1 2 FILED IN THE U.S. DISTRICT COURT EASTERN DISTRICT OF WASHINGTON 3 Apr 27, 2020 4 SEAN F. MCAVOY, CLERK
6 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WASHINGTON 7 MID-CENTURY INSURANCE 8 COMPANY, 9 NO. 2:20-CV-00045-SAB Plaintiff, 10 v. ORDER DENYING 11
DEFENDANT’S MOTION TO 12 VERNICE ZANCO, STAY PROCEEDINGS AND 13 Defendant. 14 MOTION TO DISMISS; GRANTING PLAINTIFF’S 15 MOTION FOR SUMMARY 16 JUDGMENT 17
18 19 Before the Court are Defendant’s Motion to Stay Proceedings, ECF No. 13, 20 and Rule 12(b)(6) Motion to Dismiss, ECF No. 6, and Plaintiff’s Motion for 21 Summary Judgment, ECF No. 7. The motions were originally noted for hearing on 22 April 24, 2020, but due to Court closures related to the ongoing COVID-19 23 pandemic the Court considered the motions without oral argument. Having 24 considered the briefing on the motions and the applicable caselaw and for the 25 reasons discussed herein, the Court denies Defendant’s Motion to Stay, denies 26 Defendant’s Motion to Dismiss, and grants Plaintiff’s Motion for Summary 27 Judgment. 28 // 1 Facts and Procedural History 2 1. The Insurance Policy 3 Defendant owns and operates an apartment complex in Spokane Valley, 4 Washington, known as University South & East. Id. at 2.2. Plaintiff issued 5 Defendant an Apartment Owners Liability Insurance policy from December 30, 6 2014 through December 30, 2015 for liability coverage arising out of the 7 ownership, maintenance, or use of the University apartment building premises. 8 ECF No. 1-1. 9 Relevant here are three provisions of the Policy: (1) the Designated Premises 10 Endorsement; (2) the “Who Is an Insured” (WIAI) Clause; and (3) the Apartment 11 Owners Common Policy Conditions. 12 The Designated Premises Endorsement provides as follows: 13 “This insurance applies only to ‘bodily injury’… arising out of the 14 ownership, maintenance, or use of the premises shown in the Schedule and operations necessary or incidental to those premises. This endorsement is 15 part of your policy. It supersedes and controls anything to the contrary. It is 16 otherwise subject to all the terms of the policy.” 17 ECF No. 1-1 at 92. The Policy defines the covered “premises” as 11009 E. 3rd 18 Avenue, Spokane Valley, Washington, otherwise known as the University South & 19 East apartment complex. 20 The WIAI Clause provides that the policy insures “Vernice Zanco 21 University South & East LLC.” ECF No. 1-1 at 84. As an LLC, the policy 22 considers the LLC and its members as insureds, but only with respect to the 23 conduct of the LLC’s business. Id. 24 Finally, the Apartment Owners Common Policy Conditions provide in 25 relevant part that: 26 “This policy is void in any case of fraud by you as it relates to this policy at 27 any time. It is also void if you or any other insured, at any time, intentionally 28 conceal or misrepresent a material fact concerning: (1) This policy; (2) The 1 Covered Property; (3) Your interest in the Covered Property; or (4) A claim under this policy.” 2 3 ECF No. 1, Ex. A at 100. 4 2. State Tort Liability Action, Quartararo v. Zanco 5 On June 25, 2018, Kimberly Quartararo filed a personal injury lawsuit 6 against Defendant in King County Superior Court, which was then transferred to 7 Spokane County Superior Court on March 7, 2019 (“the Liability Action”). ECF 8 No. 1-2 (state tort complaint). In the Liability Action, Quartararo alleges that she 9 was an invited social guest at Defendant’s home (not the University apartment 10 complex) on Liberty Lake at 615 S. Shoreline Drive, Spokane County, Washington 11 on June 27, 2015. Quartararo alleges that while she was a social guest, she was 12 injured when she dove off the dock at Defendant’s residence and hit her head on 13 cement blocks attached to the dock. Quartararo further alleges that Defendant’s son 14 (and co-defendant in the Liability Action) either co-owned or co-occupied the 15 residence with Defendant. 16 The Liability Action is ongoing. Defendant is currently being defended by 17 Safeco Insurance Company pursuant to a homeowner’s policy. Nearly a year into 18 the Liability Action, Safeco tendered the complaint to Plaintiff, alleging that 19 Defendant maintained a home office that implicated coverage under Plaintiff’s 20 Apartment Owner policy. ECF No. 1 at 2.8. Plaintiff agreed to defend Defendant in 21 the Liability Action, but only pursuant to a full reservation of its rights. Id. 22 After Plaintiff agreed to defend, Defendant made further allegations that the 23 social gathering at which Quartararo was injured served a “dual purpose” of 24 business and pleasure. Id. at 2.9. However, Quartararo’s complaint does not allege 25 that the party had a dual purpose, nor does she allege that she was injured in 26 connection with Defendant’s home office or any operations necessary or incidental 27 to the University apartment complex. Instead, Quartararo’s complaints have 28 consistently maintained that she was injured due to a latent defect in the dock at 1 Defendant’s home, and that Defendant is liable as a homeowner. Id. at 2.10; ECF 2 No. 1-2 at ¶¶ 47-53. 