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Anderson v. Country Mutual Insurance Co.

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

February 18, 2015



JAMES L. ROBART, District Judge.


Before the court are the parties' cross-motions for summary judgment. (Pltf.'s Mot. (Dkt. # 55); Def.'s Mot. (Dkt. # 58).) The court has considered the parties' submissions, the balance of the record, and the relevant law. Being fully advised, [1] the court DENIES both motions.


This is an insurance coverage case arising out of a fire at a house that Plaintiff Christopher H. Anderson owned in Seattle, Washington ("the House"). ( See Ver. of State Ct. Rec. (Dkt. # 3) Ex. 1 (Dkt. # 3-1) ("Compl."); Anderson Decl. (Dkt. # 56) ¶ 3.) The fire occurred on December 26, 2012, and caused significant damage to the House. (Compl. ¶ 3.1.) The Seattle Fire Department ("SFD") responded to the scene and conducted an investigation. ( See Thielbar Decl. (Dkt. # 61) ¶ 6, Ex. I (Dkt. # 61-3) ("SFD Report").) The investigation concluded that the fire occurred due to an overheated electrical outlet in the basement that was rewired for an illegal marijuana growing operation ("the Operation"). ( See id. )

The Seattle Police Department ("SPD") also conducted an investigation. (4th Carsely Decl. (Dkt. # 49) ¶ 11, Ex. F. (Dkt. # 49-6) ("SPD Report").) In the course of this investigation, Detective Marco Ortiz found that the Operation was concealed within the basement with false walls, that electricity was diverted to the Operation so that the power used for the Operation would not show up on the electricity meter, and that an airfiltering and venting system was installed to hide the smell of the Operation. ( See SPD Report at 2-4; Thenell Decl. (Dkt. # 59) ¶ 2, Ex. A (Dkt. # 59-1) ("Ortiz Dep.")[2] at 19:17-20:13, 21:3-22:18; Weber Decl. (Dkt. # 64) ¶ 5, Ex. D (Dkt. # 64-4) ("Lefebvre Dep.") at 40:19-41:5.)

Mr. Anderson had a homeowner's insurance policy with Defendant Country Mutual Insurance Company ("Country Mutual") that was effective at the time of the fire. ( See Thielbar Decl. ¶ 3, Ex. H (Dkt. ## 61-1, 61-2) ("Policy").) On January 3, 2013, Mr. Anderson reported the fire to Country Mutual, which began its own investigation. ( See Theilbar Decl. ¶¶ 5-6.) Country Mutual collected SFD and SPD reports, reviewed news reporting on the fire, and interviewed witnesses. ( See, e.g., 5th Carsely Decl. (Dkt. # 57) ¶ 2, Ex. A (Dkt. # 57-1) ("Thielbar Dep.") at 67:24-69:12, 84-94; Weber Decl. ¶ 7, Ex. F (Dkt. # 64-6) ("Lefebvre Email"); Lefebvre Decl. (Dkt. # 60) ¶ 3, Ex. G (Dkt. # 60-3) ("Anderson 1/10/13 Statement")[3].) To facilitate this investigation, Mr. Anderson signed multiple releases enabling Country Mutual to obtain documents and made available a number of additional documents not covered by the releases. ( See, e.g., 4th Carsley Decl. ¶ 19, Ex. J. (Dkt. # 49-10) ("1/9/13 Email").) In addition, Mr. Anderson hired Paul Gaouette of Adjusters International, a private adjusting firm, to assist him with the presentation of his claim. ( See 5th Carsley Decl. ¶ 8, Ex. G (Dkt. # 57-7) ("Gaouette Dep.") at 7:5-7.)

