Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Optimus Industries LLC v. Factory Mutual Insurance Co.

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

June 18, 2015

OPTIMUS INDUSTRIES LLC d/b/a CHANUTE MANUFACTURING COMPANY, a Delaware limited liability company, Plaintiff,
v.
FACTORY MUTUAL INSURANCE COMPANY, a Rhode Island Corporation; and NIPPON PAPER INDUSTRIES USA CO., LTD, a Washington corporation, Defendants.

ORDER ON DEFENDANT FACTORY MUTUAL INSURANCE COMPANY'S MOTION TO DISMISS PLAINTIFF FACTORY SALES AND ENGINEERING'S AMENDED COMPLAINT PURSUANT TO FED.R.CIV.P. 12(B)(1) AND 12(B)(6)

ROBERT J. BRYAN, District Judge.

THIS MATTER comes before the Court on a motion to dismiss by the defendant, Factory Mutual Insurance Company ("FM Insurance"). Dkt. 8, 9. The Court has reviewed Plaintiff's responsive briefing and the remainder of the file therein. Dkt. 11, 13.

I. BACKGROUND

According to the Complaint, a biomass power facility owned and operated by defendant, Nippon Paper Industries ("Nippon"), contracted with Factory Sales and Engineering, d/b/a FSE Energy ("FSE"), for the design, supply, and install of a biomass boiler. Dkt. 1, at 1, 2. The plaintiff, Optimus Industries LLC, d/b/a Chanute Manufacturing Company ("Chanute"), undertook the fabrication of a "steam drum" and a "mud drum" as a subcontractor to FSE. Id. Chanute alleges that, per the terms of a contract between FSE and Nippon ("the Contract")(Dkt. 9-1), Nippon was obligated to purchase and maintain property insurance and to pay related costs not covered by the insurance deductible. Id., at 3. See Dkt. 9-1, at 14-17. According to the Complaint, the Contract also contains a "Waivers of Subrogation" provision that would preclude lawsuits between FSE and Nippon and any subcontractors. Id. Dkt. 9-1, at 17.

The Complaint also alleges that, as required by the Contract, Nippon purchased a builders' risk insurance policy ("the Policy")(Dkt. 9-2). Dkt. 1, at 3, 4. See Dkt. 9-1, at 15, 16. FM Insurance issued the one-year policy to cover the "insured location... to the extent of the interest of the Insured in such property." Dkt. 9-2 at 16. The Policy also "insures the interest of contractors and subcontractors in insured property during construction at an insured location... to the extent of the Insured's legal liability for insured physical loss or damage to such property." Id. Dkt. 1, at 3.

Against FM Insurance, Chanute seeks declaratory judgment as to four discrete issues. For the sake of judicial economy, the Court does not quote the Contract (Dkt. 9-1) or the Policy (Dkt. 9-2) at length, but will rely on both documents in its analysis.

II. DISCUSSION

The focus of FM Insurance's argument is Chanute's standing, which FM Insurance raises under Fed.R.Civ.P. 12(b)(1) and Fed. R. Civ. Pr. 12(b)(6). See Dkt. 8. Accordingly, the Court directs its attention to this threshold issue, which FM Insurance properly raised as a Fed.R.Civ.P. 12(b) motion. Maya v. Centex Corp., 658 F.3d 1060, 1068 (9th Cir. 2011). See, e.g., Vaughn v. Bay Envtl. Mgmt., Inc., 567 F.3d 1021, 1024 (9th Cir. 2009) (statutory standing raised as Fed.R.Civ.P. 12(b)(6) motion to dismiss); Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1141 (9th Cir. 2003) (constitutional standing raised as Fed.R.Civ.P. 12(b)(1) motion to dismiss).