3 3. Federal Declaratory Relief Action 4 Plaintiff filed the instant action on January 29, 2020, seeking a declaratory 5 judgment that it has no duty to defend or indemnify Defendant in the Liability 6 Action because Defendant breached one or more policy conditions and requiring it 7 to defend and indemnify would cause actual prejudice. ECF No. 1 at 3.1-3.4. 8 Defendant filed her Motion to Dismiss, ECF No. 6, on February 19. Plaintiff filed 9 its Motion for Summary Judgment, ECF No. 7, on March 5. Defendant filed her 10 Motion to Stay Proceedings, ECF No. 13, on March 25. 11 Defendant’s Motion to Stay Proceedings 12 The Court first considers Defendant’s request that the Court stay this 13 declaratory action until the completion of the Liability Action in state court. ECF 14 No. 13. Defendant argues that not staying these proceedings would allow Plaintiff 15 to engage in forum shopping and would require her to engage in piecemeal 16 litigation, as other insurers who may not have a duty to defend are not party to 17 these proceedings. Plaintiff argues that a stay is not warranted because there are no 18 parallel state proceedings and resolving its Complaint would not involve 19 unnecessary determinations of state law. 20 28 U.S.C. § 2201 provides that “any court of the United States…may declare 21 the rights and other legal relations of any interested party seeking such 22 declaration.” However, a district court is not required to exercise jurisdiction over 23 all declaratory judgment actions. Wilton v. Seven Falls Co., 515 U.S. 277, 287 24 (1995). A federal court should not exercise its discretion to grant declaratory relief 25 “where another suit is pending in a state court presenting the same issues, not 26 governed by federal law, between the same parties.” Chamberlain v. Allstate Ins. 27 Co., 931 F.2d 1361, 1366-67 (9th Cir. 1991), abrogated on other grounds by 28 Wilton, 515 U.S. at 289-91. In this context, the district court may either dismiss, 1 abstain, or stay the federal action. R.R. Street & Co. Inc. v. Transp. Ins. Co., 656 2 F.3d 966, 975 (9th Cir. 2011). 3 In determining whether to exercise its jurisdiction, the Court should consider 4 the following factors: (1) the avoidance of needless determinations of state law 5 issues; (2) discouragement of forum shopping; and (3) avoidance of duplicative 6 litigation. Brillhart v. Excess Ins. Co., 316 U.S. 491, 495 (1942); Gov’t. Employee 7 Ins. Co. v. Dizol, 133 F.3d 1220, 1225 (9th Cir. 1998) (en banc). Where there is no 8 parallel state proceeding, “the court must balance concerns of judicial 9 administration, comity, and fairness to the litigants in determining whether to 10 exercise jurisdiction over a declaratory judgment action.” Evanston Ins. Co. v. 11 Workland & Witherspoon, PLLC, No. 2:14-CV-00193-RMP, 2014 WL 4715879 at 12 *3 (E.D. Wash. Sept. 22, 2014). 13 Courts have discretion to abstain or stay from considering a declaratory 14 judgment action if the federal case does not require resolution of legal or factual 15 issues in dispute in the state court proceeding. To the contrary, the Washington 16 Supreme Court routinely approves of insurers filing declaratory judgment actions 17 during the pendency of state court actions where their coverage liability is 18 uncertain. Woo v. Fireman’s Fund Ins. Co., 161 Wash.2d 43, 54 (2007). Indeed, 19 “there is no presumption in favor of abstention in declaratory actions generally, nor 20 in insurance coverage cases specifically.” Dizol, 133 F.3d at 1225. 21 1. Avoidance of Needless Determination of State Law Issues 22 The first factor does not weigh in favor of staying this case. Plaintiff’s 23 declaratory judgment action does not raise any federal claims, and instead raises 24 only state law breach of contract and insurance claims. However, federal courts 25 sitting in diversity—as here—frequently rule on issues of state law, and there is no 26 presumption of abstention in insurance coverage cases. Id. Furthermore, where, as 27 here, the state tort proceeding does not involve the same legal issues as the federal 28 declaratory action, there is no requirement to abstain on this ground. Am. Cas. Co. 1 of Reading, Penn. v. Krieger, 181 F.3d 1113, 1119 (9th Cir. 1999). The instant 2 federal action is not a parallel proceeding to the Liability Action because the same 3 legal issues are not at play. Id. Thus, there is no presumption that these issues of 4 state law should be determined in state court. There are no implications that the 5 Court be required to decide unsettled issues of state law by considering Plaintiff’s 6 claims. See Atl. Cas. Ins. Co. v. Bellinger, 2:16-CV-00422-SAB, 2017 WL 7 1843714 at *1 (E.D. Wash. May 8, 2017). Thus, this factor weighs against