Montler v. Belfor U.S. Grp.

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MARIANNE MONTLER, an individual; LIAM HOLBROOK, a minor, by and through his Guardian ad Litem, MARIANNE MONTLER; and MADELEINE HOLBROOK, a minor, by and through her Guardian ad Litem, MARIANNE MONTLER, Respondents, v. BELFOR USA GROUP, INC.; FIRST AMERICAN PROPERTY & CASUALTY INSURANCE CO.; CHINOOK RESTORATION, INC., dba PAUL DAVIS RESTORATION; HARTFORD FIRE INSURANCE COMPANY, Appellants.

No. 39497-2-III

Court of Appeals of Washington, Division 3

August 31, 2023

UNPUBLISHED OPINION

STAAB J.

Shortly after Marianne Montler purchased her home, she discovered mold on the main floor and submitted a claim to her insurer, First American Property &Casualty Insurance Co. (First American). First American denied the claim after concluding that the damages pre-dated Montler's homeowner's "Policy." Approximately two years later the upstairs bathroom overflowed (2017 flood). First American agreed that damages caused by the 2017 flood were covered under the Policy. When repair work started, the contractor found mold damage on the home's main floor. First American took the position that the mold on the first floor was not caused by the 2017 flood and was not covered by the policy. After First American refused to participate in appraisal, citing disagreement on the cause and coverage of the mold damage Montler sued, asserting several claims including breach of contract and breach of the Insurance Fair Conduct Act (IFCA) chapter 48.30 RCW.

Following an appraisal and a bench trial, the court entered a judgment primarily in First American's favor. The court found that Montler had proved breach of contract but failed to demonstrate any damages. The court denied attorney fees for both parties, but did impose CR 37 discovery sanctions against Montler and her attorney. On reconsideration, the court awarded Montler some of her attorney fees on her breach of contract claims.

First American appealed, and Montler cross-appealed. First American raises four issues on appeal and contends the superior court erred by: (i) finding it breached the policy, (ii) awarding Montler attorney fees pursuant to Olympic Steamship Co. v. Centennial Insurance Co., 117 Wn.2d 37, 53, 811 P.2d 673 (1991), (iii) concluding First American failed to demonstrate material misrepresentation by Montler, and (iv) denying First American's motion for CR 11 sanctions.

Montler cross-appeals, raising three primary issues with several sub-issues, contending the superior court erred by: (i) determining the mold damage was not attributable to the 2017 flood based on a number of erroneous factual findings and failing to enforce the appraisal awards, (ii) failing to give proper effect to the pre-trial rulings of Judge Veljacic with respect to Montler's claims for breach of contract and breach of IFCA, and failing to award Montler any damages, and (iii) failing to award Montler all of her attorney fees. Montler further contends she is entitled to attorney fees on appeal.

We affirm the trial court's ruling with respect to the issues raised by Montler, deny or decline to address some of the issues raised by First American, but reverse the trial court's award of attorney fees to Montler under Olympic Steamship. Finally, we deny Montler's request for attorney fees on appeal.

BACKGROUND

A. DAMAGES TO MONTLER'S HOME

Marianne Montler purchased a home in Camas, Washington, and a homeowner's policy from First American with an effective date of June 17, 2015. At the time she purchased the home, there was evidence of past water damage and mold on the first floor.

Within weeks of purchasing the home, Montler became aware of mold in the downstairs bathroom of the home and submitted a claim to First American for water and mold damage. First American assigned American Leak Detection and American Environmental Group to inspect the bathroom. American Leak Detection inspected the downstairs bathroom and reported that it had been improperly repaired or remodeled, and that the improper repair resulted in damage to the bathroom. American Leak Detection reported an elevated moisture level near the toilet, but found no moisture in the subflooring, no standing water in the crawl space, no mold growth, and no active plumbing leaks.

American Environmental Group also inspected the home's downstairs bathroom. Although the inspection found evidence of a prior water leak and water damage, American Environmental Group did not find any evidence of mold growth in the downstairs bathroom, which was the only room it inspected.^[1] First American denied the 2015 claim as the damages pre-dated the Policy, noting that the previous tenants of the home had complained of mold in 2014 and there was no evidence the home was professionally remediated prior to Montler moving into the home in 2015.

