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T-Mobile USA Inc. v. Selective Insurance Company of America

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

October 19, 2017

T-MOBILE USA INC., Plaintiff,




         Before the court are Plaintiff T-Mobile USA Inc.'s (“T-Mobile USA”) motion for reconsideration of the court's June 27, 2017, order (MFR (Dkt. # 83)), Defendant Selective Insurance Company of America's (“Selective”) motion for summary judgment on T-Mobile USA's Consumer Fraud Act (“CFA”) claim under New Jersey law (MSJ (Dkt. # 71)), and T-Mobile USA's motion to compel discovery from Selective's outside claims handling attorney (MTC (Dkt. # 90)). The court has considered the motions, the parties' submissions in support of and opposition to the motions, the relevant portions of the record, and the applicable law. Being fully advised, [1] the court DENIES T-Mobile USA's motion for reconsideration, DENIES as moot Selective's motion for summary judgment on the CFA claim, and DENIES as moot T-Mobile USA's motion to compel.


         A. Factual Background

         The court extensively detailed the factual background of this case in its June 27, 2017, order. (See 6/27/17 Order (Dkt. # 82) at 2-9.) Accordingly, the court limits its discussion here to those facts relevant to the instant matters.

         In this insurance coverage dispute, T-Mobile USA asserts that (1) it is an additional insured under a Selective insurance policy issued to Innovative Engineering, Inc. (“Innovative”), and (2) Selective wrongfully failed to defend and indemnify T-Mobile USA in construction litigation in New York State (“the underlying litigation”). (See Compl. (Dkt. # 4); 1st Bauer Decl. (Dkt. # 52) ¶ 3.)

         On July 8, 2010, T-Mobile Northeast, LLC (“T-Mobile NE”)-a wholly owned subsidiary of T-Mobile USA-entered into a “Field Services Agreement” with Innovative. (See Sheridan Decl. (Dkt. # 53) ¶ 2, Ex. A (“FSA”) at 1.)[2] Innovative contracted to perform architectural and engineering services for T-Mobile NE and to maintain general liability insurance including a waiver of subrogation in favor of T-Mobile NE and “its affiliates and subsidiaries.” (Id. at 6.) The FSA also required Innovative to provide T-Mobile NE with certificates of insurance documenting the coverage that the FSA required Innovative to obtain and naming T-Mobile NE as an additional insured on the certificates. (Id. at 7.)

         Selective issued Innovative a commercial general liability policy numbered S164349108 (“the Policy”), which was effective from January 16, 2012, through January 16, 2013. (Sheridan Decl. ¶ 3, Ex. B (“Policy”) at 2-3.) The Policy provides that “the words ‘you' and ‘your' refer to the Named Insured shown in the Declarations, and any other person or organization qualifying as a Named Insured under this policy.” (Id. at 54.) The Declarations name “Innovative Engineering Inc[.] &/ Or Innovative Client Solutions”-Innovative-as the Named Insured. (Id. at 3.) The Policy states that “SECTION II - WHO IS AN INSURED is amended to include as an additional insured any person or organization with whom you have agreed in a written contract or written agreement to add as an additional insured on your policy.” (Id. at 60.) The Policy further states that if an entity is designated in the Declarations as a limited liability company (“LLC”), its “members are also insureds, but only with respect to the conduct of [the LLC's] business.” (Id. at 39.)

         The events giving rise to this coverage dispute are as follows. In 2005, Omnipoint-T-Mobile NE's predecessor in name-leased from Virginia Properties, LLC, a portion of a rooftop on which to construct a cell phone tower. (Cyprian Decl. (Dkt. # 72) ¶ 5, Ex. C (“Lease”).) Innovative performed work for T-Mobile NE to construct the rooftop tower, and on April 23, 2013, Virginia Properties initiated the underlying litigation against T-Mobile USA and Omnipoint, alleging that the cell tower damaged the building. See Va. Props., LLC v. T-Mobile Ne. LLC, No. 13-CV-03493 (S.D.N.Y.) appeal docketed, No. 16-2973 (2d Cir. Aug. 28, 2016); (see generally Lease.)

         After T-Mobile USA and Omnipoint filed a third-party complaint against Innovative in the underlying litigation (Cyprian Decl. ¶ 6, Ex. D), Innovative tendered its defense to Selective (Sheridan Decl. ¶ 10, Ex. I). On July 23, 2013, Selective accepted the defense under a reservation of rights. (Sheridan Decl. ¶ 11, Ex. J (“ROR Letter”).) On February 1, 2013, T-Mobile USA-through Sedgwick, T-Mobile USA's claims agent-also tendered a claim to Innovative for defense and indemnification regarding the underlying litigation and requested that Innovative put its insurer on notice of the claim. (Sheridan Decl. ¶ 8, Ex. G (“Tender”).) The tender referenced a “contract with T-Mobile USA Inc. [that] contains an indemnification and hold harmless agreement that favors T-Mobile, USA Inc. in this matter” and also “requires that you obtain insurance covering not only you but T-Mobile, USA Inc. for these claims.” (Id. at 2.)