staying 8 the case. 9 2. Discouragement of Forum Shopping 10 The second factor is a closer call, but on balance does not weigh in favor of 11 granting Defendant’s motion and issuing a stay. Defendant’s motion incorporates 12 by reference the extensive history of the dispute between the parties. In 2018, 13 Plaintiff and another insurance company brought a declaratory judgment action 14 against Defendant in Spokane County Superior Court. ECF No. 14-2. The case 15 continued through motions practice, and the court denied two of Plaintiff’s motions 16 for summary judgment. See ECF Nos. 14-3, 14-4. Plaintiff appealed the court’s 17 decisions, which were denied in October 2019 and January 2020, respectively. See 18 ECF No. 14-5, 14-6. Two weeks prior to trial, Plaintiff voluntarily dismissed their 19 claims pursuant to Washington State CR 41(a)(1)(B). See ECF No. 14-8. 20 Defendant alleges she was not given advanced notice of the dismissal, nor was she 21 given advanced notice of the filing of the Complaint in this matter. See ECF No. 13 22 at 5. 23 The claims brought and relief sought by Plaintiff in this action are largely 24 the same as those in the dismissed state court action. It could be argued, then, that 25 Plaintiff would get “a second bite at the apple” if the Court were to allow it to 26 bring a declaratory judgment action in federal court after dismissing its state court 27 declaratory judgment action. See Krieger, 181 F.3d at 1119. However, “the effect 28 of a voluntary dismissal [in state court] is to render the proceedings a nullity and 1 leave[s] the parties as if the actions had never been brought.” Wachovia SBA 2 Lending v. Kraft, 138 Wash. App. 854, 861 (2007). Plaintiff was entirely within its 3 rights to dismiss its state court action and file anew in federal court on the basis of 4 diversity jurisdiction. Furthermore, the instant federal action was not filed until 5 after dismissal of the state court action. See Krieger, 181 F.3d at 1119 (“This factor 6 is understood to discourage an insurer from forum shopping, i.e., filing a federal 7 court declaratory action to see if it might fare better in federal court at the same 8 time the insurer is engaged in a state court action.”) (emphasis added). 9 Given the fact that there is no pending state action in which Plaintiff could 10 have its duties to defend or indemnify determined, the Court finds that the second 11 Brillhart factor weighs against granting the stay. 12 3. Avoidance of Duplicative Litigation 13 The third Brillhart factor weighs against granting the stay. Despite 14 Defendant’s arguments to the contrary, it is not apparent to the Court that it would 15 need to make any determinations of Defendant’s ultimate tort liability to determine 16 whether she is entitled to any coverage from Plaintiff. An insurer’s duty to defend 17 is evaluated based on the allegations contained in the liability action complaint, not 18 on a claimant’s ultimate liability. Truck Ins. Exch. v. Vanport Homes, Inc., 147 19 Wash.2d 751, 760 (2002). Thus, there is no need to avoid duplicative litigation 20 because the instant federal action is the only forum in which Plaintiff’s duty to 21 defend is in question. Accordingly, this facto weighs against granting the stay. 22 4. Concerns of Judicial Administration, Comity, and Fairness to Litigants 23 Finally, concerns of judicial administration, comity, and fairness to litigants 24 does not require the Court to stay the declaratory judgment action. “While it may 25 be inconvenient for Defendants to litigate in two separate courts simultaneously, it 26 would be equally inconvenient for [Plaintiff] to defend Defendant against state 27 court claims that this Court later may determine are not covered by the policy.” 28 Evanston Ins. Co., 2014 WL 4715879 at *7. 1 5. Conclusion 2 The Court finds that the balance of the Brillhart factors and considerations 3 of judicial administration, comity, and fairness do not weigh in favor of staying 4 this case. Indeed, courts frequently approve of declaratory judgment actions 5 brought by insurance companies for the sole purpose of determining whether there 6 is a duty to defend or indemnify. Vanport Homes, 147 Wash.2d at 760. 7 Accordingly, the Court denies Defendant’s Motion to Stay Proceedings. 8 Defendant’s Motion to Dismiss 9 Defendant also filed a Rule 12(b)(6) Motion to Dismiss, arguing that the 10 Complaint should be dismissed because the Complaint fails to allege a “short and 11 plain statement of the claim” and fails to state with particularity fraud claims. ECF 12 No. 6 at 1. Defendant requests that the Court be dismissed with leave to amend. Id. 13 at 2. In response, Plaintiff argues that its Complaint should not be dismissed 14 because it adequately pled its claims. ECF No. 11. 15 1. Rule 12(b)(6) Standard 16 Rule 12(b)(6) allows a party to move for dismissal if the plaintiff has failed 17 to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). 