Opinion
CASE NO. 3:21-cv-5579-BHS
2022-04-25
OHIO SECURITY INSURANCE COMPANY, et al., Plaintiffs, v. GARAGE PLUS STORAGE AVIATION LLC, et al., Defendants.
Jared Kiess, Michael A. Guadagno, Bullivant Houser Bailey, Seattle, WA, for Plaintiffs. Alexander G. Dietz, Christopher Eric Love, Kevin M. Hastings, Darrell L. Cochran, Pfau Cochran Vertetis Amala PLLC, Tacoma, WA, for Defendants Garage Plus Storage Aviation LLC, Mountain Crest Homes LLC. Christopher Eric Love, Kevin M. Hastings, Darrell L. Cochran, Pfau Cochran Vertetis Amala PLLC, Tacoma, WA, for Defendant Danny Simon. Christopher Eric Love, Darrell L. Cochran, Kevin M. Hastings, Patrick Antonio Brown, Pfau Cochran Vertetis Amala PLLC, Tacoma, WA, for Defendant Alan E. Rainwater. Robert C. Wilke, Sal Mungia, Gordon Thomas Honeywell LLP, Tacoma, WA, for Defendant Leah Marie Miller.
Jared Kiess, Michael A. Guadagno, Bullivant Houser Bailey, Seattle, WA, for Plaintiffs.
Alexander G. Dietz, Christopher Eric Love, Kevin M. Hastings, Darrell L. Cochran, Pfau Cochran Vertetis Amala PLLC, Tacoma, WA, for Defendants Garage Plus Storage Aviation LLC, Mountain Crest Homes LLC.
Christopher Eric Love, Kevin M. Hastings, Darrell L. Cochran, Pfau Cochran Vertetis Amala PLLC, Tacoma, WA, for Defendant Danny Simon.
Christopher Eric Love, Darrell L. Cochran, Kevin M. Hastings, Patrick Antonio Brown, Pfau Cochran Vertetis Amala PLLC, Tacoma, WA, for Defendant Alan E. Rainwater.
Robert C. Wilke, Sal Mungia, Gordon Thomas Honeywell LLP, Tacoma, WA, for Defendant Leah Marie Miller.
ORDER
BENJAMIN H. SETTLE, United States District Judge
This matter comes before the Court on Plaintiffs Ohio Security Insurance Company and Ohio Casualty Insurance Company's (collectively "Ohio") motion for summary judgment, Dkt. 14, motions to strike and dismiss Defendants’ affirmative defenses, Dkts. 25, 46, and motion for protective order, Dkt. 30, and Defendant Alan Rainwater's Rule 56(d) motion to continue, Dkt. 18. The Court has considered the briefing filed in support of and in opposition to the motions and the remainder of the file and hereby rules as follows. I. FACTUAL & PROCEDURAL BACKGROUND
Ohio commenced this declaratory judgment action in August 2021 involving a dispute as to liability insurance coverage for an underlying state court action, Alan Rainwater, et al. v. Marlene Perdue, et al. , Pierce County Case No. 18-2-12960-1 ("the Underlying Action"). Dkt. 1.
The Underlying Action arises out of the wrongful death of Susan Rainwater. See Dkt. 1-3. On August 9, 2018, Ms. Rainwater was riding her bicycle on State Route 7 in Eatonville, Washington when she was struck by a 1986 Chevrolet K-10 pickup truck driven by Jeremy Simon. Dkt. 1, ¶ 20. Mrs. Rainwater died at the scene. Id. Defendant Alan Rainwater, Mrs. Rainwater's husband and personal representative of her estate, filed suit again Jeremy Simon and his father, Danny Simon, in the Underlying Action. Id. ¶ 21. Defendant Leah Marie Miller intervened as a plaintiff in the Underlying Action, and the Estate subsequently added Jeremey's mother, Marlene Perdue, Mountain Crest Homes LLC, and Garage Plus Storage Aviation LLC as defendants. Id.
The Court uses "Jeremy" and "Danny" to refer to Jeremy Simon and Danny Simon, respectively, and uses "the Estate" to refer to Mr. Rainwater for ease of reference and intends no disrespect.
