Scottsdale Insurance Company v. Mayer d/b/a Steps Re-Entry et al, No. 2:2017cv00236 - Document 21 (E.D. Wash. 2018)
Court Description: ORDER GRANTING 13 Plaintiff's Motion for Summary Judgment. File closed. Signed by Judge Stanley A Bastian. (SK, Case Administrator)
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Scottsdale Insurance Company v. Mayer d/b/a Steps Re-Entry et al Doc. 21 1 2 FI LED I N THE U.S. DI STRI CT COURT EASTERN DI STRI CT OF WASHI NGTON 3 Jul 09, 2018 4 5 UNITED STATES DISTRICT COURT 6 EASTERN DISTRICT OF WASHINGTON SEAN F. MCAVOY, CLERK 7 8 SCOTTSDALE INSURANCE 9 COMPANY, NO. 2:17-cv-00236-SAB Plaintiffs, 10 v. 11 ORDER GRANTING 12 TERRI MAYER D/B/A STEPS RE- PLAINTIFF’S MOTION FOR 13 ENTRY; STEPS RE-ENTRY, A SUMMARY JUDGMENT 14 WASHINGTON NON-PROFIT 15 CORPORATION; TERRI MAYER AND 16 BRENT MAYER AND THE MARITAL 17 COMMUNITY COMPRISED THEREOF; 18 KENNETH WENHAM, AN 19 INDIVIDUAL; LINCOLN CAPITAL, 20 LLC, A WASHINGTON LIMITED 21 LIABILITY COMPANY, Defendants. 22 23 24 Before the Court is Plaintiff’s Motion for Summary Judgment, ECF No. 13. 25 Defendants do not oppose the motion, which was heard without oral argument. For 26 the reasons stated herein, the Court grants Plaintiff’s motion and enters judgment 27 in its favor. 28 // ORDER GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT + 1 Dockets.Justia.com Background 1 On June 27, 2018, Plaintiff filed a Complaint for Declaratory Relief seeking 2 3 a declaratory judgment that it has no obligation to defend or otherwise indemnify 4 Defendants in an underlying action.1 ECF No. 1. On November 16, 2017, Plaintiff 5 notified the Court that Defendants Brent Mayer and Terri Mayer filed for Chapter 6 7 Bankruptcy in the United States Bankruptcy Court for the Eastern District of 7 Washington. ECF No. 10. As a result, this action was automatically stayed. 11 8 U.S.C. § 362. On February 27, 2018, the Bankruptcy Court granted Plaintiff’s 9 motion for relief from stay, ECF No. 12, and Plaintiff filed its Motion for 10 Summary Judgment, ECF No. 13. No answer or opposition to Plaintiff’s motion 11 has been filed. Facts 12 The underlying action at issue in this case arises from the business 13 14 operations of Defendants' Steps Re-entry, Terri Mayer, and Brent Mayer 15 (collectively “Steps”), for which Plaintiff provided a policy of insurance. In the 16 state court complaint, Defendants Kenneth Wenham and Lincoln Capital, LLC 17 (collectively “Lincoln Capital”) allege Steps was a vendor for the Washington 18 Department of Corrections (“DOC”) providing housing for clients participating in 19 the Voucher Program. ECF No. 14-1. Steps allegedly requested Lincoln provide 20 housing for approximately thirty clients in exchange for payment. Lincoln 21 provided that housing. However, for four months, Steps received payment from the 22 DOC and failed to forward that payment to Lincoln after repeatedly promising to 23 do so. Lincoln states claims for breach of oral contract, fraud, unjust enrichment, 24 25 26 1 The Court takes judicial notice of the Complaint in the underlying action: 27 Complaint, Wenham v. Steps Reentry, No. 172002971 (Wash. Sup. Ct. Nov. 11, 2016), ECF No. 14. See Mack v. S. Bay Beer Distrib., 798 F.2d 1279, 1282 (9th 28 Cir. 1986). ORDER GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT + 2 1 conversion, negligent misrepresentation, and violations of the Washington 2 Consumer Protection Act, Wash. Rev. Code. §§ 19.86.010. 3 Plaintiff is defending Steps in the underlying action subject to a reservation 4 of rights. It now seeks a declaration that it owes no duty to defend or indemnify 5 pursuant to the terms of the applicable insurance policy. The relevant terms of the 6 insurance policy are as follows: SECTION I — COVERAGES 7 COVERAGE A — BODILY INJURY AND PROPERTY DAMAGE 8 LIABILITY 1. Insuring Agreement 9 a. We will pay those sums that the insured becomes legally obligated 10 to pay as damages because of “bodily injury” or “property damage” to which this insurance applies. We will have the right and duty to 11 defend the insured against any “suit” seeking those damages. 