Premier Harvest et al v. AXIS Surplus Insurance Company et al

Filing 43

ORDER denying Defendant Axis' 33 Motion for Protective Order; denying Defendant Axis' 13 Motion to Dismiss, signed by U.S. District Judge John C Coughenour.(SWT)

THE HONORABLE JOHN C. COUGHENOUR

1
2
3
4
5
6

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

7
8
9

PREMIER HARVEST LLC, et al.,

10

Plaintiffs,

CASE NO. C17-0784-JCC
ORDER

v.

11

AXIS SURPLUS INSURANCE
COMPANY, et al.,

12
13

Defendants.

14
15

This matter comes before the Court on Defendant Axis Surplus Insurance Company’s

16
17
18
19
20
21
22
23
24
25
26

(“Axis”) motion to dismiss (Dkt. No. 13) and motion for a protective order (Dkt. No. 33).
Having thoroughly considered the parties’ briefing and the relevant record, the Court finds oral
argument unnecessary and hereby DENIES Axis’ motions to dismiss (Dkt. No. 13) and for a
protective order (Dkt. No. 33) for the reasons explained herein.

I.

BACKGROUND
Plaintiffs are three related entities: Premier Harvest LLC, a Washington Limited Liability

Company; Premier Harvest LLC, an Alaskan Limited Liability Company; and Premier Harvest
Adak LLC, an Alaskan Limited Liability Company. (Dkt. No. 1-6 at 1–2.) They own and operate
a crab and fish processing facility in Adak, Alaska, one of the “most remote inhabited places on
earth.” (Id. at 3.) The facility was damaged by two separate windstorms during December 2015

ORDER
C17-0784-JCC
PAGE - 1

1

and a freeze event in January 2016. (Id. at 3–4.)

2

Defendant Axis is Plaintiffs’ insurer. (Id. at 2.) Plaintiffs purchased the policy through an

3

insurance broker in Seattle. (Id. at 3.) The policy covers property damage of up to $5 million per

4

occurrence, with no aggregate limit. (Id.) Axis engaged Defendant Cunningham Lindsey U.S.,

5

Inc. (“Cunningham”) to investigate Plaintiffs’ claims of loss resulting from the windstorms and

6

freeze event. (Id. at 2–4.)

7

Plaintiffs brought suit against Defendants in King County Superior Court in May 2017

8

(Dkt. No. 1), approximately sixteen months after the freeze event. They allege that even though

9

Cunningham representatives informally indicated to Plaintiffs that the value of their claims

10

exceeded $12 million, Axis has advanced only $3 million to date, has failed to reasonably

11

investigate Plaintiffs’ claims, and has failed to make a final coverage determination. (Dkt. No. 1-

12

6 at 3–4.) They further allege this is the result of Defendants’ bad faith and negligence, is a

13

breach of the policy, and violates various insurance and consumer protection statutes and

14

regulations. (Id. at 11–12.) Plaintiffs also allege that due to inadequate advances under the

15

policy, they have been unable to make the necessary repairs to secure or operate the facility,

16

thereby suffering additional physical damage and lost income. (Id. at 9.) Plaintiffs seek a

17

declaratory judgment that Defendants have breached the insurance policy, violated various

18

consumer protection and claim processing insurance regulations and statutes, and negligently

19

handled its claims. (Id. at 10.) Plaintiffs also seek damages and an injunction. (Id. at 14.)

20

Axis removed to this Court (Dkt. No. 1) and now moves to dismiss without prejudice

21

(Dkt. No. 13). 1 Axis asserts the action is not ripe because it has not completed its investigation

22

and has not denied the claim. (Id. at 8–9.) Axis also moves for a protective order staying further

23

discovery. (Dkt. No. 33.)

24
25
26

1

In the alternative, Axis moves to stay, pending additional efforts by Plaintiffs to support
their losses. (Dkt. No. 13 at 2, 6, 10). Axis provides no legal argument or authority supporting
this position. The Court will not consider it.
ORDER
C17-0784-JCC
PAGE - 2

1
2

II.

DISCUSSION
Axis does not cite a procedural basis for its motion to dismiss. The Court will treat it as a

3

motion brought under Federal Rule of Civil Procedure 12(b)(1). See St. Clair v. City of Chico,

4

880 F.2d 199, 201 (9th Cir. 1989) (treating a motion asserting lack of ripeness as a 12(b)(1)

5

motion). 2

6

A.

