State Farm Fire & Casualty Co. v. Hardie et al

Filing 24

ORDER granting plaintiffs' 20 Motion for Summary, signed by Judge Thomas S. Zilly.(SWT)

Judge Thomas S. Zilly

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UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WASHINGTON,
AT SEATTLE

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STATE FARM FIRE AND CASUALTY
COMPANY, an Illinois corporation,

Cause No. 2:17-cv-00718TSZ

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Plaintiff,
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ORDER GRANTING PLAINTIFF'S
MOTION FOR SUMMARY JUDGMENT

vs.
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RYAN HARDIE and NICOLE HARDIE,
husband and wife, and the marital community
comprised thereof; and GURDEEP SEMBHI,
a single person,
Defendants.

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This matter came before the Court on plaintiff’s motion for summary judgment, docket

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no. 20. Having considered the briefing and evidence submitted by the plaintiff and the

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defendants having failed to respond, and being fully advised in the premises, this Court now

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enters the following order.

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Plaintiff’s motion for summary judgment, docket no. 20, is GRANTED for the
following reasons and the Court enters this declaratory judgment:

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ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY
JUDGMENT – 1
USDC WD WA/SEA CAUSE NO. 2:17-cv-00718TSZ

SOHA & L ANG, P.S.
ATTORNEYS AT LAW
1325 FOURTH AVENUE, STE 2000

SEATTLE, WASHINGTON 98101
[phone]/FAX [phone]

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1.

The claims alleged in the underlying liability lawsuit, Sembhi v. Hardie, et al,

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King County Superior Court cause no. 16-2-23628-6, arise out of Mr. Sembhi’s purchase of

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real property located at 8010 25th Ave. NW in Seattle from Ryan and Nicole Hardie. The sale

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closed on May 20, 2015. Mr. Sembhi alleges that the property was listed, advertised and

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represented as a three-unit triplex and was rented to three separate tenants at the time of his

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purchase. Eight months after closing, Mr. Sembhi received a City of Seattle Land Use Notice of

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Violation dated March 16, 2016, alerting him that using the property as a triplex was in

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violation of the city land use code, which only allows single family residences and duplexes.

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After receiving this notice, Mr. Sembhi terminated one tenant’s lease and paid $2,520 for

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relocation assistance. Mr. Sembhi alleges damages based on the income differential between a

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triplex and a duplex, and a loss for the allegedly diminished value of the property as a whole.

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His liability complaint against the Hardies asserts causes of action for negligent misrepresenta-

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tion, constructive fraud, intentional misrepresentation, breach of contract and warranty.

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2.

State Farm issued three policies to the Hardies that are at issue in this lawsuit.

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These are Apartment Policy no. 98-BJ-H402-4, Homeowners Policy no. 47-E6-3760-2, and

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Personal Liability Umbrella Policy no. 47-BR-M415-5.

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3.

State Farm and the Hardies have stipulated that Apartment Policy no. 98-BJ-

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H402-4 and Homeowners Policy no. 47-E6-3760-2 do not provide coverage for Mr. Sembhi’s

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claims. They have also stipulated that there is no coverage under the January 6, 2015 to January

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6, 2016 policy term of Personal Liability Umbrella Policy no. 47-BR-M415-5. ECF 19.

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4.

The only policy under which the Hardies are now seeking coverage for Mr.

Sembhi’s claims is Personal Liability Umbrella Policy no. 47-BR-M415-5 in effect for the

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ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY
JUDGMENT – 2
USDC WD WA/SEA CAUSE NO. 2:17-cv-00718TSZ

SOHA & L ANG, P.S.
ATTORNEYS AT LAW
1325 FOURTH AVENUE, STE 2000

SEATTLE, WASHINGTON 98101
[phone]/FAX [phone]

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January 6, 2016 to January 6, 2017 policy term. This policy is likewise inapplicable and it does

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not provide coverage for Mr. Sembhi’s claims for the following reasons:

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a.

The claims alleged by Mr. Sembhi in the liability lawsuit do not allege a

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“loss” involving “property damage” under the policy’s insuring agreement. This policy defines

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“property damage” as “physical damage to or destruction of tangible property, including loss of

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use of this property.” Mr. Sembhi does not allege that the property he purchased from the

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Hardies was in any way physically damaged. Rather, Mr. Sembhi alleges only economic losses.

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b.

