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Hell Yeah Cycles v. Ohio Security Insurance Co.

United States District Court, E.D. Washington

April 28, 2014

HELL YEAH CYCLES, Plaintiff,
v.
OHIO SECURITY INSURANCE COMPANY, Defendant

Page 1225

For Hell Yeah Cycles, a Washington Limited Liability Company, Plaintiff: Brian Scott Sheldon, LEAD ATTORNEY, Phillabaum Ledlin Matthews & Sheldon PLLC, Spokane, WA.

For Ohio Security Insurance Company, a foreign insurer, Defendant: John Michael Silk, LEAD ATTORNEY, Wilson Smith Cochran Dickerson, Seattle, WA.

OPINION

Page 1226

THOMAS O. RICE, United States District Judge.

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S PARTIAL MOTION FOR SUMMARY JUDGMENT

BEFORE THE COURT is Plaintiff's Motion for Partial Summary Judgment (ECF No.14). This matter was heard with telephonic oral argument on March 13, 2014. Brian Sheldon appeared on behalf of the Plaintiff. John Silk appeared on behalf of Defendant. The Court has reviewed the briefing and the record and files herein, and is fully informed.

BACKGROUND

This case concerns an insurance policy covering business property damaged in a fire.

FACTS

Plaintiff Hell Yeah Cycles (" HYC" ) is a Washington limited liability company owned bye Frank Smith (" Smith" ). Defendant Ohio Security Insurance Company (" OSI" ) is a foreign insurer licensed to do business in Washington. On November 28, 2012, an electrical fire caused extensive damage to the building HYC was occupying and to HYC's property in the building. At the time of the fire, HYC was insured under a business owner's policy issued by OSI.

Page 1227

Plaintiff reported the fire loss to OSI the day after the fire, and OSI assigned adjuster David Bjorklund (" Bjorklund" ) to the claim. Bjorklund went to the fire-damaged property at least twice to document and photograph damage. Within two months after the fire, OSI issued checks to HYC for $5,000, $25,000 and $50,000. Subsequently, OSI issued payment of $14,000 for temporary rental space and $1,626.79 for labor costs to mitigate further losses to HYC property.

The parties dispute much of what happened otherwise. In particular, the parties disagree about the maximum limits of the insurance policy. Defendant maintains that the maximum limit of Plaintiff's Business Personal Property coverage was $80,000. ECF No. 20 at 6. Plaintiff contends that its Business Personal Property coverage was subject to " additional coverages" that extended the limits above $80,000. ECF No. 15 at 1, 2. But Defendant claims that Plaintiff has failed to produce evidence of damages necessitating the application of " additional coverages" to the policy beyond those paid by OSI to date. ECF No. 20 at 7.

The parties' specific disputes over coverage limits include the following:

o Smith claims he was storing kitchen cabinets in the basement of the building for use in his home. ECF No. 15 at 4. Plaintiff contends that Bjorklund advised Smith that the cabinets were subject to a $2,500 limit applicable to personal effects of the insured, but that the actual limit for personal effects under the policy was $15,000. Id. Plaintiff also claims that Bjorklund took photos of the cabinets the day after the fire. Id. at 4-5. But Defendant maintains that Plaintiff failed to provide evidence of the value of the cabinets. ECF No. 20 at 7.
o Plaintiff contends that the policy contains an endorsement that added $25,000 of additional coverage for employee tools, and claims to have submitted an inventory of damaged tools in the amount of $67,213. ECF No. 15 at 7. Plaintiff claims that Bjorklund advised Smith that he no longer needed to keep tools damaged in the fire in order to document the claim. ECF No. 15 at 3. Defendant contends that Bjorklund told Smith that the tools would likely clean up with labor. ECF No. 20 at 7.
o Plaintiff contends that Bjorklund told Smith in error that coverage for employee wages is limited to 60 days from the date of loss, and that as a result, he terminated one of his employees on the belief that OSI would no longer cover her lost wages. ECF No. 15 at 4. Plaintiff contends that Smith provided W-2 forms for his two employees at the time of the fire, but OSI has made no payment to HYC for employee wages. ECF No. 15 at 4, 7. Defendant maintains that Plaintiff has failed to submit evidence of damages related to employee wages beyond the W-2s. ECF No. 20 at 7.
o Plaintiff rented storage units to store HYC's damaged inventory and equipment. ECF No. 15 at 5. Plaintiff contends that Bjorklund approved their rental, but that although Smith submitted receipts for the units, OSI has not issued payments. Id.
o Plaintiff contends that Smith rented a truck to move the damaged property out of the building to be stored and inventoried. ECF No. 15 at 5. Because two of Smith's business were operating out of the building--HYC and the Handlebar, a restaurant/bar

Page 1228

--Smith proposed that OSI pay half the truck rental fee. Id. Plaintiff contends that OSI agreed to pay for one week of rental but has not done so. Id.
o Plaintiff contends that the OSI policy contained an additional coverage for outdoor signs. ECF No. 15 at 5. Plaintiff claims that Bjorklund inspected and photographed the damage to the existing signs, and Smith submitted an estimate for their replacement, but OSI has not paid Plaintiff for any of the signs. Id.
o Plaintiff claims that the OSI policy contained additional coverage for computer equipment. ECF No. 15 at 5. Plaintiff contends that Bjorklund documented damage to Plaintiff's computer equipment but that OSI has issued no payment for the computers. Id.
o Plaintiff claims that the OSI policy contained additional coverage for lost business income. ECF No. 15 at 6. Plaintiff contends that OSI advised Plaintiff that it would have to produce documents that did not exist. Id. Furthermore, Plaintiff states that documentation was difficult to procure because its records were destroyed in the fire and because it had only been in business for six weeks at the time of the fire. Id.
o Plaintiff contends that the OSI policy covered additional expenses incurred as a result of the loss. ECF No. 15 at 6. Plaintiff claims it submitted invoices for costs of improvements to the new building, but OSI has not made any payments for these additional expenses. Id.
o Plaintiff contends that the policy contained additional coverage for tenant improvements and glass, but that the claim for glass has not been paid. ECF No. 15 at 7.

Plaintiff claims Smith asked Bjorklund " multiple" times to explain the available coverage under the policy. ECF No. 15 at 3. Plaintiff contends that OSI never requested additional information to substantiate the claims nor responded to HYC's attempts to resolve the remaining claims.

Plaintiff now moves for partial summary judgment on the following issues:

1. Whether OSI violated WAC 284-30-330(9) by issuing payments to HYC that were not accompanied by a statement setting forth the coverage under which the payment was made.
2. Whether OSI violated WAC 284-30-330(1) and WAC 284-30-350 by misrepresenting or concealing pertinent benefits, coverages, or policy provisions.
3. Whether OSI violated WAC284-30-330 by failing to attempt to settle HYC's claim in good faith.
4. Whether OSI violated the Consumer Protection Act by violating the unfair claims practices regulations.
5. Whether OSI's denial of benefits violated the Insurance Fair Conduct Act.
6. Whether OSI's handling of HYC's insurance claim constitutes bad faith.

DISCUSSION

1. Whether the Court Should Continue Consideration of Plaintiff's Motion Pursuant ...


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