7

Axis asserts it is continuing to investigate Plaintiffs’ losses and, therefore, Plaintiffs’

Motion to Dismiss

8

claims are not yet ripe. (Dkt. No. 13 at 8.) It further asserts any delay in its investigation is the

9

result of Plaintiffs’ failure to timely fulfill their policy obligations. (Id. at 8–9.) On this basis, it

10

moves to dismiss. (Dkt. No. 13.) Plaintiffs assert they have provided supporting information to

11

Defendants but Defendants have been negligent and shown bad faith in continuing to seek

12

additional information. (Dkt. No. 18 at 7, 12, 16–18.) Plaintiffs also assert that Defendants have

13

had sufficient time to investigate the matter and are dragging their feet. (Id. at 10–13.)

14

Defendants, in asserting that Plaintiffs have not yet fulfilled their policy obligations,

15

primarily focus on two requirements: (1) inadequate proof of loss statements supporting funds

16

advanced to date and (2) the failure of Plaintiffs’ principals to submit to an examination of the

17

insured under oath. (Dkt. No. 13 at 6.) According to the insurance policy, Plaintiffs are to

18

provide a “signed sworn proof of loss containing the information we request to investigate the

19

claim” and must do so “within 60 days” of Axis’ request. (Dkt. No. 21-2 at 21.) Plaintiffs allege

20

they have met this obligation for the $3 million already advanced. (Dkt. No. 18 at 16–17.) Axis

21

asserted the original accounting to support the statements was insufficient. (Dkt. No. 23 at 3.) In

22

response, Plaintiffs provided a “lengthy narrative with supporting documents.” (Dkt. No. 18 at

23

7.) Axis again asserted the documentation was inadequate to support funds advanced to date.

24

(Dkt. No. 23 at 3.) In response, Plaintiffs provided spreadsheets, bank records, and receipts. (Id.)

25
2

26

The fact that Axis filed declarations in support of its motion does not convert it to one
seeking summary judgment. St. Clair, 880 F.2d at 201.
ORDER
C17-0784-JCC
PAGE - 3

1

Based on the information Plaintiffs provided, Axis determined that of the $3.8 million Plaintiffs

2

allegedly spent, only $1.36 million was adequately documented as relating to insurable losses.

3

(Id.) Also according to the policy, Axis “may examine any insured under oath.” (Dkt. No. 21-2 at

4

21.) At the time Axis filed its motion to dismiss, it had sought to examine Plaintiffs’ principal

5

Dustin Anderson. (Dkt. No. 23 at 4–5.) But it had been unable to do so due to Anderson’s

6

medical condition. (Id.) On this basis, Axis claimed dismissal was warranted. (Dkt. No. 13 at 6.)

7

Axis has since examined Anderson. (Dkt. No. 31.) It now asserts the examination was inadequate

8

and that further examination is required. (Id. at 3.) Otherwise, it “cannot in good faith make a

9

final determination of its further payment obligations.” (Id.) Plaintiffs assert they fully complied

10

with the examination obligation, no further examination is warranted, and that Axis is using the

11

requirement to “further delay adjustment of the claim.” (Id.)

12
13

1.

Declaratory Judgment

Plaintiffs seek a declaratory judgment that Defendants have demonstrated bad faith and

14

negligence in failing to fully investigate their claim within a reasonable time and, as a result,

15

have breached the insurance policy and violated various consumer protection and insurance

16

regulations and statutes. (Dkt. No. 1-6 at 10.) Axis moves to dismiss on the basis that Plaintiffs’

17

claims are not yet ripe because it has not yet made “a final determination of what damage is or is

18

not covered by the policy or what further amounts, if any, are owed.” (Dkt. No. 13 at 9.)

19

To emphasize, Plaintiffs do not ask the Court for declaratory judgment on whether their

20

claimed damages are covered by their policy. This issue would not be ripe until such time as

21

Axis makes a coverage decision. But this is not the issue for which Plaintiffs seek declaratory

22

judgment. (Dkt. No. 1-6 at 10.) They seek declaratory judgment on whether Defendants have met

23

their duties in investigating their claims, both under the policy and under applicable state law.

24

(Id.) The Court may issue a declaratory judgment in the case of an “actual controversy within its

25

jurisdiction.” 28 U.S.C. § 2201(a). The key considerations are “the fitness of the issue for

26

judicial decision and the hardship to the parties of withholding court consideration.” Abbott
ORDER
C17-0784-JCC
PAGE - 4

1
2

Labs. v. Gardner, 387 U.S. 136, 149 (1967).
In considering fitness, the court asks whether further factual development is necessary to

3

resolve the case. See Nat’l Park Hosp. Ass’n v. Dep’t of Interior, 538 U.S. 803, 812 (2003).

