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Century Surety Co. v. Belmont Seattle, LLC

United States District Court, W.D. Washington, Seattle

April 9, 2014

CENTURY SURETY COMPANY, Plaintiff,
v.
BELMONT SEATTLE, LLC, Defendant.

ORDER DENYING MOTIONS FOR SUMMARY JUDGMENT

MARSHA J. PECHMAN, Chief District Judge.

This matter is before the Court on Defendant's motion for summary judgment and attorney's fees and costs (Dkt. No. 55) and on Plaintiff's renewed motion for summary judgment (Dkt. No. 57). The Court reviewed both motions and all related pleadings and documents. The Court DENIES both motions for summary judgment without prejudice.

Background

Plaintiff-insurer Century Surety ("Century") originally brought this insurance dispute against Defendant-insured Belmont Seattle, LLC ("Belmont"), seeking declaration that Century had no duty to defend Belmont in an underlying lawsuit brought by a third party for alleged construction defects in Belmont's property. (Dkt. No. 31.)

In 2005, Westmoore Management, LLC ("Westmoore") and other investors in a joint venture purchased an apartment building with the intent to convert it into a condominium. (Dkt. No. 36 at 1.) As manager of the Joint Venture, Westmoore worked to move out existing tenants after the purchase. (Id. at 9.) Westmoore did not renew or initiate new leases, but continued to collect rent from existing tenants until all tenants were vacated from the building. (Id. at 2.) Rent collected was deposited into Westmoore's account. (Id. at 3.) In 2007, the Joint Venture formed a limited liability company, Belmont Seattle, LLC, which took title to the apartment building by quit claim deed and completed converting the building into a condominium. (Dkt. Nos. 1 at 6, 31 at 4.)

Century provided an apartment building policy under which Belmont was covered. (Dkt. No. 1 at 1.) During the coverage period, Belmont sold 11 of the 42 condominium units, leaving Belmont owners of 31 units. (Dkt. No. 36 at 3.) When the Belmont Lofts Condominium Owners Association brought the underlying lawsuit against Belmont, Century agreed to defend Belmont under a reservation of rights. (Dkt. No. 1 at 7.)

Century brought this declaratory judgment action to determine whether there is a coverage obligation in the underlying lawsuit. (Id. at 7-8.) Century challenges its obligation based on exclusionary language in the policy contract stating coverage does not apply for property damage to the following:

(1) Property you own, rent, or occupy, including any costs or expenses incurred by you, or any other person, organization or entity, for repair, replacement, enhancement, restoration or maintenance of such property for any reason, including prevention of injury to a person or damage to another's property;
(2) Premises you sell, give away or abandon, if the "property damage" arises out of any part of those premises; *** Paragraph (2) of this exclusion does not apply if the premises are "your work" and were never occupied, rented or held out for rental by you. (Dkt. No. 32-2.)

The term "you" used in these exclusions is defined in the insurance contract as "the Named Insured shown in the Declarations, and any other person or organization qualifying as a Named Insured under this Policy." (Dkt. No. 32-3.)

On December 19, 2012, this Court issued an Order granting summary judgment in favor of Century, deciding both exclusions applied to bar coverage because Westmoore "stood in the shoes of Belmont" in collecting rent. (Dkt. No. 46 at 5.) This determination was made based on language in the quit claim deed, which stated Westmoore "in consideration of mere change in identity or form pursuant to WAC 458-61A-211(a) in hand paid, conveys and quit claims [the property] to Belmont Seattle, LLC." (Id.)

Belmont appealed the Order. The Ninth Circuit reversed and remanded, finding the record was too bare to disregard the corporate separateness of Belmont and Westmoore and impute Westmoore's rent collecting activity to Belmont. (Dkt. No. 50.) While the appeal was pending, the underlying case settled, and other insurers paid the settlement. (Dkt. No. 55 at 2.) Century petitioned for panel rehearing en banc, which was denied. (Appellate Dkt. Nos. 26, 30.)

This case is now before this Court on remand from the Ninth Circuit. Belmont moved for summary judgment and Olympic Steamship attorney's fees, arguing it "prevailed" against Century's claim for declaratory judgment. (Dkt. No. 55 at 2.) Century opposed the motion and renewed its motion for summary judgment, arguing the alienated property exclusion applies because Belmont "rented or held out for rental" units through its agent ...


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