The Phoenix Insurance Company v. Diamond Plastics Corporation

 THE HONORABLE JOHN C. COUGHENOUR 1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 WESTERN DISTRICT OF WASHINGTON 8 AT SEATTLE 9 THE PHOENIX INSURANCE COMPANY, CASE NO. C19-1983-JCC 10 Plaintiff, ORDER 11 v. 12 DIAMOND PLASTICS CORPORATION, 13 Defendant. 14 15 This matter comes before the Court on Defendant Diamond Plastics Corporation’s 16 (“Diamond”) motion for partial summary judgment (Dkt. No. 53). Having thoroughly considered 17 the parties’ briefing and the relevant record, and finding oral argument unnecessary, the Court 18 hereby GRANTS the motion for the reasons explained herein. 19 I. BACKGROUND 20 This coverage action arises from an alleged incident that occurred during a construction 21 project. (See Dkt. Nos. 1 at 2–4, 20 at 5–6.) Diamond provided pipe for the project and Plaintiff, 22 The Phoenix Insurance Company (“Phoenix”), provided Diamond commercial general liability 23 insurance. (Id.) Phoenix brings suit against Diamond seeking, among other things, a declaratory 24 judgment from the Court that it had no duty to defend Diamond in an action brought in King 25 County Superior Court: H.D. Fowler Company v. Diamond Plastics Corporation, No. 19-2- 26 08572-0 KNT. (Dkt. No. 53.) In that action, H.D. Fowler Company (“Fowler”), the pipe supplier 1 in the above-referenced construction project, brought suit against Diamond. (Dkt. No. 54.) 2 Fowler alleges that the pipe Diamond provided for Fowler’s job “suddenly and physically failed 3 as workers attempted to install it” and, in the process of excavating the damaged pipe, “other 4 property at the site was physically damaged” and “portions of the Project site could not be used 5 for construction.” (Id. at 7.) The Court previously set forth the underlying facts of this action and 6 will not repeat them here. (See Dkt. Nos. 47, 49, 60.) Diamond now moves for partial summary 7 judgment, seeking a declaratory judgment from the Court that Phoenix has a duty to defend 8 Diamond in the action before the King County Superior Court. 9 II. DISCUSSION 10 A. Legal Standard 11 “The court shall grant summary judgment if the movant shows that there is no genuine 12 dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. 13 Civ. P. 56(a). Material facts are those that may affect the outcome of the case, and a dispute 14 about a material fact is genuine if there is sufficient evidence for a reasonable jury to return a 15 verdict for the non-moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248–49 (1986). 16 In deciding whether there is a genuine dispute of material fact, the court must view the facts and 17 justifiable inferences to be drawn therefrom in the light most favorable to the nonmoving party. 18 Id. at 255. The court is therefore prohibited from weighing the evidence or resolving disputed 19 issues in the moving party’s favor. Tolan v. Cotton, 572 U.S. 650, 657 (2014). 20 “The moving party bears the initial burden of establishing the absence of a genuine issue 21 of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). “If a moving party fails to 22 carry its initial burden of production, the nonmoving party has no obligation to produce anything, 23 even if the nonmoving party would have the ultimate burden of persuasion at trial.” Nissan Fire 24 & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102–03 (9th Cir. 2000). But once the moving 25 party properly supports its motion, the nonmoving party “must come forward with ‘specific facts 26 showing that there is a genuine issue for trial.’” Matsushita Elec. Indus. Co. v. Zenith Radio 1 Corp., 475 U.S. 574, 587 (1986) (quoting Fed. R. Civ. P. 56(e)). Ultimately, summary judgment 2 is appropriate against a party who “fails to make a showing sufficient to establish the existence 3 of an element essential to that party’s case, and on which that party will bear the burden of proof 4 at trial.” Celotex, 477 U.S. at 322. 