WEST BEACH CONDOMINIUM, a Washington non-profit corporation, Appellant,
COMMONWEALTH INSURANCE COMPANY OF AMERICA, a foreign insurance company, Respondent.
Beach Condominium appeals the dismissal of its claim that its
property insurer, Commonwealth Insurance Company of America,
wrongfully denied coverage. We conclude that the one-year
suit limitation clause in the Commonwealth policies precludes
West Beach from suing the insurer for breach of contract but
does not bar West Beach's extra-contractual claims under
the Insurance Fair Conduct Act and the Consumer Protection
Act. We reverse the summary judgment in favor of Commonwealth
Beach is a homeowner's association for a condominium
complex in West Seattle. The 84 residential units in 3
buildings were constructed in the mid to late 1960s or early
1970s. In June 2015, West Beach retained Amento Group to
conduct an assessment and intrusive investigation of the
building envelope on each of the 3 buildings. Amento Group
reported the results of its investigation to West Beach on
September 8, 2015-documenting water damage behind the
exterior cladding and building envelope.
September 26, 2016, West Beach submitted a claim for
insurance coverage to Commonwealth. Included with the claim
letter was an Amento Group report that detailed the discovery
of, among other things, deficiencies in flashings,
weather resistant barriers, and
waterproofing transitions at elevated walkways and unit
decks; moisture issues at the belly band and cold joints in
one building; below grade water intrusion; insufficient
exhaust of moisture from unit interiors; improper flashings;
moisture damaged gypsum; lack of waterproofing of deck
surfaces; deteriorated metal fascia at deck edges; and the
lack of head flashing at sliding glass doors.
Beach also notified Commonwealth it had filed a lawsuit
against it to preserve claims that may become time barred.
The parties agreed to enter into a tolling agreement
effective September 22, 2016, and West Beach dismissed its
complaint without prejudice to allow Commonwealth to conduct
retained an engineering consultant to perform a visual
inspection of the property on November 15, 2016. In March
2017, Commonwealth denied coverage. It contended West Beach
had been experiencing water intrusion issues for at least 10
years, and concluded that:
• All of the policies required suit to be commenced at
least 12 months after the "occurrence" giving rise
to the claim, and West Beach did not sue within that time
• The 2009 policy covered only direct physical loss or
damage "commencing" during the policy period, and
the 2010 and 2011 policies covered only direct physical loss
or damage "occurring" during the policy periods.
Commonwealth concluded that the losses West Beach had
sustained neither commenced nor occurred during the
applicable policy periods.
• The policies only covered "fortuitous
risks," and none had been identified by West Beach.
• The policies did not cover faulty construction or
inadequate repairs, and the Amento Group report identified
numerous deficiencies that fell into this excluded category.
• The policies did not cover rust, corrosion, wear and
tear, or gradual deterioration, and some of the losses fell
into this excluded category.
• The policies excluded coverage for mold, bacteria,
fungi, and wet or dry rot, and some of the losses fell into
this excluded category.
also raised a number of other "potentially
applicable" exclusions, including an exclusion for the
settling, cracking, or expansion in foundations, and seepage
of water below ground level.
2017, West Beach refiled its complaint, alleging breach of
contract, bad faith investigation, and Consumer Protection
(CPA) violations relating to the investigation of West
Beach's claim and Commonwealth's denial of coverage.
It subsequently filed an amended complaint, adding a claim
for Insurance Fair Conduct Act (IFCA) violations based on the
same investigation and denial of coverage.
December 2017, the trial court held the 2009 policy did not
cover any of West Beach's losses because the claimed
damage commenced years before 2009. It also held that
Commonwealth's 2010 and 2011 all-risk policies covered
damage from faulty construction, faulty maintenance, and
wind-blown rain, contrary to the position Commonwealth had
taken in its denial letter. It also concluded that the
policies covered damage resulting from a combination of
excluded and non-excluded perils. The court concluded that
Commonwealth was liable for all covered damage if any of the
damage occurred during the policy periods. But it found
genuine issues of fact regarding the causes and timing of the
then moved to dismiss West Beach's breach of contract
claim based on the "suit limitation" provision in
the policies. The provision at issue required any lawsuit to
be filed no later than 12 months after discovery of the loss.
Commonwealth argued that West Beach had notice of its loss no
later than September 8, 2015, the date Amento Group presented
the results of its investigation, and West Beach did not file
suit within 1 year of that date. In August 2018, the trial
court granted Commonwealth's motion and dismissed West
Beach's breach of contract claim.
same month, as both parties prepared for trial, they filed
motions for a legal ruling as to whether the suit limitation
provision also barred West Beach's IFCA and CPA claims
and, if not, what damages West Beach could recover.
Commonwealth argued that the suit limitation clause not only
barred a breach of contract claim but it also voided its
underlying coverage obligations under the 2010 and 2011
policies. It maintained that under Coventry Associates v.
American States Insurance Co., 136 Wn.2d 269, 961 P.2d
933 (1998), West Beach could not use the CPA or IFCA to
obtain policy coverage that otherwise did not exist.
Beach contended the suit limitation clause did not affect
Commonwealth's obligations under the policy. It argued
Coventry only addressed what damages a policyholder
could recover in the absence of coverage. It asserted both
IFCA and the CPA allow a policyholder to recover policy
benefits when those benefits should have been paid by the
trial court ruled that
[i]n light of [its] August 17, 2018 order granting
[Commonwealth's motion to enforce the suit limitation
provisions], [West Beach] cannot establish that
Commonwealth's coverage denial was unreasonable. [West
Beach] failed to allege any consequential damages proximately
caused by Commonwealth's alleged bad faith or breach of
the [CPA], and it cannot seek contract damages on its
dismissed the bad faith, CPA, and IFCA claims with prejudice