The Fourth Amended Complaint in the Underlying Action alleged that the negligence of Jeremy, his parents, and the two companies owned by Danny, Mountain Crest and Garage Plus, caused or contributed to the August 9 accident. Id. ¶ 22; see also Dkt. 1-3. Specifically, the Fourth Amended Complaint alleged that Jeremy had disclosed to Danny that he was having drug problems, that Danny relayed that disclosure to Perdue, that Danny told Perdue that Jeremy could not drive the 1986 Chevrolet K-10 pickup truck until Jeremy completed drug treatment, and that Perdue did not keep the keys of the pickup truck from Jeremy despite knowing about his drug issues. Dkt. 1-3, ¶ 3.17. The Fourth Amended Complaint further alleged that Jeremy was employed by Mountain Crest and Garage Plus and that on August 9 he drove the pickup truck, owned by Danny, for the purposes of his employment. Id. ¶¶ 3.18, 6.4.
Garage Plus operated a storage facility in Spanaway, Washington and owned airplane hangars and real property used by Mountain Crest for its land development project. See Dkt. 15-5 at 8–9; Dkt. 1-3, ¶ 3.18. Ohio issued commercial package and excess policies to Garage Plus. Dkt. 1, ¶ 11. Ohio Security issued commercial package policy number BKS (19)57196541, which generally affords liability coverage for "those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ ... caused by an ‘occurrence.’ " Dkt. 1-1 at 57. This coverage is subject to various exclusions, one of which is the subject of this declaratory action. Exclusion 2.g provides, in relevant part, that the Policy does not apply to:
"Bodily injury" or "property damage" arising out of the ownership, maintenance, use or entrustment to others of any aircraft, "auto" or watercraft owned or operated by or rented or loaned to any insured. Use includes operation and "loading or unloading".
This exclusion applies even if the claims against any insured allege negligence or other wrongdoing in the supervision, hiring, employment, training or monitoring of others by that insured, if the "occurrence" which caused the "bodily injury" or "property damage" involved the ownership, maintenance, use
or entrustment to others of any aircraft, "auto" or watercraft that is owned or operated by or rented or loaned to any insured.
Id. at 60. An "auto" under the terms of the Ohio Security Policy means "[a] land motor vehicle, trailer or semitrailer designed for travel on public roads, including any attached machinery or equipment[.]" Id. at 70.
In addition to the named insured, Garage Plus, the Ohio Security Policy also extends insured status to other persons acting in certain capacity with respect to the named insured. See id. at 66–67. For a limited liability company like Garage Plus, the Policy provides that the company's "members are also insureds, but only with respect to the conduct of [the] business" and that "managers are insureds, but only with respect to their duties as [ ] managers." Id. at 66. The Policy further extends insured status to " ‘volunteer workers’ only while performing duties related to the conduct of [the] business" and " ‘employees’ ... but only for acts within the scope of their employment by [the business] or while performing duties related to the conduct of [the] business." Id. The Ohio Security Policy is subject to a $1,000,000 each occurrence liability limit. Dkt. 1, ¶ 15.
Ohio Casualty issued an Excess Liability Policy No. ESO (19)57196541 to Garage Plus. See Dkt. 1-2. The Ohio Casualty Policy provides an additional layer of coverage over and above the limits of the policy of the "first underlying insurance" but is subject to all the first underlying insurance policy's terms, conditions, definitions, and exclusions. Id. at 19. The Ohio Casualty Policy identifies the Ohio Security Policy as the "first underlying insurance" and is subject to liability of $2,000,000 each occurrence. Dkt. 1, ¶¶ 18–19.
Garage Plus tendered the Fourth Amended Complaint in the Underlying Action to Ohio for defense and indemnity on March 31, 2021. See Dkt. 16-4. Ohio asserts that it promptly investigated the allegations and evaluated coverage under the Policies. Dkt. 16, ¶ 8. Ohio concluded that the Policies did not afford coverage because it determined that Ms. Rainwater's injuries arose out of the "ownership, maintenance, use or entrustment to others of any ‘auto’ owned or operated by or rented or loaned to any insured" within the meaning of Exclusion 2.g. Dkt. 14 at 9 (alterations omitted); see also Dkt. 16-5. Ohio disclaimed any duty to defend or indemnify Garage Plus on April 6, 2021 and declined the Estate's settlement demand. See Dkts. 16-5, 16-6.
On July 27, 2021, Mountain Crest and Garage Plus entered into a Settlement Agreement, Assignment of Rights, Covenant Not to Execute, and Covenant Judgment with the Estate. See Dkt. 15-8 at 8–17. Mountain Crest and Garage Plus agreed to stipulate to a judgment against them in the Underlying Action for $12 million in exchange for a covenant that the Estate will not execute that judgment against either company. Id. at 13–14. Mountain Crest and Garage Plus additionally assigned to the Estate any and all of their rights against their respective insurance companies. Id. at 15.
