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Alterra America Insurance Co. v. James W. Fowler Co.

United States District Court, D. Oregon, Portland Division

September 30, 2018

ALTERRA AMERICA INSURANCE COMPANY, a Delaware corporation, Plaintiff,
JAMES W. FOWLER CO. an Oregon corporation; and NORTHWEST RENTAL EQUIPMENT, INC., an Oregon corporation, Defendants.


          Ann Aiken U.S. District Judge

         This case arises out of an insurance contract between plaintiff Alterra America Insurance Company ("Alterra") and defendant James W. Fowler Company ("JWF"). Defendant suffered a loss of equipment and made a claim pursuant to the contract which was paid in part and denied in part by plaintiff. Plaintiff filed the present suit seeking declaratory relief that it has satisfied the terms of the insurance agreement. Defendant filed affirmative defenses and raised counterclaims against plaintiff for breach of insurance contract, promissory estoppel, reformation, bad faith claims handling, declaratory judgment, and violations of Washington's Consumer Protection Act ("CPA") and Washington's Insurance Fail Conduct Act ("IFCA"). Plaintiff now moves for partial summary judgment (doc. 53) on its claim for declaratory judgment that it fulfilled its obligations under the coverage in effect at the time of the loss. Plaintiff also seeks summary judgment in its favor regarding defendant's counterclaims for breach of contract, promissory estoppel, reformation, and declaratory judgment. Plaintiff also moves for partial summary judgment (doc. 37) in its favor on three of defendant's counterclaims for bad faith claims handling as well as the alleged violations of Washington's CPA and IFCA. Defendant has also filed a cross-motion for summary judgment (doc, 55) regarding the choice-of-law on these counterclaims. For the reasons that follow, Defendant's motion (doc.55) is DENIED and plaintiffs motions (docs. 37 and 53) are GRANTED.


         Defendant JWF is a diversified general contractor that provides heavy civil and tunneling construction solutions to municipalities, agencies, and private owners across North America.[1] Defendant is incorporated in Oregon and is registered to do business in Washington, Hawaii, Oregon, California, and North Dakota, among other states.

         Plaintiff is incorporated in Delaware and has its principal place of business in Virginia. Plaintiff sole agent in Washington was Parker Smith & Feek ("PS&F"), an insurance producer and defendant's insurance broker. PS&F is incorporated and has its principal place of business in Washington. At all relevant times in this case PS&F's office was in Washington.

         To insure its equipment from damage or loss, JWF purchased contractor's equipment insurance coverage from plaintiff through PS&F and paid its premiums to PS&F. Thus, plaintiff has provided contractor's equipment coverage to JWF since 2011. Kathy Bare was the primary contact at PS&F for both JWF and Alterra. JWF renewed its contractor's equipment coverage with Alterra each year from 2012 through 2015 through PS&F.

         In August 2013, defendant entered into a contract with the North Dakota State Water Commission to construct approximately 2, 800 lineal feet of pipeline under Lake Sakakawea near Beulah, North Dakota. The project called for lake water to be pumped from the bottom of the Lake Sakakawea, piped to the shore, and screened by a water treatment plant operated by the North Dakota State Water Commission. The treated water would then be used to supply potable water for both domestic and livestock use in Southwest North Dakota.

         In August 2015, PS&F sent a letter to JWF starting the renewal process for the 2015-2016 policy period effective November 1, 2015 to November 1, 2016. In October 2015, JWF prepared to renew its insurance. It updated and revised its original Equipment Schedule, listing the machinery, equipment, and tools that it wanted to insure under the next policy. JWF provided that Revised Equipment Schedule to PS&F, which in turn provided it to Alterra on October 16, 2015.

         On or about October 28, 2015, Alterra issued a renewal binder to JWF for commercial output insurance coverage effective during the November 1, 2015 to November 1, 2016 coverage period. The renewal binder contained the Revised Equipment Schedule submitted by JWF on October 16, 2015, identifying the individual items of contractors' equipment covered and their respective limits. According to the Renewal Binder, the Contractors Equipment coverage was subject to limits of $9, 306, 134.

         While working on the North Dakota Project, JWF employed a Micro-Tunnel Boring Machine ("MTBM") and other related equipment to tunnel horizontally under the lake in order to install an underground intake pipeline. Early on November 1, 2015, the first day of the policy, while defendant was working on project, the tunnel caved in and caused a total loss of some of JWF's equipment. JWF made a claim under the policy seeking to recover for the lost equipment.

