Snohomish County v. Allied World National Assurance Company et al

Filing 237

ORDER granting Defendant Lexington Insurance Company's 205 Motion for Summary Judgment; signed by Judge Barbara J. Rothstein. (SWT) (Lexington Insurance Company as defendant terminated.)

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

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SNOHOMISH COUNTY,
Plaintiff,

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CASE NO. C16-63 BJR
ORDER GRANTING LEXINGTON
INSURANCE COMPANY’S
MOTION FOR SUMMARY
JUDGMENT

v.
ALLIED WORLD NATIONAL
ASSURANCE COMPANY, et al.,

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Defendants.
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I.

Introduction

This matter is before the Court on a motion for summary judgment by Defendant Lexington

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Insurance Company (“Lexington”) against Plaintiff Snohomish County (“the County”).

The

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dispute centers around whether Lexington owed a duty to defend the County against a series of

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lawsuits in the wake of a catastrophic landslide in 2014.

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Having reviewed the parties’ briefing, the relevant case law, and the entire record, the Court

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will grant Lexington’s motion for summary judgment against the County and dismiss the lawsuit

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against Lexington without prejudice. The Court’s reasoning follows:

ORDER GRANTING LEXINGTON INSURANCE COMPANY’S MOTION FOR SUMMARY JUDGMENT - 1

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II. Background

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On March 22, 2014, in Snohomish County, the town of Oso was the scene of a

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catastrophic mudslide that wreaked havoc on lives and property. The number of deaths, personal

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injuries, and destruction to homes and other property resulted in four lawsuits (hereinafter the

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"underlying lawsuits"). The underlying lawsuits are Pszonka v. Snohomish County (King Co. Sup.

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Ct. No. 14-2-18401-8-SEA; “Pszonka”); Ward v. Snohomish County, King Co. Sup. Ct. No. 14-2-

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2955-4-SEA; “Ward”); Regelbrugge v. State of Washington, King Co. Sup. Ct. No. 15-2-01672-

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5-SEA (“Regelbrugge”); Lester v. Snohomish County, King Co. Sup. Ct. No. 15-2-02908-6-SEA

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(“Lester”).

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At issue in this summary judgment motion are five successive annual excess insurance

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policies issued by Lexington. 1 Lexington is a “second-layer” excess insurer whose duty to cover

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and defend begins when the County’s self-insured retention and the first layer of excess coverage

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has been exhausted.

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The second-layer Lexington policies share the following features:

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•

The duty to defend and/or pay a covered loss arises only after the County has fully

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exhausted its self-insured retention and the respective policy limits of its underlying

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insurance policies;
•

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The policies follow the form of the underlying first-layer excess insurance policies

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issued by Defendant The Insurance Company of the State of Pennsylvania (“ICSOP”)

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during the same policy period (i.e., if an underlying ICSOP Policy does not cover a

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May 1, 2005 – May 1, 2006 (“2005-06 Lexington Policy”); May 1, 2006 – March 15, 2007 (“2006-07 Lexington
Policy”); March 15, 2007 – March 15, 2008 (“2007-08 Lexington Policy”); March 15, 2008 – March 15, 2009
(“2008-09 Lexington Policy”); March 15, 2009 – March 15, 2010 (“2009-10 Lexington Policy”). See Dkt. No. 203,
Declaration of Broker, ¶¶ 6-11, Exs. 4-8.

ORDER GRANTING LEXINGTON INSURANCE COMPANY’S MOTION FOR SUMMARY JUDGMENT - 2

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claim or suit, the Lexington Policy from that same policy period will also not cover the

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claim or suit). 2

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On September 14, 2016, the underlying lawsuits against the County were dismissed. (Dkt.

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No. 204, Declaration of Meyers, Exs. 1, 2.) The dismissal of the underlying litigation is currently

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on appeal. (Dkt. No. 200, Declaration of Genster at ¶ 3.)

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III. Discussion

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A. Legal standards

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Summary judgment is proper “if the movant shows that there is no genuine issue as to any

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material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).

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The moving party bears the initial burden of demonstrating the absence of a genuine issue of

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material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). In deciding a summary

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judgment motion, the court must view the evidence in the light most favorable to the non-moving

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party and draw all justifiable inferences in its favor. Anderson v. Liberty Lobby, Inc. 477 U.S. 242,

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55 (1986).

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The moving party is only required to assert that the party with the burden of proof cannot

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carry that burden, and “that there is an absence of evidence to support the nonmoving party’s case.”

