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International Marine Underwriters v. ABCD Marine, LLC

Supreme Court of Washington, En Banc

November 27, 2013

International Marine Underwriters, Respondent,
ABCD Marine, LLC, et al., Defendants, Albert Boogaard, Petitioner

Argued February 19, 2013.

Appeal from King County Superior Court. 08-2-13632-9. Honorable Eric Bjug Watness.

David J. Balint and Martin D. Fox for petitioner.

Dennis M. Moran and William A. Keller (of Moran & Keller PLLC ), for respondent.

AUTHOR: Justice James M. Johnson. WE CONCUR: Chief Justice Barbara A. Madsen, Justice Susan Owens. AUTHOR: Justice Charles K. Wiggins. WE CONCUR: Justice Mary E. Fairhurst. AUTHOR: Justice Charles W. Johnson. WE CONCUR: Justice Debra L. Stephens, Justice Steven C. Gonzá lez, Justice Sheryl Gordon McCloud.


Page 396

J.M. Johnson, J.

[179 Wn.2d 275] ¶ 1 Albert Boogaard argues that the comprehensive marine liability insurance policy he purchased from International Marine Underwriters (IMU) for his general partnership, ABCD Marine, covers the bodily injuries he suffered while working as an independent [179 Wn.2d 276] contractor for Northland Services Inc. (NSI). Specifically, Boogaard claims that even as a general partner he qualifies and is covered as a third party under the " insured contract" provision of the policy.

Page 397

IMU contends that as a general partner and an insured, Boogaard is not a third party under the insured contract provision, so there is no coverage.

¶ 2 We affirm summary judgment in favor of IMU. As a general partner, Boogaard does not qualify as a third party under the " insured contract" provision in accordance with Washington partnership law.

Facts and Procedural History

¶ 3 At the time pertinent to this case, Boogaard was one of two partners in ABCD, a Washington general partnership. Boogaard formed ABCD by oral agreement with Wes Dahl in 2000 for the purpose of providing marine welding services. Boogaard and Dahl were both welders and did the majority of their work as independent contractors for the Northland family of companies at " Terminal 115" on the Duwamish River in Seattle. Boogaard was the senior partner and took the responsibility on himself to secure insurance and handle all of the partnership's other administrative paperwork.

¶ 4 In August 2001, the supervisor for barge maintenance and repair at Terminal 115 sent the contractors working at the terminal a letter in which he informed them that they would need to provide proof of general liability coverage in the amount of $ 1,000,000 in order to continue to work at the terminal. Clerk's Papers (CP) at 328. The required proof was a certificate of insurance that in addition to stating the coverage details, had to name and expressly add Naknek Barge Lines LLC (Naknek) and Northland Holdings Inc. (Northland) as additional insureds. Id. In order to comply with this requirement, Boogaard turned to ABCD's insurance broker, Alliance Insurance Corporation. Boogaard took the supervisor's letter directly to Alliance and requested [179 Wn.2d 277] insurance that complied with its requirements. Alliance purchased a policy on ABCD's behalf and issued a certificate reflecting aggregate coverage of $ 1,000,000 and Naknek and Northland as additional insureds. CP at 330. Alliance issued a similar certificate for the 2002-2003 policy period. [1] CP at 332. No endorsements securing Naknek and Northland's status as additional insureds were ever issued. The policy included an exclusion for contractually assumed liability but had an exception to that exclusion for " insured contracts" : contracts in which the insured " assume[s] the tort liability of another party to pay for 'bodily injury' or 'property damage' to a third person or organization." CP at 136.

¶ 5 In September 2004, after Naknek was acquired by a Northland entity, the terminal supervisor informed the contractors that they would need to sign a new agreement (Access Agreement) with NSI in order to continue work at Terminal 115. The Access Agreement required ABCD to indemnify NSI for " all bodily and personal injuries to all persons arising out of or resulting from its operations and/or use of the [NSI] [p]roperty, including bodily and personal injuries to its own employees, except if caused by the sole intentional negligence of NSI." CP at 275. The Access Agreement also required ABCD to maintain a general liability policy for $ 1,000,000 that included an additional insured endorsement naming NSI as an additional insured. Id.

¶ 6 On September 29, 2004, Boogaard was presented with the Access Agreement. CP at 179-80, 274. Boogaard gave it a five-minute review and then personally filled it out and signed it in his capacity as " Senior Partner." Id. Boogaard did not know what an " additional insured" was and thought the insurance he had in place at the time was sufficient. CP at 183. Boogaard did not contact his broker, Alliance, to see if he had to modify his insurance in any way to comply with [179 Wn.2d 278] the requirements detailed in the Access Agreement. Id. Boogaard did not take the Access Agreement to a lawyer or anyone else to see if it required additional insurance. [2] CP at 184.