Mountain Crest is insured by Nautilus Insurance Company, who has also brought a declaratory action regarding its obligations to provide insurance coverage in connection with the Underlying Action. See Nautilus Ins. Co. v. Rainwater, et al. , No. 21-cv-5558 (W.D. Wash.).
Ohio seeks a Court order pursuant to the Declaratory Judgments Act, 28 U.S.C. § 2201(a), declaring that Ohio had no duty to defend or indemnify in the Underlying Action. Dkt. 1 at 12. Ohio moves for summary judgment, arguing that the Policies do not afford coverage for the Estate's claims against Garage Plus. Dkt. 14. In response, the Estate seeks a Federal Rule of Civil Procedure 56(d) continuance of Ohio's summary judgment motion so that it can conduct discovery on its affirmative defenses of coverage by estoppel, unjust enrichment, and unclean hands. Dkt. 18. Ohio additionally moves to strike and dismiss the Estate's and Garage Plus, Mountain Crest, and Danny's affirmative defenses, Dkts. 25, 46, and for a protective order relating to discovery on Defendants’ affirmative defenses, Dkt. 30.
II. DISCUSSION
A. Motions to Strike or Motion to Dismiss
Defendants assert five affirmative defenses:
A. Plaintiff has failed to state a claim upon which relief can be granted.
B. Plaintiff has engaged in bad faith and as such, its claims are barred by the doctrines of estoppel, waiver and/or laches.
C. Plaintiff's bad faith has resulted in its unjust enrichment by collecting insurance premiums but failing to provide a defense or coverage for claims covered under its insurance policy.
D. Plaintiff's bad faith bars its claims under the doctrine of unclean hands.
E. Defendant reserves the right to amend affirmative defenses as new information becomes available.
Dkt. 17 at 7; see also Dkt. 34 at 7–8; Dkt. 35 at 7; Dkt. 36 at 7–8.
Ohio moves to strike and dismiss Defendants’ affirmative defenses, primarily arguing that their bad faith defense is not a proper affirmative defense, that the defense should be construed as a counterclaim, and that the counterclaim should be dismissed pursuant to Rule 12(b)(6). Dkts. 25, 46. Ohio additionally argues that Mountain Crest and Garage Plus do not have standing to allege bad faith. Dkt. 46 at 8–10.
1. Standards
The Federal Rules of Civil Procedure allow a district court to "strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed. R. Civ. P. 12(f). "An affirmative defense, under the meaning of Federal Rule of Civil Procedure 8(c), is a defense that does not negate the elements of the plaintiff's claim, but instead precludes liability even if all of the elements of the plaintiff's claim are proven." Beaver v. Tarsadia Hotels , 315 F.R.D. 346, 349 (S.D. Cal. 2016) (internal quotation and citations omitted). But, even if a defense is insufficient as an affirmative defense and "[i]f a party mistakenly designates ... a counterclaim as a defense, the court must, if justice requires, treat the pleading as though it were correctly designated ...." Fed. R. Civ. P. 8(c)(2). A motion to dismiss a counterclaim under Rule 12(b)(6) is evaluated under the same standard as a motion to dismiss a plaintiff's complaint. AirWair Int'l Ltd. v. Schultz , 84 F. Supp. 3d 943, 949 (N.D. Cal 2015).
2. Affirmative Defenses A and E
Preliminarily, the Court agrees that Defendants’ Affirmative Defenses A and E are improper affirmative defenses. Relevant to Affirmative Defense A, "[a] defense which demonstrates that plaintiff has not met its burden of proof is not an affirmative defense." Zivkovic v. S. Cal. Edison Co. , 302 F.3d 1080, 1088 (9th Cir. 2002). And as to Affirmative Defense E, "Rule 15 does not require a party to reserve the right to assert additional defenses." Johnson v. Providence Health & Servs. , No. C17-1779-JCC, 2018 WL 2289331, at *3 (W.D. Wash. May 18, 2018) (internal citation omitted). Accordingly, "reservation of rights language is therefore immaterial to its affirmative defenses." Id.
Ohio's motion to strike is therefore GRANTED as to affirmative defenses A and E, without leave to amend.
