Stillwater Insurance Company v. Wang

• Court: District Court, W.D. Washington
• Decided: March 13, 2025
• Docket: 2:24-cv-01531
• Status: Unknown

Opinion

THE HONORABLE JOHN C. COUGHENOUR 1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 WESTERN DISTRICT OF WASHINGTON 8 AT SEATTLE 9 STILLWATER INSURANCE COMPANY, CASE NO. C24-1531-JCC 10 Plaintiff, ORDER 11 v. 12 SHU-MEI WANG and BEIJING MEN, 13 Defendants. 14

15 This matter comes before the Court on Plaintiff Stillwater Insurance Company’s motion 16 for summary judgment (Dkt. No. 14). Having thoroughly considered the briefing and relevant 17 record, and finding oral argument unnecessary,1 the Court GRANTS the motion for the reasons 18 explained herein. 19 I. BACKGROUND 20 According to Stillwater’s Amended Complaint, (Dkt. No. 7 at 19–23), it provided 21

22 1 Plaintiff requested oral argument, but Defendants did not. (Compare Dkt. No. 14 at 1, with Dkt. No. 17 at 1.) The Court deems such argument unnecessary because the parties have had a full 23 opportunity to brief Plaintiff’s motion. See Partridge v. Reich, 141 F.3d 920, 926 (9th Cir. 1998) 24 (oral argument not required if parties are given adequate opportunity to submit papers in support of and/or opposition to the motion). Moreover, as the Court is ultimately ruling in Plaintiff’s 25 favor, it cannot show prejudice from failing to present its arguments orally. See Jasinski v. Showboat Operating Co., 644 F.2d 1277, 1280 (9th Cir. 1981) (requiring a showing of 26 prejudice). 1 Defendants Shu-Mei Wang and Beijing Men, a married couple (“the insureds”), with 2 homeowners insurance, (see Dkt. No. 14-2) (policy). They were then named as defendants in two 3 suits, each alleging that Ms. Wang misrepresented possible real estate investments to individuals. 4 (See Dkt. Nos. 14-3, 14-4) (complaints originally filed in King County Superior Court2). The 5 resulting complaints assert a variety of claims against one or both of the insureds, including 6 breach of contract, fraud, statutory violations, and negligent misrepresentation. (See generally 7 id.) Stillwater is defending each under a reservation of rights, (see Dkt. No. 7 at 23). This is 8 consistent with its policy. (See Dkt. No. 14-2 at 27) (provision articulating Stillwater’s duty to 9 defend). 10 Stillwater recently brought suit against the insureds in this Court, arguing that the 11 allegations in the underlying cases do not trigger a duty to defend (nor would a resulting 12 judgment trigger an indemnification obligation) because its policy does not cover the alleged 13 wrongs. (See generally Dkt. No. 7.) Stillwater sought declaratory relief from this Court on this 14 basis. (Id. at 29–30.) Stillwater now moves for summary judgment. (See Dkt. No. 14.) In support, 15 it offers the policy with the insureds, along with the copies of the complaints Stillwater is 16 currently defending. (See generally Dkt. Nos. 14, 14-2–14-4.) 