UniBank, et al. v. Great American Security Insurance Company

• Court: District Court, W.D. Washington
• Decided: June 23, 2026
• Docket: 2:25-cv-01261
• Status: Unknown

Opinion

1 The Honorable Barbara J. Rothstein

5 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON 6 AT SEATTLE

7 NO. 25-cv-1261-BJR UNIBANK, et al., 8 ORDER GRANTING DEFENDANT’S Plaintiffs, MOTION TO DISMISS 9 v. 10 GREAT AMERICAN SECURITY 11 INSURANCE COMPANY,

12 Defendant.

13 I. INTRODUCTION 14 This lawsuit involves an insurance coverage dispute between Plaintiffs, UniBank and U&I 15 Financial Corp. (collectively, “UniBank”), and Defendant Great American Security Insurance 16 Company (“Great American”). Currently pending before the Court is Great American’s Motion to 17 Dismiss Plaintiffs’ Second Amended Complaint, Mot., ECF No. 41. Having reviewed the materials1 18 and the relevant legal authorities, the Court will grant the motion. The reasoning for the Court’s 19 decision follows. 20 21 22 1 Including the motion, ECF No. 41; Plaintiffs’ response in opposition, ECF No. 45; and Defendant’s reply, ECF No. 23 47; together with attached declarations and exhibits.

24 ORDER GRANTING DEFENDANT’S MOTION TO DISMISS 1 II. BACKGROUND 2 Great American insured UniBank under a Directors & Officers Liability Policy, Policy 3 Number DNOE423841, for the period from October 31, 2022 to October 31, 2023 (“the Policy”). 4 Sec. Am. Compl.2 ¶ 1, ECF No. 38; Policy, Ex. 1, ECF No. 43-1. On October 31, 2023, a lawsuit 5 was filed against UniBank and certain of its individual officers and/or directors (“the Bowman 6 Lawsuit”),3 which was timely tendered to Great American for coverage under the Policy. Id. ¶ 4. 7 Additional individuals were added to the Bowman Lawsuit in November 2025, and factual 8 allegations were expanded in an amended complaint. Id. ¶ 5; Bowman Lawsuit Compl., Ex. 2, ECF 9 No. 44-1. 10 The Bowman plaintiffs allege that UniBank provided Small Business Administration loans 11 to finance purchases of carbon capture and utilization units from Clean Energy Technology

12 Association, Inc. (“CETA”), which turned out to be a Ponzi scheme. Bowman Lawsuit Compl. 2. 13 A second underlying proceeding was also tendered to Great American for coverage—an 14 administrative action filed by the State of Washington Department of Financial Institutions, 15 Division of Banks (“the Administrative Action”). Sec. Am. Compl. ¶ 10. The Administrative Action 16 involved allegations against former UniBank officers related to their role in arranging loans from 17 UniBank to finance CETA purchases. Id. ¶¶ 11-13. 18 UniBank seeks a declaratory judgment that the Policy provides coverage for the two 19 underlying actions up to the $7 million D&O Policy limit, and that it also provides separate 20 coverage under the Broad Form Company Liability (“BFCL”) limit of $3 million, including the 21 costs of defending against the claims asserted in the underlying actions. Sec. Am. Compl. ¶¶ 15-

22 2 The Second Amended Complaint, ECF No. 38, is the operative complaint. 23 3 Referring to Bowman, et al. v. UniBank, et al., Snohomish County Case No. 23-2-07972-31).

24 ORDER GRANTING DEFENDANT’S MOTION TO DISMISS 1 17. This represents total coverage of $10 million. Id. UniBank also asserts a second cause of action 2 for breach of contract, alleging that Great American breached its obligations under the Policy by 3 failing to make the full policy limits available in response to the Bowman Lawsuit and the 4 Administrative Action. Id. ¶¶ 18-21. 5 Great American responds that the underlying actions constitute a single claim that arises out 6 of UniBank’s “Lending Services” and is subject to the BFCL limit of $3 million. Mot. 2-3. As such, 7 Great American asserts that this case involves a narrow legal dispute, requiring the interpretation 8 of a single provision of an insurance policy, which is appropriate for resolution and dismissal with 9 prejudice under Federal Rule of Civil Procedure 12(b)(6). Id. at 8. 10 III. LEGAL STANDARDS 11 A. Dismissal under Rule 12(b)(6) 12 A motion to dismiss for failure to state a claim under Rule 12(b)(6) is properly granted if 13 the complaint does not “contain sufficient factual matter, accepted as true, to ‘state a claim to relief 14 that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. 15 v. Twombly, 550 U.S. 544, 570 (2007)). The plaintiff must plead “factual content that allows the 16 court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. 17 “A complaint may fail to show a right to relief either by lacking a cognizable legal theory or by 18 lacking sufficient facts alleged under a cognizable legal theory.” Woods v. U.S. Bank N.A., 831 F.3d 19 1159, 1162 (9th Cir. 2016). When considering a motion to dismiss under Rule 12(b)(6), courts must 20 accept the factual allegations in the complaint as true and construe such allegations in the light most 21 favorable to the plaintiff. Interpipe Contracting, Inc. v. Becerra, 898 F.3d 879, 886-87 (9th Cir.