¶ 7 In October 2004, Boogaard was seriously injured while on the job at Terminal 115

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by an NSI employee operating a forklift.[3], [4] As a result of his injuries, Boogaard incurred approximately $ 92,000 in medical bills, suffered permanent injuries, and was out of work for approximately one year.

¶ 8 In November 2004, Boogaard and Dahl converted ABCD into a limited liability company (LLC). As a result of the accident, Boogaard realized that as a general partnership he and Dahl were exposed to what he deemed to be an unacceptable amount of personal liability. CP at 170.

¶ 9 In December 2004, acting on behalf of ABCD LLC, Alliance contacted IMU and asked that IMU change ABCD's policy to reflect its new LLC status, issue a certificate of insurance naming NSI as an additional insured, and issue additional insured and waiver of subrogation endorsements. For an additional $ 250 premium, IMU changed the policy and issued the endorsements as requested effective prospectively starting December 1, 2004. Alliance issued the accompanying certificate on December 10, 2004.

¶ 10 In November 2006, Boogaard filed a lawsuit in King County Superior Court against NSI and the forklift operator. NSI answered and counterclaimed, alleging, among other things, breach of the Access Agreement. In March [179 Wn.2d 279] 2007, Boogaard tendered defense of the counterclaims to IMU. IMU accepted the tender under a reservation of rights and appointed additional counsel to work with Boogaard's primary counsel to defend against NSI's counterclaims. In March 2008, the trial court granted NSI summary judgment, ordering Boogaard to indemnify NSI pursuant to the Access Agreement for any amounts he may recover against NSI in the action, including attorney fees and costs. The trial court also found that Boogaard breached the Access Agreement by failing to procure insurance covering NSI.

¶ 11 After the trial court issued the summary judgment order, Boogaard's primary counsel asked IMU if it would be willing to continue to prosecute the appeal of the summary judgment order and if IMU would be covering any of the damages the court awarded NSI. IMU responded by letter on March 20, 2008, that it would continue to provide counsel for an appeal but that it would not agree to cover the damages the court awarded NSI, as IMU had determined that the policy did not cover NSI.

¶ 12 On April 10, 2008, during mediation, NSI and Boogaard reached a settlement agreement in which Boogaard was awarded $ 600,000 and NSI was awarded $ 712,022.01 (indemnification for the amount of damages awarded to Boogaard and NSI's attorney fees and costs). CP at 595-96, 740-743. NSI also agreed to pay Boogaard an additional $ 50,000 in partial satisfaction of the $ 600,000 judgment against NSI. CP at 596, 743. Boogaard agreed not to execute or enforce his judgment against NSI and to only seek recovery from IMU. CP at 742. The parties further agreed that resolution of the insurance claims, regardless of the outcome of that litigation, would be deemed as satisfaction of the judgments each party had against the other. Id.

¶ 13 On April 28, 2008, IMU filed a complaint for declaratory relief, seeking a judicial determination that there is no coverage under the IMU policy for the NSI counterclaims. In his answer and counterclaim, Boogaard argued that IMU's denial was in bad faith, that there was coverage [179 Wn.2d 280] under the policy for the counterclaims, or in the alternative, that IMU should be estopped from denying coverage and that Boogaard should be awarded treble damages and attorney fees. [5]

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¶ 14 In August 2008, the trial court determined that the settlement between Boogaard and NSI was reasonable. In its reasonableness order, the court specifically found the settlement reasonable as to IMU because not only was IMU involved in the defense of the counterclaims, it was also a party to the mediation where the settlement was negotiated and was given both a notice of the reasonableness hearing and an opportunity to participate. [6]

¶ 15 In November 2009, IMU moved for partial summary judgment in the declaratory action, asking the court to determine that as a matter of law the IMU comprehensive marine liability policy does not cover the damages resulting from the NSI counterclaims. IMU argued that the policy was intended to cover ABCD and Boogaard's liability to others for the partners' negligence. IMU argues that this intent is manifested by the policy's listing ABCD Marine as the " named insured" and Boogaard as an " insured." CP at 110, 125. IMU acknowledged that there was an " insured contract" exception that would cover the torts of others which cause damage to " third persons or organizations." Id. [179 Wn.2d 281] IMU argued, however, that Boogaard does not qualify as a " third person," under the terms of the policy. [7]

¶ 16 In January 2010, the trial court granted IMU's motion for partial summary judgment, ruling that as a matter of law, the damages arising out of the forklift incident are not covered by the IMU policy. The trial court subsequently denied Boogaard's motion for reconsideration. [8]

¶ 17 Boogaard and ABCD appealed the trial court's summary judgment order and the Court of Appeals affirmed the trial court in a 3-0 decision, holding that Boogaard is not a " third person." Int'l Marine Underwriters v. ABCD Marine, LLC, 165 Wn.App. 223, 232, 267 P.3d 479 (2011). Boogaard and ...

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