206-624-1800 info@sohalang.com

United States District Court for the Eastern District Washington Applies Xia v. ProBuilders Specialty Insurance Company RRG

In the matter of The Dolsen Companies, et al. v. Bedivere Insurance Company, et al., Case No. 1:16-CV-3141-TOR, 2017 WL 3996440 (E.D.Wash. September 11, 2017) (ECF 70), the United States District Court for the Eastern District of Washington addressed the application of an absolute pollution exclusion to claims for defense and indemnity of a lawsuit alleging environmental contamination and liability under the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq. (“RCRA”), the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. § 11001 et seq. (“EPCRA”), and the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. § 9601 et seq. (“CERCLA”).

The underlying lawsuit alleged that the plaintiffs, three dairy farm operations (“the Dairy Farms”), caused contamination to ground water and drinking water through their use and storage of liquid manure. The Dairy Farms submitted the claim to several insurers who had issued policies covering after the year 2000 (“Insurers”). The Insurers denied both defense and indemnity based, in part, on the absolute pollution exclusion contained in the policies. The Dairy Farms sued the Insurers and the parties cross moved on summary judgment to determine whether the absolute pollution exclusion applied to preclude coverage for the environmental contamination claims under the policies.

The Court first construed the language of the absolute pollution exclusion and found that it was unambiguous in the context of the environmental contamination claims. The Court considered and rejected the Dairy Farms’ argument that cow manure did not qualify as a “pollutant” under the policy because it has a beneficial non-polluting use. The Court also analyzed and rejected the Dairy Farms’ argument that coverage should be afforded under the policies because a reasonable purchaser of a farm policy would not expect to have part of their operations excluded from coverage. The Court noted that Washington Courts have expressly declined to adopt the “reasonable expectation” line of reasoning.

Citing to Kent Farms v. Zurich Ins. Co., 140 Wn.2d 396 (2000) and Quadrant Corp. v. Am. States Ins. Co., 154 Wn.2d 165 (2005), the Court held that absolute pollution exclusions apply to traditional environmental harm arising from a pollutant acting as a pollutant. The Court found that the underlying environmental claims clearly alleged that manure was acting as a pollutant when it caused the loss at issue.

The Court then turned to the efficient proximate cause analysis as set out in Xia v. ProBuilders Specialty Insurance Company RRG, 2017 WL 3711907, at *4 (April 27, 2017), originally published at 188 Wn.2d 171 (2017), as modified (August 16, 2017).  The Court stressed:

The distinguishing feature between these two lines of cases is the relation between the initial act and the pollutant causing harm—viz., whether the initial peril was the polluting act (i.e., whether the incident involved pollutants in the first place) or whether the initial peril was some other act that incidentally led to a polluting harm. Although subtle, this framework is workable and leads to a clear result in this case: the initial act was intimately tied to the pollutant and thus the initial peril was the polluting act.

Applying this framework to the environmental claims at issue, the Court found that the initial act giving rise to the environmental harm (the storage and application of liquid manure) was an excluded harm and there was no other covered occurrence that otherwise led to the harm. The Court rejected the argument that the negligent construction of the storage facilities for the manure presented a separate cause of the loss, instead finding that the absolute pollution exclusion specifically excluded coverage for the seepage of pollutants stored or processed as waste.

The Court also rejected the Dairy Farms’ argument that under American Best Food, Inc. v. Alea London, Ltd., 168 Wn.2d 398, 229 P.3d 693 (2010), the Insurers had a duty to defend because a Washington case had not yet determined that cow manure was a “pollutant” as defined by the policies, and at least one case from a different jurisdiction had found that pig manure was not a pollutant.   The Court rejected this argument and found “a different approach in another state does not create lack of clarity where the underlying rules are much different and are clearly inconsistent with the approach in Washington.”

Accordingly, the Court found that the absolute pollution exclusion applied and that the Insurers had no duty to defend or indemnify the Dairy Farms for the environmental contamination claims.