         Twelve days later, on November 13, 2015, JWF submitted to Alterra, through PS&F, a Revised Equipment Schedule with deletions and additions of various equipment, revisions of the stated equipment values, and other modifications. Some of the added equipment to be covered by the policy included the equipment lost in the North Dakota cave-in. One such item that was listed on the November 13, 2015 Equipment Schedule-that was previously unlisted-was an "Umbilical system" with a reported value of $2, 926, 300. The umbilical system was comprised of a collection of equipment put together to create one line-time for the November 13, 2015 Revised Equipment Schedule. Some of the equipment in the system had been included in the October 16, 2016 Revised Equipment Schedule.

         From January to March, 2016, Alterra issued payments to JWF for items listed on the October 16, 2015 Amended Equipment Schedule, including a payments for five components of the umbilical system which were listed in that Amended Equipment Schedule, for a total amount of $2, 255, 134. However, the remaining amount associated with the umbilical system as listed in the November 13, 2016 Revised Equipment Schedule was not reimbursed to JWF, on the basis that it was not included in the October 16, 2015 Revised Equipment Schedule. Id.

         Plaintiff then filed the present action on March 24, 2016 before this Court seeking a declaratory judgment that it had no duty to indemnify JWF for the loss of any equipment not included in the October 16, 2015 Revised Equipment Schedule. The parties have filed several motions for the Court's consideration, The parties have filed Cross-Motions for Summary Judgment (doc. 37 and 55) on whether Oregon or Washington law applies to defendants' counterclaims. Plaintiff has also filed a Motion for Partial Summary Judgment (doc. 53) on its declaratory relief claims, as well as defendants' counterclaims. I address each motion in turn.


         Summary judgment is appropriate if "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). A fact is material if it "is relevant to an element of a claim or defense and [its] existence might affect the outcome of the suit." T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987). A dispute is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Special rules of construction apply when evaluating a summary judgment motion: (1) all reasonable doubts as to the existence of genuine issues of material fact should be resolved against the moving party; and (2) all inferences to be drawn from the underlying facts must be viewed in the light most favorable to the nonmoving party. T. W. Elec, 809 F.2d at 630. "Summary judgment is inappropriate if reasonable jurors, drawing all inferences in favor of the nonmoving patty, could return a verdict in the nonmoving party's favor." Diaz v. Eagle Produce Ltd. P'ship, 521 F.3d 1201, 1207 (9th Cir. 2008).

         When cross-motions for summary judgment are presented, the court must "review the evidence properly submitted in support of [each] motion to determine whether it present[s] a disputed issue of material fact[.]" Fair Hous. Council of Riverside Cty., Inc. v. Riverside Two, 249 F.3d 1132, 1135 (9th Cir. 2001). The court must evaluate each motion independently on its own merits. Id. at 1136.

         The interpretation of an insurance policy is a matter of law. Emp 'rs Ins. of Wausau v. Tektronix, Inc., 156 P.3d 105, 116 (Or. Ct. App. 2007). The court's objective in construing an insurance contract is to determine the intent of the parties. Hoffman Constr. Co. of Alaska v. Fred S. James & Co., 836 P.2d 703, 706 (Or. 1992). To make that determination, the court uses a three-step process. Id. at 706-07. The first step is to examine the text of the policy to determine whether it is ambiguous, that is, whether it is susceptible to more than one plausible interpretation. Tualatin Valley Hans. v. Truck Ins. Exch, 144 P.3d 991, 993 (Or. Ct. App. 2006). The court will apply any definitions that are supplied by the policy itself and will otherwise presume that words have their plain, ordinary meanings. Id. If a term has only one plausible interpretation, it is interpreted in accordance with that unambiguous meaning. Andres v. Am. Standard Ins. Co., 134 P.3d 1061, 1063 (citing Hoffman, 836 P.2d at 706). If the wording of the policy is susceptible to more than one plausible interpretation, the court must examine the disputed terms in the context of the policy as a whole. Id. As a last resort, the courts resolves ambiguity by construing the tern against the drafter-generally, the insurance company. Hoffinan, 836 P.2d at 706-07. In the context of insurance contracts, courts determine plain meaning from the perspective of a reasonable insured. Id.

         The insured bears the initial burden of proving that a loss is covered under an insurance policy, while the insurer bears the burden of proving that a loss is excluded from coverage. Wausau, 156 P.3d at 119. It is also the insured's burden to ...

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