W. Am. Ins. Co. v. Del Ray Props., Inc.

671 F.Supp.3d 1194

WEST AMERICAN INSURANCE COMPANY et al., Plaintiffs, v. DEL RAY PROPERTIES INC. et al., Defendants.

CASE NO. 3:22-cv-05563-LK

United States District Court, W.D. Washington, at Tacoma

Signed May 1, 2023

Daniel Rhim, Michael A. Guadagno, Bullivant Houser Bailey, Seattle, WA, for Plaintiffs.

ORDER GRANTING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT

Barbara Jacobs Rothstein, United States District Court Judge

Plaintiffs West American Insurance Company ("West American") and North Pacific Insurance Company ("North Pacific") seek a judgment permitting them to withdraw their legal defense of Defendant Del Ray Properties, Inc. ("Del Ray") in a pending lawsuit in Cowlitz County Superior Court. Before the Court is Plaintiffs' Motion for Summary Judgment. Dkt. No. 3. Defendants Del Ray, the City of Longview, and Sharon Doerr have not appeared or defended in this action. For the reasons stated below, Plaintiffs' motion is GRANTED.¹

I. BACKGROUND

A. Underlying State Court Lawsuit

Del Ray is a Washington corporation that operates two mobile home parks in the city of Longview. Dkt. No. 1 at 2-3. In August 2016, Longview sued Del Ray in Cowlitz County Superior Court for failing to pay its utility bills. Dkt. No. 4-1; see also Dkt. No. 1-5 (Longview's amended complaint). In September 2017, the Superior Court consolidated Longview's lawsuit with two other related actions brought by Del Ray residents—Sharon Doerr and Randall Beck—under Cowlitz County Superior Court Cause No. 17-2-00870-08. Dkt. No. 4-4; see also Dkt. No. 1-6 (Doerr complaint); Dkt. No. 1-7 (Beck complaint). The Court refrains from reciting the entire history of the underlying state court proceedings, see Dkt. No. 1 at 3-10; Dkt. No. 3 at 4-9, but briefly summarizes a few additional details relevant to Plaintiffs' motion.

In its amended complaint, Longview alleges that Del Ray owes it approximately $50,000 for unpaid utility bills at Del Ray's two mobile home park locations. Dkt. No. 1-5 at 3. Longview claims that it "made a demand for payment of [Del Ray's] delinquent utility charges" but Del Ray "failed to make payment for past or current utility service." Id. As a result, Longview seeks to recover damages in the amount it is owed plus pre- and post-judgment interest and attorney fees. Id. After Longview initiated its action, Del Ray residents Sharon Doerr and Randall Beck filed suit, alleging that Del Ray "knowingly and willfully failed to pay the City of Longview utility bills," placing them at risk of Longview turning off the water and discontinuing garbage service to Del Ray residents. Dkt. No. 1-6 at 2, 4; Dkt. No. 1-7 at 2-3, 5-6. Accordingly, they request injunctive relief and damages based on, among other things, violations of Washington's Manufactured/Mobile Home Landlord-Tenant and Consumer Protection Acts, Wash. Rev. Code. §§ 59.20.070(6), 19.86.020, breach of contract, and infliction of emotional distress. Dkt. No. 1-6 at 5-8; Dkt. No. 1-7 at 7-11.² On February 9, 2021, the Superior Court dismissed Beck's claims with prejudice. Dkt. No. 14-1. Based on the available records, however, Longview and Doerr's claims remain pending. Dkt. No. 4-11.

On January 30, 2018, January 23, 2019, and July 12, 2022, Plaintiffs issued reservation of rights letters to Del Ray agreeing to defend it in the consolidated state court action, but reserving their right to disclaim insurance coverage. Dkt. Nos. 5-3-5-5; see also Dkt. No. 5 at 2.

B. Del Ray's Insurance Policies

This case centers on two insurance policies issued to Del Ray: (1) West American's Commercial General Liability Policy No. BKW (17) 57 42 82 52, for the policy period beginning October 25, 2016 and ending on October 25, 2017 ("General Liability Policy"); and (2) North Pacific's Businessowners Policy No. BOP 12-62-60, for the policy period beginning October 25, 2015 and ending on October 25, 2016, ("Businessowners Policy"). Dkt. No. 3 at 10, 15; see Dkt. No. 5-1 (copy of General Liability Policy); Dkt. No. 5-2 (copy of Businessowners Policy).

