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Wampold v. Safeco Insurance Company of America

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

August 28, 2019

MICHAEL S. WAMPOLD and DINA L. WAMPOLD, husband and wife and the marital community composed thereof, Plaintiffs,
v.
SAFECO INSURANCE COMPANY OF AMERICA, a non-Washington Corporation, Defendant.

          ORDER

          Thomas S. Zilly United States District Judge.

         THIS MATTER comes before the Court on Plaintiffs' Motion for Partial Summary Judgment, docket no. 10, and Defendant's Cross-Motion for Partial Summary Judgment, docket no. 17. Having reviewed all papers filed in support of, and in opposition to, the motions, the Court enters the following order.

         Background

         Plaintiffs Michael and Dina Wampold (together, “the Wampolds”) live at the top of a steep slope on Mercer Island. They are insured under a homeowners insurance policy issued by Defendant Safeco Insurance Company of America (“Safeco”). That policy (the “Policy”) provides both property and liability coverage for the Wampolds. On December 9, 2015, during a large rainstorm, a landslide occurred on the Wampold property. As a result, the City of Mercer Island (“City”) issued a “red-tag, ” which prohibited the Wampolds from reoccupying their home until they obtained a geotechnical report and complied with that report's recommendations. Pursuant to the City's directives, the Wampolds obtained geotechnical reports, which concluded that the property was safe to occupy, proposed a monitoring program, and recommended long-term slope stabilization repairs. The Wampolds implemented the reports' recommendations, including by working with their neighbors, the Suns, to build a retaining wall on their properties. The Wampolds agreed to pay for approximately $800, 000 of the retaining wall project, and after it was completed sought indemnity from Safeco pursuant to the liability coverage on their Policy. Safeco reserved its rights and has declined to pay, claiming (1) that the red-tag is not a “claim” for purposes of the Policy, (2) that the retaining wall is designed to remedy damage to the Wampolds' property and is therefore excluded from coverage by the “owned property” exclusion in the Policy, and (3) that the Wampolds' request was untimely.

         In light of Safeco's refusal to pay, the Wampolds' filed this action, alleging six claims: declaratory relief, breach of contract, insurance bad faith, negligence, violation of the Consumer Protection Act, and violation of the Insurance Fair Conduct Act. Safeco answered the complaint, and the parties promptly filed cross-motions for partial summary judgment to resolve the coverage issue.

         I. Landslide

         The landslide on and near the Wampolds' property affected two downslope properties. See Declaration of Michael S. Wampold (“Wampold Decl.”), docket no. 13, ¶¶ 4-5. One of the downhill properties damaged was owned by Johnny and Myoung Leong. The slide filled their backyard with debris and damaged their roof. Id. ¶ 6. That same day, the City issued a “red tag” prohibiting the Wampolds from occupying the property “until investigation, mitigation [and] a supporting opin[ion] by a Washington state licensed geotechnical engineer that [the home] is safe to occupy is submitted to the building official.” Id., Ex. A. Two other nearby homes, including the Leongs', also received red tags.

         II. Inspections and Proposed Remediation

         Several geotechnical inspections and reports ensued. The first, by Nelson Geotechnical Associates, Inc. (“NGA”), concluded in a December 17, 2015 report that conditions at the Wampold property did not “pose an immediate hazard” to the Wampolds and expressed no objection to the City lifting the red tag. Declaration of Charles L. Vita, docket no. 18, Ex. 2(a), at 41. The NGA report also stated that further permanent slope stabilization work would be required. Id. at 42. The report stated as follows:

Although the residence is supported on pin piles and no distress within this structure was observed, it is possible that continued erosion of the steep slope will eventually impact the residence foundation if adequate measures for stabilizing the affected area is [sic] not implemented in the near future. Therefore our opinion is conditioned on the assumption that the ground slope adjacent to the house will be reconstructed to re-establish a protective buffer around the exposed pin pile, that broken storm and sewer drain lines will be replaced and made functional again and that the damaged slope will be remediated to protect against erosion. . . . A geotechnical evaluation of the slope to develop recommendations for restoring the ground surface and installing permanent erosion control measures may be postponed only until weather conditions are more appropriate for working on the slope. We do not anticipate that this delay will materially impact the stability of the house but the foundation and slope should be monitored on an on-going basis, especially during the wet season, for any changes, and corrective actions promptly taken should any signs of instability be observed. Engineering work related to permanent stabilizations measure [sic] should commence as soon as possible.

