|N THE COURT OF APPEALS OF THE STATE OF WASH|NGTON
ZUR|CH AMER|CAN iNSURANCE
COMPANY, a foreign insurance
company1
Respondent/Cross-Appei|ant,
V.
!_EDCOR !NDUSTR|ES (USA) |NC., a
Washington corporation,
ADIV||RAL WAY, LLC, a Washington
iimited iiabi|ity company, and SQ[, iNC.,
a Washington corporation
Appei|ants/Cross-Respondents.
LEDCOR |NDUSTREES (USA) INC., a
Wash§ngton corporation,
Appe||ants,
v.
AMER!CAN iNTERNATiONAL
SPEC|ALTY L|NES iNSURANCE
COJVIPANY, INC., a foreign insurance
company; CAIV|BREDGE |NTEGRATED
SERVICES GROUP, |NC., a foreign
corporation; LIBERT¥ !NSURANCE
UNDERVVR|TERS, |NC., a foreign
insurance company; AEU
NO` 76490-0~¥
D|V|SEON ONE
UNPUBL|SHED OP|N!ON
FELED: December 10, 20?8
NO. 76490-0~|/2
COMMERC|AL li\ESUFiANCE
CO|V|PANY OF CANADA, a foreign
insurance company; LEX|NGTON
|NSURANCE COMPANY, a foreign
insurance company; i_lBERTY
SUFlPLUS INSURANCE
CORPOF{AT|ON, a foreign insurance
company; HARTFORD PROPERTY
ANE) CASUALTY COMPANY, a foreign
insurance company; and
CONT|NENTAL WESTERN
iNSUFiANCE COMPAN¥, a foreign
insurance company,
Third-Party Defendants,
VlFiG|NlA SURETY CO|V!PANY, ENC., a
foreign insurance company;
TRANSPORTATJON lNSUFiANCE
COMPANY, a foreign insurance
company; TRANSCONT|NENTAL
lNSUFiANCE COMPANY, a foreign
insurance company; NORTH PAC£F|C
lNSUFiANCl-E CO|V|PANY, a foreign
insurance company; and FlFiST
MEF{CUFtY lNSUFiANCE COMPANY, a
foreign insurance company,
Respcndents.
i\/|ANN, A.C.J. _ This is one of two closely connected insurance coverage appeals
arising out of the construction of “The Adrnirai,” a mixed use condominium building in
West Seattie.1 The appeilant in this case was the general contractoi, Ledcor industries
(USA), Enc. (i_edcor). The building owner and deveioper, Adrniral Way LLC (Adrnira|
Way), contracted with Ledcor for construction of the buiiding. Ledcor in turn contracted
with several subcontractors including The Painters, |nc. (The Painters) and SO|, lnc.
(soi).
1 See Admiral Wav. LLC v. Zurich American |ns. Co.. No. 76405-5-i (Wash. Ct. App. Dec. 10,
2018) (unpub|ished).
_2_
No. 76490~0-|/3
After the Adrnirai Way Condominiurn Owners’ Association (COA) sued Adrniral
Way and Ledcor in 2007 for construction defects, Ledcor tendered the claim to its
insurers and its subcontractors insurers. After responding and defending against tne
COA’s claims under a reservation of rights, Zuricn Arnerican |nsurance Company
(Zurich) filed a declaratory judgment action against Ledcor ciaiming it did not owe
coverage under its poiicies. Ledcor responded by fiiing counterclaims and third-party
causes against multipte insurers claiming bad faith and vioiations of the Consumer
Protection Act (CPA)?, and the insurance Fair Conduct Act (iFCA)3.
Ledcor appeals the trial court’s decision granting summary judgment and
dismissing Zurich, Virginia Surety Cornpany (VSC), First Nlercury insurance Cornpany
(i`-`NilC), North Pacific insurance Company (i\iorth Pacific), and Transportation insurance
Company (Transportation). We reverse dismissal of Ledcor’s claims against VSC and
Transportation. We affirm dismissal of Zurich, FiVi|C, and North Pacific.