4

Here, further factual development is not necessary to determine whether Defendants have met

5

their duties in investigating Plaintiffs’ losses. Plaintiffs losses arose in December 2015 and

6

January 2016. (Dkt. No. 1-6 at 3–4.) 21 months have elapsed since then. Throughout this time,

7

Plaintiffs have provided Defendants information and Defendants have attempted to investigate

8

Plaintiffs’ claims. 3 A sufficient amount of time has passed to make the Plaintiffs’ claims ripe.

9

Abbot Labs., 387 U.S. at 149.

10

In considering hardship, the Court examines the difficulty the parties will face if a

11

judicial decision is denied. See Toilet Goods Ass'n, Inc. v. Gardner, 387 U.S. 158, 164–65

12

(1967). Plaintiffs assert that “[Defendants’] actions have put the survival of [Plaintiffs’] business

13

operations in serious jeopardy.” (Dkt. No. 1-6 at 9.) This is a sufficient hardship to make the

14

Plaintiffs’ claims ripe. Abbot Labs, 387 U.S. at 149.

15
16

On this basis, the Court finds Plaintiffs’ declaratory judgment action is a controversy ripe
for review.

17
18

2.

Other Causes of Action

Plaintiffs also seek damages resulting from the following: Defendants’ negligence;

19

Defendants’ breach of contract and breach of the duty of good faith and fair dealing; and

20

Defendants’ violations of the Washington Consumer Protection Act (“WCPA”), Revised Code of

21

Washington § 19.86, and the Washington Insurance Fair Conduct Act (“WIFCA”), Revised

22
23
24
25
26

3

That being said, many facts are disputed. (See Dkt. Nos. 1-6, 13, 18, 23) (disputed facts
include the sufficiency of Plaintiff’s documentation for the $3 million advanced, the sufficiency
of the examination of Plaintiffs’ principals, the level of Plaintiffs’ cooperation throughout
Defendants’ investigation, and Defendants’ competency and diligence in investigating Plaintiffs’
losses).
ORDER
C17-0784-JCC
PAGE - 5

1

Code of Washington § 48.30. 4 (Id. at 10–12.) Plaintiffs also ask the Court to enjoin Defendants

2

from further acts in violation of WCPA and WIFCA and to require Defendants to “live up to

3

their legal obligations to insureds.” (Id. at 13.)

4

The standard for assessing ripeness for the claims described above is similar to that for

5

declaratory judgment. See Principal Life Ins. Co. v. Robinson, 394 F.3d 665, 669 (9th Cir.2005)

6

(“[T]he appropriate standard for determining ripeness of private party contract disputes is the

7

traditional ripeness standard, namely, whether ‘there is a substantial controversy, between parties

8

having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a

9

declaratory judgment.”); see also Coventry Assoc’s v. Am. States Ins. Co., 961 P.2d 933, 936–37

10

(Wash.1998) (“[A]n insured may maintain an action against its insurer for bad faith investigation

11

of the insured's claim and violation of the CPA regardless of whether the insurer was ultimately

12

correct in determining coverage did not exist.”). Therefore, Plaintiffs’ other claims also survive

13

Axis’ motion to dismiss.

14

For the reasons stated herein, the Court DENIES Axis’ motion to dismiss.

15

B.

16

In light of its pending motion to dismiss, Axis moves for a protective order staying all

Motion for Protective Order

17

discovery in the matter. (Dkt. No. 33 at 3). In light of the Court’s ruling above on Axis’ motion

18

to dismiss, see supra Part II.A., the Court DENIES Axis’ motion for a protective order as moot

19

(Dkt. No. 33).

20

III.

21

CONCLUSION
For the foregoing reasons, Axis’ motions to dismiss (Dkt. No. 13) and for a protective

22
4

23
24
25
26

In the alternative, Plaintiffs allege violations under Alaska law. (Dkt. No. 1-6 at 13.)
This Court, sitting in diversity, follows Washington’s conflict of law rules. Patton v. Cox, 276
F.3d 493, 495 (9th Cir. 2001). There is no conflict between the laws of Alaska and Washington
for Plaintiffs’ claims. This is undisputed. (See Dkt. Nos. 35–37) (parties’ briefing on choice of
law). Therefore, Washington law applies. See Erwin v. Cotter Health Centers, 161 Wn.2d 676,
692 (2007) (Washington law applies unless there is an actual conflict between Washington law
and the laws or interests of another state).
ORDER
C17-0784-JCC
PAGE - 6

1
2

order (Dkt. No. 33) are DENIED.
DATED this 12th day of October 2017.

A

3
4
5

John C. Coughenour
UNITED STATES DISTRICT JUDGE

6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
ORDER
C17-0784-JCC
PAGE - 7