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Developers Surety and Indemnity Co. v. Woodland Park Townhomes, LLC

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

April 16, 2019

DEVELOPERS SURETY AND INDEMNITY COMPANY, Plaintiff,
v.
WOODLAND PARK TOWNHOMES, LLC, Defendant.

          ORDER GRANTING IN PART PLAINTIFF'S MOTION FOR DEFAULT JUDGMENT

          ROBERT S. LASNIK, UNITED STATES DISTRICT JUDGE

         This matter comes before the Court on plaintiff Developers Surety and Indemnity Company's (“DSIC”) motion for default judgment. Dkt. #8.

         BACKGROUND

         This case pertains to the Woodland Park Townhomes project (“the Townhomes”), which consists of seven townhome-units located at 4319-4325 Woodland Park Avenue North in Seattle, Washington. Dkt. #1 (Compl.) at ¶ 4.1. The Townhomes were built by defendant Woodland Park Townhomes, LLC (“Woodland Park”). Dkt. #6 at ¶ 1. Woodland Park has been sued in state court for various construction defects. See Woodland Park Townhomes Homeowners Association v. Woodland Park Townhomes LLC, No. 17-2-24978-5 SEA (King Cty. Sup. Ct.) (“the State Court Case”).

         On March 5, 2015, Hardy Development Company (“Hardy”) retained Urban Construction Company, LLC (“Urban”) as the General Contractor for the Townhomes. See Ex. I, Dkt. #9 at 23-25. Per their contract, Urban was obligated to add Woodland Park as an additional insured on its insurance policies. Id. at 24. DSIC issued Commercial General Liability Policy No. BIS0019539-0 for the policy period of July 28, 2014 to July 28, 2015 to Urban (“the Policy”). See Ex. Q, Dkt. #9 at 74-169. Woodland Parks asserts that it is an “additional insured” under the Policy's Blanket Additional Insured endorsement. Compl. at ¶ 3.2; see Ex. L, Dkt. #9 at 35; see Ex. Q, Dkt. #9 at 155 (Blanket Additional Insured endorsement).

         Construction seems to have begun in 2015, sometime between April and August. See Exs. A-H, Dkt. #9 at 6-22. In 2016, the Woodland Park Townhomes Homeowners Association (“the HOA”) was incorporated. See Ex. J, Dkt. #9 at 26-27. On September 22, 2017, the City of Seattle approved the Townhomes for occupancy. See Ex. H, Dkt. #9 at 22. On the same day, the HOA filed a lawsuit against Woodland Park alleging breach of contract, breach of express warranty, and breach of implied warranty of habitability. See Ex. K, Dkt. #9 at 29-33. Counsel for the HOA notified DSIC of the State Court Case on May 30, 2018. Ex. L, Dkt. #9 at 35-36.

         DSIC agreed to defend and indemnify Woodland Park subject to a full reservation of rights. Ex. M, Dkt. #9 at 42-55. On August 15, 2018, DSIC filed a complaint seeking declaratory judgment as to the nature of its obligations. Woodland Park failed to respond. Default was entered against Woodland Park on October 3, 2018. Dkt. #7. DSIC now moves for default judgment. Dkt. #8.

         DISCUSSION

         DSIC seeks default judgment and declarations that 1) no property damage occurred during the Policy period, 2) the Townhomes were Urban's “product, ” 3) the Townhomes were “new residential construction” and not covered under the Policy, 4) property damage only occurred after the Policy period and is not covered, 5) the Policy's construction management exclusion precludes coverage, and 6) additional conditions exclude coverage.

         Federal Rule of Civil Procedure 55 provides for a two-step procedure to the entry of a default judgment. See Eitel v. McCool, 782 F.2d 1470, 1471 (9th Cir. 1986). Once an entry of default has been made, the Court has discretion whether to enter a default judgment. Id. When exercising that discretion, courts may consider:

(1) the possibility of prejudice to the plaintiff, (2) the merits of plaintiff's substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to excusable neglect, and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits.

Id. at 1471-72.

         A. Sufficiency of the Complaint, Merits of DSIC's Substantive Claims, and the Possibility of a Dispute Concerning Material Facts

         “The general rule of law is that upon default the factual allegations of the complaint, except those relating to the amount of damages, will be taken as true.” Geddes v. United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977) (citing Pope v. United States, 323 U.S. 1, 12 (1944)); Flaks v. Koegel, 504 F.2d 702, 707 (2d Cir. 1974). The Court will ...


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