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Hay v. American Safety Indemnity Co.

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

September 19, 2017

MAUREEN HAY, a Washington resident, IGOR SMAL, a Washington resident, HANNA SMAL, a Washington resident, JORDAN SMITH, a Washington resident, CAMERON SMITH, a Washington resident, ALEX KULIBABA, a Washington resident, NATALYA MANCHIK, a Washington resident, DAN HART, a Washington resident, SHAWNA HART, a Washington resident, PETER MANNING, a Washington resident, ADRIENNE MANNING, a Washington resident, TAWNY CABRAL, a Washington resident, WHITNEY DECORIA, a Washington resident, RYAN DECORIA, a Washington resident, JOSEPHINE PANGAN, a Washington resident, AUBREY BRADLEY, a Washington resident, OZNUR BRADLEY, a Washington resident, CODY WHITNEY, a Washington resident, YVONNE WHITNEY, a Washington resident, HAROON SAKHI, a Washington resident, ADELA SAKHI, a Washington resident, CHRISTINE JOHNSON, a Washington resident, KEN EDWARDS, a Washington resident, SHERRI PENA, a Washington resident, YONG LIM, a Washington resident, AMBER LEE, a Washington resident, WHITNEY SARGENT, a Washington resident, YEVGENIY “JOHN” ZADNEPROVSKIY, a Washington resident, MARIA ZADNEPROVSKIY, a Washington resident, EUN YOUNG LEE, a Washington resident, KURY BERG, a Washington resident, TRACEY BERG, a Washington resident, PETE NITO, a Washington resident, JENELYN NITO, a Washington resident, WILLIAM DUNGER, a Washington resident, BANNY CHHOEUN, a Washington resident, SARETH CHHOEUN, a Washington resident, ADAM JACKSON, a Washington resident, SARA JACKSON, a Washington resident, LAYLA BUGADO, a Washington resident, BRAD BUGADO, a Washington resident, PHU DO, a Washington resident, HIEN TRAN, a Washington resident, Plaintiffs,
v.
AMERICAN SAFETY INDEMNITY COMPANY, Defendant.

          ORDER ON CROSS MOTIONS FOR SUMMARY JUDGMENT

          ROBERT J. BRYAN, UNITED STATES DISTRICT JUDGE

         This matter comes before the Court on Defendant's Motion for Summary Judgment (Dkt. 14) and the Plaintiffs' Motion for Summary Judgment (Dkt. 16, refiled as 20-1). The Court has considered the pleadings filed in support of and in opposition to the motions and the file herein.

         In this insurance coverage dispute, Plaintiffs assert that Defendant American Safety Indemnity Company (“ASIC”) is liable for breach of contract, bad faith, violations of Washington's Insurance Fair Conduct Act (“IFCA”) and Washington's Consumer Protection Act (“CPA”) in connection with property damage to Plaintiffs' homes in the Valley Haven housing community. Dkt. 1. Both parties now move for summary judgment. For the reasons provided, the Defendant's Motion for Summary Judgment (Dkt. 14) should be granted and the Plaintiffs' Motion for Summary Judgment (Dkt. 16, refiled as 20-1) should be denied.

         I. RELEVANT FACTS AND PENDING MOTIONS

         Plaintiffs are purchasers of homes in the Fife, Washington Valley Haven housing development. Dkt. 1. The houses were built and sold by Highmark Homes, LLC and its principal owner and agent Tom Tollen (collectively “Highmark”). Dkt. 17-14. Highmark purchased the lots for the houses from First Savings Bank in phases pursuant to a purchase and sales agreement in which Highmark agreed to purchase a group of lots, and then had the right of first refusal on the other lots with preset deadlines. Dkt. 17-14, at 7-8. Highmark purchased the lots on which the homes were built in the following phases: around eight lots on March 30, 2012, another group on September 13, 2012, one lot on November 27, 2012, and the last group of lots on December 27, 2012. Dkts. 17-1, 17-2, 17-4, and 17-5. The first house was complete in July of 2012; the last in July 2013. Dkt. 17-9, at 4-5. Highmark had insurance policies with other carriers and Defendant ASIC. Dkt. 17-9.