FM Insurance argues that Chanute lacks standing because Chanute is neither an Insured, Named Insured, nor a third-party beneficiary of the Policy. Dkt. 8, at 7, 11-21. Furthermore, FM Insurance contends, Chanute is not named as an Additional Insured, but even if so, Chanute has not pleaded the existence of a Certificate of Insurance or the equivalent, as required by the Policy. Id., at 9. See Dkt. 9-2, at 7. Finally, Chanute is not a coinsured, according to FM Insurance, because there is no evidence of mutual intent by Nippon and FM Insurance that FM Insurance would assume a direct obligation to Chanute. Id., at 15-18. FM Insurance's reply briefing mostly reiterates its prior arguments that Chanute is not an Insured, co-insured, or third-party beneficiary, but also responds to Chanute's arguments about relying on the Federal Declaratory Judgment Act ("the FDJA") as a basis for standing. See generally, Dkt. 13.

Chanute argues firstly that FM Insurance has conflated "standing" with "being an insured.'" Dkt. 11, at 1, 8. Chanute has standing under the FDJA, Chanute contends, because there is an actual controversy that is immediate and real: FM Insurance refuses to pay for damage to Nippon's biomass boiler, but if FM Insurance pays on the policy, it is barred from subrogating against Chanute, which makes the interests of FM Insurance and Chanute adverse. Id., at 8-11. In addition, Chanute argues, Chanute has standing because it has an insurable interest both under the plain terms of the Policy and under Washington law Id., at 11-13. See RCW 48.18.040 and 48.18.050. Chanute also argues that Chanute is a co-insured because Nippon and FM Insurance waived their subrogation rights by the Contract, and that Chanute is a third-party beneficiary under the plain terms of the Policy. Id., at 14-19. Chanute does not argue that it is an Additional Insured as defined in the Policy. See generally, id.

While there is no question that a party seeking to enforce a contract must have standing, in this case whether Chanute has standing turns on the Court's interpretation of the Policy. Under Washington State law, "the interpretation of language in an insurance policy is a matter of law." Moeller v. Farmers Ins. Co. of Wash., 173 Wn.2d 264, 267 (2011). "If the language in an insurance contract is clear and unambiguous, the court must enforce it as written and may not modify the contract or create ambiguity where none exists." Transcon. Ins. Co. v. Wash. Pub. Utils. Dists.' Util. Sys., 111 Wn.2d 452, 455 (1988). Nevertheless, "the contract as whole must be read as the average person would read it; it should be given a practical and reasonable rather than a literal interpretation, and not a strained or forced construction leading to absurd results." Moeller, 267 P.3d at 1002 (citations and quotations omitted). Any undefined terms should be "given their ordinary and common meaning, not their legal, technical meaning." Moeller, 267 P.3d at 1002. "Exclusionary clauses are to be most strictly construed against the insurer." Vadheim v. Cont'l Ins. Co., 107 Wash.2d 836, 839 (1987).

After careful consideration of the Policy in its entirety, the Court concludes that the most reasonable and practical interpretation of the Policy creates an insurable interest for subcontractors, including Chanute. The Policy is unambiguous when it states that "[t]his Policy also insures the interest of contractors and subcontractors in insured property during construction at an insured location[.]" Dkt. 9-2, at 16 (emphasis added). On its own terms then, the Policy plainly creates an insurable interest for subcontractors, and Chanute is undisputedly a subcontractor.

This interpretation is further supported by the broader context of the section entitled "Property Damage, " in which the above provision is found. Id., at 16. After creating an insurable interest for contractors, see supra, the Policy goes on to specify the limits of the liability for contractors and subcontractors, confining them "to the extent of the Insured's legal liability for insured physical loss or damage to such property. Such interest... is limited to the property for which they have been hired to perform work[.]" Id. Reading "Insured" as referring to Nippon ( see Dkt. 9-2, at 7, "Nippon... hereafter referred to as the Insured'"), the Property Damage provision thus covers damage to the insured property caused by both Chanute and Nippon.

In sum, the Policy creates an insurable interest for contractors, including Chanute. The Court will now direct its attention to analyzing the type of insured interest in the Policy Chanute possesses: whether Chanute is a Named Insured, Insured, Additional Insured, coinsured, or third-party beneficiary. The type of interest may be dispositive as to whether a party has standing under a policy for specific claims. See, e.g., Tank v. State Farm & Cas. Co., 105 Wn.2d 381, 393 (1986) (no ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.