In Tim Ryan Construction, Inc. v. Burlington Insurance Co., 2012 WL 6567586 (W.D. Wash. December 17, 2012) the Court was faced with a General Contractor which was denied a Defense under an Additional Insured Endorsement. The General Contractor sued for a Declaration of Insurance Coverage and for Bad Faith Damages. The Court granted the General Contractor's Motion for Summary Judgment in all pertinent respects.
Tim Ryan Construction, Inc. ("TRC") is the General Contractor. Its subcontractor on a commercial building project, Sound Glass, purchased a Commercial General Liability Policy from Burlington. Burlington's CGL has an Additional Insured Endorsement under which TRC is 'indisputably' "covered as an additional insured under Burlington's policies with Sound Glass." Tim Ryan Construction, Inc. v. Burlington Insurance Co., 2012 WL 6567586 *1 (W.D. Wash. December 17, 2012).
In the State of Washington, Coverage for a Defense under a Liability Policy can be determined by comparing the Policy language with the Underlying Complaint, or by comparing a combination of the language of these documents with facts extrinsic to the Underlying Complaint. Tim Ryan Construction, Inc. v. Burlington Insurance Co., 2012 WL 6567586 *3 (W.D. Wash. December 17, 2012). "In arriving at this decision, extrinsic evidence cannot be used to deny the duty to defend, only to trigger it." Tim Ryan Construction, Inc. v. Burlington Insurance Co., 2012 WL 6567586 *5 (W.D. Wash. December 17, 2012). [Emphasis added.]
TRC was sued in an Underlying Complaint filed in 2011 which did not mention its subcontractor, Sound Glass. Burlington denied TRC a Defense to the 2011 Complaint for that reason, relying also on the language of the Additional Insured Endorsement to the effect that Additional Insureds are Burlington's Insureds "'only with respect to liability arising out of 'your work' for that insured by or for you.... [Further,] any other insurance maintained by the Additional Insured [here, TRC] shall be excess and noncontributory but ... only if such claim, loss or liability is determined to be solely due to the negligence or responsibility of the Named Insured [i.e., of Sound Glass in this instance].'" Tim Ryan Construction, Inc. v. Burlington Insurance Co., 2012 WL 6567586 *4 (W.D. Wash. December 17, 2012). Burlington contended that since Sound Glass was not named in the 2011 Complaint, there was no Duty to Defend TRC.
The Federal Court disagreed in this case. The Court accepted the position advanced by TRC that the silence of the 2011 Complaint "leaves open the possibility that Sound Glass was one of the various subcontractors who was responsible for the alleged damages". Tim Ryan Construction, Inc. v. Burlington Insurance Co., 2012 WL 6567586 *4 (W.D. Wash. December 17, 2012). In essence, to decide that question was to rely on extrinsic evidence to deny a Duty to Defend, contrary to Washington State law. This is what Burlington did by looking to the "final determination of the named insured's loss and liability," a determination which "has no bearing" on the Duty to Defend question in the first place, the Court wrote. "Contrary to Burlington's assertion, it is clear to the Court that Burlington has a duty to defend TRC against the 2011 Complaint." Tim Ryan Construction, Inc. v. Burlington Insurance Co., 2012 WL 6567586 *6 (W.D. Wash. December 17, 2012). [Emphasis added.]
Having determined the Coverage Claim in favor of the General Contractor, the Court turned its attention to both the Bad Faith Claims in this case, and TRC's Claims based on several Model Unfair Claim Practices Act provisions which are enacted into the Washington State Insurance Fair Conduct Act.
The Federal Court's disposition of the Bad Faith Claims and the IFCA Claims, and Damages, will be addressed in a further article to be posted here. To Be Continued ....
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