         According to Kary Cyprian, Claims Management Specialist for Selective, based on her initial investigation into T-Mobile USA's tender, the only information she needed to make a final determination as to whether T-Mobile USA was an additional insured was a copy of T-Mobile USA's own insurance policy. (See Sheridan Decl. ¶ 9, Ex. H (“Cyprian Dep.”) at 199-201, 211-12, 219.)[3] On July 8, 2013, Selective claims handler, Michael Parlin, took over T-Mobile USA's claim. (Sheridan Decl. ¶ 4, Ex. C (“Parlin Dep.”) at 119, 125.) After Mr. Parlin assumed responsibility for the claim, Selective did not act on T-Mobile USA's tender until February 26, 2015. (Sheridan Decl. ¶ 13, Ex. L at 2.) On February 25, 2015, Sedgwick again demanded that Selective defend T-Mobile USA. (Id. ¶ 12, Ex. K.) The next day, Mr. Parlin denied via email T-Mobile USA's tender. (Id. ¶ 13, Ex. L at 2.) Mr. Parlin's email merely pointed T-Mobile USA to Selective's 2013 reservation of rights letter to Innovative. (Id. (“Based on this letter, Selective must respectfully decline your request for defense and indemnification . . . .”); see also ROR Letter.) In Mr. Parlin's subsequent deposition testimony, he stated that he denied T-Mobile USA's tender based on the Professional Services Exclusion in the Policy. (See, e.g., Parlin Dep. at 119-20.) Sedgwick again emailed Mr. Parlin on March 13, 2015, stating “[a]s my client T-Mobile [USA] is an additional insured on your policy, we continue to look to you for defense and indemnification on this claim.” (Sheridan Decl. ¶ 14, Ex. M at 2.)

         In August 2015, Selective's coverage counsel, Dan Kohane, responded to an inquiry from T-Mobile USA Insurance & Claims Manager, Lisa Bauer, about Selective's position regarding coverage of T-Mobile USA under the policy. (Parlin Decl. (Dkt. # 73) ¶ 14, Ex. B at 2.) T-Mobile USA asked Selective to clarify the basis for denying coverage. (See id.) Mr. Kohane stated that Selective had determined T-Mobile USA was not a named or additional insured under the Policy and therefore was not entitled to coverage. (Id. ¶ 5, Ex. C (“Kohane Email”) at 2.)

         B. Procedural Background

         T-Mobile USA then brought this suit in the Superior Court for King County, alleging that the terms of the Policy cover T-Mobile USA (see Compl. ¶ 13), and Selective removed the case to this court on November 4, 2015 (Not. of Rem. (Dkt. # 1)). T-Mobile USA asserted claims for: (1) declaratory judgment that Selective is contractually obligated to defend and indemnify T-Mobile USA in the underlying action, (2) breach of the insurance contract, (3) attorneys' fees, (4) breach of the duty of good faith and fair dealing, (5) violation of the Washington State Consumer Protection Act (“CPA”), RCW 19.86, et seq., and (6) estoppel. (Compl. ¶¶ 24-44.)

         The parties both moved for summary judgment. T-Mobile USA moved for partial summary judgment on its breach of contract, declaratory judgment, and bad faith claims. (Pl. MSJ at 2.) T-Mobile USA contended that (1) Selective was contractually obligated to provide a defense to T-Mobile USA and that the only basis on which Selective denied coverage was incorrect (id. at 15-17); (2) Selective was estopped from asserting that T-Mobile USA could not have tendered a defense as an additional insured under the Policy (id. at 17-18); (3) even if Selective could argue additional coverage defenses, (a) T-Mobile USA is an additional insured because Selective's agent issued a certificate of insurance naming T-Mobile USA as an additional insured (id. at 19-22), (b) the Policy's additional insured endorsement confers coverage on T-Mobile USA as T-Mobile NE's sole member (id. at 22-23), and (c) T-Mobile USA has standing to recover defense costs as T-Mobile NE's parent company (id.); and (4) Selective's actions constituted bad faith as a matter of law (id. at 23-25).

         Selective moved for summary judgment on all of T-Mobile USA's claims. (See Def. MSJ.) Selective argued that (1) T-Mobile USA is not an insured under the Policy (id. at 17-20), (2) the certificate of insurance does not confer coverage on T-Mobile USA (id. at 20-28), (3) T-Mobile USA is judicially estopped from seeking coverage under the Policy because T-Mobile USA took an inconsistent position in the underlying litigation (id. at ...

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