12 However, we will have no duty to defend the insured against any “suit” seeking damages for “bodily injury” or “property damage” to 13 which this insurance does not apply. 14 ... COVERAGE B – PERSONAL AND ADVERTISING INJURY 15 LIABILITY 16 1. Insuring Agreement a. We will pay those sums that the insured becomes legally obligated 17 to pay as damages because of “personal and advertising injury” to 18 which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. 19 However, we will have no duty to defend the insured against any 20 “suit” seeking damages for “personal and advertising injury” to which 21 this insurance does not apply. ... 22 SECTION V – DEFINITIONS 23 ... 3. “Bodily injury” means bodily injury, sickness or disease sustained 24 by a person, including death resulting from any of these at any time. 25 ... 14. “Personal and advertising injury” means injury, including 26 consequential “bodily injury”, arising out of one or more of the 27 following offenses: a. False arrest, detention or imprisonment; 28 ORDER GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT + 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 b. Malicious prosecution; c. The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor; d. Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services; e. Oral or written publication, in any manner, of material that violates a person’s right of privacy; f. The use of another’s advertising idea in your “advertisement”; or g. Infringing upon another’s copyright, ... 17. “Property damage” means: a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the “occurrence” that caused it. 15 ECF No. 15-1 at 12-27. SECTION 1 – COVERAGE 16 1. Insuring Agreement. 17 a. We will pay those sums that the insured becomes legally obligated to pay as “damages” as a result of an “error or omission” to which this 18 insurance applies. We will have the right and duty to defend the 19 insured against any “suit” seeking those “damages.” However, we will have no duty to defend the insured against any “suit” seeking 20 “damages” for an “error or omission” to which this insurance does not 21 apply. We may, at our discretion, investigate any “error or omission” and settle any “claim or “suit” that may result. 22 ... 23 2. Exclusions This insurance does not apply to: 24 a. “Errors or omissions” for which the insured is obligated to pay 25 “damages” by reason of the assumption of liability in a contract or agreement. This exclusion does not apply to liability for “damages” 26 that the insured would have in the absence of the contract or 27 agreement. ... 28 ORDER GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT + 4 1 2 d. Injury arising out of a dishonest, fraudulent, malicious or criminal act by any insured. 3 ECF No. 15-1 at 34-35. SECTION VI – DEFINITIONS 4 ... 4. “Error or omission” means any negligent act, error or omission 5 while performing those services described in the Schedule of this 6 Coverage Part under the Description of Services.” 7 ECF No. 15-1 at 42. 8 9 Legal Standard Summary judgment is appropriate if the “pleadings, depositions, answers to 10 interrogatories, and admissions on file, together with the affidavits, if any, show 11 that there is no genuine issue as to any material fact and that the moving party is 12 entitled to judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 13 323 (1986) (citing Fed. R. Civ. P. 56(c)). There is no genuine issue for trial unless 14 there is sufficient evidence favoring the nonmoving party for a jury to return a 15 verdict in that party’s favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 16 (1986). The moving party has the burden of showing the absence of a genuine 17 issue of fact for trial. Celotex, 477 U.S. at 325. 18 In addition to showing that there are no questions of material fact, the 19 moving party must show that it is entitled to judgment as a matter of law. Smith v. 20 Univ. of Wash. Law Sch., 233 F.3d 1188, 1193 (9th Cir. 2000). The moving party 21 is entitled to judgment as a matter of law if the non-moving party has failed to 22 make a sufficient showing on an essential element of a claim on which the non23 moving party has the burden of proof. Celotex, 477 U.S. at 323. 