_E_é\£§
Admirai Way is the owner and deveioper of “The Adrniral” a mixed use, four~story
building in West Seattie with street level retaii, 60 condominiums and an underground
parking garage. On Apri| 3, 2001 , Admiral Way and Ledcor entered into a construction
contract for construction of the building. Ledcor Was the general contractor. Ledcor in
turn contracted with various specialty subcontractors Fie|evant to this appeal, Ledcor
subcontracted with SQl to instaii the originai roof, and in 2005, Ledcor again
subcontracted with SO| to conduct substantial roofing repair. Ledcor subcontracted with
2 Ch. 19.86 RCW
3 FiCW 48.30.010~.015
NO. 76490-0-|/4
The Painters to provide labor, materiais, and equipment for a “Gacoflex” waterproofing
system on the baiconies and courtyards of The Adrniral.
The contract between Ledcor and Adrnira| Way required Ledcor to obtain
commercial general iiability (CGL) insurance naming Adrnirai Way as an additional
insured The contract between Ledcor and its subcontractors required that the
subcontractors each obtain CGi_ insurance naming Ledcor as an additional insured
Ledcor purchased a CGL insurance poiicy from VSC for the policy period of
December 1, 2003 through December i, 2004. Ledcor also purchased two consecutive
annuai CGL policies from Zurich, for the policy periods from December 1, 2005 through
December 1, 2007. 801 purchased three consecutive annual CGi_ policies frorn
Transportation covering the period from Nlay 1, 2000 through |Vtay 1, 2003. SQi also
purchased CGL policies from FiV|iC for the policy period of May 1, 2006 to lViay 'i, 2008.
`i'he Painters purchased CGL poiicies from North Pacific for the period cf December 26,
2001 to December 26, 2002.
Construction of The Admiral began in 2001. The City of Seatt|e issued a
certificate of occupancy in March 2003. `i“he sate of condominiums began in Aprii 2013.
After a contract dispute, on February 10, 2004, Ledcor and Admira| Way executed a
contract addendum that resoived their remaining disputes about payment and
performance of Ledcor's work. The parties agreed in the addendum that the project
was complete other than specific items in an attached punch list that Were to be
completed by February 20, 2004.
in 2001, Admiral Way retained i\/lorrison i-Iershfie|d (l\/iorrison) as a building
envelope consuitant to provide recommendations to the project architect on baicony and
NO. 76490-0-|/ 5
wall interface detaiis. Ledcor also retained Morrison and received a report from the firm
in December 2002. l\/lorrison concluded there were significant areas where there was
“inappropriate design, and to a lesser degree inappropriate construction that in our
opinion makes the building high risk for premature building envelope faiiure." in i\/iarch
2003, Morrison recommended substantial repairs to the building’s brick veneer and pre-
cast column caps. i\/lorrison believed that if the recommended work was not done, the
walls would “remain susceptible to water entry” that “wouid lead to deterioration ot the
sheathing and corrosion of the framing,” and “result in a compromise of the structural
integrity." i\/iorrison further reported, “[wje are of the opinion that if not addressjedj at
this time, these as-bui|t detaits wii| require remediation within the next five years.”
i\/lorrison expressed similar concerns with other recommended work.
On February 28, 2007, the COA sent Admira| Way a notice of construction defect
claim alleging that the buiiding, or components of the buiiding, Were defectively
designed and/or constructed, resulting in water intrusion that affected residential units,
commercial spaces, and common areas throughout the project. `i'his notice was
followed by the fiiing of a complaint in the King County Superior Court. in its complaint,
the COA alleged that damage to the building began after the compietion ot construction:
As a result of Deciarant’s acts and omissions, property damage to
the Condominium has occurred to that pari of real property on which
contractors or subcontractors working on Declarant’s behalf have
completed their operations Such property damage has also occurred to
that part of real property that rnust be restored, repaired or replaced
because of the work of others performed on Declarant’s behaif. The
property damage is continuous and ongoing throughout the Condominium.