22 2018). 23

24 ORDER GRANTING DEFENDANT’S MOTION TO DISMISS 1 Typically, a court may not consider material beyond the pleadings in ruling on a Rule 2 12(b)(6) motion. United States v. Ritchie, 342 F.3d 903, 907 (9th Cir. 2003). “A court may, 3 however, consider certain materials—documents attached to the complaint, documents 4 incorporated by reference in the complaint, or matters of judicial notice—without converting the 5 motion to dismiss into a motion for summary judgment.” Id. at 908. The court may consider such 6 documents so long as their authenticity is not contested, and the complaint relies on them.4 Id., see 7 also Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001). 8 B. Principles Governing Insurance Contract Interpretation 9 Federal Courts sitting pursuant to diversity jurisdiction, as here, apply state substantive law, 10 including the state substantive law regarding insurance policy interpretation. See Indian Harbor 11 Ins. Co. v. City of Tacoma Dep’t of Pub. Utilities, 354 F. Supp. 3d 1204, 1212 (W.D. Wash. 2018) 12 (citing Gasperini v. Center for Humanities, Inc., 518 U.S. 415, 427 (1996)). Under Washington 13 law, “[c]onstruction of an insurance policy is a question of law for the courts, the policy is construed 14 as a whole, and the policy ‘should be given a fair, reasonable, and sensible construction as would 15 be given to the contract by the average person purchasing insurance.’” Queen Anne Park 16 Homeowners Ass’n v. State Farm Fire & Cas. Co., 183 Wn. 2d 485, 489 (2015) (quoting Queen 17 City Farms, Inc. v. Cent. Nat’l Ins. Co. of Omaha, 126 Wn. 2d 50, 65 (1994)). 18 “In construing the language of an insurance policy,” the Court looks to “the entire contract, 19 [which] must be construed together so as to give force and effect to each clause.” Boeing Co. v. 20 Aetna Cas. & Sur. Co., 113 Wn. 2d 869, 876 (1990). Undefined terms within a policy are to be 21 given their “plain, ordinary, and popular meaning.” Xia v. ProBuilders Splty Ins. Co., 188 Wn.2d

23 4 The Court has considered the Policy and the underlying Bowman Lawsuit Complaint.

24 ORDER GRANTING DEFENDANT’S MOTION TO DISMISS 1 171, 181-82 (2017) (quoting Key Tronic Corp. v. Aetna (CIGNA) Fire Underwriters Ins. Co., 124 2 Wn. 2d 618, 627 (1994)). 3 If an undefined term is ambiguous, it “must be construed against the insurer and in favor of 4 the insured.” Holden v. Farmers Ins. Co. of Wash., 169 Wn. 2d 750, 756 (2010). A term is 5 considered ambiguous where “it is susceptible to more than one reasonable interpretation.” Id.; see 6 also McLaughlin v. Travelers Com. Ins. Co., 196 Wn. 2d 631, 642 (2020). In determining whether 7 ambiguity exists, the Court may look to “context and the intent of parties.” Holden, 169 Wn. 2d at 8 756. Where, however, the language of a policy is clear and unambiguous, the Court “must enforce 9 the policy as it is written and may not modify the policy or create ambiguity where none exists.” 10 Mass. Bay Ins. Co. v. Walflor Indus., Inc., 383 F. Supp. 3d 1148, 1157 (W.D. Wash. 2019) (citing 11 Pub. Util. Dist. No. 1 of Klickitat Cnty. v. Int’l Ins. Co., 124 Wn. 2d 789, 797 (1994)).

12 IV. DISCUSSION 13 A. Policy Interpretation 14 Great American argues that the unequivocal language of the Policy Section VI.A.(5) caps 15 its total liability at $3 million (the BFCL amount) because all UniBank’s claims arise out of 16 “Lending Services.” Mot. 9. The referenced Policy language states: 17 The Insurer’s maximum Limit of Liability under this Policy with respect to all Claims arising out of or in any way involving 18 Lending Services shall not exceed the Limit of Liability provided under the Lender Liability Insuring Agreement, Broad Form Lender 19 Liability Insuring Agreement or Broad Form Company Insuring Agreement, whichever is so attached to this Policy, regardless as to 20 whether a shared or separate limit is specified in Item 8. of the Declarations for any Insuring Agreement provided to the Insured 21 under this Policy. 22 Policy at 47, 1.(5). The Broad Form Company Liability limit is set at $3 million under Item 9 of 23 the Policy. Id. at 3.