3. Affirmative Defenses B, C, and D
Ohio additionally argues that the Court should strike Defendants’ "bad faith" Affirmative Defense because an affirmative claim for insurance bad faith is not a proper affirmative defense. See e.g. , Dkt. 25 at 5–7. It further argues that, because the allegation of bad faith provides the sole basis for the defenses of "estoppel," "waiver," "laches," "unjust enrichment," and "unclean hands," those affirmative defenses should be stricken as well. Id. at 7.
The Estate clarifies in its motion for a Rule 56(d) continuance that its affirmative defenses are coverage by estoppel, unjust enrichment, and unclean hands. See Dkt. 18 at 2. Washington cases recognize a rebuttable presumption of harm and that coverage by estoppel is one appropriate remedy when an insurer acts in bad faith by improperly refusing to defend. See Kirk v. Mt. Airy Ins. Co. , 134 Wash.2d 558, 562–63, 951 P.2d 1124 (1998). Even where there would be no coverage or right to a defense under a policy's terms, if an insurer mishandles a claim in bad faith, coverage by estoppel may be available. St. Paul Fire & Marine Ins. Co. v. Onvia, Inc. , 165 Wash.2d 122, 131–32, 196 P.3d 664 (2008) ; see also Truck Ins. Exch. v. Vanport Homes, Inc. , 147 Wash.2d 751, 759, 58 P.3d 276 (2002) (en banc) ("[A]n insurer that, in bad faith, refuses or fails to defend is estopped from denying coverage.").
Defendants’ claim of bad faith asserted in Affirmative Defenses B through D could be an affirmative defense because "it defeats the claim that [Ohio] had no duty to indemnify their insureds even if [Ohio's] interpretation of their policies is correct and under the language of the policies there would have been no duty to indemnify their insureds." Dkt. 28 at 8 n.9. Indeed, this Court has considered bad faith and coverage by estoppel as either an affirmative defense or counterclaim. See, e.g. , Allstate Prop. & Cas. Ins. Co. v. A.R. , No. C13-6041 RBL, 2014 WL 3579672, at *5–6 (W.D. Wash. July 21, 2014). But in this instance, the Court agrees with Ohio that bad faith and coverage by estoppel should be categorized as a counterclaim, not an affirmative defense, because it may provide independent relief for Defendants.
The Court therefore converts Affirmative Defenses B, C, and D into counterclaims pursuant to Rule 8(c)(2). Rule 12(b)(6) and the plausibility standard apply to counterclaims, see AirWair Int'l , 84 F. Supp. 3d at 949–50, and the assertions of bad faith as currently alleged do not meet this standard. The Court therefore GRANTS Ohio's motion to dismiss as to Affirmative Defense B, C, and D, but with leave to amend as a counterclaim. Any amendment should consider the standing issues raised by Ohio. See Dkt. 46 at 8–10.
B. Motion for Summary Judgment and Motion for Rule 56(d) Continuance
1. Standards
Summary judgment is proper only if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The moving party is entitled to judgment as a matter of law when the nonmoving party fails to make a sufficient showing on an essential element of a claim in the case on which the nonmoving party has the burden of proof. Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). There is no genuine issue of fact for trial where the record, taken as a whole, could not lead a rational trier of fact to find for the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (nonmoving party must present specific, significant probative evidence, not simply "some metaphysical doubt"). Conversely, a genuine dispute over a material fact exists if there is sufficient evidence supporting the claimed factual dispute, requiring a judge or jury to resolve the differing versions of the truth. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 253, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ; T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n , 809 F.2d 626, 630 (9th Cir. 1987).
The determination of the existence of a material fact is often a close question. The Court must consider the substantive evidentiary burden that the nonmoving party must meet at trial—e.g., a preponderance of the evidence in most civil cases. Anderson , 477 U.S. at 254, 106 S.Ct. 2505 ; T.W. Elec. Serv., Inc. , 809 F.2d at 630. The Court must resolve any factual issues of controversy in favor of the nonmoving party only when the facts specifically attested by that party contradict facts specifically attested by the moving party. The nonmoving party may not merely state that it will discredit the moving party's evidence at trial, in the hopes that evidence can be developed at trial to support the claim. T.W. Elec. Serv., Inc. , 809 F.2d at 630 (relying on Anderson , 477 U.S. at 255, 106 S.Ct. 2505 ). Conclusory, nonspecific statements in affidavits are not sufficient, and missing facts will not be presumed. Lujan v. Nat'l Wildlife Fed'n , 497 U.S. 871, 888–89, 110 S.Ct. 3177, 111 L.Ed.2d 695 (1990).
