not sufficient to make a plaintiff a

prevailing party where that plaintiff eventually loses on the merits, as the victory is

‘ephemeral’ and the plaintiff has merely won the battle but lost the war.” Id. at 523.

Here, Montler did not prevail for purposes of attorney fees under Olympic

Steamship because by the time she filed her motion, she had already received all of the

benefits under the policy to which she was entitled.

37 No. 39497-2-III Montler v. Belfor USA Group, Inc., et al.

Montler contends that she did prevail because the court required First American to

continue paying loss of use benefits on a temporary basis. But Olympic Steamship

provides equitable grounds for attorney fees when the insured obtains the full benefit of

an insurance contract by pursuing legal action. 117 Wn.2d at 53. Here, even though the

court ordered First American to continue paying loss of use benefits while the parties

resolved their dispute, ultimately the court concluded that Montler was not entitled to

those loss of use benefits.

While her interlocutory motion was successful, Montler failed to succeed at trial

on her additional claim that the mold damage was caused by the 2017 flood. Ultimately,

her lawsuit failed to obtain any additional benefit under the policy. In other words, she

won the battle and lost the war. Because she did not prevail on her claim to extend

coverage, Montler is not entitled to attorney fees under Olympic Steamship.

F. WHETHER THE TRIAL COURT ERRED IN NOT FINDING FIRST AMERICAN HAD PROVED ITS AFFIRMATIVE DEFENSES OF MISREPRESENTATION AND FRAUD

In its third issue on appeal, First American challenges the trial court’s conclusion

that First American failed to prove that Montler intentionally or materially

misrepresented or concealed material information in her insurance claim for the 2017

flood. At trial, First American argued that Montler’s attorney misrepresented that Kester

had determined the cause of the mold in his report and also made misrepresentations to

the court and First American’s counsel that the Yang lawsuit was wholly separate and

38 No. 39497-2-III Montler v. Belfor USA Group, Inc., et al.

unrelated to this lawsuit. The policy provided that in the event the insured intentionally

conceals or misrepresents a material fact or engages in fraudulent conduct, the insurer can

void the policy.

The trial court found that First American failed to prove these affirmative

defenses. Otherwise, First American prevailed at trial except for the trial court’s

conclusion that it breached the policy by failing to participate in an appraisal and the

award of attorney fees under Olympic Steamship, both of which we reverse above. First

American does not identify any other right affected by the trial court’s conclusion that it

failed to prove fraud or misrepresentation. Because we grant First American relief on

other grounds, and because First American does not claim it is otherwise aggrieved, we

decline to address this issue.7 See RAP 3.1

G. WHETHER THE TRIAL COURT ABUSED ITS DISCRETION BY FAILING TO IMPOSE CR 11 SANCTIONS AGAINST MONTLER

In its fourth issue on appeal, First American assigns error to the trial court’s

finding that Montler and her attorney did not violate CR 11.8 In its motion, First

American argued that Montler, her attorney, and her appraiser misrepresented Kester’s

7 First American does not claim that it will seek to recover overpayments made to Montler. 8 In its motion for CR 11 sanctions, First American incorrectly quotes and cites to the federal rule, Fed. R. Civ. Proc. 11, which is similar, but not identical to the applicable state CR 11. See CP at 2421, and Clare v. Telquist McMillen Clare PLLC, 20 Wn. App. 2d 671, 683, 501 P.3d 167 (2021).

39 No. 39497-2-III Montler v. Belfor USA Group, Inc., et al.

findings and report, misrepresented that the claims made in the Yang case were unrelated,

and wrongfully withheld the settlement demand letter in the Yang case during discovery.

Under CR 11, an attorney or pro se party’s signature on a pleading constitutes a

certificate that the pleadings are well grounded in fact and warranted by law and are not

being interposed for an improper purpose. 3A KARL B. TEGLAND, WASHINGTON

PRACTICE: RULES PRACTICE CR 11 author’s cmt. 2, at 230 (5th ed. 2006) (quoting

Bryant, 119 Wn.2d 210). We review a trial court’s decision on a request for CR 11

sanctions for abuse of discretion. Clare v. Telquist McMillen Clare PLLC, 20 Wn. App.

2d 671, 681, 501 P.3d 167 (2021). This deferential standard of review recognized that

the trial court is in the best position to gage whether CR 11 was violated. Id.

At the hearing on First American’s motion for CR 11 sanctions, the court noted

that Montler’s attorney had engaged in concerning conduct throughout the litigation,

especially with respect to his representations as to what issues were before the court at

trial. The court declined to impose CR 11 sanctions, but ultimately imposed CR 37

sanctions based on Montler’s failure to provide discovery of the Yang settlement letter

and associated documents. The court’s order granting CR 37 sanctions noted that the

2018 Yang settlement letter and attachments called into question the sincerity of Vance’s

repeated arguments that the damages sought in this case were wholly separate from those

sought in Yang. It also noted that while the representations did not amount to CR 11

40 No. 39497-2-III Montler v. Belfor USA Group, Inc., et al.

violations, the use of the Blagg estimate and the Kester report in both cases demonstrate a

“failure to show forthrightness and transparency in litigation.” CP at 2709.

