United States District Court, W.D. Washington, Seattle
SNOHOMISH COUNTY PUBLIC HOSPITAL DISTRICT NO. 1, Plaintiff,
HARTFORD FIRE INSURANCE COMPANY, et al., Defendants.
ORDER ON CROSS-MOTIONS FOR PARTIAL SUMMARY
L. ROBART, UNITED STATES DISTRICT JUDGE.
the court are the parties' cross-motions for partial
summary judgment. (See Pl. MSJ (Dkt. # 24); Def. MSJ
(Dkt. # 21).) The court has considered the parties'
motions, their submissions in support of and in opposition to
the motions, the relevant portions of the record, and the
applicable law. Being fully advised,  the court GRANTS in part and
DENIES in part Plaintiff Snohomish County Public Hospital
District No. 1 d/b/a EvergreenHealth Monroe's
(“EHM”) motion for partial summary judgment, and
DENIES Defendant Hartford Fire Insurance Company's
(“Hartford”) motion for partial summary judgment.
a “small public hospital in Snohomish County,
Washington.” (Compl. (Dkt. # 1-1) ¶ 1.1.) This is
an insurance coverage dispute related to the failure of the
hydraulic cylinder-depicted directly below-in EHM's
elevator. (Id. ¶ 4.1.)
Pendleton Decl. (Dkt. # 25) ¶ 2.) The court recounts
below the relevant factual and procedural background.
October 20, 2015, Hartford issued EHM Policy No. 10 UUN
HV1618 (“the Policy”) covering November 1, 2015,
to October 1, 2016. (1st Pendleton Decl. ¶ 3, Ex. 1
(“Policy”) at 3-4; see also 1st Adams
Decl. (Dkt. # 22) ¶ 2, Ex. 1.) The Policy stated that
Hartford “will pay for direct physical loss of or
direct physical damage to . . . Covered Property caused by or
resulting from a Covered Cause of Loss.” (Policy at 4.)
Covered Property included “[p]ermanently installed
machinery and equipment” (id.), and a Covered
Cause of Loss included “direct physical loss or direct
physical damage that occurs during the Policy Period . . .
unless the loss or damage is excluded or limited in this
policy” (id. at 14). The Policy specifically
provided coverage arising from an “Equipment Breakdown
Accident to Equipment Breakdown Property.”
(Id. at 20.) The Policy defined an “Equipment
Breakdown Accident” as “direct physical loss or
direct physical damage” such as “[m]echanical
breakdown, including rupture or bursting caused by
centrifugal force.” (Id.) The Policy also
defined “Equipment Breakdown Property” as
“property . . . that generates, transmits or utilizes
energy, including electronic communications and data
processing equipment.” (Id.)
Policy further contained a “Special Business Income
Coverage Form, ” which covered “the actual loss
of Business Income [EHM] sustain[ed] and the actual,
necessary and reasonable Extra Expense [EHM] incur[red] due
to the necessary interruption of [its] business
operations.” (Id. at 10.)
Policy also contained two exclusions relevant here: (1) an
underground vessels exclusion, and (2) a corrosion exclusion.
The Policy stated that,
[t]he following is not Equipment Breakdown Property[:] . . .
Any sewer piping, any underground vessels or
piping, any piping forming a part of a sprinkler system or
water piping other than boiler feedwater piping, boiler
condensate return piping or water piping forming a part of a
refrigerating or air conditioning system.
(Id. at 20-21 (bolding added).) The corrosion
exclusion stated that Hartford “will not pay for loss
or damage caused by or resulting from any of the following .
. . Wear and tear, or change in color, texture, or finish; .
. . Rust, corrosion, decay, or
deterioration.” (Id. at 20 (bolding added).)
Damage to the Hydraulic Cylinder
April 6, 2016, one of EHM's elevators stopped working
properly, and EHM subsequently tendered its claim to
Hartford. (See, e.g., 1st Pendleton Decl.