18 Dismissal under his rule is only proper if there is either a “lack of a cognizable 19 legal theory” or “the absence of sufficient facts alleged under a cognizable legal 20 theory.” Taylor v. Yee, 780 F.3d 928, 935 (9th Cir. 2015); Balistreri v. Pacifica 21 Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). When considering a 12(b)(6) 22 motion, the court accepts the allegations in the complaint as true and construes the 23 pleading in the light most favorable to the party opposing the motion. Lazy Y 24 Ranch Ltd. v. Behrens, 546 F.3d 580, 588 (9th Cir. 2008). 25 To survive a motion to dismiss, the plaintiff must allege “enough facts to 26 state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 27 U.S. 544, 570 (2007); see also Levit v. Yelp!, Inc., 765 F.3d 1123, 1135 (9th Cir. 28 2014) (requirements of notice pleading are met if plaintiff makes a short and plain 1 statement of their claims). A claim is plausible on its face when “the plaintiff 2 pleads factual content that allows the court to draw the reasonable inference that 3 the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 4 678 (2009). The allegations must be enough to raise the right to relief about a 5 speculative level. Twombly, 550 U.S. at 555. For certain claims, such as fraud, the 6 plaintiff must state the circumstances giving rise to the fraud claim with 7 particularity. Fed. R. Civ. P. 9(b). Dismissal without leave to amend is proper only 8 if it is absolutely clear that deficiencies in the complaint cannot be corrected by 9 amendment. AmerisourceBergen Corp. v. Dialysis West, Inc., 465 F.3d 946, 951 10 (9th Cir. 2006). 11 2. Discussion 12 Contrary to Defendant’s arguments, Plaintiff has satisfied the requirements 13 of notice pleading because its Complaint states the elements of declaratory relief 14 and states sufficient facts to give Defendant notice of the claims against her. See 15 Levit, 765 F.3d at 1135. Plaintiff plainly alleges that it has no duty to defend or 16 indemnify Defendant in the Liability Action because she allegedly breached 17 several terms of the insurance contract. These allegations are sufficient to place 18 Defendant on notice of the claims against her. 19 Defendant is also incorrect that Plaintiff’s Complaint should be dismissed 20 because it fails to state with particularity the facts giving rise to a fraud claim. 21 Plaintiff alleges that Defendant and another insurance provider made statements 22 that induced it to defend Defendant in the Liability Action. Plaintiff cites in its 23 Complaint a provision of the insurance policy that provides that an insured’s 24 misrepresentations or fraud voids the policy. 25 The Washington Supreme Court analyzed a nearly identical provision in 26 Mut. of Enumclaw Ins. Co. v. Cox, 110 Wash.2d 643 (1988). There, the Court held 27 that an insured’s breach of such a provision during the claims process voids the 28 policy and precludes the payment of any benefit that would have otherwise been 1 available. Id. at 648-49. To void coverage pursuant to the policy, the insurer need 2 only show the insured made a misrepresentation by a preponderance of the 3 evidence, and it need not show that it was prejudiced by the alleged fraud. Ki Sin 4 Kim v. Allstate Ins. Co., Inc., 153 Wash. App. 339, 355 (2009). Where an insured 5 knowingly makes a false or misleading statement, courts will presume that the 6 insured intended to deceive the insurance company and the burden shifts to the 7 insured to establish an honest or innocent intent. Reverse Now VII, LLC v. Oregon 8 Mut. Ins. Co., 341 F. Supp. 3d 1233, 1237 (W.D. Wash. 2018). 9 Plaintiff’s Complaint explicitly alleges that Defendant and another insurance 10 company made representations to Plaintiff to establish coverage that did not appear 11 on the face of the Liability Action Complaint. See ECF No. 1 at 2.7-2.10. Although 12 Defendant is correct that Rule 9(b) applies to all civil cases in federal court that 13 bring claims sounding in fraud, see Vess v. Ciba-Giegy Corp. USA, 317 F.3d 1097, 14 1103 (9th Cir. 2002), Plaintiff has stated its claims with sufficient particularity. 15 Plaintiff alleges that Defendant made material misrepresentations about (1) the 16 purpose of the party at which the Liability Action plaintiff alleges she was injured 17 and (2) the presence of a home office at Defendant’s home. 18 3. Conclusion 19 Because the Court has a duty to draw all reasonable inferences in favor of 20 Plaintiff as the non-moving party, it can be inferred that Plaintiff has stated a claim 21 for breach of policy conditions due to fraud. Accordingly, the Court denies 22 Defendant’s Rule 12(b)(6) Motion to Dismiss. 