Tackle Eligible Inc v. Scottsdale Insurance Company

• Court: District Court, W.D. Washington
• Decided: September 6, 2022
• Docket: 2:22-cv-00530
• Status: Unknown

Opinion

1 2 3 4

5 6 7 UNITED STATES DISTRICT COURT 8 WESTERN DISTRICT OF WASHINGTON AT SEATTLE 9 10 TACKLE ELIGIBLE, INC., CASE NO. C22-0530-LK 11 Plaintiff, ORDER GRANTING MOTION TO 12 v. STAY 13 SCOTTSDALE INSURANCE COMPANY, 14 Defendant. 15 16 This matter comes before the Court on Tackle Eligible, Inc’s motion to stay this case 17 pending a decision from the Washington State Supreme Court in Hill & Stout PLLC v. Mutual of 18 Enumclaw Ins. Co., No. 100211-4 (Wash.), which, like this case, involves potentially insured 19 losses caused by the COVID-19 pandemic. Dkt. No. 21. For the reasons set forth below, the Court 20 grants the motion to stay. 21 I. BACKGROUND 22 Tackle Eligible, Inc. d.b.a. Earl’s on the Ave owns and operates a bar on University Way 23 in Seattle, Washington. Dkt. No. 1-1 at 3. Tackle Eligible alleges that it was forced to close Earl’s 24 1 as a result of Governor Inslee’s proclamations issued in response to the global COVID-19 2 pandemic, including a proclamation that required the closure of bars and other venues where 3 people gather. Id. at 5–6. Tackle Eligible claims that the “all-risk” insurance policies it purchased 4 from Scottsdale Insurance Company cover the losses it has incurred as a result of the mandatory

5 closures and resulting loss of business. Id. at 4, 6. However, Scottsdale denied coverage to Tackle 6 Eligible. Id. at 6. 7 Tackle Eligible filed suit in King County Superior Court in March 2022, Dkt. No. 1-1 at 2, 8 and Scottsdale promptly removed the case to this Court, Dkt. No. 1. Tackle Eligible asserts claims 9 for a declaratory judgment and for breach of contract, contending that deprivation of the normal 10 use of its insured property is covered under Scottsdale’s property and business insurance policies. 11 Dkt. No. 1-1 at 6–7. Scottsdale counters that pandemic-related losses are not covered because the 12 claims “do not involve ‘direct physical loss of or damage to property’ and are otherwise subject to 13 exclusions from coverage for virus-related losses.” Dkt. No. 24 at 2. 14 The Washington Supreme Court granted discretionary review in Hill & Stout in January

15 2022 and heard oral argument on June 28, 2022.1 Tackle Eligible moved this Court to stay this 16 case pending a decision from the Washington Supreme Court. Dkt. No. 21. A few days later, 17 Scottsdale filed a motion to dismiss. Dkt. No. 22. 18 II. JURISDICTION 19 This Court has jurisdiction based on 28 U.S.C. § 1332. Tackle Eligible seeks “all coverage 20 due” under the insurance policies, Dkt. No. 1-1 at 4, and the policy limits are $300,000, Dkt. No. 21 4 at 2. Tackle Eligible is a Washington corporation with its principal place of business in Seattle, 22

23 1 The Washington Supreme Court also heard oral argument on June 28, 2022 in Seattle Tunnel Partners v. Great Lakes Reinsurance (UK) PLC, No. 100168-1 (Wash.), which also involves the meaning of the “direct physical loss” policy 24 language. See 492 P.3d 843 (Wash. Ct. App. 2021), review granted, 501 P.3d 133 (Wash. 2022). 1 Washington, id. at 1, and Scottsdale is an Ohio corporation with its principal place of business in 2 Ohio, Dkt. No. 1-1 at 3. Accordingly, the parties are diverse, the amount in controversy 3 requirement is met, and this Court has jurisdiction. 4 III. DISCUSSION