Id.

         Mitigation work progressed in two phases: initial emergency work that permitted the Wampolds to conditionally re-occupy their home under a “yellow tag, ” and a later permanent repair. Declaration of Robb A. Dibble (“Dibble Decl.”), docket no. 12, ¶ 9; see also Wampold Decl., Ex. B.

         On January 4, 2016, Dibble Engineering, Inc. (“DEI”), retained by the Wampolds, issued a Structural Review Summary. See Dibble Decl., docket no. 12, ¶ 7. The DEI report concluded that the Wampold property was safe for occupancy, and like the earlier NGA report recommended that “additional slope stabilization be completed during the upcoming dry season” to provide safety and stability. Vita Decl., Ex. 2(d), at 61.[1] The report by DEI stated that “as a condition of removing the Red/Yellow Tags, the City of Mercer Island required the Wampolds to perform mitigation, engineering, and construction work on their property that was necessary to prevent further harm to the Leong property.” Dibble Decl., docket no. 12, ¶ 12. The Wampolds shared the reports with the City on January 4, 2016 and asked that the yellow tag be removed. See Wampold Decl., docket no. 13, Ex. C, at 13. On January 7, 2016, the City asked the Wampolds to provide written confirmation from a geotechnical engineer that “mitigation measures were inspected and installed in accordance with their recommendations, and that their recommended monitoring program will be fully implemented in a timely manner.” Id. at 12. The City made no statement explicitly requiring additional stabilization work. On March 25, 2016, the City sent a follow-up email requesting confirmation that “temporary mitigation measures [were] properly installed” and reminded the Wampolds that “continued occupancy of your home remains subject to receipt and satisfactory resolution” of that confirmation, and that failure to provide it would mean” that the conditions of occupancy have not been met and further actions may become necessary.” Id. at 10. In April of 2016, Michael Wampold emailed City officials to request that the City reconsider its requirement of ongoing monitoring. Id., Ex. D at 17. Wampold explained that the monitoring was expensive and “burdensome and unnecessary” “[s]ince we also are incurring the cost of investigating a long term solution to the slide problem on this hillside.” Id. The City responded that although there were no restrictions on occupancy of the Wampolds' house, “the monitoring is a requirement of your geotechnical engineer's opinion that the home can be occupied prior to the installation of permanent mitigation measures.” Id. at 16. The City explained that unless the geotechnical engineer's opinion about monitoring had changed, the Wampolds would need to submit the monitoring reports, without which the City “may be required to take enforcement action.” Id. The engineer responded to this exchange, stating that monitoring should continue “as the permanent stabilization is designed.” Id.

         On June 17, 2016, NGA provided the Wampolds and Grace Sun (an adjoining neighbor) with a Geotechnical Engineering Evaluation as part of their ongoing monitoring program, which concluded in part that “slope stabilization measures are needed at the site to protect existing structures” on their properties and that NGA was recommending “soldier pile cantilever retaining walls located near the upper part of the landslide zone to support the soils in that area.” Vita Decl., Ex. 2(f) at 69. DEI designed the retaining wall. See Dibble Decl., docket no. 12, ¶ 10. After the wall on the Wampold and Sun properties was completed in 2018, the City emailed the Wampolds to set up a time for a final inspection. The Wampolds spent approximately $800, 000 on the stabilization project. Wampold Decl., docket no. 13, ¶ 14.

         III. Indemnification for Retaining Wall

         In December 2017, before the wall was completed, the Leongs sued the Wampolds for damage related to the landslide. See Wampold Decl. ¶ 11. Safeco agreed to defend under a reservation of rights. Id.; see also Ex. E at 24. During this litigation, on October 1, 2018, the Wampolds asked Safeco to indemnify them for their share of the cost of stabilizing the hillside.[2]See Wampold Decl. ΒΆ ...


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