Washington Supreme Court Holds that the Lystedt Law Provides a Cause of Action

In Swank, et al. v. Valley Christian School et al., ___ Wn.2d ___, ___ P.3d ___ (July 6, 2017), the Washington Supreme Court held that the Lystedt law (RCW 28A.600.190) creates an implied cause of action. The 2009 Lystedt law requires that 1) schools develop a concussion and head injury information sheet; 2) youth athletes be removed from play on suspicion of sustaining a concussion or head injury; and 3) youth athletes removed from play may not return without written clearance from a health care provider.

Andrew Swank (Drew) was a student at Valley Christian School, a non-profit religious school in Spokane, WA. In 2007, a parent, Jim Puryear, approached Valley Christian and offered to start a football team. Valley Christian accepted and Puryear began coaching as an unpaid volunteer. Valley Christian developed a concussion information sheet (CIS) and Coach Puryear distributed the CIS to parents at the beginning of the 2009 season. Coach Puryear discussed the CIS with parents and  Drew and his mother both signed the CIS.

On September 18, 2009, Drew was hit hard on the head during a football game. The Swanks live in Idaho and took Drew to his primary care physician in Idaho – Dr. Burns. Dr. Burns examined Drew in Idaho. Two days later, Dr. Burns wrote a note for Drew at his mother’s request.

Drew played football the next day. Though he initially played well, his performance declined sharply during the game. Drew appeared sluggish and confused and was slow to respond. Drew was hit by an opposing player during the game, staggered to the sidelines, and collapsed. He died two days later.

The Swanks sued Valley Christian, Coach Puryear, and Dr. Burns. The trial court granted summary judgment against the Swanks. The Court of Appeals affirmed the trial court on all but the Swanks’ negligence claim against Valley Christian. The Washington Supreme Court reversed the trial court decision, except as regards Dr. Burns.

The Court applied the Bennett test to determine whether the Lystedt law provides an implied cause of action. The Court found that all three elements of the Bennett test were met: 1) Drew is a member of the class protected by the statute; 2) the legislative history showed support for a remedy; and 3) an implied cause of action is consistent with the purpose of the statute. Having found that the Lystedt law includes an implied cause of action, the Court further held that the requirements in RCW 28A.600.190(2), (3), and (4) include duties which can support a claim.

The Court found that the Swanks’ claims against Valley Christian and Coach Puryear may proceed, but that the Washington Courts lacked personal jurisdiction against the Idaho physician, Dr. Burns.

The Washington Supreme Court remanded the matter with instructions to reinstate the Swanks’ claims against Valley Christian and Coach Puryear.

Washington Supreme Court Holds that Fault for Negligence Cannot be Apportioned to a Parent of the Plaintiff Under RCW 4.22.070

In Smelser v. Paul, et al, ___ Wn.2d ___, ___ P.3d ___ (July 6, 2017), the Washington Supreme Court found that, under the parental immunity doctrine, parents owe no duty of care to their children, and on that basis, fault for negligence cannot be apportioned to a parent of the plaintiff under RCW 4.22.070.

Derrick Smelser, then two years old, was run over by a car driven by defendant, Jeanne Paul while playing in his yard. At the trial court level, Ms. Paul was allowed to assert an affirmative defense that the child’s father was partially at fault on a theory of negligent supervision.  The trial court instructed the jury under RCW 4.22.070, and the jury determined that the father was 50% at fault.  The trial court did not enter judgment against the father because of the parental immunity doctrine.

The Washington Supreme Court found that the common law doctrine of parental immunity in Washington State establishes that there is no tort liability or tort duty applicable to a parent for negligent supervision or negligence in other parenting activities.  The Washington Supreme Court went on to state that, under RCW 4.22.051, in order to be an at-fault entity, the party must have engaged in negligent or reckless conduct that breaches a recognized duty.  Because the Court found that parents do not have a recognized duty of supervision of their children, the parents’ conduct is not tortious, and they cannot be an at-fault entity.

Pursuant to this holding, the Washington Supreme Court remanded the matter to the trial court, with instructions to enter judgement for 100% of the damages against Ms. Paul.