24 A motion for summary judgment cannot be granted simply because there is 25 no opposition, even if the failure to oppose violated a local rule. Henry v. Gill 26 Indus., 983 F.2d 943, 950 (9th Cir. 1993). The moving party must demonstrate the 27 absence of genuine issues of material fact, regardless of whether the party against 28 ORDER GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT + 5 1 whom the motion for summary judgment is direct has filed any opposition. 2 Cristobal v. Siegel, 26 F.3d 1488, 1491 (9th Cir. 1994). Discussion 3 4 Under Washington law, a “duty to defend ‘arises at the time an action is first 5 brought, and is based on the potential for liability.’” Woo v. Fireman’s Fund Ins. 6 Co., 161 Wash.2d 43, 52 (2007) (quoting Truck Ins. Exch. v. VanPort Homes, Inc., 7 147 Wash.2d 751, 760 (2002)) (emphasis added in Woo). An insurer has a duty to 8 defend “when a complaint against the insured, construed liberally, alleges facts 9 which could, if proven, impose liability within the policy’s coverage.” Id. at 52-53 10 (citing Truck Ins. Exch., 147 Wash.2d at 760) (internal quotation marks omitted). 11 “An insurer is not relieved of its duty to defend unless the claim alleged in the 12 complaint is ‘clearly not covered by the policy.’” Id. at 53 (quoting Truck Ins. 13 Exch., 147 Wash.2d at 760)). Thus, the duty to defend must be determined from 14 the complaint. 15 Each of Lincoln’s causes of action outlined in the Complaint arise from a 16 common set of facts: Steps requested Lincoln provide housing for DOC Voucher 17 clients; Lincoln provided housing; Steps failed to pay after promising to do so; 18 Steps benefited financially at Lincoln’s expense. ECF No. 14-1. The Court finds 19 that there is no conceivable coverage under the insurance policy based on these 20 allegations. 21 First, there is no coverage under the bodily injury or property damage 22 provisions of the policy, nor under the personal and advertising injury. This case 23 indisputably does not involve damage to a person, property, or reputation. Second, 24 while the errors and omissions endorsement provides Plaintiff will pay for “those 25 sums that the insured becomes legally obligated to pay as ‘damages’ as a result of 26 an error or omission’ to which this insurance applies,” ECF No. 15-1 at 34, this 27 endorsement does not cover the alleged acts. An error or omission is a negligent 28 act occurring in the course of business. Id. at 42. Each of the allegations in the ORDER GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT + 6 1 Complaint relate to an intentional, fraudulent act; no negligence is alleged here. 2 Third, the errors and omissions endorsement excludes from coverage injuries 3 arising from breach of contract and fraudulent conduct. Lincoln alleges Steps 4 breached its oral contract to pay for housing services and failed to do so after 5 repeatedly assuring Lincoln payment was forthcoming. These allegations squarely 6 fall within the errors and omissions exclusions, and therefore, no coverage exists. 7 Because the allegations in the underlying action are clearly not covered by 8 the policy, Plaintiff has no duty to defend or indemnify Steps in the state court 9 proceedings. See Woo, 161 Wash.2d at 53. Accordingly, Plaintiff’s Motion for 10 Summary Judgment, ECF No. 13, is granted. 11 Accordingly, IT IS HEREBY ORDERED: 12 1. Plaintiff’s Motion for Summary Judgment, ECF No. 13, is GRANTED. 13 2. The District Court Executive is hereby directed to enter judgment in 14 favor of Plaintiff and against Defendants. 15 IT IS SO ORDERED. The District Court Executive is hereby directed to 16 file this Order, provide copies to counsel, enter judgment, and close this file. 17 DATED this 9th day of July 2018. 18 19 20 21 22 23 24 Stanley A. Bastian United States District Judge 25 26 27 28 ORDER GRANTING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT + 7
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