23 Plaintiff’s Motion for Summary Judgment 24 Finally, the Court considers Plaintiff’s Motion for Summary Judgment, ECF 25 No. 7. Plaintiff argues that it is entitled to summary judgment because there are no 26 disputes of material fact and because, as a matter of law, it has no duty to defend or 27 indemnify Defendant in the Liability Action. ECF No. 7 at 1. In particular, Plaintiff 28 raises three arguments: (1) on the face of the Liability Action Complaint, it has no 1 duty to defend or indemnify; (2) Plaintiff has no duty to defend or indemnify under 2 the Designated Premises Endorsement; and (3) Plaintiff has no duty to defend or 3 indemnify under the WIAI Clause. Defendant argues that the motion should not be 4 granted because there are genuine disputes of material fact. For the reasons 5 discussed herein, the Court grants Plaintiff’s Motion for Summary Judgment. 6 1. Summary Judgment Standard 7 Summary judgment is appropriate “if the movant shows that there is no 8 genuine dispute as to any material fact and the movant is entitled to judgment as a 9 matter of law.” Fed. R. Civ. P. 56(a). There is no genuine issue for trial unless 10 there is sufficient evidence favoring the non-moving party for a jury to return a 11 verdict in that party’s favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 12 (1986). The moving party has the initial burden of showing the absence of a 13 genuine issue of fact for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). 14 If the moving party meets its initial burden, the non-moving party must go beyond 15 the pleadings and “set forth specific facts showing that there is a genuine issue for 16 trial.” Anderson, 477 U.S. at 248. 17 In addition to showing there are no questions of material fact, the moving 18 party must also show it is entitled to judgment as a matter of law. Smith v. Univ. of 19 Wash. Law Sch., 233 F.3d 1188, 1193 (9th Cir. 2000). The moving party is entitled 20 to judgment as a matter of law when the non-moving party fails to make a 21 sufficient showing on an essential element of a claim on which the non-moving 22 party has the burden of proof. Celotex, 477 U.S. at 323. The non-moving party 23 cannot rely on conclusory allegations alone to create an issue of material fact. 24 Hansen v. United States, 7 F.3d 137, 138 (9th Cir. 1993). 25 When considering a motion for summary judgment, a court may neither 26 weigh the evidence nor assess credibility; instead, “the evidence of the non-movant 27 is to be believed, and all justifiable inferences are to be drawn in his favor.” 28 Anderson, 477 U.S. at 255. 1 2. Legal Standard: Interpretation of Insurance Contracts 2 Interpretation of insurance policies is a question of law, in which the policy 3 is construed as a whole and each clause is given force and effect. Overton v. 4 Consol. Ins. Co., 145 Wash.2d 417, 424 (2002). The terms of a policy should be 5 given a “fair, reasonable, and sensible construction as would be given to the 6 contract by the average person purchasing insurance.” Id. The court must enforce 7 the policy as written if the language is clear and unambiguous. Morgan v. 8 Prudential Ins. Co. of Am., 86 Wash.2d 432, 434 (1976). If the contract is 9 ambiguous, the contract will be construed in favor of the insured. Id. at 435. The 10 policy will not be given a forced or constrained construction that would lead to an 11 absurd conclusion or that would render the contract ineffective. Wash. Pub. Util. 12 Dist. Utils. Sys. v. Pub. Util. Dist. No. 1 of Clallam Cnty., 112 Wash.2d 1, 11 13 (1989). When coverage is not provided, the policy will not be rewritten to do so. 14 Grange Ins. Co. v. Brosseau, 113 Wash.2d 91, 99-100 (1989). To determine 15 whether a policy covers a claim, the court must make two determinations: (1) 16 whether the insured has established that the claim falls within the scope of 17 coverage; and (2) whether any exclusions bar the claim. McDonald v. State Farm 18 Fire & Cas. Co., 119 Wash.2d 724, 731 (1992). 19 Whether a lawsuit triggers a duty to defend is a question of law. Webb v. 20 USAA Cas. Ins. Co., --- Wash. App. 2d ---, 2020 WL 812137 at *5 (2020). This 21 determination is made based on the facts alleged in the underlying complaint and 22 the terms of the insurance contract. Woo, 161 Wash.2d at 52-53 (describing the 23 eight corners rule). The duty to defend hinges on whether the complaint contains 24 any factual allegations that render the insurer liable to the insured under the policy. 25 State Farm v. Emerson, 102 Wash.2d 477, 486 (1984). When coverage is clearly 26 inapplicable to the facts alleged in the underlying complaint, the insurer has no 27 duty to defend. Id. 28 1 There are two exceptions to the eight corners rule. First, if the complaint’s 2 allegations are unclear, the insurer must investigate to determine if the true facts of 3 the claim could conceivably give rise to a duty to defend. United Servs. Auto. Ass’n 4 v. Speed, 179 Wash. App. 184, 194-95 (2014). Second, if the allegations in the 5 complaint conflict with known facts or are ambiguous or inadequate, the insurer 6 may consider facts outside the complaint in order to trigger a duty to defend. Id. 7 However, insurers do not have an unlimited duty to defend and do not have to 8 defend claims that clearly fall outside the terms of the policy. Id. at 195-97. 