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Feenix Parkside LLC v. Berkley North Pacific

Court of Appeals of Washington, Division 1

April 8, 2019

FEENIX PARKSIDE LLC, Appellant,
v.
BERKLEY NORTH PACIFIC and CONTINENTAL WESTERN INSURANCE COMPANY, Respondents.

          Appelwick, C.J.

         The ceiling of a commercial building owned by Feenix partially collapsed. Feenix sought coverage under the insurance policy's coverage for collapse due to decay, claiming the collapse was caused by a gradual decline in strength, soundness. Berkley denied coverage for the loss. The trial court granted summary judgment to Berkley on the coverage issue. We reverse.

         FACTS

         Feenix Parkside LLC (Feenix) owns a single story commercial building in Auburn, Washington. The building was built approximately 40 years ago, around 1979. On or about July 4, 2015, a portion of the building's roof truss system failed, and that portion of the roof collapsed. At that time, Feenix was insured by a Continental Western Insurance Company policy issued by Berkley North Pacific (Berkley). Feenix submitted a claim to Berkley. Berkley retained Independent Adjuster Rob Stone from McLarens Young and Engineer Mark Schaefer with Pacific Engineering Technologies Inc. (PET) to investigate the claim.

         Stone and Schaefer initially inspected the building on July 8, 2015. Schaefer again inspected the building on July 13, 21, and 27, 2015. Based on his inspections and research, Schaefer performed a structural analysis of the roof truss system. In his opinion, the roof trusses failed when the top chord members fractured as a result of applied tension perpendicular to the wood grain immediately adjacent to the rear exterior bearing wall. He determined that the roof trusses failed because of two concurrent factors: (1) the configuration of the truss plate connection adjacent to the rear exterior bearing wall had inadequate strength to resist the applied loads, and (2) higher than normal temperatures reduced the strength of the wood trusses by up to 30 percent.

         In a letter dated August 19, 2015, Berkley denied Feenix's claim because the loss was caused by "defective methods in construction and excessive temperatures in the attic," which are not covered causes of loss under the policy's collapse coverage.

         Feenix retained CT Engineering Inc. to conduct an independent investigation of the loss shortly after receiving Berkley's denial. CT Engineering concluded,

[W]ater penetrated thru [sic] the upper layer of roofing and collected between the two layers providing a concealed, encapsulated water delivery system. The water between the roofing layers sought the drain location although [sic] became trapped. As the water volume increased, so did the pressure on the old roofing layer which we believe, slowly allowed the water to penetrate into the interior of the building near the roof drains. The water wicked through the blocking and delivered moisture to the truss bearing ends. In support of this, water staining is clearly visible in both the blocking and truss bearing ends [on] each side of the roof drains.

         CT Engineering also wrote, "It is our opinion that the cause of the truss collapse is due to the combined effects of both an elevated temperature in the attic space due to solar radiation gain (125 -150 degrees) as well as a moisture content exceeding 19% for an extended period of time." Based on CT Engineering's findings, Feenix requested that Berkley reconsider its denial of coverage.

         As a result of Feenix's letter, Berkley reopened its investigation and instructed PET to determine whether "'hidden decay"' contributed to the roof collapse. On July 13, 2016, PET revisited the building site and inspected portions of the original roof sheathing and roof trusses still onsite. Schaefer did not alter his opinions on the cause of the collapse, and noted the following:

• Visual examination of the failure surfaces in the top chord members of trusses in place shortly after the collapse showed no evidence of wood decay in the failure surface.
• Examination of the failure surfaces in the top chord members truss pieces stored on site in 2016 showed no evidence of wood decay in the failure surface.
• Examination of the failure surfaces in the top chord members truss pieces stored at the MDE [Inc.] in 2016 showed no evidence of wood decay in the failure surface. The darkened wood along the shafts of nails that were exposed in the failure plane appears to be iron staining, which is a common phenomenon in wood where elevated moisture is present at some point. Iron staining does not reduce the strength of the affected wood.

         Following PET's supplemental report, Berkley confirmed its denial of Feenix's claim.

         On September 23, 2016, Feenix sued Berkley. Berkley and Feenix filed cross motions for summary judgment on the issue of coverage for the building roof collapse. On August 4, 2017, the trial court granted Berkley's motion for summary judgment and denied Feenix's motion. On September 18, 2017, the trial court entered an amended order on the parties' cross motions, which reflected all submissions and materials considered by the trial court at the summary judgment hearing. The amended order did not alter or modify the legal conclusions and findings of fact in the trial court's August 4, 2017 orders. Feenix appeals.

         DISCUSSION

         Feenix makes two arguments. First, it argues that the trial court erred in finding the term "decay" unambiguous in Berkley's insurance policy. Second, it argues that the trial court erred by construing the term "system" against Feenix and in favor of Berkley.

         I. Standard of Review

         An order granting summary judgment is reviewed de novo, "with the reviewing court performing the same inquiry as the trial court." Ski Acres, Inc. v. Kittitas County. 118 Wn.2d 852, 854, 827 P.2d 1000 (1992). When we review a summary judgment order, we must consider all evidence in favor of the nonmoving party. Keck v. Collins. 184 Wn.2d 358, 368, 357 P.3d 1080 (2015). Summary judgment is appropriate if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. CR 56(c); TracFone Wireless. Inc. v. Dep't of Revenue. 170 Wn.2d 273, 281, 242 P.3d 810 (2010).

         II. Insurance

         Courts in Washington construe insurance policies as the average person purchasing insurance would, giving the language a fair, reasonable, and sensible construction. Vision One. LLC v. Phila. Indem. Ins. Co., 174 Wn.2d 501, 512, 276 P.3d 300 (2012). Undefined terms are to be given their ordinary meaning, Id. The entire contract must be construed together in order to give force and effect to each clause. Wash. Pub. Util. Dists.' Utils. Sys. v. Pub. Util. Dist. No. 1 of Clallam County., 112 Wn.2d 1, 10, 771 P.2d 701 (1989). The court must enforce the contract as written if the language is clear and unambiguous. Id. If the language on its face is fairly susceptible to two different but reasonable interpretations, the contract is ambiguous, and the court must attempt to discern and enforce the contract as the parties intended, Id. at 10-11. In the event of an ambiguity, the contract will be construed in favor of the insured. Id. at 11.

         A. Burden

         Property insurance policies generally fall into two categories: named-peril and all-risk. 174 Wn.2d at 513. "Named perils" policies provide coverage only for the specific risks enumerated in the policy and exclude all other risks, Id. All-risk policies, on the other hand, provide coverage for all risks unless the specific risk is excluded, Id. In both types of property insurance, coverage is commonly triggered-or excluded-when a specified peril '"causes'" a loss. Id. at 514.

         Determining whether coverage exists is a two-step process. McDonald v. State Farm Fire & Cas. Co., 119 Wn.2d 724, 731, 837 P.2d 1000 (1992). The insured must show the loss falls within the scope of the policy's insured losses. Id. To avoid coverage, the insurer must then show the loss is excluded by specific policy language, Id.

         B. The Policy

         Here, the coverage form states, "[Berkley] will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss."

         The Causes of Loss-Special Form (COL Form) states, A. Covered Causes of Loss

When Special is shown in the Declarations, Covered Causes of Loss means Risks of Direct Physical Loss unless the loss is:
1. Excluded in Section B., Exclusions; or
2. Limited in Section C, Limitations; that ...

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