17 II. DISCUSSION 18 Summary judgment is proper if “there is no genuine dispute as to any material fact and 19 the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). When considering a 20 motion for summary judgment, the Court views the facts in the light most favorable to the 21 nonmoving party and resolves ambiguity in that party’s favor, but it must not make credibility 22 determinations or weigh evidence. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248–49, 23 255 (1986); Bator v. Hawaii, 39 F.3d 1021, 1026 (9th Cir. 1994). 24 The policy at issue covers “bodily injury” or “property damage” arising from an 25 2 The latter was removed to this Court. See Zhu v. Wang, et al., Case No. 2:23-cv-1395-JCC, 26 Dkt. No. 1 (W.D. Wash. 2023) (notice of removal). 1 “occurrence.” (Dkt. No. 14-2 at 27.) Stillwater asserts it has no duty to defend or indemnify 2 because the conduct and harms alleged are not covered by the policy and, even if they were, a 3 coverage exclusion applies. (Dkt. No. 14 at 15–25.) Specifically, says Stillwater, (1) Ms. Wang’s 4 alleged conduct was intentional and, therefore, not an “occurrence;” (2) the harms alleged do not 5 constitute a bodily injury or property damage; and, finally, (3) business activity and/or 6 professional services policy exclusions apply. (Id. at 23–29.) 7 Under Washington law,3 an insurer’s “duty to defend arises when a complaint against the 8 insured, construed liberally, alleges facts which could, if proven, impose liability upon the 9 insured within the policy’s coverage.” Nat’l Sur. Corp. v. Immunex Corp., 297 P.3d 688, 691 10 (Wash. 2013) (internal quotations omitted); see Mut. of Enumclaw Ins. Co. v. USF Ins. Co., 191 11 P.3d 866, 873 n.7 (Wash. 2008) (“[T]he duty to defend arises when a complaint contains any 12 allegations that could make an insurer liable to an insured under the policy.”). A duty to 13 indemnify arises once an insured is found legally responsible for the harms alleged in the 14 complaint. Natl. Sur. Corp., 297 P.3d at 691. “In sum, the duty to defend is triggered if the 15 insurance policy conceivably covers the allegations in the complaint, whereas the duty to 16 indemnify exists only if the policy actually covers the insured’s liability.” Natl. Sur. Corp. v. 17 Immunex Corp., 256 P.3d 439, 445 (Wash. Ct. App. 2011), aff’d, 297 P.3d 688 (Wash. 2013). 18 In an insurance dispute such as this one, “[t]he party seeking to establish coverage bears 19 the initial burden of proving coverage under the policy has been triggered,” while “[t]he insurer 20 bears the burden of establishing an exclusion to coverage.” Pleasant v. Regence BlueShield, 325 21 P.3d 237, 243 (Wash. Ct. App. 2014) (citing Diamaco, Inc. v. Aetna Cas. & Sur. Co., 983 P.2d 22 707, 709 (Wash. Ct. App. 1999)). To determine whether a claim might conceivably be covered 23 (and trigger a duty to defend), an insurer typically looks to the “eight cor[n]ers” of the policy and 24 the complaint(s) against the insured. Xia v. ProBuilders Specialty Ins. Co., 400 P.3d 1234, 1240 25 (Wash. 2017). If the documents do not raise an issue of fact or law that could conceivably result

