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Ohio Security Insurance Co. v. Axis Insurance Co.

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

May 3, 2017



          BENJAMIN H. SETTLE United States District Judge

         This matter comes before the Court on the cross-motions for summary judgment of Plaintiff Ohio Security Insurance Company (“Ohio Security”) and Defendant Axis Insurance Company (“Axis”). Dkts. 19, 22. Also before the Court is the parties' stipulated motion to continue the scheduled trial and related dates. Dkt. 34. The Court has considered the pleadings filed in support of and in opposition to the cross-motions and the remainder of the file and reserves ruling on the cross-motions for the reasons stated herein. The Court also grants the stipulated motion for a continuance.


         This case concerns insurance coverage for a building located at 9625 32nd Ave. S., Lakewood, Washington, that is used to store ice. In May, 2011, Grosso Enterprises Tacoma, LLC (“Grosso”) leased the building to Reddy Ice Corporation (“Reddy Ice”) for a period of ten years. See Dkt. 21-1. On January 20, 2012, a snowstorm caused the building's roof to become overloaded and collapse. Thereafter, Reddy Ice tendered an insurance claim to Axis and Grosso tendered an insurance claim to Ohio Security. The Axis insurance policy, issued to Reddy Ice as the “Named Insured, ” covered a period from August 25, 2011, to August 25, 2012. Dkt. 21-2. The Ohio Security policy was issued to Grosso and covered a period from May 17, 2011, to May 17, 2012. Dkt. 20-1. Both insurance companies began investigating the loss after claims were tendered from the respective insureds.

         In December 2012, Axis retroactively issued an endorsement to Grosso naming him as an additional insured under the Axis policy. Dkt. 21 at 2. The endorsement's effective date was August 25, 2011, and covered the same period as the Axis policy, ending on August 25, 2012. Dkt. 25 at 4.

         In providing coverage for the damaged building, Ohio Security issued the following payments to Grosso:

May 5, 2012 ........................ $250, 000
June 6, 2012 ........................ $551, 743.87
October 3, 2013 .................. $71, 838.81
November 21, 2013 ............ $920, 504.42

Dkt. 21-3.

         On January 16, 2015, Ohio Security filed a complaint in Pierce County Superior Court, bringing a claim against Axis for equitable contribution. Dkt. 1-3 at 2. Ohio Security claims that it is entitled to equitable contribution from Axis on its payments to Grosso in order to rebuild the building that collapsed. Dkt. 1-2.

         On January 28, 2015, Ohio Security caused the summons and complaint to be served on Edith Green, an employee of Axis, at Axis's registered address for service of process on file with the state's insurance commissioner. Dkt. 1-3 at 13-14. On August 25, 2015, Axis moved to dismiss on the grounds of insufficiency of service of process. Id. at 51-58. On August 28, 2015, Ohio Security again served the summons and complaint, this time on the insurance commissioner. Id. at 175-76.

         On September 28, 2015, Axis removed, before the motion to dismiss was addressed by the Superior Court. Dkt. 1. On October 5, 2017, Axis filed its answer, raising the affirmative defenses of the statute of limitations. Dkt. 9.

         On March 9, 2017, the parties filed their cross-motions for summary judgment and supporting declarations. Dkts. 19-25. On March 27, the parties filed their responses. Dkts. 26, 29. On March 31, 2017, the parties filed replies. Dkts. 30, 31. On April 25, 2017, the parties filed a stipulated motion to continue the trial and related dates. Dkt. 34.


         A. Summary Judgment Standard

         Summary judgment is proper only if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The moving party is entitled to judgment as a matter of law when the nonmoving party fails to make a sufficient showing on an essential element of a claim in the case on which the nonmoving party has the burden of proof. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). There is no genuine issue of fact for trial where the record, taken as a whole, could not lead a rational trier of fact to find for the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986) (nonmoving party must present specific, significant probative evidence, not simply “some metaphysical doubt”). See also Fed. R. Civ. P. 56(e). Conversely, a genuine dispute over a material fact exists if there is sufficient evidence supporting the claimed factual dispute, requiring a judge or jury to resolve the differing versions of the truth. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 253 (1986); T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987).

         The parties' disputes focus entirely on the construction of the Ohio Security and Axis insurance policies and the meaning of the lease agreement between Grosso and Reddy Ice. The interpretation of insurance policies and lease agreements is generally a question of law to be decided by the court. Quadrant Corp. v. Am. States Ins. Co., 154 Wn.2d 165, 171 (2005); Duvall Highlands LLC v. Elwell, 104 Wn.App. 763, 771 n.18 (2001). However, where a material provision of a contract is ambiguous, “[d]etermining a contractual term's meaning involves a question of fact and examination of objective manifestations of the parties' intent.” Martinez v. Miller Indus., Inc., 94 Wn.App. 935, 943 (1999).