The trial court’s decision on First American’s motion for CR 11 sanctions was not

an abuse of discretion. First American fails to demonstrate that CR 11 applies to the

majority of the alleged misrepresentations it identifies. First American argues that

Montler and her attorney violated CR 11 in several respects: though declarations and

testimony, the oral arguments of her attorney, Montler’s responses to discovery, a letter

to the Yang’s attorney, and a reply to Montler’s motion to compel an appraisal wherein

Montler’s attorney asserts that the claims made in the Yang case were unrelated to the

claims in this case.

CR 11(a) applies to “[e]very pleading, motion, and legal memorandum of a party

represented by an attorney.” A “legal memorandum” is generally recognized as a legal

brief. Clare, 20 Wn. App. 2d at 682. A “pleading” is defined as “a complaint, answer,

reply, and similar third-party complaints, answers, and replies.” CR 7(a). Declarations

are not pleadings or legal memorandum. Clare, 20 Wn. App. 2d at 682-83. Instead,

declarations are signed under penalty of perjury and controlled in certain circumstances

by CR 56(g). Discovery responses are governed by CR 26 and CR 37, not CR 11. See

Clipse v. State, 61 Wn. App. 94, 97, 808 P.2d 777 (1991) (CR 11 does not apply to

discovery disclosures). CR 11 sanctions are inappropriate “where other court rules more

specifically apply.” Biggs v. Vail, 124 Wn.2d 193, 197, 876 P.2d 448 (1994). First

41 No. 39497-2-III Montler v. Belfor USA Group, Inc., et al.

American cites no authority for its position that CR 11 applies to oral arguments or letters

to counsel.

The only alleged misrepresentation falling within the scope of CR 11 is Montler’s

reply brief in support of the motion to compel appraisal, which asserted that the Yang

matter was “unrelated” to the claims Montler was making against First American. While

somewhat disingenuous, the representation could be considered a legitimate trial strategy.

It is undisputed that Montler’s home sustained mold and water damage. The

common issue between the two lawsuits was the cause and extent of the mold damage

and whether it occurred before or after Montler purchased the home. Given the

potentially overlapping damages presented by these unconsolidated cases, it would be a

reasonable litigation strategy under the circumstances to claim all damages in both cases

to protect Montler’s interest, or suggest the Yangs could be held liable for the mold-

related damage to encourage settlement. As the court concluded, Vance certainly should

have more forthcoming about the Yang matter and the settlement in that case, and his

assertion that the matters were “unrelated” does not appear sincere in light of the 2018

Yang settlement letter. However, this was arguably a litigation tactic where Montler was

taking the position in this case that all of the mold-related damage was caused by the

October 2017 event. Moreover, at the time Vance filed this reply, Montler had settled the

Yang lawsuit for $120,000, which ostensibly covered non-economic medical expenses

and damages for 2015 repairs to the home. Accordingly, Montler was no longer seeking

42 No. 39497-2-III Montler v. Belfor USA Group, Inc., et al.

damages in that matter and had purportedly not received any money for the property

damage identified in the Kester report and Blagg appraisal.

Even if the trial court had found that Montler’s reply brief violated CR 11, the

court was within its discretion to decline sanctions. Clare, 20 Wn. App. 2d at 681-82.

While an earlier version of the rule made sanctions mandatory once a violation was

found, the rule was amended in 1993 to give courts considerable discretion in deciding

whether to impose sanctions even if a violation is found. Snohomish County v. Citybank,

100 Wn. App. 35, 995 P.2d 119 (2000).

First American fails to establish that the trial court’s conclusion that Montler and

her attorney did not violate CR 11 was an abuse of discretion.

H. WHETHER MONTLER IS ENTITLED TO HER ATTORNEY FEES ON APPEAL

Montler contends she is entitled to attorney fees on appeal under RAP 18.1 and

Olympic Steamship. RAP 18.1(a) authorizes a party to request attorney fees on appeal if

“applicable law grants to a party the right to recover reasonable attorney fees or expenses

on review.” As noted above, Olympic Steamship only authorizes an award of fees in an

action where the insurer compels the insured to assume the burden of legal action to

obtain the full benefit of his insurance contract, but only where the insured is the

prevailing party. Since Montler did not prevail on her claim that the policy covered the

mold damage, we decline to award attorney fees on appeal.

43 No. 39497-2-III Montler v. Belfor USA Group, Inc., et al.

We affirm the trial court’s decisions on the issues raised by Montler. We likewise

affirm on most of the issues raised by First American. We reverse the trial court on two

issues: (1) the court’s conclusion that First American breached the policy by refusing to

name an appraiser, and (2) the court’s award of attorney fees to Montler under Olympic

Steamship. We remand for the trial court to modify its judgment according to this

opinion.

A majority of the panel has determined this opinion will not be printed in the

Washington Appellate Reports, but it will be filed for public record pursuant to RCW

2.06.040.

_________________________________ Staab, J.

WE CONCUR:

_________________________________ Pennell, J.

_________________________________ Siddoway, J.P.T.*

* Judge Laurel H. Siddoway was a member of the Court of Appeals at the time argument was held on this matter. She is now serving as a judge pro tempore of the court pursuant to RCW 2.06.150