26 3 It is undisputed that Washington law controls. (See generally Dkt. Nos. 14, 17.) 1 in coverage, then the insurer need not defend. Id. But “if there is any reasonable interpretation of 2 the facts or law that could result in coverage, the insurer must defend.” Am. Best Food, Inc. v. 3 Alea London, Ltd., 229 P.3d 693, 696 (Wash. 2010). 4 Stillwater first contends that the allegations against Ms. Wang amount to “intentional 5 conduct [by her] related to various business transactions.” (Dkt. No. 14 at 17.) Meaning, they do 6 not amount to a qualifying “occurrence” because they are not accidental or unforeseen. (Id.) In 7 response, the insureds point to the negligent misrepresentation claims each complaint asserts 8 against Ms. Wang. (See Dkt. No. 17 at 7.) While the allegations supporting such claims are 9 minimal, (see Dkt. Nos. 14-3 at 29–31, 14-4 at 14), they exist. And they are sufficient to 10 withstand summary judgment, at least on the issue of a qualifying occurrence. See Truck Ins. 11 Exch. v. Vanport Homes, Inc., 58 P.3d 276, 281 (Wash. 2002) (“if there is any potential for 12 coverage, the insurer must defend” even if “certain allegations fall outside of the policy’s 13 coverage.”). But this is not the end of the story. 14 Stillwater next contends that the complaints fail to allege a qualifying harm,4 namely 15 property damage. (Dkt. No. 14 at 17–20.) The policy defines “property damage” to include the 16 “loss of use of tangible property.” (Dkt. No. 14-2 at 10, 27.) In opposing summary judgment, the 17 insureds focus on this language—they contend that certain allegations within the complaint(s) 18 could be interpreted to represent a loss of use of property. (See Dkt. No. 17 at 7–8.) Specifically, 19 they point to the allegation that Ms. Wang told investors, in exchange for money remitted, they 20 would receive an investment secured by real property. (See Dkt. Nos. 14-3 at 7, 12, 19; 14-4 at 4, 21 5.) The insureds suggest the deprivation of their security interest(s) could amount to a loss of use 22 of the underlying property. (See Dkt. No. 17 at 7–8.) The argument is not well taken. For one, a 23 possible security interest in property, and the loss thereof, is far too attenuated to represent the 24 25 4 There seems to be no dispute that bodily injury is not alleged in the underlying complaints. (See 26 generally Dkt. No. 14, 17.) 1 loss of use of property. 5 For two, the complaint(s) also indicate that, in fact, the investors 2 received no legally colorable security interest(s) in such property. (See Dkt. Nos. 14-3 at 20, 14-4 3 at 10–12.) Thus, there can be no loss of use, and, as such, no qualifying injury. 4 Finally, Stillwater contends, (see Dkt. No. 14 at 20–22), had there been a qualifying 5 injury, the policy’s business6 exclusion precludes coverage, (see Dkt. No. 14-2 at 29) (exclusion 6 provision at issue). Under Washington law, a business exclusion provision is effective unless the 7 insured is operating outside of the scope of their employment, not using an instrument related to 8 the business, or not motivated by a business purpose. Stuart v. Am. States Ins. Co., 932 P.2d 697, 9 700 (Wash. Ct. App. 1997), aff’d, 953 P.2d 462 (Wash. 1998). According to each underlying 10 complaint, Ms. Wang held herself out to be a real estate professional when soliciting the funds at 11 issue from investors. (See Dkt. Nos. 14-3 at 4, 14-4 at 4–11.) Thus, says Stillwater, any resulting 12 conduct and harms, even if otherwise covered, would be excluded by the nature of Ms. Wang’s 13 profession, as it falls squarely within its scope. (See Dkt. No. 14 at 20–22.) The Court agrees. 14 The complaints describe Ms. Wang as an individual who marketed real estate investments and 15 solicited funds in her capacity as a real estate professional. (See Dkt. Nos. 14-3 at 4, 14-4 at 4– 16 11.) Thus, the business exclusion applies. Stillwater also suggests its professional services policy 17 exclusion applies. (See Dkt. No. 14 at 22–25.) The Court elects not to reach this argument, as 18 Stillwater’s other arguments are sufficient to support summary judgment in Stillwater’s favor. 19 To summarize, the Court finds as a matter of law that Stillwater’s policy does not impose 20 a duty to defend or indemnify the insureds in the underlying suits. This is because there is no 21 coverage for the alleged conduct and, even if there were, policy exclusions would preclude 22 5 The cases the insureds cite in support otherwise, (see Dkt. No. 17 at 5–7), are inapt. Each 23 involve the loss of use of actual property. See State Farm Fire and Cas. Co. v. Heather Ridge, L.P., 2013 WL 179713, slip op. at 3 (W.D. Wash. 2013)) (loss of use of apartment complexes); 24 Allstate Ins. Co. v. Bowen, 91 P.3d 897, 900 (Wash. Ct. App. 2004) (damage to a sewer line 25 resulting in loss of use of real property). 6 “Business” is broadly defined as a “trade, profession, or occupation engaged in on a full-time, 26 part-time, or occasional basis.” (Id. at 8.) 1 coverage. 2 III. CONCLUSION 3 For the foregoing reasons, the Court GRANTS Stillwater’s motion for summary 4 judgment (Dkt. No. 14). 5 6 DATED this 13th day of March 2025. A 7 8 9 John C. Coughenour 10 UNITED STATES DISTRICT JUDGE

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