¶ 3, Ex. 3 (“McIntosh Rep.”) at 24.) EHM
sought the cost of removal, manufacture, expedited shipping,
and installation of a new hydraulic cylinder. (Id.
at 27.) EHM also sought lost business income of $70, 000.00.
(Id.; see also 1st Pendleton Decl. ¶
3, Ex. 4 (“Rog. Ans.”) at 42.)
to an investigation report by Brian McIntosh, a Loss Control
Inspector for Hartford Steam Boiler (“HSB”), one
of EHM's elevators began making “a horrible
noise.” (McIntosh Rep. at 25.) EHM's maintenance
department called the elevator manufacturer, ThyssenKrupp,
and a technician came to EHM and filled the oil reservoir.
(See id.) After filling the reservoir, the
technician tested the elevator by raising it to the second
floor “to see how long the elevator would hold its
position.” (Id.) After only minutes,
“the elevator lowered a foot.” (Id.) EHM
then took the elevator out of service overnight, and when the
elevator was checked the next morning, it had descended to
the first floor. (See id.) EHM then
“discovered that the elevator hydraulic [cylinder] had
a leak.” (Id.) EHM removed the hydraulic
cylinder “from the hole in the elevator pit after the
hydraulic oil was pumped out.” (Id.) The
hydraulic cylinder measured approximately 14 feet long and 6
inches in diameter. (See id.) The physical damage-
depicted in the photo below-to the hydraulic cylinder was
“a small hole” that “blew out of a piece of
the metal cylinder.” (Id. At 26.)
Adams Decl. ¶ 4, Ex. 3 at 3.) Mr. McIntosh noted at that
time that hydraulic pressure apparently caused the damage.
(McIntosh Rep. at 26.) The elevator would be inoperative
until the hydraulic cylinder could be replaced, and because
of the inoperative elevator, one of EHM's tenants had to
relocate. (Id. at 27.)
6, 2016, Hartford denied EHM's claim on two bases: (1)
the elevator did not meet the definition of covered equipment
breakdown because the hydraulic cylinder was an underground
vessel; and (2) the hydraulic cylinder had
corroded. (1st Adams Decl. ¶ 3, Ex. 2
(“5/6/16 Denial”) at 4; see also 1st
Pendleton Decl. ¶ 3, Ex. 8 at 64.) Internal Hartford
emails show that Hartford believed because the cylinder was
“below grade, ” it was “underground.”
(1st Pendleton Decl. ¶ 3, Ex. 11 at 74.) The photo below
shows the hole in the ground in which part of the cylinder
Adams Decl. ¶ 4, Ex. 3 at 3; see also 2d
Pendleton Decl. (Dkt. # 36) ¶ 2 (authenticating a
similar image embedded in EHM's response brief); Pl.
Resp. (Dkt. # 34) at 4 (depicting a similar image).) At least
one Hartford agent, however, questioned that conclusion,
because “regardless of location[, ] a pump (hydraulic
ram) simply pushes or moves liquid but does not contain or
store liquid as would a vessel.” (1st Pendleton Decl.
¶ 3, Ex. 12 at 78.) And as of June 28, 2016, a Hartford
representative stated that it “still ha[s] no written
evidence that confirms that Corrosion was the cause of the
Hydraulic [Cylinder] Failure, only [ESI's] report listing
Hydraulic Pressure.” (Id. at 79.)
September 1, 2016, Parker, Smith & Fleek
(“PSF”), EHM's insurance broker, responded to
Mr. McIntosh's report and Hartford's denial of
coverage. (1st Pendleton Decl. ¶ 3, Ex. 9 (“1st
PSF Letter”) at 67-69.) PSF shared its “belief
that the declination was issued in error” because
“there were no findings during the investigation that
the hydraulic . . . cylinder sustained damage relating to
wear and tear, rust or maintenance issues.”
(Id. at 68.) PSF further stated that
“[n]othing in the report makes any reference of the
hydraulic [cylinder] being located underground. . . . The pit
is below grade but certainly not ...