9 3. Analysis 10 In its motion, Plaintiff points to three separate grounds for summary 11 judgment. First, Plaintiff argues that there is no overage of the claims in the 12 Liability Action based on the eight corners of the Complaint in the Liability Action 13 and the Policy. Second, Plaintiff argues that the Designated Premises endorsement, 14 which limits coverage to bodily injury arising out of the ownership, maintenance, 15 and use of the covered apartment complex and operations necessary or incidental 16 to the apartment complex, excludes coverage. ECF No. 7 at 1-2. Plaintiff argues 17 that because the claimed injury in the state tort proceeding occurred at Defendant’s 18 home—and not at the covered apartment complex—and is alleged to have arisen 19 out of a defect in her dock and not anything to do with the apartment complex, the 20 claim does not fall within the scope of coverage. Id. at 2. Third, Plaintiff asserts 21 that it is entitled to summary judgment because the underlying tort claim does not 22 fall within the scope of coverage afforded by the “Who Is an Insured” clause, 23 which provides that Defendant is an insured only with respect to the conduct of her 24 business. Id. at 2. 25 In response, Defendant argues that the party that gave rise to the claims in 26 the Liability Action had a dual business-pleasure purpose, thus giving rise to 27 coverage under the Policy. Defendant also argues that, because she keeps a home 28 office from which she manages the apartment complex, the policy is implicated. 1 a. Whether There Are Any Genuine Disputes of Material Fact 2 Plaintiff argues that, based on the facts alleged in the Liability Action 3 Complaint, there are no facts related to the business of running Defendant’s 4 apartment building, and therefore there are no genuine disputes of material facts. In 5 response, Defendant argues that extrinsic facts suggest that the events giving rise to 6 the Liability Action had a dual business-pleasure purpose and that the Policy is 7 therefore implicated. ECF No. 16 at 1-2. Defendant also argues that because 8 Defendant has a home office, the Policy is implicated. 9 Under Washington law, an insurer s permitted to use the eight corners rule to 10 determine whether there is an issue of fact or law that could conceivably result in 11 coverage under the policy. Xia v. ProBuilders Specialty Ins. Co. RRG, 188 12 Wash.2d 171, 182 (2017); Safeco Ins. Co. of Am. v. Wolk, 342 F. Supp. 3d 1104, 13 1108 (W.D. Wash. 2018). Facts outside the eight corners of the underlying 14 complaint and the insurance policy may be considered only if the “true” allegations 15 are unknown because the complaint allegations are unclear or if the complaint 16 allegations conflict with known facts or are ambiguous or inadequate. Speed, 179 17 Wash. App. at 195-97. 18 To the extent Defendant seeks to rely on facts outside of the Liability Action 19 complaint to show that Plaintiff has a duty to defend, those facts cannot be 20 considered because they are not material. The Liability Action alleges that 21 Defendant is liable due to a failure to warn of a condition in her home’s dock. 22 There are no allegations on the face of the Liability Action complaint that the 23 dock’s condition was related to any business purpose or the University apartment 24 complex. Indeed, the complaint does not even mention the University complex or 25 any of Defendant’s business endeavors. Indeed, the Liability Action alleges that 26 Defendant is liable as a homeowner, not as a business owner. 27 Under the eight corners rule, the Court cannot consider Defendant’s extrinsic 28 facts because the facts do not rely on the true allegations as detailed in the Liability Action complaint and because the allegations in the Liability Action complaint are 2|| not ambiguous or inadequate to determine coverage. Thus, those extrinsic facts are not material; they do not make it more likely than not that Defendant would succeed on its claims. See, e.g., Am. Fam. Mut. Ins. Co. SI v. Bell, No. C18- 59790RBL, 2019 WL 2339965 at *2 (W.D. Wash. June 3, 2019). Accordingly, there is no genuine dispute of material fact. b. Whether Plaintiff Entitled to Judgment as a Matter of Law 8 Plaintiff argues that it is entitled to judgment as a matter of law on three grounds: (1) Plaintiff has no duty to defend or indemnify because there is no possibility of coverage under the Policy; (2) if there is coverage under the terms of the policy, the DPE clause bars coverage; or (3) if there is coverage under the terms of the policy, the WIAI clause bars coverage. Defendant argues that Plaintiff is not entitled to summary judgment on any of these grounds because the events giving rise to the underlying Liability Action are covered by the terms of the 15|| policy. Defendant also argues the DPE clause and the WIAI clause do not bar coverage. 