24 ORDER GRANTING DEFENDANT’S MOTION TO DISMISS 1 Great American asserts that the “Declarations, main form and endorsements were all issued 2 together, as one contract,” so must be “read as a whole, including endorsements.” Reply 6 (quoting 3 Kut Suen Lui v. Essex Ins. Co., 185 Wn. 2d 703, 716-17 (2016)). According to Great American, 4 that single contract allows for coverage for liability arising out of “Lending Services” for both 5 individual directors and officers (under Insuring Agreements A and B) and the company (under the 6 BFCL Insuring Agreement), but all coverage is subject to a $3 million limit. Id. 7 UniBank argues that the plain language of the Policy declarations specifies the base limits 8 that Great American agreed to provide, and “Item 3a states that the ‘Total Policy Limit’ ‘shall not 9 exceed $14,000,000, ‘regardless of whether such Insuring Agreement is provided as a sublimit or 10 separate limit.’” Opp’n 5 (quoting the Policy at 2). According to UniBank, the “average purchaser 11 of insurance would reasonably interpret the foregoing as stating that the Policy provides $7 million

12 in limits for any D&O claim, but no more than $14 million for all claims in a policy year,” and 13 “that the Broad Form Endorsement’s separate $3 million limit is in addition to the Main Form’s $7 14 million limit for claims implicating both coverages, such that $10 million in total coverage is 15 available for such claims.” Id. at 5-6. UniBank also argues that the “Order of Payments” section 16 clearly anticipates that “one or more Claims” can implicate multiple coverages and limits under the 17 Policy. Id. at 8. Further, according to UniBank, the allegations against the directors and officers go 18 beyond lending activities, alleging other “wrongful acts” that trigger the additional D&O coverage. 19 Id. at 2-4. 20 In sum, the disputed issue is whether Great American’s liability is limited to $3 million 21 under the circumstances here. As stated above, Washington courts enforce clear contract language

22 as it is written. Mass. Bay, 383 F. Supp. 3d at 1157. Here, the Policy explicitly dictates that the 23 coverage cap of $3 million applies to all Claims “arising out of or in any way involving Lending

24 ORDER GRANTING DEFENDANT’S MOTION TO DISMISS 1 Services,” expressly overriding any separate or shared limits listed elsewhere, including Item 8 of 2 the Declarations. Policy 47. The Policy broadly defines “Lending Services” to encompass any 3 services “involving or relating to” an extension of credit, loan servicing, or collections. Both the 4 Bowman Lawsuit and the Administrative Action fundamentally stem from UniBank’s provision of 5 loans that financed purchases from CETA. Sec. Am. Compl. ¶¶ 8-13; Bowman Lawsuit Compl.; 6 also see Opp’n 2-3. Although there may be other “wrongful acts” alleged, both matters directly 7 involve and relate to Lending Services, which triggers the clear, contractually agreed-upon cap on 8 coverage for loss arising out of Lending Services. See Policy 47 (describing “Lending Services” as 9 those “involving or relating to an extension of credit”). 10 The Policy language caps the entire Claim if it possesses any nexus to Lending Services. 11 See Policy at 10, 19 (describing a single Claim as claims based upon or arising out of the same

12 wrongful act or interrelated wrongful acts); see also State Farm Mut. Auto. Ins. Co. v. Centennial 13 Ins. Co., 14 Wn. App. 541, 543 (1975) (reasoning that “[t]he phrase ‘arising out of’ is unambiguous 14 and has a broader meaning than ‘caused by’ or ‘resulted from,’” and is ordinarily understood to 15 mean “originating from”, “having its origin in”, “growing out of”, or “flowing from”). Since the 16 entire Claim undeniably involves Lending Services, UniBank cannot manufacture additional 17 coverage limits or circumvent the contractually agreed-upon cap by recharacterizing portions of the 18 dispute as independent, non-lending wrongful acts. 19 Further, UniBank’s attempt to construct a $10 million limit by combining the $7 million 20 D&O limit and the $3 million BFCL limit ignores the Policy’s specific exception for claims 21 involving “Lending Services,” which creates a financial ceiling of $3 million for this lending-

22 involved dispute. 23

24 ORDER GRANTING DEFENDANT’S MOTION TO DISMISS 1 B. Requested Discovery 2 The issue before the Court is one of contract interpretation of policy language that the Court 3 finds clear and unambiguous. This being a legal issue, the Court finds that discovery will not be 4 helpful or illuminating. Therefore, the Court will deny UniBank’s request for discovery and grant 5 Great American’s motion to dismiss. 6 V. CONCLUSION 7 For the foregoing reasons: 8 1. Defendant’s Motion to Dismiss Second Amended Complaint, ECF No. 41, is GRANTED; 9 2. Plaintiffs’ Second Amended Complaint is DISMISSED WITH PREJUDICE; 10 3. Judgment shall be entered by separate Order. 11 DATED this 23rd day of June 2026. 12 A 13 14 B arbara Jacobs Rothstein United States District Judge 15 16 17 18 19 20 21 22 23

24 ORDER GRANTING DEFENDANT’S MOTION TO DISMISS