Montler also contacted the prior owners of the home. The parties hired Mold Investigations, LLC, who conducted an inspection in July 2015 and identified past moisture intrusion and the presence of mold in air samples. It is not clear what work, if any, was done on the home after these inspections.

Two years later, "on October 17, 2017, the upstairs master bathroom toilet overflowed. The water flooded the bathroom floor and into the master bedroom," but "did not flow into the upstairs hallway or inside the master bedroom closet. Some of the water flowed through the ceiling to the entryway" on the main level of the home. Clerk's Papers (CP) at 2339.

Montler reported the 2017 flood to First American, who retained Josh Peters as its independent field adjuster. First American again hired American Leak Detection to investigate. American Leak Detection found high moisture readings on the engineered wood floor and in the coat closet on the main level, as well as in the master bedroom and bathroom where the toilet overflowed, but did not find elevated readings or anomalies in the living room ceilings or drywall. "First American also hired Belfor [USA Group, Inc. (Belfor)] to perform emergency remediation work," which included "removing all impacted sheetrock, insulation, cabinets, fixtures, flooring and carpet. Belfor then set up" and operated "drying equipment until its testing confirmed the impacted area was dry." CP at 2339.

Belfor provided the parties an estimate for repairing the home of $20,788.10. "On November 6, 2017, First American paid Montler for Belfor's remediation work." CP at 2339. Based on the Belfor estimate, First American issued payments to Montler and her home mortgage bank on November 13 for $18,684.79 to cover the estimated cost of repairs.

"On March 6, 2018, Montler retained Paul Davis [Restoration] to repair the home. First American and Montler agreed on the scope and cost of repairs." CP at 2340. "Davis discovered evidence of prior water damage and some possible mold near the kitchen and downstairs bathroom" after removing the living room flooring. CP at 2340. The bamboo flooring on the first floor had been installed by the prior owners. "Davis offered to clean the area and continue with the repairs," but "Montler refused." CP at 2340. Montler contacted First American to request a mold inspection and stated that she and her family needed to move into a hotel." CP at 2340. "First American agreed to pay for the hotel until it could determine the cause of the mold." CP at 2340.

In May 2018, American Leak Detection performed another inspection of the home. The May 2018 report indicated that repairs of the damage from the 2017 flood had uncovered prior damage. Specifically, the report noted, "[a] full inspection of the home's ground floor found multiple signs of previous water damage most likely from both upstairs bathrooms and kitchen," and "[t]he damage in the kitchen is from a previous leak near/at the kitchen sink area. No leak is present now." CP at 963-64.

"First American retained Nancy Lee [ ], a Certified Industrial Hygienist for Rimkus Consulting Group, to determine the location and source of the water and mold spores. Ms. Lee inspected the home on May 18, 2018." CP at 2340. Her report, dated June 6, (hygienist report) "indicated that the total airborne concentration of fungal spores [in the home] was at least 1.6 times higher outdoors than indoors" and that "indoor levels of [certain types of] fungal spores were above outdoor levels at the time of sampling." Ex. 150 at 5. She concluded that these results suggested "the presence of active and/or historical fungal growth within the residence likely related to the mold growth observed within the walls of bathroom 1 as well as throughout the first-floor underlayment." Ex. 150 at 5. Lee reported "multiple areas of prior water intrusion and evidence of inactive mold growth." CP at 2340. She concluded there were four possible moisture/water sources: one being the 2017 flood and the other three sources pre-dating the effective date of the policy. She also identified six areas in the home with indicators of water and/or mold damage. Only one of the six observations of water and/or mold identify the 2017 flood as the source of damage, with three moisture sources pertaining to the dining room and family room attributed, designated as unknown.

On May 22, "Montler retained Adam Blagg as her appraiser" and he "developed an estimate of costs to repair the home and an estimate to remediate/replace the contents." CP at 2341. He valued the "property damage to the Home at $187,247.79 and the damage to the contents of the Home at $138,753.10 for replacement cost value and $118,552.91 as actual cash value." CP at 2341. He estimated $31,557.62 in repairs to the upper level, and $110,628.38 to the main level. Although Blagg's estimate did not indicate a cause of the damages, the court found that he "should have known through his inspection of the Home and...