7 i. Whether Plaintiff has a Duty to Defend or Indemnify under the Terms of the Policy 18 19 Whether Plaintiff has a duty to defend or indemnify Defendant in the Liability Action is determined from the eight corners of the Liability Action complaint and the terms of the Policy. Xia, 188 Wash.2d at 182. The Liability Action complaint alleges the following facts: 23 e Defendant owned the residential property at 615 S. Shoreline Drive, 24 Spokane County, Washington; 5 e Defendant’s son keeps a boat at his mother’s house, and he is an authorized agent of Defendant allowed to invite guests to the house; 26 e The dock at the residential property is owned and maintained by 07 Defendant; e The dock constitutes an artificial and known dangerous condition; 28 e Defendant did not provide warning signs on the dock; ORDER DENYING DEFENDANT?’S MOTION TO STAY AND MOTION THY TATICRATCC. SI DANRAITTIAMSC' DI ATINITILCLE? SO RALCATICAYA CLAD CTINANT
I e The plaintiff in the Liability Action was a social guest of Defendant’s son, and she was invited to swim and boat at Defendant’s home; e The plaintiff dove off the dock, and her head hit a cement block 3 connected to the dock, sustaining personal injuries; and e Defendant owed a duty of care to the plaintiff to maintain the dock in 5 a safe condition.
Nowhere in the Liability Action does the plaintiff mention Defendant’s business or the University apartment complex, nor are there references to a home office or any business-related purpose of the party. In addition, the Liability Action does not 9||name Vernice Zanco University South & East as a party. The Liability Action 10}| complaint does not allege that the injury occurred at the apartment complex or that occurred with any connection to the operations necessary or incidental to the 12|| apartment complex. Indeed, the Liability Action appears to be a run-of-the-mill personal injury action against Defendant in her capacity as a homeowner. 14 it. Whether the DPE Clause Bars Coverage 15 Plaintiff also argues that, even if there was a possibility of coverage under 16| the eight corners rule, coverage would be excluded because of the Designated 17|| Premises Endorsement. Defendant argues that the DPE is ambiguous, and that on terms the policy covers any occurrence that occurs within the United States, Puerto Rico, and Canada, rather than just occurrences at the University complex or occurrences incidental to the operation of the University complex. For the reasons 21\| discussed herein, Plaintiff is entitled to judgment as a matter of law because the 22\| DPE bars coverage. 23 The DPE is in the Policy as an endorsement modifying the terms of the original insurance contract. At the top of the page with the clause, it reads in bold and all caps font: “THIS ENDORSEMENT CHANGES THE POLICY.” By its terms, the DPE provides that: 27 “This insurance applies only to ‘bodily injury’... arising out of the 28 ownership, maintenance, or use of the premises shown in the Schedule and ORDER DENYING DEFENDANT?’S MOTION TO STAY AND MOTION TA NICAITICR,. ODANTING DT ATINITTI EES MATIAN DAD CTIININAADY
1 operations necessary or incidental to those premises. This endorsement is part of your policy. It supersedes and controls anything to the contrary. It is 2 otherwise subject to all the terms of the policy.” 3 4 ECF No. 1, Ex. A at 92. Plaintiff has not argued that the policy covers only injuries 5 that occur at the designated premises (here, the University apartment complex). 6 Washington law provides that an endorsement supersedes the original terms 7 of the policy and becomes a part of the original insurance contract. Ku Suen Lui v. 8 Essex Ins. Co., 185 Wash.2d 703, 711-12 (2016). Specific language in an 9 endorsement is not rendered ambiguous by general terms of the policy that the 10 endorsement is intended to modify. Mut. of Enumclaw Ins. Co. v. Patrick Archer 11 Const. Inc., 123 Wash. App. 728, 738 (2004). 12 Here, the DPE modifies the general terms of the policy cited by Defendant 13 to cover all injuries that occur in the United States, Puerto Rico, and Canada. 14 Pursuant to the DPE, the policy covers only injuries that arise out of the ownership, 15 maintenance, use, or operations necessary or incidental to the University complex. 