         B. Equitable Contribution

         Ohio Security has advanced a single claim against Axis for equitable contribution. Axis argues that it is entitled to summary judgment on the basis that (1) the policies from Axis and Ohio Security do not cover the same loss, Dkt. 19 at 7-8; (2) Grosso never tendered a claim to Axis, id. at 9-10; and (3) Ohio Security's claim is barred by the statute of limitations, id. at 10-11. Ohio Security argues that it is entitled to summary judgment because the Axis and Ohio Security policies covered the same loss.

         1. Same Loss

         “In the context of insurance law, contribution allows an insurer to recover from another insurer where both are independently obligated to indemnify or defend the same loss.” Wellman & Zuck, Inc. v. Hartford Fire Ins. Co., 170 Wn.App. 666, 679 (2012) (quoting Mut. of Enumclaw Ins. Co. v. USF Ins. Co., 164 Wn.2d 411, 419 (2008)). For two policies to cover the same loss, the “polic[ies] must insure [1] the same property and [2] the same interest [3] against the same risk . . . .” Kirkland v. Ohio Cas. Ins. Co., 18 Wn.App. 538, 545 (1977). Additionally, for the policies to cover the same loss, they must run to the same insured because “[e]quity provides no right for an insurer to seek contribution from another insurer who has no obligation to the insured.” Mut. of Enumclaw Ins. Co., 164 Wn.2d at 420. See also Kirkland, 18 Wn.App. at 547 (“The same interest would not be insured under the two policies if the vendor was the loss payee under one and the vendee or assignee the loss payee under the other.”).

         The Axis policy covers damage to real property. See Dkt. 24-1 at 17. Under its plain language, damage to “real property” would include structural damage such as the collapsed roof in this case. However, coverage for real property damage under the Axis policy is limited to real property “in which the insured has an insurable interest.” Id. (emphasis added). Therefore, the parties' dispute as to whether the Axis and Ohio Security policies covered the same loss depends upon (1) whether damage to the structure and its roof was an insurable interest under the Axis policy and (2) whether Grosso was an insured under both policies.

         a. Reddy Ice's Insurable Interest Under the Axis Policy

         Under Washington law, an “insurable interest” in property insurance “means any lawful and substantial economic interest in the safety or preservation of the subject of the insurance free from loss, destruction, or pecuniary damage.” RCW 48.18.040. Accordingly, because RCW 48.18.040 “permit[s] any legal or equitable interest to create an insurable interest, ” Wolstein v. Yorkshire Ins. Co., Ltd., 97 Wn.App. 201, 207 (1999), Reddy Ice had an insurable interest to the extent that it was required under the lease agreement to obtain insurance. Indeed, it is a longstanding principle that “a tenant who has agreed . . . to keep the demised property insured is liable to the lessor for a breach of that agreement, and has an insurable interest in the property to the extent of the amount agreed to be insured.” Berry v. Am. Cent. Ins. Co. of St. Louis, 132 N.Y. 49, 56-57 (1892). Accordingly, the Court will examine the lease agreement to ascertain the extent of Reddy Ice's insurable interest in the leased property.

         “The touchstone of contract interpretation is the parties' intent.” Martinez v. Miller Indus., Inc., 94 Wn.App. 935, 942 (1999) (quoting Tanner Electric Coop. v. Puget Sound Power & Light, 128 Wash.2d 656, 674 (1996)). In determining the intent of Reddy Ice and Grosso as it pertains to Reddy Ice's insurable interest, the Court considers the following:

The intent of the parties in reducing an agreement to writing may be discovered from [1] the actual language of the agreement, as well as from [2] the contract as a whole, [3] the subject matter and objective of the contract, [4] all the circumstances surrounding the making of the contract, [5] the subsequent acts and conduct of the parties to the contract, and the [6] reasonableness of respective interpretations advocated by the parties.

Martinez v. Miller Indus., Inc., 94 Wn.App. 935, 943 (1999).

         Article 11 (“Insurance and Indemnification”) of the lease agreement indicates that Reddy Ice is obligated to carry property damage insurance. Dkt. 21-1 at 14-15. Specifically, the agreement states:

11.01 Tenant's Insurance Obligation. Tenant Covenants and agrees that from and after taking possession of the Premises, Tenant will carry and maintain, at its sole cost and ...

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