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Celotex, 477 U.S. at 325. On those issues where it bears the burden of proof, the non-moving party

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must present actual evidence to successfully oppose the motion and may not rest on allegations,

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speculations or opinion. Anderson, 477 U.S. at 248.

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ICSOP filed its own motion for summary judgment against the County (see Dkt. No. 202); the County’s responsive
brief to that motion incorporates their response to Lexington’s motion as well. (See Dkt. No. 210.) An order has
issued on ICSOP and the County’s cross-motions for summary judgment. (See Dkt. No. 235.)

ORDER GRANTING LEXINGTON INSURANCE COMPANY’S MOTION FOR SUMMARY JUDGMENT - 3

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B. Lexington’s Motion for Summary Judgment

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Since the Lexington policies “follow form” with the ICSOP policies, a portion of

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Lexington’s summary judgment request consists of a “me too” motion in which it argues that its

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policies do not cover the claims against the County because its policies contain the same

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exclusionary provisions that ICSOP asserted in its motion for summary judgment (see fn. 2). That

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portion of Lexington’s argument is unavailing – as fully explained in the order issued on the cross-

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motions for summary judgment between ICSOP and the County (see Dkt. No. 235; Order Granting

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Motion for Summary Judgment by Snohomish County and Denying Motion for Summary

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Judgment by The Insurance Company of the State of Pennsylvania), the ICSOP Policies do

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“conceivably cover” the claims asserted by the County and thus that element of the duty to defend

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has been satisfied. (Id. at 14-24.) Therefore Lexington’s argument as regards “follow-on”

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coverage (or lack thereof) fails.

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However, Lexington’s legal position differs from ICSOP’s in one critical regard.

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Lexington is a “second-layer” excess insurer and its obligations to its insured are not triggered

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until both the County’s self-insured retention and the first-layer excess coverage have been

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exhausted. The County concedes in its briefing that it

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has not submitted proof of exhaustion to Lexington because… the County has incurred in
excess of $4 million in defense costs and Lexington’s liability does not attach until that
figure reaches $6 million ($1 million SIR plus the $5 million limit on the underlying ICSOP
policy).
(Dkt. No. 210, County Response at 34.)

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Although the County’s lawsuit against Lexington seeks only

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a declaratory judgment that defendants are obligated to pay in full on behalf of Snohomish
County: (1) all costs of defending Snohomish County against the various claims arising out
of the Oso Landslide; and (2) any and all sums which Snohomish County becomes legally
obligated to pay as damages with respect to the Oso Landslide[.]

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ORDER GRANTING LEXINGTON INSURANCE COMPANY’S MOTION FOR SUMMARY JUDGMENT - 4

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(Dkt. No. 1, Complaint at ¶ 13.1), the County’s admission that it has never submitted proof of
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exhaustion to Lexington renders its request for declaratory relief regarding the duty to defend
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premature. The County alleges in its complaint that Lexington has already breached its duty to
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indemnify and that “[a]n actual controversy of a justiciable nature presently exists.” (Id. at ¶¶ 7.45
7.5) As has been discussed at length in the order on the ICSOP-Snohomish County cross-motions,
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absent proof of exhaustion there is no duty to defend. (See Dkt. No. 235, Order on Cross-Motions
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at 24-31.)
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The County argues that Lexington’s summary judgment motion is “premature and
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inappropriate.” (County Response at 34.) In actuality, it is the County’s request for declaratory
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judgment as to a duty whose conditions the County has not yet fulfilled that is premature.
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Lexington is entitled to summary judgment as a matter law, and thus to dismissal of the complaint
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against it.
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IV.

Conclusion

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In conceding that it has not provided Defendant Lexington Insurance Company with proof
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of exhaustion, the County has failed to establish a critical element of its claim against the insurer
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and the Court is not in a position to enter a declaratory judgment in its favor. There are no disputed
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issues of material fact, and Lexington is entitled to summary judgment as a matter of law.
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Defendant’s motion is granted and the County’s complaint against Lexington is dismissed.
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However, as the Court does not intend to preclude the County from seeking a declaratory
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judgment or other relief against its “second-layer” excess insurers should circumstances warrant
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in the future, the dismissal will be without prejudice and with leave to re-file the complaint at a
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later date.
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ORDER GRANTING LEXINGTON INSURANCE COMPANY’S MOTION FOR SUMMARY JUDGMENT - 5

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The clerk is ordered to provide copies of this order to all counsel.

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Dated: August 21, 2017.

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A
Barbara Jacobs Rothstein
U.S. District Court Judge

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