The claims alleged by Mr. Sembhi in the liability lawsuit do not allege a

“loss” involving the commission of the “personal injury” offense of “wrongful eviction.” Under

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Kitsap County v. Allstate Insurance Co., 136 Wn.2d 567, 580, 964 P.2d 1173 (1998), in

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determining whether a policy’s “personal injury” coverage applies, this Court must look to the

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type of offense alleged. Coverage applies only to the enumerated offenses set forth in the

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“personal injury” definition, or claims that are analogous or equivalent to those enumerated

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offenses. Id. at 580, 586. Mr. Sembhi’s claims against the Hardies are based on theories of

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negligent misrepresentation, constructive fraud, intentional misrepresentation, and breach of

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contract and warranty. There are no allegations that the Hardies wrongfully evicted Mr.

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Sembhi, no allegations that there was a landlord-tenant relationship between the Hardies and

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Mr. Sembhi, and no allegations that the Hardies were given notice and an opportunity to correct

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the code violation. Likewise, Mr. Sembhi is not seeking damages against the Hardies because

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of any “wrongful eviction.” Rather, he is seeking damages for loss of rents and for the

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allegedly diminished value of the property as a whole. These are not the types of damages that

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would be awarded on a “wrongful eviction” claim.

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ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY
JUDGMENT – 3
USDC WD WA/SEA CAUSE NO. 2:17-cv-00718TSZ

SOHA & L ANG, P.S.
ATTORNEYS AT LAW
1325 FOURTH AVENUE, STE 2000

SEATTLE, WASHINGTON 98101
[phone]/FAX [phone]

c.

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Although this Court has determined that coverage does not apply

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because Mr. Sembhi’s complaint does not allege “loss” as required by the insuring agreement,

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if “loss” were alleged, there exists an alternative ground supporting the conclusion that the

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policy does not provide coverage. Exclusion 6 to the policy eliminates coverage for “loss”

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arising out of any insured’s “business property” or “business” pursuits of any insured. The

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policy defines “business property” to include premises that “is rented to others or held for

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rental, in whole or in part,” and it defines “business” as “a trade, profession or occupation.” Mr.

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Sembhi’s claims fall within this exclusion because the property the Hardies sold to Mr. Sembhi

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meets the definition of “business property.” The Hardies did not reside at the property, but

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instead rented it to others or held it for rental. No facts have been presented indicating that the

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triplex was anything other than an income-producing rental property. In addition, under the

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standard established by Stuart v. American States Ins. Co., 134 Wn.2d 814, 822, 953 P.2d 462

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(1998), an activity is a “business pursuit” if it is conducted on a regular and continuous basis

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and is motivated by profit. The Hardies’ ownership of the triplex as a rental income property

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qualifies as a “business pursuit,” and the exclusion applies because their alleged liability to Mr.

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Sembhi arises out of their regular and continuous ownership of the triplex over a period of

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years for the purpose of producing rental income.

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5.

State Farm Fire and Casualty Company has no duty to defend Ryan and Nicole

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Hardie under Apartment Policy no. 98-BJ-H402-4, under Homeowners Policy no. 47-E6-3760-

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2, or under Personal Liability Umbrella Policy no. 47-BR-M415-5 for the claims alleged by

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Mr. Hardie in the liability lawsuit.

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ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY
JUDGMENT – 4
USDC WD WA/SEA CAUSE NO. 2:17-cv-00718TSZ

SOHA & L ANG, P.S.
ATTORNEYS AT LAW
1325 FOURTH AVENUE, STE 2000

SEATTLE, WASHINGTON 98101
[phone]/FAX [phone]

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6.

State Farm Fire and Casualty Company may withdraw from the defense it is

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currently providing to defendants Ryan and Nicole Hardie for the claims alleged in the liability

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lawsuit within 14 days from entry of this order.

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7.

State Farm Fire and Casualty Company has no duty to indemnify defendants

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Ryan and Nicole Hardie under Apartment Policy no. 98-BJ-H402-4, under Homeowners Policy

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no. 47-E6-3760-2, or under Personal Liability Umbrella Policy no. 47-BR-M415-5 in

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connection with any settlement entered into or judgment entered with respect to the claims

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alleged in the liability lawsuit.

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ORDER ENTERED this 8th day of March, 2018.

A

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Thomas S. Zilly
United States District Judge

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Presented by:
SOHA & LANG, P.S.

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By: s/Mary DeYoung
Mary DeYoung, WSBA # 14332
Email: [e-mail]
1325 Fourth Avenue, Suite 2000
Seattle, WA 98101-2570
Telephone: [phone]
Facsimile: 206-624-3585
Attorneys for Plaintiff State Farm Fire and
Casualty Company

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ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY
JUDGMENT – 5
USDC WD WA/SEA CAUSE NO. 2:17-cv-00718TSZ

SOHA & L ANG, P.S.
ATTORNEYS AT LAW
1325 FOURTH AVENUE, STE 2000

SEATTLE, WASHINGTON 98101
[phone]/FAX [phone]