United States District Court, W.D. Washington, Tacoma
TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, et al., Plaintiffs,
NORTHWEST PIPE COMPANY, et al., Defendants.
ORDER GRANTING IN PART AND DENYING IN PART
DEFENDANT'S MOTION TO BIFURCATE
BENJAMIN H. SETTLE UNITED STATES DISTRICT JUDGE.
matter comes before the Court on the motion to bifurcate of
Defendant Norwest Pipe Company (“NPC”). Dkt. 52.
Plaintiffs Travelers Property Casualty Company of America
(“Travelers”) and The Phoenix Insurance Company
“Plaintiffs”) oppose the motion. Dkt. 57. The
Court has considered the pleadings filed in support of and in
opposition to the motion and the remainder of the file and
hereby grants the motion in part and denies it in part for
the reasons stated below.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
August 7, 2015, Defendant Greater Vancouver Water District
(“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.
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.
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. Plaintiffs' 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. Additionally,
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
February 8, 2017, Plaintiffs filed their complaint in this
case. Dkt. 1. Plaintiffs seek a declaratory judgment that
they owe no duty to defend or indemnify in the underlying
dispute between NPC and the Water District. Id. at
March 30, 2017, NPC moved for partial summary judgment on
whether Plaintiffs have a duty to defend NPC in the
underlying lawsuit. Dkt. 14. On April 13, 2017, Plaintiffs
moved for summary judgment. Dkt. 17. On April 20, 2017, NPC
also moved for a partial stay of this case and the summary
judgment proceedings on the issue of whether Plaintiffs have
a duty to indemnify NPC for the damages alleged in the
underlying litigation. Dkt. 21.
4, 2017, NPC filed a motion for leave to amend its answer to
the complaint and to assert extra-contractual counterclaims
for bad faith and violations of the Washington Consumer
Protection Act. Dkt. 26.
22, 2017, the Court entered an order denying NPC's motion
to stay the issue of indemnity. Dkt. 38. In reaching its
decision to deny the requested stay, the Court stated:
[W]hile the duty to defend is distinctly broader than the
duty to indemnify, both are derivative of the same underlying
concept: coverage under the applicable policy. “When
the facts or the law affecting coverage is disputed, the
insurer may defend under a reservation of rights until
coverage is settled in a declaratory action.”
Am. Best Food, Inc. v. Alea London, Ltd., 168 Wn.2d
398, 405 (2010), as corrected on denial of
reconsideration (June 28, 2010) (emphasis added).
Because this is just such a declaratory action, the issue
before the Court is whether coverage exists under the
applicable policy for the various claims in the underlying
litigation. This issue is dispositive of both the duty to
defend and the duty to indemnify.
Indeed, the fact that the duty to defend is implicated by the
timing of this lawsuit is important to the Court's
analysis, as it refines the lens through which the Court may
view the issue of coverage. For instance, because the
underlying litigation is unresolved, the duty to defend is
ongoing and the Court's review must generally be limited
to “look[ing] at the ‘eight corners' of the
insurance contract and the underlying complaint.”
Nat'l Union Fire Ins. Co. of Pittsburgh, PA v.
Coinstar, Inc., 39 F.Supp.3d 1149, 1156 (W.D. Wash.
2014). Nonetheless, the distinction between the duties to
defend or indemnify is not so profound, by itself, to justify
staying the Court's analysis of one duty while addressing
the other. Contrary to the Defendants' assertions,
analysis of whether the allegations in the underlying lawsuit
implicate covered property damage will not prejudice them in
any way. Accordingly, the motion to stay is denied.
Id. at 8.
20, 2017, the Court entered an order granting in part and
denying in part the parties' motions for summary judgment
and granting NPC's motion for leave to amend. ...