Washington Supreme Court Extends Olympic Steamship to Sureties in Public Works Contract

In King County v. Vinci Constr. Grands Projects, et al.,  __Wn.2d __, __ P.3d __ (July 6, 2017), the Washington Supreme Court was asked to review an award of nearly $15 million in attorney fees against five surety companies following a jury trial for breach of contract in a public works project.  In a six to three decision, the Washington Supreme Court ruled attorney fees under Olympic S.S. Co. v. Centennial Ins. Co., 117 Wn.2d 37, 811 P.2d 673 (1991) (“Olympic Steamship Fees”), which arguably had been restricted to disputes where an insured is a prevailing party in a lawsuit that is forced by an insurer’s refusal to defend or pay the claim, may be applied in the context of a dispute with sureties on a performance.

In 2006, King County contracted with three construction firms to expand its wastewater treatment system. One of the contractors, VPFK, did not perform its portion of the work by the performance deadline contained in the contract. VPFK had a performance bond that obligated the sureties to step in and “promptly remedy the default in a manner acceptable to [King County],” if VPFK did not perform under the contract.

After King County declared VPFK to be in default, the County requested that the sureties either cure VPFK’s default themselves or agree to fund a new contractor to complete VPFK’s work. The sureties, however, responded that performance was not required under the bond because no breach had occurred.

King County filed suit against VPKF and one of its sureties.  VPKF’s other sureties intervened.  Together, the five sureties denied coverage and adopted all of VPFK’s defenses against breach of contract.  The matter proceeded to trial, and the jury found in favor of King County. As part of the relief awarded after the trial, the court awarded $15 million in Olympic Steamship Fees. Moreover, the trial court held, as a basis for awarding the County all of its legal fees, that it didn’t matter if the fees were incurred in pursuing claims against VPKF or the sureties. Because King County’s claim against the sureties was intertwined and indistinguishable from its claim against VPFK, the county could recover all of its fees under Olympic Steamship.

Washington’s Insurance Fair Conduct Act Does Not Create an Independent Cause of Action for Violations of Washington Administrative Code Regulations

The Washington Supreme Court held today that violation of Washington Administrative Code (“WAC”) regulations alone does not support a cause of action under the Insurance Fair Conduct Act (“IFCA”) in Perez-Crisantos v. State Farm Fire and Casualty Co., No. 92267-5, with eight justices joining the lead opinion. The Court’s findings included the following:

  • IFCA does not state a cause of action for first party insureds “whose claims were processed in violation of the insurance regulations,” but it explicitly lays out a cause of action for first party insureds who are unreasonably denied a claim.
  • When the Washington State Voters were presented with the IFCA initiative, the ballot title clearly indicated an intent to create a cause of action for unreasonable denial of coverage, not for regulatory violations. On the whole, the Court concluded that the legislative history suggests that IFCA does not create an independent cause of action for regulatory violations.
  • The reading sought by Mr. Perez-Crisantos would render portions of IFCA superfluous.

In reaching this conclusion, the Court agreed with the rationale of prior federal decisions that an independent cause of action based on a WAC violation was not created.  Among the decisions cited by the Court was Country Preferred Ins. Co. v. Hurless, 2012 WL 2367073 (W.D. Wash. 2012), in which Soha & Lang, P.S. successfully represented the insurer on this issue.

The litigation between State Farm and Mr. Perez-Crisantos arose from his insurance claim regarding a motor vehicle accident caused by another driver. Mr. Perez-Crisantos made an underinsured motorist (“UIM”) claim with State Farm. State Farm determined that Mr. Perez-Crisantos had been fully compensated, and declined to make further payments under the UIM coverage. Mr. Perez-Crisantos sued State Farm on multiple grounds, including a claim for violation of IFCA.  Mr. Perez-Crisantos premised his IFCA claim on, among other things, State Farm’s alleged violation of certain WAC regulations.

This is a fair and reasonable reading of the Insurance Fair Conduct Act and good news for insurers and, in the long run, their customers.

 

Disclaimer: The opinions expressed in in this blog are those of the authors and do not necessarily reflect those of Soha and Lang, P.S. or its clients.