5 B. Duty to Defend 6 An insurer’s “duty to defend arises when a complaint against the insured, construed 7 liberally, alleges facts which could, if proven, impose liability upon the insured within the 8 policy’s coverage.” Nat’l Sur. Corp. v. Immunex Corp., 297 P.3d 688, 691 (Wash. 2013) 9 (internal quotations omitted); see also Robbins v. Mason County Title Ins. Co., 462 P.3d 430, 10 435 (Wash. 2020) (quoting Black’s Law Dictionary 542 (11th ed. 2019)) (defining “‘demand’ as 11 ‘[t]he assertion of a legal or procedural right’”). “The party seeking to establish coverage bears 12 the initial burden of proving coverage under the policy has been triggered,” while “[t]he insurer 13 bears the burden of establishing an exclusion to coverage.” Pleasant v. Regence BlueShield, 325 14 P.3d 237, 243 (Wash. Ct. App. 2014) (citing Diamaco, Inc. v. Aetna Cas. & Sur. Co., 983 P.2d 15 707, 709 (Wash. Ct. App. 1999)). 16 To determine whether a claim is covered under an insurance policy, an insurer must look 17 to the “eight cor[n]ers” of the policy and the complaint against the insured. Xia v. ProBuilders 18 Specialty Ins. Co., 400 P.3d 1234, 1240 (Wash. 2017). If neither document raises an issue of fact 19 or law that could conceivably result in coverage, then the insurer need not defend. Id. But “if 20 there is any reasonable interpretation of the facts or law that could result in coverage, the insurer 21 must defend.” Am. Best Food, Inc. v. Alea London, Ltd., 229 F.3d 693, 696 (Wash. 2010). And if 22 the facts in the complaint are ambiguous, then the insurer must investigate facts outside of the 23 complaint to determine if the insured is conceivably covered. See Woo v. Fireman’s Fund Ins. 24 Co., 164 P.3d 454, 459 (Wash. 2007). 25 Phoenix asserts it has no duty to defend because the events described in Fowler’s 26 complaint are not the type generally covered under the policy and even if they were, a variety of 1 policy exclusions would preclude coverage. (Dkt. No. 57 at 7–15.) 2 1. General Coverage Under the Policy 3 The policy applies to “those sums that [Diamond] becomes legally obligated to pay as 4 damages” because of “bodily injury” or “property damage” caused by an “occurrence.” (Dkt. No. 5 57-2 at 116.) An “occurrence” is defined as “an accident, including continuous or repeated 6 exposure to substantially the same general harmful conditions.” (Dkt. No. 57-2 at 129.) Phoenix 7 argues that Diamond’s alleged delivery of defective pipe is not an “accident” and, therefore, the 8 events at issue do not constitute an “occurrence.” (Dkt. No. 57 at 7–10.) Diamond relies on 9 DeWitt Const. Inc. v. Charter Oak Fire Ins. Co., 307 F.3d 1127 (9th Cir. 2002) to support its 10 assertion that the “mismanufacture of a product is an ‘occurrence’ under Washington law.” (Dkt. 11 No. 53 at 6 (emphasis added).) Like the policy at issue in this instance, the insured’s policy in 12 DeWitt defined an occurrence as “an accident.” 307 F.3d at 1133. According to the Ninth Circuit, 13 Washington law provides that the “unintentional mismanufacture of a product constitutes an 14 ‘occurrence.’” Id. (citing Yakima Cement Products Co. v. Great American Ins. Co., 608 P.2d 15 254, 257 (1980)). Diamond similarly relies on Baugh Constr. Co. v. Mission Ins. Co., 836 F.2d 16 1164, 1169 (9th Cir. 1988), where the Court found that “negligent construction and negligent 17 design claims fall within the definition of a fortuitous event.” (Dkt. Nos. 53 at 6; 58 at 3.) 18 Phoenix asserts that DeWitt and Baugh are distinguishable because, in those cases, the 19 manufacturing occurred on-site, whereas Diamond manufactured the pipe off-site. (Dkt. No. 57 20 at 9.) This is a distinction without legal significance. Fowler’s complaint articulates an 21 “occurrence,” as defined under Washington law. 22 The policy defines “property damage” as “[p]hysical injury to tangible property, 23 including all resulting loss of use of that property” and “loss of use of tangible property that is 24 not physically injured.” (Dkt. No. 57-2 at 130.) According to Fowler’s complaint, during the 25 process of removing Diamond’s faulty pipe, “other property at the Project site was physically 26 damaged during ‘rip and tear.’” (Dkt. No. 54 at 7.) Phoenix argues that this is not “property 1 damage,” as defined by the policy. (Dkt. No. 57 at 11–15.) Diamond again relies on DeWitt in 2 asserting otherwise. (Dkt. No. 58 at 4–5.) In that decision, the Court held that the “work of other 3 subcontractors” at the site, “which had to be removed and destroyed as a result of DeWitt’s 4 installation of defective piles, is property damage within the scope of the policies.” DeWitt 5 Const. Inc., 307 F.3d at 1134 (citing Baugh Constr. Co., 836 F.2d at 1170). Similarly, the Court 6 finds that Fowler’s complaint articulates “property damage,” as defined under Washington law. 7 Therefore, absent the application of a policy exclusion, Phoenix has a duty to defend Diamond. 