Since the outset of Country Mutual's investigation, Mr. Anderson has maintained that he did not know about the Operation and suggested that it was likely carried on by his tenant, Mark Gray. ( See, e.g., Anderson 1/10/13 Statement at 30; 2d Carsley Decl. (Dkt. # 22) ¶ 8, Ex. G (Dkt. # 22-2) at 2-13 ("Anderson 2/8/13 Statement")[4]; Pltf.'s Mot. at 3-4.) Mr. Anderson told Country Mutual about his tenant around the time he gave notice of the fire and provided a form lease agreement signed by Mr. Gray. ( See Anderson 1/10/13 Statement at 6; Lefebvre Decl. ¶ 2, Ex. E (Dkt. # 60-1) ("Lease Email"), Ex. F (Dkt. # 60-2) ("Lease").) Mr. Anderson told Country Mutual that he thought Mr. Gray had lived in the House for about 19 months with his girlfriend and two children. (Anderson 1/10/13 Statement at 6-7; Anderson 2/8/13 Statement at 18; Pltf.'s Mot. at 3.) In addition, Mr. Anderson related that he had visited the House on several occasions while Mr. Gray lived there, including to repair the deck, but had never conducted a walkthrough, gone into the basement, or detected the Operation. ( See Anderson 1/10/13 Statement at 7-9, 26-27; Anderson 2/8/13 Statement at 28-31, 35-36.) Mr. Anderson further asserted that he does not smoke marijuana and has never grown it. (Anderson 2/8/13 Statement at 36-37.)

On January 10, 2013, Country Mutual claims handler James Lefebvre conducted an initial interview with Mr. Anderson. ( See generally Anderson 1/10/13 Statement.) During that interview, Mr. Lefebvre asked Mr. Anderson where he was at the time of the fire. ( Id. at 20.) Mr. Anderson responded that he was golfing in Chelan, Washington. ( See id.; see also Anderson 2/8/13 Statement at 38-39.) In checking Mr. Anderson's story, Country Mutual learned that the golf course was closed on December 26, 2012, due to snow. (Thielbar Decl. ¶ 12.)

Approximately one month later, Country Mutual special investigator Chris Thielbar conducted a second interview with Mr. Anderson. ( See id. ¶ 11; Anderson 2/8/13 Statement.) Mr. Theilbar confronted Mr. Anderson with the facts about the snow, to which Mr. Anderson responded that he had actually been in Roslyn, Washington, on December 26, 2012, with a prostitute named Teyana Dorsey. ( See Anderson 2/8/13 Statement at 37-41.) Mr. Anderson acknowledged that he had lied about his whereabouts but explained that his only motive was to prevent his daughter from finding out that he was with Ms. Dorsey. ( See id. at 38-43.)

In addition to that misrepresentation, Country Mutual claims to have discovered several other irregularities in Mr. Anderson's statements. ( See Def.'s Mot. at 3-6.) For example, Country Mutual asserts that Mr. Anderson has testified inconsistently about the frequency and timing of his visits to the House in the months leading up to the fire and about how he received and processed rent payments from Mr. Gray. ( See id. at 4-6.) Country Mutual highlights contradictory statements from Mr. Anderson about Mr. Gray's vehicle. ( See id. at 4, 6.) Country Mutual also points out that after the fire the SPD found property belonging to Mr. Anderson in the House; that the lease agreement is inconsistent with Mr. Anderson's statements because it lists Mr. Anderson as a coresident and prohibits children; and that the utilities for the House were in Mr. Anderson's name. ( See id. at 3, 5.) Furthermore, Country Mutual has been unsuccessful in locating Mr. Gray. (Thielbar Decl. ¶ 20.)

On October 9, 2013, Country Mutual sent a letter to Mr. Anderson informing him that it was denying coverage. ( See 2d Carsley Decl. ¶ 15, Ex. N (Dkt. # 22-3) at 21-25. ("Denial Letter").) It based this denial on two policy exclusions. ( See id. at 4.) The first exclusion precludes coverage when the insured has misrepresented any material fact relating to the insurance ("the misrepresentation exclusion"). ( See id.; Policy at 32.) The second exclusion bars coverage when the loss results from the illegal manufacture of controlled substances and the insured has knowledge of such manufacture ("the controlled substances exclusion"). ( See Denial Letter at 4; Policy at 26, 28.) The denial letter supported application of those exclusions with the following facts: Mr. Anderson admitted to visiting the House on numerous occasions before the fire and misrepresented his whereabouts at the time of the fire. ( See Denial Letter at 3-4.)