         After the Plaintiffs moved into the homes, they noticed various issues with the construction, including problems with the siding and windows, and water intrusion. Dkt. 17-6. On May 15, 2014, Plaintiffs filed suit in Pierce County, Washington Superior Court against Highmark and Mr. Tollen, asserting construction defect claims (“underlying case”). Dkt. 17-7; Hay v. Highmark, et al., Pierce County, Washington Superior Court case number 14-2-08793-0. The Plaintiffs asserted that Highmark “constructed 29 homes located within Valley Haven project development, in Fife, Washington” and “sold 29 homes located within Valley Haven project development, in Fife, Washington.” Id. Plaintiffs made claims against Highmark for negligence, breach of contract, breach of express and implied warranties, and violations of the Washington Condominium Act. Id. Highmark, in turn, asserted crossclaims against some of its subcontractors, AAA Framing Corporation, Absi Builders, Inc., and Afdem & Son's Dozing, Inc. See Dkt. 17-13.

         On May 22, 2014, Highmark tendered a claim, by letter, to Defendant ASIC (and the other insurance companies), and included a copy of the Plaintiffs' complaint and other pleadings filed in the underlying case. Dkt. 15-4, at 2-47. In the tender letter, Highmark indicated that 29 homeowners had filed suit against it. Dkt. 15-4, at 3. One of the other insurance carriers, International Insurance Company of Hannover (“Hannover”), agreed to defend Highmark. Dkt. 17-15.

         On May 29, 2014, a representative of ASIC contacted Highmark's attorney, and asked for information including: dates of completion and sale, when work was completed, other insurance, job files, and subcontractor information. Dkt. 17-8. Highmark's attorney sent a response on June 13, 2014. Dkt. 17-9. On June 23, 2014, ASIC sent an email and asked Highmark's lawyer to “please confirm whether Highmark worked on all 29 homes.” Dkt. 15-5, at 2. On July 15, 2014, Highmark's lawyer responded and stated that Highmark and its subcontractors constructed all 29 homes at issue in the underlying case. Id.

         ASIC sent Highmark a letter, dated August 7, 2014, and advised that there was no coverage under the policies for its claim, citing, in part an exclusion for “tract housing.” Dkt. 15-5, at 5-10. On October 21, 2014, Highmark re-tendered the claim, explaining that the tract housing exclusion did not apply because “the houses weren't built and arranged according to a single plan, ” Highmark wasn't the original developer, the original developer lost the lots in foreclosure, Highmark initially bought a few lots, built homes on those lots, and then evaluated whether to purchase more lots. Dkt. 15-5, at 13. The letter asserted that “Highmark did not by a tract or any portion thereof, and never contemplated developing a unified community, ” so the exclusion did not apply. Id.

         On March 9, 2015, ASIC again denied Highmark's claim, citing the “tract housing” exclusion. Dkt. 15-5, at 25-27.

         In September of 2016, Plaintiffs settled the claims asserted in the underlying case against Highmark for $4, 250, 000 and for an assignment of Highmark's potential claims against the subcontractors and Highmark's insurance companies (except Hannover). Dkt. 17-15.

         On November 21, 2016, Plaintiffs' attorney, in accord with assigned claims from Highmark, mailed ASIC a Washington Office of the Insurance Commissioner's “Insurance Fair Conduct Act 20 Day Notification Sheet, ” which was stamped as received by ASIC on November 28, 2016. Dkts. 15-5, at 29-30. This form identified “Highmark Homes LLC” as the first party claimant and “Commercial General Liability Policy” as the line of insurance. Id., at 29. It did not identify a policy number. Id.

         In response, ASIC's counsel contacted Plaintiffs' counsel and indicated that it did not know to which case the notification applied or the basis for any complaints. Dkt. 15-5, at 32. Plaintiffs' counsel responded by email on December 13, 2016, stating that: ASIC “insured Best Quality Framing (“BQF”) which contracted to [sic] with Highmark Homes to build homes in the Valley Haven project. The contract required BQF to name Highmark Homes as an addition insured. . . Highmark tendered the claims on February 19, 2015.” Dkt. 15-5, at 32. The email then lists policy numbers; none of the policy numbers listed in the email match the policy numbers at issue here. Id.

         This case was filed on January 31, 2017. Dkt. 1. On February 16, 2017, the Pierce County, Washington Superior Court entered judgment in the underlying case against Highmark in favor of the Plaintiffs for $4, 462, 344.00. Dkt. 19-1, at 2; Hay v. Highmark, et al., Pierce County, Washington Superior Court case number 14-2-08793-0.

         Parties now file cross motions for summary judgment, and have both filed cross responses and replies. Dkts. 14, 16, 18, 22, 24 and 25. Their arguments will be considered by claim.

         II. DISCUSSION

         A. SUMMARY ...


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