United States District Court, E.D. Washington
ORDER DENYING PLAINTIFF'S MOTION FOR PARTIAL
SALVADOR MENDOZA, JR. UNITED STATES DISTRICT JUDGE
Evanston Insurance Company (Evanston) seeks declaratory
judgment that it has no duty to defend or indemnify
subrogation claims asserted by its insured, Rells Fire
Protection, in an underlying state court action. In the
underlying action, Jac's Mountain Group (Jac's) and
Oregon Mutual Insurance Company allege that Rells negligently
and in breach of contract failed to properly inspect fire
suppression equipment at a diner owned by Jac's,
resulting in a fire that destroyed the diner. Evanston moves
for summary judgment that it has no duty to defend the
underlying action because the claims fall within the
applicable insurance policy's (the policy) breach of
contract and professional liability exclusions.
further argues that because it has no duty to defend, it
necessarily also has no duty to indemnify and summary
judgment should be granted in its favor on all claims.
underlying breach of contract claim plainly falls within the
policy's breach of contract exclusion. But that exclusion
cannot bar coverage for claims of negligence. Whether the
negligence claim falls within the professional liability
exclusion cannot be resolved based on the allegations in the
underlying complaint. It is at least conceivable that the
underlying negligence claim is covered by the policy.
Evanston therefore has a duty to defend. Accordingly,
Evanston's motion for partial summary judgment is denied.
Factual and procedural background
alleged in the underlying action, Defendant Jac's
Mountain Group owned a diner in Leavenworth, Washington. ECF
No. 28-3 at 3. Jac's property and casualty insurance
provider, Oregon Mutual Insurance Company, contracted with
Rells Fire Protection (Rells) to inspect the diner's fire
suppression and exhaust system. ECF No. 28-3 at 3. Following
each service inspection, Jac's “received notice
that the restaurant's suppression and exhaust system
exhibited no deficiencies.” ECF No. 28-3 at 3.
2016, a grease fire started at the diner, the fire
suppression system failed to stop the fire, and the diner was
destroyed. ECF No. 28-3 at 3. An inspection revealed that the
restaurant's fire suppression and exhaust system was
deficient and prevented the flames from being extinguished.
ECF No. 28-3 at 3.
Mutual and Jac's filed a lawsuit in state court alleging
negligence and breach of contract against Rells. ECF No.
28-3. The amended complaint alleges that “prior to the
fire, there were neither reasonable nor adequate measures
taken by Rells's Fire in order to notify [Jac's]
about the system's deficiencies.” ECF No. 28-3 at
3. With respect to the negligence claim, the amended
complaint alleges that “Rells's Fire was negligent
in its inspection and diagnosis of the fire suppression and
exhaust system because it failed to (1) notify Plaintiff that
the system did not conform to applicable code/regulations,
and (2) instruct Plaintiff about the need for repairs.”
ECF No. 28-3 at 3-4. With respect to breach of contract, the
amended complaint alleges that “Rells's Fire
entered into a contract with Plaintiff to inspect and service
the building's fire suppression and exhaust system for
the express purposes of maintaining safety and compliance
with state and local requirements.” ECF No. 28-3 at 4.
The amended complaint further alleges that “Rells's
Fire breached its contract and/or warranties when it failed
to properly inspect the fire suppression and exhaust system,
identify the deficiencies, notify Plaintiff of the
deficiencies, and recommend repairs.” ECF No. 28-3 at
provided notice of the lawsuit to its commercial general
liability insurer, Evanston, which agreed to defend under a
reservation of rights. ECF No. 1-3 at 3. Evanston
subsequently filed this declaratory judgment action asserting
that the claims in the underlying action are not covered
because they fall within Rells's policy's (the
policy) breach of contract and professional liability
exclusions. ECF No. 1 at 3; ECF No. 1-4 at 5-6.
Relevant policy provisions
issued an insurance policy to Rells covering the period from
November 10, 2015, to November 10, 2016. ECF No. 26-1 at 4.
The policy contains three primary areas of coverage: (A)
bodily injury and property damage; (B) personal and
advertising injury; and (C) medical payments. ECF No. 26-1.
The policy contains two specific exclusions to coverages A
and B that are relevant here. First, the coverage excludes
“[c]laims arising out of breach of contract, whether
written or oral, express or implied, implied-in-law, or
implied-in-fact contract.” ECF No. 26-1 at 52. Second,
the coverage excludes “[p]rofessional liability,
errors, omissions, negligent acts, malpractice or acts of any
type including rendering or failure to render any type of
professional service, unless such coverage is specifically
endorsed onto the policy.” ECF No. 26-1 at 53.
judgment is appropriate if 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). When considering a motion for summary
judgment, the Court does not weigh the evidence or assess
credibility; instead, “the evidence of the non-movant
is to be believed, and all justifiable inferences are to be
drawn in his favor.” Sgt. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 255 (1986). “In short,
what is required to defeat summary judgment is simply
evidence ‘such that a reasonable juror drawing all
inferences in favor of the respondent ...