8 2. Policy Exclusions 9 Phoenix asserts that even if coverage would otherwise apply, any one of a number of 10 policy exclusions preclude a duty to defend. (See generally Dkt. No. 57 at 15–22.) 11 Phoenix first points the Court to policy exclusion k., which excludes coverage for 12 “‘[p]roperty damage’ to ‘your product.’” (Dkt. No. 57-2 at 120.) But Fowler’s complaint alleges 13 injury based upon damage to the construction site, i.e., other property—not damage to 14 Diamond’s property. (See Dkt. No. 54 at 7.) Exclusion k. does not apply here. 15 Phoenix next turns to policy exclusion m., which bars coverage for “‘property damage’ to 16 ‘impaired property’ or property that has not been physically injured.” (Dkt. No. 57-2 at 120.) 17 However, Fowler’s complaint alleges “the Project site was physically damaged” during the “‘rip 18 and tear’” process used to remove the pipe. (Dkt. No. 54 at 7.) This type of property damage is 19 analogous to that in DeWitt. See 307 F.3d at 1134 (finding that “the destroyed work of other 20 subcontractors was not merely impaired”). Exclusion m. does not apply here. 21 Phoenix also points the Court to policy exclusion n., which bars coverage for “[d]amages 22 claimed for . . . the . . . recall . . . removal or disposal of . . . ‘your product’ . . . if such product 23 . . . is withdrawn or recalled from the market . . . from use . . . because of a known or suspected 24 defect, deficiency, inadequacy or dangerous condition in it.” (Dkt. No. 57-2 at 120.) Phoenix 25 points the Court to no authority applying the recall exclusion in the manner Phoenix is 26 attempting to do. (See generally Dkt. No. 57 at 20–21.) Conversely, Diamond cites to cases in 1 this district declining to bar coverage under this provision when, like here, a product is not 2 actually recalled from the market. (See Dkt. No. 58 at 8–9 (citing Indian Harbor Ins. Co. v. 3 Transform LLC, 2010 WL 3584412, slip op. at 9 (W.D. Wash. 2010); Mid-Continent Cas. Co. v 4 Titan Const. Co., 2009 WL 1587215 (W.D. Wash. 2009).) Exclusion n. does not apply here. 5 Finally, Phoenix points to policy exclusion j., which excludes coverage for “‘[p]roperty 6 damage’ to . . . [t]hat particular part of any property that must be restored, repaired or replaced 7 because ‘your work’ was incorrectly performed on it.” (Dkt. No. 57-2 at 119.) According to the 8 policy, “your work” means “[w]ork or operations performed by . . . and [m]aterials . . . furnished 9 in connection with such work.” (Dkt. No. 57-2 at 130.) However, Fowler’s complaint does not 10 allege that Diamond performed any work at the job site, only that Diamond shipped pipe to be 11 installed at the site and that upon installation it “suddenly and physically failed.” (Dkt. No. 54 at 12 5–9.) Moreover, the case Phoenix cites, Harrison Plumbing & Heating, Inc. v. New Hampshire 13 Group, 681 P.2d 875 (Wash. App. 1984), is inapposite. (Dkt. No. 57 at 21.) In that case the 14 insured performed work on the job site. See Harrison Plumbing & Heating, Inc., 681 P.2d at 15 877. Exclusion j. does not apply here. 16 Based upon the “eight cor[n]ers” of the policy and Fowler’s complaint, Xia, 400 P.3d at 17 1240, the Court concludes that a “reasonable interpretation . . . could result in coverage.” Am. 18 Best Food, Inc., 229 F.3d at 696. Therefore, Phoenix has a duty to defend Diamond in the King 19 County Superior Court proceeding against Fowler. The Court GRANTS summary judgment to 20 Diamond on Phoenix’s declaratory judgment request. 21 III. CONCLUSION 22 For the foregoing reasons, Defendant’s motion for partial summary judgment (Dkt. No. 23 53) is GRANTED. 24 // 25 // 26 // 1 DATED this 9th day of October 2020. A 2 3 4 John C. Coughenour 5 UNITED STATES DISTRICT JUDGE 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26