Damage rnay have commenced at or shortly after the completion of each
building or element of infrastructure, and may be continuing to the present
No. 76490-G-i/ 6
in response to the COA compiaint Admirai Way fiied a third-party complaint
against Ledcor alieging Ledcor and its subcontractors were responsibie for the defective
work.
Ledcor initiaiiy tendered defense of the action to its own insurers Zu rich and
VSC. Zurich accepted Ledcor's tender and assigned counsel. Zurich defended Ledcor
in the underlying case, from 2007 through settlement in duly 2009, while expressiy
reserving its right to contest coverage under a reservation of rights.
Ledcor also tendered the action to FlViiC, `t'ransportation, and i\iorth Pacific, for
defense and indemnity for damages arising from SQi's and The Painters' work. Fivi|C
accepted SOl’s tender under a reservation of rights and contributed to SQl's defense
FM|C did not defend nor indemnify Ledcor. Transportation and North Pacific denied
coverage VSC originally denied coverage, then agreed to defend Ledcor under a
reservation of rights just as the final settlement was being reached VSC did not pay
any defense costs and did not indemnify.
Zurich fiied the underlying action in iViarch 2009 seeking declaratory judgment of
its obligations to defend and indemnify its named insured, Ledcor, and the additional
insured Admirai Way. Ledcor filed counterclaims for declaratory relief, insurance bad
taith, and vioiations of the CPA and the lFCA. i_edcor’s counterclaims inciuded third
parties FMIC, 'i`ransportation, North Paciiic, and VSC, as well as muitiple other insurers
l\/leanwhiie, the COA, Admiral Way, and l_edcor settied their dispute over the
condominium damage on duty 28, 2009. The COA’s claims against Admiral Way and
i_edcor settled for $4,700,000. The settiement was contingent upon AiG, another of
NO. 76490-0-|/7
Ledcor’s insurers funding $2,550,000. Ledcor agreed to pay $150,000, and iviarc Gartin
on behaif of Admiral Way agreed to pay $2,000,000.
The underlying declaratory judgment action proceeded with discovery and
motions in June 2010, the trial court granted Zurich’s motions for partial summary
judgment on (i) coverage under the poiicy in effect between December t, 2006 and
December 1, 2007 and (2) dismissing Ledcor’s counterclaims for insurance bad faith,
CF’A, and lFCA violations The trial court also denied Ledcor’s motion for partial
summary judgment against Zurich for insurance bad faith and CPA violations At the
same time, the triat court granted VSC’s motion for summary judgment and dismissed
Ledcor’s ciaims against VSC.
in l\/iarch 2011, the triai court dismissed Ledcor’s remaining counterclaims
against Zurich, concluding that Zurich had no duty to defend or indemnify t.edcor with
respect to the COA’s construction defect claims
in Apri| 201 t, the trial court granted Fi\/iiC’s motion for summary judgment
conciuding i_edcor Was not entitled to coverage under the poiicy issued by FivliC to SQ!
as a matter of law.
in duty 201i, the trial court granted North Pacific’s motion for summary judgment
and dismissed Ledcor’s third party claims related to its poiicy issued to The Painters
in February 2014, the trial court granted Transportation’s motion for partial
summary judgment and dismissed Ledcor’s breach of contract claims for policies issued
to SQI.
in a separate action, Ledcor sued its subcontractors Through a settiement
between Ledcor and SQi, Ledcor took assignment of SOl’s direct claims against Fl\/iiC.
NO. 76490-0-|/ 8
On October 31, 2016, the trial court granted FM|C’s motion for summary judgment
agreeing that FlVllC did not have an obligation to cover SOi‘s defense against Ledcor’s
claim and that the policy FivltC issued to SQi was not applicabie, and even if it were, the
continuous or progressive injury or damage exclusion barred recovery.
Ledcor appeals
ANALYSlS
We review summary iudgrnent orders de novo, engaging in the same inquiry as
the trial court. l