5 “[T]he power to stay proceedings is incidental to the power inherent in every court to 6 control the disposition of the causes on its docket with economy of time and effort for itself, for 7 counsel, and for litigants.” Landis v. North Am. Co., 299 U.S. 248, 254 (1936). In considering 8 whether to grant a stay, courts consider several factors, including 9 the possible damage which may result from the granting of a stay, the hardship or inequity which a party may suffer in being required to go forward, and the orderly 10 course of justice measured in terms of the simplifying or complicating of issues, proof, and questions of law which could be expected to result from a stay. 11 CMAX, Inc. v. Hall, 300 F.2d 265, 268 (9th Cir. 1962). 12 Scottsdale argues that there is no reason for a stay—and that a stay will cause unnecessary 13 delay and expense—because a Court in this district has already held that there is no coverage for 14 losses due to COVID-19. Dkt. No. 24 at 2 (citing Nguyen v. Travelers Cas. Ins. Co. of Am., 541 F. 15 Supp. 3d 1200 (W.D. Wash. 2021)); id. at 4. But “when this Court decided Nguyen, it had to predict 16 how the Washington Supreme Court would interpret the relevant policy language,” and now that 17 “the Washington Supreme Court has heard argument on identical language[, i]t would not be in 18 the interest of judicial economy for this Court to predict how the Washington Supreme Court 19 would rule when very soon the court will in fact rule.” Jorgensen v. Dentists Ins. Co., No. 2:22- 20 CV-00474-BJR, 2022 WL 3204893, at *2 (W.D. Wash. July 8, 2022); see also Reckless 21 Enterprises, Inc. v. First Mercury Ins. Co., No. 2:22-CV-00471-BJR, 2022 WL 3204895, at *2 22 (W.D. Wash. July 8, 2022) (“[T]his Court and others have stayed numerous COVID-19 insurance 23 cases since the Washington Supreme Court granted review in Hill & Stout.”). Furthermore, the 24 1 Nguyen decision has been appealed, and the Ninth Circuit recently stayed the case and vacated its 2 submission “pending a decision by the Washington Supreme Court in Hill & Stout PLLC v. Mutual 3 of Enumclaw Insurance Co., No. 100211-4.” Nguyen v. Travelers Cas. Ins. Co. of Am., No. 21- 4 35496, Dkt. No. 74 (9th Cir. Aug. 19, 2022).

5 A stay will promote judicial economy by allowing this Court to receive guidance from the 6 Washington Supreme Court in Hill & Stout before issuing any rulings on the merits, including on 7 Scottsdale’s pending motion to dismiss. Importantly, this case presents two of the same issues as 8 in Hill & Stout: (1) whether COVID-19 related losses are “physical” losses for purposes of the 9 policies and (2) whether Washington’s “efficient proximate cause” rule requires a factual 10 determination of the predominant cause of loss before an insurer can bar coverage by relying on a 11 “virus” coverage exclusion. See Dkt. No. 21 at 1–2, 25. Hill & Stout’s guidance on those legal 12 issues will promote judicial economy by answering threshold questions, regardless of whether the 13 ruling will provide a “definitive answer” to the specific questions presented in this case. Dkt. No. 14 24 at 3. In addition, a stay will not cause unnecessary delay because it will avoid the danger of

15 inconsistent results. “While a delay in proceedings certainly imposes some hardship on both 16 parties, the hardship that could result from conflicting rulings would be far greater.” H Lodge LLC 17 v. Liberty Mut. Fire Ins. Co., No. C21-5184-BHS, 2022 WL 279070, at *4 (W.D. Wash. Jan. 31, 18 2022). 19 IV. CONCLUSION 20 For the foregoing reasons, the Court GRANTS Tackle Eligible’s motion to stay, Dkt. No. 21 21. The parties are directed to submit a joint status report within 30 days of the date of a final 22 decision in Hill & Stout. 23

24 1 Dated this 6th day of September, 2022. 2 A 3 Lauren King United States District Judge 4 5 6 7 8 9 10 11 12 13 14

15 16 17 18 19 20 21 22 23