United States District Court, W.D. Washington, Tacoma
TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, et al., Plaintiffs,
NORTHWEST PIPE COMPANY, et al., Defendants.
ORDER DENYING PLAINTIFFS' MOTION TO STRIKE AND
DEFENDANTS' JOINT MOTION TO STAY AND RESERVING RULING ON
DEFENDANT'S MOTION TO AMEND AND THE PARTIES' MOTIONS
FOR SUMMARY JUDGMENT
BENJAMIN H. SETTLE United States District Judge
matter comes before the Court on the following motions:
Defendant Norwest Pipe Company's (“NPC”)
motion for partial summary judgment (Dkt. 14); Plaintiffs
Travelers Property Casualty Company of America's
(“Travelers”) and The Phoenix Insurance
Company's (“Phoenix”) (collectively
“Plaintiffs”) motion for summary judgment (Dkt.
17); NPC's and Defendant Greater Vancouver Water
District's (“Water District”) (collectively
“Defendants”) joint motion to stay (Dkt. 21); and
NPC's motion for leave to amend its answer to the
complaint (Dkt. 26).
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
Underlying Dispute and Litigation Between the Water District
August 7, 2015, the Water District commenced an action
against NPC in the Supreme Court of British Columbia. Dkt.
18-12. In that action, the Water District alleges that it
suffered damages in the construction of a large water
pipeline, referred to as the “Twin Tunnels”
project, arising from the alleged failure of circumferential
welds that were being used to attach grout plugs to a large
steel pipe liner. Id. Both the grout plugs and steel
liner were manufactured and supplied to the Water District by
NPC. Id. at 5. Specifically, the Water District
brought the following allegations against NPC:
Claim against Northwest Pipe
39. Northwest Pipe had an obligation under the Pipe Supply
Contract and owed a duty of care to the GVWD to ensure that
the Material that it manufactured and supplied to the GVWD
conformed to the design specifications, was free from defects
and was fit for the purpose for which it was to be used.
40. Northwest Pipe breached the Pipe Supply Contract and was
negligent by failing to exercise the reasonable skill, care
or diligence of a competent metals fabricator, particulars of
which include the following:
a. failing to ensure that the Material that it manufactured
and supplied to the GVWD conformed to the design
specifications provided to Northwest Pipe;
b. failing to ensure that the Material that it manufactured
and supplied to the GVWD was free from defects;
c. failing to ensure that the Material that it manufactured
and supplied to the GVWD was fit for the purpose for which it
was to be used; and
d. such further and other particulars as may be advised.
41. Northwest Pipe's breach of contract and negligence
caused the Grout Plug Failures and delayed the construction
of the Twin Tunnels.
42. As a result of the breach of contract and negligence of
Northwest Pipe, the GVWD has suffered and continues to suffer
loss, damage and expense.
* * *
47. As a result of the negligence, breach of duty and
breaches of contract by HMM, Northwest Pipe and SCP, the GVWD
has incurred additional and unnecessary cost, including the
a. additional cost to investigate the cause of the Grout Plug
b. additional cost to redesign the method for sealing the
grout ports of the Steel Liner;
c. the additional cost to install, remove and then replace
the failed grout plugs;
d. delay in construction of the Twin Tunnels as a result of
Grout Plug Failures; and
e. such further and other particulars as may be provided to
the defendants prior to the trial of this action.
Id. at 10-11.
August 5, 2016, NPC tendered a claim to Plaintiffs based on
this underlying lawsuit. Dkt. 18-13 at 1. On August 9, 2016,
Plaintiffs acknowledged NPC's claim. Id. On
October 26, 2016, Plaintiffs assumed the defense of NPC under
a reservation of rights, including the right “to
withdraw from the defense of NPC in regard to the Underlying
Lawsuit.” Dkt. 18-15.
Policy Provisions Applicable to Reservation of
reservation of rights letter highlighted potential coverage
issues based on the theory that the damage alleged in the
underlying litigation may not constitute “property
damage” as covered by the policy. Dkt. 18-15 at 8. The
policy's applicable coverage provision and relevant
definitions are provided below:
SECTION I - COVERAGES
BODILY INJURY AND PROPERTY DAMAGE LIABILITY
1. Insuring Agreement
a. We will pay those sums that the insured
becomes legally obligated to pay as damages because of
“bodily injury” or “property damage”
to which this insurance applies. We will have the right and
duty to defend the insured against any “suit”
seeking those damages. However, we will have no duty to
defend the insured against any “suit” seeking
damages for “bodily injury” or “property
damage” to which this insurance does not apply. We may,
at our discretion, investigate any “occurrence”
and settle any claim or “suit” that may result.
(1) The amount we will pay for damages is
limited as described in Section III - Limits Of Insurance;
(2) Our right and duty to defend ends when
we have used up the applicable limit of insurance in the
payment of judgments or settlements under Coverages A or B or
medical expenses under Coverage C.
No other obligation or liability to pay sums or perform acts
or services is covered unless explicitly provided for under
Supplementary Payments - Coverages A and B.
b. This insurance applies to “bodily
injury” and “property damage” only if:
(1) The “bodily injury” or
“property damage” is caused by an
“occurrence” that takes place in the
(2) The “bodily injury” or
“property damage” occurs during the policy
(3) Prior to the policy period, no insured
listed under Paragraph 1. of Section II - Who Is An Insured
and no “employee” authorized by you to give or
receive notice of an “occurrence” or claim, knew
that the “bodily injury” or “property
damage” had occurred, in whole or in part.
* * *
17. “Property damage” means:
a. Physical injury to tangible property,
including all resulting loss of use of that property. All
such loss of use shall be deemed to occur at the time of the
physical injury that caused it; or
b. Loss of use of tangible property that is
not physically injured. All such loss of use shall be deemed
to occur at the time of the “occurrence” that
Dkt. 18-1 at 20-21, 34.
Plaintiffs' reservation of rights letter stated that
coverage may be precluded by any of several exclusions,
including: (1) the “Your Product” exclusion, (2)
the “Impaired Property” exclusion, and (3) the
“Recall” exclusion. See Dkt. 18-15 at 8-
16. Those exclusions and relevant definitions are set forth
in the applicable policy as follows:
This insurance does not apply ...