1. West American's General Liability Policy

West American's General Liability Policy provides that it will defend Del Ray in suits seeking "damages because of 'bodily injury' or 'property damage' " caused by an "occurrence" and unknown prior to the policy period. Dkt. No. 5-1 at 61. "Bodily injury" is defined as "physical injury, sickness or disease sustained by a person," including "mental anguish, mental injury, shock, fright or death that results from such physical injury, sickness or disease." Id. at 99. "Property damage" is defined as "[p]hysical injury to tangible property, including all resulting loss of use of that property," or "[l]oss of use of tangible property that is not physically injured." Id. at 76-77. And an "occurrence" means "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Id. at 76. The policy also provides coverage for damages because of "personal and advertising injury," which includes "[t]he wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies[.]" Id. at 66, 76.

Importantly, the policy contains several exclusions. It excludes coverage for bodily injury or property damage "expected or intended from the standpoint of the insured." Id. at 100. It also does not apply to personal and advertising injuries "caused by or at the direction of the insured with the knowledge that the act would violate the rights of another and would inflict [such injury]," knowingly false publications, breach of contract, and for such injury arising out of the failure of services "to conform with any statement of quality or performance made" through advertisement. Id. at 67. The policy further excludes " '[p]roperty damage' to 'impaired property' or property that has not been physically injured, arising out of . . . [a] delay or failure by [the insured] or anyone acting on [its] behalf to perform a contract or agreement in accordance with its terms." Id. at 65.

2. North Pacific's Businessowners Policy

North American's Businessowners Policy is "organized somewhat differently," but "contains substantively identical coverages and exclusion." Dkt. No. 3 at 15. The policy covers "those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury', 'property damage' or 'personal and advertising injury' to which this insurance applies." Dkt. No. 5-2 at 41. Like the General Liability Policy, the Businessowners Policy is limited to bodily injury or property damages "caused by an 'occurrence' " and unknown prior to the policy period. Id. at 41-42. "Bodily injury" is defined by the policy as "bodily injury, sickness or disease sustained by a person[.]" Id. at 52. "Property damage" is defined as "[p]hysical injury to tangible property, including all resulting loss of use of that property," or "[l]oss of use of tangible property that is not physically injured." Id. at 54. "Occurrence" means "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Id. And "[p]ersonal and advertising injury," is defined as "injury, including consequential 'bodily injury', arising out of" certain offenses, including "[t]he wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies[.]" Id. As for exclusions, the Businessowners Policy includes the same material exclusions as the General Liability Policy. See id. at 43, 47.

C. Plaintiffs' Declaratory Judgment Action

On August 3, 2022, Plaintiffs initiated this lawsuit seeking a declaratory judgment that, based on the claims and damages asserted in the underlying state court action, no liability coverage applies to Del Ray. Dkt. No. 1 at 18-19. The same day, Plaintiffs moved for summary judgment. Dkt. No. 3. Plaintiffs effectuated service on Del Ray, Longview, and Doerr, but no Defendant has appeared or defended in this matter. Dkt. Nos. 12, 15-16. Accordingly, upon Plaintiffs' motion, Dkt. No. 17, the Clerk of Court entered default against Defendants, Dkt. No. 19.³

II. DISCUSSION

A. Jurisdiction

This Court has subject matter jurisdiction under 28 U.S.C. § 1332(a) because there is complete diversity of citizenship and the amount in controversy exceeds $75,000. See Dkt. No. 1 at 1-2; Dkt. No. 22 at 2.⁴ Furthermore, the Court finds that this case presents an "actual case or controversy" under the Declaratory Judgments Act, 28 U.S.C. § 2201, and that the discretionary exercise of jurisdiction is warranted. See Am. States Ins. Co. v. Kearns, 15 F.3d 142, 143-45 (9th Cir. 1994).

The "philosophic touchstone" for district courts when determining whether to exercise discretion to retain jurisdiction over a declaratory judgment action are the factors outlined by the Supreme Court in Brillhart v. Excess Ins. Co., 316 U.S. 491, 62 S.Ct. 1173, 86 L.Ed. 1620 (1942). Am. Cas. Co. of Reading, Pennsylvania v. Krieger, 181 F.3d 1113, 1118 (9th Cir. 1999) (quotation marks omitted); accord Argonaut Ins. Co. v. St. Francis Med. Ctr., 17 F.4th 1276, 1280, 1284 (9th Cir. 2021). As a general rule, Brillhart directs that the court should avoid needless determinations of state law issues, discourage litigants from filing declaratory actions as a means of forum shopping, and avoid duplicative litigation. Gov't Emps. Ins. Co. v. Dizol, 133 F.3d 1220, 1225 (9th Cir. 1998) (en banc). In addition, "[i]f there are parallel state proceedings involving the same issues and parties pending at the time the federal declaratory action is filed, there is a presumption that the entire suit should be heard in state court." Id.; see also id. at 1225 n.5 (noting that the Brillhart factors are "not exhaustive," and listing additional consideration such as whether the declaratory action (1) "will settle all aspects of the controversy;" (2) "will serve a useful purpose in...