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MKB Constructors v. American Zurich Insurance Co.

United States District Court, W.D. Washington

September 25, 2014

MKB CONSTRUCTORS, Plaintiff,
v.
AMERICAN ZURICH INSURANCE COMPANY, Defendant

Decided Date: September 24, 2014.

Page 815

[Copyrighted Material Omitted]

Page 816

[Copyrighted Material Omitted]

Page 817

For MKB Constructors a Washington joint venture, Plaintiff: A Richard Dykstra, LEAD ATTORNEY, FRIEDMAN RUBIN (SEATTLE), SEATTLE, WA; Kenneth R Friedman, FRIEDMAN RUBIN (BREMERTON), BREMERTON, WA; Peter J Mullenix, FRIEDMAN RUBIN (SEATTLE), SEATTLE, WA.

For American Zurich Insurance Company an Illinois corporation, Defendant: Elaine Videa, Jonathan R. Gross, LEAD ATTORNEYS, PRO HAC VICE, MOUND COTTON WOLLAN & GREENGRASS, EMERYVILLE, CA; Jose Dino Vasquez, KARR TUTTLE CAMPBELL, SEATTLE, WA.

Page 818

ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT

JAMES L. ROBART, United States District Judge.

I. INTROCUTION

This order addresses two motions: (1) Plaintiff MKB Constructors' (" MKB" ) motion for partial summary judgment (MKB Mot. (Dkt. # 91)), and (2) Defendant American Zurich Insurance Company's (" American Zurich" ) motion for summary judgment (AZ Mot. (Dkt. # 93)). The court has review the motions, all submissions filed in support of and opposition thereto, the balance of the record, and the applicable law. Being fully advised,[1] the court GRANTS in part and DENIES in part both motions.

Page 819

II. BACKGROUND

This case is an insurance coverage dispute involving a " Builders Risk" policy. MKB contracted with the Lower Yukon School District (" LYSD" ) for Phase I of a project that involved " the procurement, delivery and placement of gravel fill" for a new building pad and driveway upon which a school building would be erected in Emmanak, Alaska (" the Project" ). (Am. Compl. (Dkt. # 35) ¶ 6; 7/22/14 Videa Decl. (Dkt. # 94) Ex. 1 at 2.) In March 2012, LYSD requested contractors to bid on Phase I of the Project and provided the bidding contractors information, including topographical maps or drawings that showed the elevation of the original ground and the elevation to which the gravel pad was to be built. (Carl Decl. (Dkt. # 96) ¶ 5.) From this information, LYSD expected bidding contractors to calculate the volume of compacted gravel that would be required to complete Phase I of the Project. ( See id.) The maps and drawings were incorporated into and made a part of the Phase I contract. ( Id.)

The Project site was built on tundra that melted during the summer, becoming marshy and pocketed by pools of standing water. ( See 7/22/14 Videa Decl. Ex. 3 (Nesheim Dep.) at 28:9-14, Ex. 4 (Romine Dep.) at 33:9-12; Ex. 6 (Wilson Dep.) at 170:4 (" It's a swamp." ).) LYSD provided the bidding contractors with a geotechnical report that stated: " Settlements of 3 to 9 inches should be expected in area [sic] with 30 inches of fill and 5 to 12 inches in areas with 72 inches of fill." ( Id. Ex. 7 (attaching February 2012 Revised Northern Geotechnical Engineering Report) at 5.) The geotechnical report did not give the rate of settlement. ( See generally id.) LYSD, however, also issued Addendum 2, which stated:

There will be some initial settlement of about two inches that will occur during construction but the majority of the settlement will occur over a few years. The Phase I contractor is expected to bring the gravel to the grades shown on the drawings, concluding with substantially [sic] completion on September 15, 2012. The final topping and finish grading will be done by the Phase II contractor after the old HS building is demolished; this Phase II work will correct for any additional settlement occurring after Phase I substantial completion.

( Id. Ex. 8 (attaching Addendum 2) at 3 of 5; 7/22/14 Mullenix Decl. (Dkt. # 92) Ex. 14 at 3 of 5.) LYSD intended to pay for additional gravel that the contractor placed due to more than two inches of settlement. (7/22/14 Videa Decl. Ex. 34 (John Dep.) at 44:2-8; John Decl. (Dkt. # 96) ¶ 18.)

LYSD placed the drawings showing the topographical elevation contours of the original existing ground and the elevation to which the gravel pad would be built on a website called " The Plans Room." (John Decl. ¶ 5.) The drawings on the website were not distorted (7/22/14 Videa Decl. Ex. 12 (" Fortunato Dep." ) at 97:14-17), but they became so when MKB printed hardcopies of the drawings on its office printer ( id. Ex. 9 (" 12/17/13 Jensen Dep." ) at 47:16-23, 115: 10-20; Ex. 13 (" 8/27/13 Jensen Dep." ) at 8:15-17, 9:20-23). MKB assigns responsibility for the distorted drawings to LYSD. ( See Jensen Decl. (Dkt. # 110) ¶ 13.) In any event, MKB used the distorted drawings to estimate that it would need a volume of 23,626 cubic yards of compacted gravel for Phase I of the Project. (12/17/13 Jensen Dep. at 47:16-49:2, 126:2-5.) Based on MKB's bid of $5,582,887.00, LYSD awarded the Phase I contract to MKB. (John Decl. ¶ 8; 7/22/14 Videa Decl. Ex. 14; 7/22/14 Mullenix Decl. Ex. 10.)

Page 820

After winning the bid, MKB hired a computer-aided earthwork calculations specialist, Earthwork Services (" Earthworks" ), which determined that the required volume of compacted gravel for Phase I was 26,767 cubic yards. ( See 7/22/14 Videa Decl. Ex. 15 (" Zimmerman Dep." ) at 39:5-15; id. Ex. 16 at 2; see 7/22/14 Mullenix Decl. Ex. 12 (" 12/17/13 Jensen Dep." ) at 26:12-21.) As a part of its analysis, Earthworks pointed out to MKB that the drawings MKB had relied upon in making its bid to LYSD were distorted. (7/22/14 Mullenix Decl. Ex. 21.) As a result, MKB " ...


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