16 The injury at issue in the Liability Action occurred at somewhere other than the 17 designated premises, the claim involves no allegations regarding the designated 18 premises, and the designated premise and business incidental to it had no role in 19 the events giving rise to the claims in the Liability Action. See generally ECF No.1 20 Exs. A and B. 21 Indeed, in discovery in the Liability Action, Defendant admits that the 22 plaintiff in the Liability Action was a social guest, not a business partner or 23 someone at her home for business purposes. See ECF No. 9-1, Answer to RFA No. 24 9. Defendant’s extrinsic argument that, because Defendant’s son is an employee of 25 the apartment complex business and he was socializing with other employees, 26 construing the policy to apply to anything he does with those friends as 27 “incidental” to apartment operations is absurd. See Pub. Util. Dist. No. 1 of 28 1 Clallam Cnty., 112 Wash.2d at 11 (court will not construe an insurance contract to 2 apply to a given circumstance if that construction would be absurd). 3 Thus, based on the plain allegations of the Liability Action complaint and 4 the limits imposed by the DPE, Plaintiff has no duty to defend or indemnify 5 Defendant in the Liability Action. There are no allegations in the Liability Action 6 that could lead to the conclusion that the condition of the dock at Defendant’s 7 home was related to any operation or activity of the University complex. Because 8 there is no causal connection between the University complex and the injury 9 alleged in the Liability Action, the DPE precludes coverage. 10 iii. Whether the WIAI Clause Bars Coverage 11 Plaintiff also argues that the application of the WIAI clause is another 12 independent basis for summary judgment. Plaintiff argues the WIAI clause 13 requires that, in order to trigger coverage under the policy, Defendant’s alleged 14 liability be “with respect to the conduct of a business” of which she is the sole 15 owner. In response, Plaintiff argues that she is not the sole owner of the University 16 complex, so there is no coverage under the Policy. Second, Plaintiff argues that 17 because the Liability Action complaint makes no allegations against Defendant for 18 business conduct, she is not an “insured” for purposes of the Liability Action. As 19 above, Defendant relies on extrinsic facts to argue that the events giving rise to the 20 Liability Action had a business purpose and therefore coverage is triggered. 21 Based on the undisputed facts in the Liability Action and because the Court 22 cannot consider the extrinsic facts put forth by Defendant, there is no coverage due 23 to the WIAI clause. It is undisputed that there are no facts alleged in the Liability 24 Action connecting the condition of the dock and Defendant’s potential liability to 25 any business conduct. The claims against Defendant are unrelated to the conduct of 26 her business, the University apartment complex LLC is not a defendant, and there 27 are no claims against Defendant that are attributable to that LLC. Defendant cannot 28 1 rely on extrinsic facts to change this where neither exception to the eight corners 2 rule applies. 3 4. Conclusion 4 Plaintiff is entitled to summary judgment. There are no genuine disputes of 5 material fact. Although Defendant attempts to introduce extrinsic evidence to 6 create a dispute, these disputes are not of material fact because they do not change 7 the outcome of the Court’s analysis. See Montes v. City of Yakima, 40 F. Supp. 3d 8 1377, 1386 (E.D. Wash. 2014). Plaintiff is entitled to judgment as a matter of law 9 because there is no coverage under the policy. Accordingly, Plaintiff’s Motion for 10 Summary Judgment is granted. 11 Accordingly, IT IS ORDERED: 12 1. Defendant’s Motion to Stay Proceedings, ECF No. 13, is DENIED. 13 2. Defendant’s Rule 12(b)(6) Motion to Dismiss, ECF No. 6, is DENIED. 14 3. Plaintiff’s Motion for Summary Judgment, ECF No. 7, is GRANTED. 15 4. The District Court Executive is directed to enter judgment in favor of 16 Plaintiff and against Defendant declaring as a matter of law that: 17 1. The Mid-Century Insurance Company “Apartment Owners 18 Liability Insurance Policy” No. 60487-27070 issued to Vernice Zanco 19 University South & East LLC does not provide for either the defense 20 of, or indemnity coverage for, the personal injury claims and alleged 21 damages plead in any of the subject lawsuits involving claims by 22 Kimberly Quartararo against Vernice Zanco occurring at Vernice 23 Zanco’s personal home at 615 S. Shoreline Drive, Spokane County, 24 Washington on June 27, 2015; and 25 2. Mid-Century Insurance Company has no further duty to defend 26 defendant Vernice Zanco in any of the subject lawsuits involving 27 claims by Kimberly Quartararo against Vernice Zanco occurring at 28 1 Vernice Zanco’s personal home on June 27, 2015 and may withdraw 2 from her defense. 3 IT IS SO ORDERED. The District Court Clerk is hereby directed to enter this Order, enter declaratory judgment in favor of Plaintiff and against Defendant, 5|| to provide copies to counsel, and close the file. DATED this 27th day of April 2020.
8 9 ‘ Souleyld Eston " Stanley A. Bastian 12 United States District Judge 13 14 15 16 17 18 19 20 21 22) 23 24 25 26 27 28 ORDER DENYING DEFENDANT?’S MOTION TO STAY AND MOTION TA NICAITICR,. ODANTING DT ATINITTI EES MATIAN DAD CTIININAADY