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Market Place North Condominium Association v. Affiliated Fm Insurance Co.

United States District Court, W.D. Washington

May 7, 2018

MARKET PLACE NORTH CONDOMINIUM ASSOCIATION, a Washington non-profit corporation, Plaintiff,



         This matter comes before the Court on Plaintiff Market Place North Condominium Association (“the Association”)'s Motion for Partial Summary Judgement against Defendant Affiliated FM Insurance Company (“AFM”). Dkt. #19. The Association asks the Court to rule as a matter of law that “the Association's 2015-16 AFM all-risk property policy covers both water intrusion damage and mold, ” that AFM owes coverage to the Association under the insurance contract, and that AFM's denial of coverage violates Washington's Insurance Fair Conduct Act (“IFCA”). Defendant opposes this Motion and alternatively seeks relief under Rule 56(d). Dkt. #27. For the reasons set forth below, the Court GRANTS IN PART the Association's Motion.

         I. BACKGROUND

         Built in 1982, the Market Place North Condominium is located in downtown Seattle. Dkt. #22 (Peter Danelo Declaration), ¶ 3. The property consists of a high-rise tower, a set of townhomes, a parking garage, and four commercial spaces. Id. There are 90 units, 86 of which are residential. Id. The property is managed by an Association, which is acting as the Plaintiff in this case. The Association is governed by a volunteer board of directors. Id. at ¶ 4. In August 2015, the Association undertook certain outdoor deck repairs of the high-rise tower. Id. at ¶ 5. Those repairs were completed in spring 2016 and cost the Association approximately $400, 000. Damage uncovered during those deck repairs led the Association to investigate other portions of the building. Id. at ¶ 6. After learning in the summer of 2016 that water intrusion damage, or at least signs of it, existed throughout the property, the Association put its insurer, Defendant in this case, on notice.[1] Id. at ¶ 7.

         The Association's investigation team met in person with AFM in early December 2016 to show damage already uncovered at the property, indicators that additional damage existed, and to discuss the Association's proposed intrusive investigation plan that it wanted AFM to participate in. See Dkt. 20-3. AFM rejected the Association's proposal, indicating that it did not believe it had a legal obligation “to investigate potential damage, as opposed to actual damage.” Dkt. #20-4 at 2. The Association then sent AFM a notice under Washington's Insurance Fair Conduct Act based on AFM's failure to investigate. Dkt. #20-5. AFM did not change its position, and the Association filed a Complaint in King County Superior Court in March of 2017. See Dkt. #6. AFM removed to this Court in April of 2017. Dkt. #1.

         The intrusive investigation was scheduled to begin in May of 2017, and AFM eventually agreed to participate and pay half of the associated costs, estimated to be around $150, 000. See Dkt. #20-6. The investigation consisted of approximately 40 openings throughout the property and produced at least some evidence of long-term and ongoing water intrusion damage, including at the framing and sheathing. Dkt. #21 (Moe Declaration) at ¶5. In June, around the time the investigation was ending, AFM advised that it had changed its position and was now unwilling to pay any of the costs associated with the investigation. See Dkt #20-6. The parties attempted to proceed with alternative dispute resolution, which was unsuccessful. After extension of certain deadlines in this case, on September 22, 2017, AFM denied coverage in a letter to the Association. Dkt. #20-7. It is unclear if this letter was a final decision. Although AFM stated coverage decisions and conclusions it also stated that it was providing “preliminary analysis of potential coverage issues, ” and that it “finds itself in the position of attempting to analyze coverage in the absence of a fully supported and documented claim.” Id. That letter was accompanied by a report from AFM's consultant, WJE, which documented the presence of water intrusion “deterioration” and “decay” at the property. See Dkt. #20-8. AFM's letter primarily relied upon three coverage exclusions: defective construction, faulty maintenance, and/or wear and tear/corrosion/deterioration. See Dkt. #20-7. AFM also discussed evidence that the Association may have known about the water damage on an ongoing basis and stated, “[g]iven the large volume of documents the Association has produced, AFM's careful review of the documentation is still ongoing.” Id. at 14-15.

         In response to AFM's apparent coverage denial, the Association provided another IFCA notice in October 2017. Dkt. #20-9. The Association later produced to AFM a scope of repair and cost document estimating that repair costs will exceed $27 million. Dkt. #20 (Miller Declaration) at ¶12.

         The Association amended its complaint on January 4, 2018, to add an IFCA claim. Dkt. #18. The current Amended Complaint has causes of action for declaratory relief, breach of insurance contract, common law bad faith, breach of the state Consumer Protection Act (“CPA”), negligence, and IFCA. Id.


         A. Legal Standard

         Summary judgment is appropriate where “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). Material facts are those which might affect the outcome of the suit under governing law. Anderson, 477 U.S. at 248. In ruling on summary judgment, a court does not weigh evidence to determine the truth of the matter, but “only determine[s] whether there is a genuine issue for trial.” Crane v. Conoco, Inc., 41 F.3d 547, 549 (9th Cir. 1994) (citing Federal Deposit Ins. Corp. v. O'Melveny & Meyers, 969 F.2d 744, 747 (9th Cir. 1992)).

         On a motion for summary judgment, the court views the evidence and draws inferences in the light most favorable to the non-moving party. Anderson, 477 U.S. at 255; Sullivan v. U.S. Dep't of the Navy, 365 F.3d 827, 832 (9th Cir. 2004). The Court must draw all reasonable inferences in favor of the non-moving party. See O'Melveny & Meyers, 969 F.2d at 747, rev'd on other grounds, 512 U.S. 79 (1994). However, the nonmoving party must make a “sufficient showing on an essential element of her case with respect to which she has the burden of proof” to survive summary judgment. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

         B. Analysis

         1. ...

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