During the investigation, Country Mutual made payments to Mr. Anderson totaling $5, 565.29 and $29, 200.00. ( See Thielbar Decl. ¶ 21, Ex. O (Dkt. # 61-9) ("Ledger").) The first sum was, in Country Mutual's words, "towards the Dwelling, " while the second was for rent replacement. ( See id. ) Also during the investigation, Country Mutual paid $97, 996.74 for the actual cash value ("ACV") of the House to Mr. Anderson's mortgagee as the loss payee under Mr. Anderson's policy. ( See id.; Def.'s Mot. at 14.) Mr. Anderson alleges that the denial of coverage caused him to lose the property because he could no longer afford his mortgage and had to sell the property to avoid foreclosure. ( See Anderson Decl. ¶ 3.) Mr. Anderson also contends that if coverage had not been denied, he would have retained the property and repaired or replaced the House. ( See id.; Weber Decl. (Dkt. # 64) ¶ 15, Ex. L (Dkt. # 64-12) ("Neupert Dep.") at 5, 7.)

On December 20, 2013, Mr. Anderson filed this lawsuit in the Superior Court for King County, Washington, bringing claims against Country Mutual for breach of contract, bad faith, and violation of the Consumer Protection Act ("CPA"), RCW ch. 19.86.010, et seq., and the Insurance Fair Conduct Act ("IFCA"), RCW 48.30.15. ( See generally Compl.) Country Mutual removed the case to this court on January 10, 2014. (Not. of Rem. (Dkt. # 1).) Shortly thereafter, Country Mutual filed an answer and asserted two counterclaims for breach of contract. ( See Answer (Dkt. # 6) at 8-9.)

The parties filed the instant cross-motions for summary judgment on December 16, 2014. ( See Pltf.'s Mot.; Def.'s Mot.) Mr. Anderson moves for partial summary judgment on two issues. (Pltf.'s Mot. at 2.) First, Mr. Anderson asks the court to rule that Country Mutual is estopped from relying on evidence other than what it stated in its denial letter, provided Country Mutual knew or should have known of the additional evidence at the time of the denial letter. ( See id. at 11-18; Pltf.'s Reply at 2-9.) Second, Mr. Anderson seeks to preclude Country Mutual from asserting the controlled substances exclusion. ( See Pltf.'s Mot. at 2.) Mr. Anderson argues that Country Mutual had so little evidence of Mr. Anderson's knowledge of the Operation that its conclusion in that regard is unreasonable as a matter of law. ( See id. at 18-23; Pltf.'s Reply at 9-12.) He points out that Country Mutual lacked any direct evidence of Mr. Anderson's knowledge, distrusted Mr. Anderson, and failed to pursue avenues of investigation that might have corroborated Mr. Anderson's story, such as the efficacy of the various measures concealing the Operation. ( See Pltf.'s Mot. at 20-23; Pltf.'s Reply at 10-12.)

Country Mutual, in turn, moves for summary judgment on five issues. ( See Def.'s Mot. at 10-17.) First, it asks the court to rule that the misrepresentation exclusion applies because Mr. Anderson's initial statement about his whereabouts is a material misrepresentation. ( See id. at 10-11; Def.'s Reply at 2-3.) Second, it moves for summary judgment on the reasonableness of its conclusion that Mr. Anderson knew about the Operation and thus that the controlled substances exclusion barred coverage. ( See Def.'s Mot. at 13-14; Def.'s Reply at 4-5.) Third, Country Mutual argues that it is enjoys immunity from Mr. Anderson's bad faith, IFCA, and CPA claims under RCW 48.50.075. ( See Def.'s Mot. at 14-15; Def.'s Reply at 6-7.) That statute protects insurance companies who deny coverage in reliance on a written opinion from a qualified agency that the claim involves criminal activity and that the insured is the target of the investigation. See RCW 48.50.075. Fourth, Country Mutual contends that Mr. Anderson's bad faith claim must fail because he has no evidence of damages. ( See Def.'s Mot. at 16-17; Def.'s Reply at 7.) Fifth and finally, it requests a determination that it has fulfilled its obligations under the contract by paying the ACV of the House to Mr. Anderson's mortgagee. ( See Def.'s Mot. at 14; Def.'s Reply at 5-6.)

The parties' cross-motions are now before the court. For the reasons stated below, the court finds that summary judgment is inappropriate on the issues raised by the parties and therefore DENIES the parties' cross-motions for summary judgment.


A. Summary Judgment ...

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