United States District Court, W.D. Washington, Seattle
S. ZILLY UNITED STATES DISTRICT JUDGE.
MATTER comes before the Court on Plaintiff's Motion for
Summary Judgment, docket no. 25. Having reviewed all papers
filed in support of and in opposition to the motion, the
Court enters the following order.
Economy Premier Assurance Company (“EPAC”) issued
a homeowner's insurance policy to Defendants Scott and
Carol Morrison (together, “the Morrisons”),
including an umbrella endorsement, which was effective from
May 24, 2014 to May 24, 2016. See Declaration of
Matthew Brand, docket no. 26, ¶ 2, Ex. A. The policy
provides liability coverage for “legal liability
resulting from an occurrence in which there is actual
accidental property damage, personal injury or death . . .
subject to the limitations and exclusions in” the
policy. Id., Ex. A at 023. The policy contains
exclusions for liability connected to an insured's
business, profession, or occupation. Id., Ex. A at
039 (defining “Major Exclusions” to include
“any liability or claims connected with any business,
profession or occupation”). The separate umbrella
endorsement also states that EPAC “won't cover any
liability connected with any business, profession or
occupation of any insured by this endorsement.”
Id., Ex. A at 069.
Tek-Line Construction, Inc., Ian Edens, and Ted Watson
(together, “Tek-Line”) filed an action in King
County Superior Court against the Morrisons on April 20, 2018
(“Underlying Complaint”). Declaration of John C.
Riseborough, docket no. 27, Ex. A. The Underlying Complaint
asserted claims for breach of contract, conversion, breach of
fiduciary duty, and sought a declaratory judgment.
Id. at 4-5. The factual basis for that suit was an
agreement between Scott Morrison and Tek-Line to develop a
roofing business, followed by a separation agreement between
Scott Morrison and Tek-Line. Id. Specifically, the
Underlying Complaint alleges that “Tek-Line hired Scott
Morrison, an experienced roofer, to expand Tek-Line's
business to include a roofing division.” Id.
¶ 3.2. “At the time of his hiring, Morrison stated
that he could help Tek-Line's business grow to between
five and ten million dollars annually.” Id.
¶ 3.3. The Underlying Complaint alleges that the company
experienced losses during Morrison's time at the company,
and that in the spring of 2015, Morrison “registered
the name ‘Tekline Roofing LLC' with the Washington
Secretary of State” and began operating that company as
a “stand-alone entity using assets and customers from
Tek-Line.” Id. ¶¶ 3.5-3.6. Tek-Line
and Scott Morrison then entered into an agreement whereby
Morrison would withdraw from Tek-Line, would stop seeking new
ventures under Tekline Roofing LLC, and that Morrison would
take other precautions to protect Tek-Line's interests
during the separation. Id. ¶¶ 3.7-3.10.
According to the Underlying Complaint, Morrison did not
comply with the separation agreement's terms and
wrongfully took property belonging to Tek-Line. Id.
Morrisons tendered the defense of the Underlying Complaint to
EPAC, which accepted under a reservation of rights.
See Brand Decl., docket no. 26, ¶ 4. EPAC then
filed the instant action to determine its rights and
obligations under the Morrison's policy. Id.
¶ 5. EPAC propounded interrogatory 6 to the Morrisons,
asking them to identify what allegations or claims in the
Underlying Complaint are not connected to the Morrisons'
business, profession, or occupation. The Morrisons objected
to the interrogatory as calling for a legal conclusion, but
otherwise answered that “[t]here are no such
allegations in the Underlying Complaint.” Riseborough
Decl., docket no. 27, Ex. D at 6. EPAC also served Requests
for Admission to the Morrisons regarding the same topic.
Subject to objections for vagueness, the Morrisons admitted
that each cause of action in the Underlying Complaint is
connected to the Morrisons' business, profession, or
occupation. Id., Ex. C.
Standard of Review
Court shall grant summary judgment if no genuine issue of
material fact exists and the moving party is entitled to
judgment as a matter of law. Fed.R.Civ.P. 56(a). The moving
party bears the initial burden of demonstrating the absence
of a genuine issue of material fact. Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986). A fact is material if
it might affect the outcome of the suit under the governing
law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248 (1986). To survive a motion for summary judgment, the
adverse party must present affirmative evidence, which
“is to be believed” and from which all
“justifiable inferences” are to be favorably
drawn. Id. at 255. When the record, however, taken
as a whole, could not lead a rational trier of fact to find
for the non-moving party, summary judgment is warranted.
See Beard v. Banks, 548 U.S. 521, 529 (2006)
(“Rule 56(c) ‘mandates the entry of summary
judgment, after adequate time for discovery and upon motion,
against a party who fails to make a showing sufficient to
establish the existence of an element essential to that
party's case, and on which that party will bear the
burden of proof at trial.'” (quoting
Celotex, 477 U.S. at 322)).
Exclusion for Liability Related to Business, Profession, or
allegations and claims in the Underlying Complaint are
connected to the Morrisons' business, occupation, or
profession, and as a result, coverage is excluded. “The
duty to indemnify exists only if the policy actually covers
the insured's liability.” Nat'l Sur. Corp.
v. Immunex Corp., 162 Wn.App. 762, 774, 256 P.3d 439
(2011). Washington courts construe insurance policies as a
whole, giving the policy the “fair, reasonable, and
sensible construction” that an average person
purchasing insurance would. Vision One, LLC v. Phila.
Indem. Ins. Co., 174 Wn.2d 501, 512, 276 P.3d 300
(2012); see also Panorama Vill. Condo. Owners Ass'n
Bd. of Dirs. v. Allstate Ins. Co., 144 Wn.2d 130, 137,
26 P.3d 910 (2001). Inclusionary clauses are liberally
construed in favor of coverage, while exclusionary provisions
are interpreted strictly against the insurer. Assurance
Co. of Am. v. Wall & Assocs. LLC of Olympia, 379
F.3d 557, 560 (9th Cir. 2004) (summarizing Washington law).
If the language of a policy is “clear and unambiguous,
” the Court must “enforce it as written and may
not modify it or create ambiguity where none exists.”
Weyerhaeuser Co. v. Com. Union Ins. Co., 142 Wn.2d
654, 665-66, 15 P.3d 115 (2000).
exclusion for claims related to a business, occupation, or
profession is unambiguous. The Underlying Complaint makes
allegations and brings claims related to Scott Morrison's
business, occupation, or profession-his work and business
contracts with Tek-Line. The Morrisons admit this connection
in their discovery responses. The Court finds there is no
genuine dispute of material fact precluding summary judgment
that EPAC has no duty to defend the Morrisons in the state
Defendants' Request for a Continuance
do not dispute Plaintiff's arguments. Rather they request
a continuance pursuant to CR56(B) to depose Matthew Brand,
who Defendants contend is a “previously undisclosed
witness . . . offering testimony on the primary document
supporting Plaintiff's case [i.e., the insurance
policy].” Defs.' Opposition, docket no. 31, at 1.
Brand is a Senior Claim Adjuster with EPAC, and authenticates
the homeowner's insurance policy and umbrella
endorsements that are at issue in this case. Brand Decl.
¶¶1-2. Defendants argue that they did not know to
depose Brand because he was not identified as a potential
witness in Plaintiff's initial disclosures. Defendants
also argue that Brand “is the only witness put forward
by the Plaintiff who claims to authenticate the controlling
document of the case . . ...