However, if a nonmovant shows by affidavit or declaration that, for specified reasons, it cannot present facts essential to justify its opposition, the court may defer considering the motion, deny the motion, or allow time to obtain affidavits or declarations or to take discovery. Fed. R. Civ. P. 56(d). The nonmovant must show that "(1) it has set forth in affidavit form the specific facts it hopes to elicit from further discovery; (2) the facts sought exist; and (3) the sought-after facts are essential to oppose summary judgment." Family Home & Fin. Ctr., Inc. v. Fed. Home Loan Mortg. Corp. , 525 F.3d 822, 827 (9th Cir. 2008). When confronted with a Rule 56(d) motion, the court may "(1) defer considering the motion or deny it; (2) allow time to obtain affidavits or declarations or to take discovery; or (3) issue any other appropriate order." Fed. R. Civ. P. 56(d).
2. Motion for Rule 56(d) Continuance
The Estate seeks a 90-day continuance so that it may conduct discovery regarding Ohio's alleged bad faith. Dkt. 18. Specifically, the Estate seeks discovery on "any communications made between the insurer and its insureds after the policy was issued, any investigation and evaluation of the claims performed by the insurer, and what actions the insurer took after receiving notice of the claim." Id. at 6.
While this discovery may be relevant to the Estate's counterclaims, it fails to meet the requirements of Rule 56(d) to permit a continuance. In support of its motion, the Estate provides the declaration of its counsel, but the declaration does not specify either the facts it hopes to elicit from further discovery or how those facts are essential to oppose Ohio's motion for summary judgment. See Dkt. 19. Rather, the declaration simply attaches the Estate's first set of interrogatories and requests for production it propounded on Ohio. Id. , Exs. 1, 2. While the Estate explains in its reply why the evidence is essential to contest Ohio's motion for summary judgment, see Dkt. 22, that is not the standard. The Federal Rules of Civil Procedure require that the nonmovant show by "affidavit or declaration that, for specified reasons, it cannot present facts essential to justify its opposition[.]" Fed. R. Civ. P. 56(d) (emphasis added). "Failure to comply with these requirements is a proper ground for denying discovery and proceeding to summary judgment." Family Home & Fin. Ctr. , 525 F.3d at 827 (internal quotation omitted).
The Court additionally notes that, "[a]s a general rule, a movant may not raise new facts or arguments in [its] reply brief." Karpenski v. Am. Gen. Life Cos., LLC , 999 F. Supp. 2d 1218, 1226 (W.D. Wash. 2014) (internal quotation and citation omitted).
The Estate has failed to meet the requirements of Rule 56(d). Its motion for a Rule 56(d) continuance is, therefore, DENIED.
3. Motion for Summary Judgment
"Interpretation of an insurance contract is a question of law[.]" Woo v. Fireman's Fund Ins. Co. , 161 Wash.2d 43, 52, 164 P.3d 454 (2007). Terms are to be interpreted as the "average person purchasing insurance" would understand them. Id. While the insured has the burden of proving that claims fall within a grant of coverage, the insurer has the burden of proving that an exclusion bars coverage. See McDonald v. State Farm Fire & Cas. Co. , 119 Wash.2d 724, 731, 837 P.2d 1000 (1992) (en banc). The duty to defend is broader than the duty to indemnify and arises "when a complaint against the insured, construed liberally, alleges facts which could, if proven, impose liability upon the insured within the policy's coverage." Woo , 161 Wash.2d at 52–53, 164 P.3d 454. Ambiguities are construed in favor of the triggering the duty to defend. Id. at 53, 164 P.3d 454.
In Washington, in a declaratory judgment action, the duty to defend is determined by the facts alleged in the complaint. Holland Am. Ins. Co. v. Nat'l Indem. Co. , 75 Wash.2d 909, 911, 454 P.2d 383 (1969) (en banc). "Insurance companies are required to look beyond the allegations of the complaint and reasonably investigate when the allegations are in conflict with facts known to or readily ascertainable by the insurer, or if the allegations of the complaint were ambiguous or inadequate." Unigard Ins. Co. v. Leven , 97 Wash. App. 417, 425, 983 P.2d 1155 (1999). However, the insurer may rely on extrinsic facts learned through such an investigation only to trigger the duty to defend, not deny it. Grange Ins. Ass'n v. Roberts , 179 Wash. App. 739, 752, 320 P.3d 77 (2013) (internal citation omitted). "After obtaining a declaration of noncoverage, an insurer will not be obligated to pay from that point forward." Nat'l Sur. Corp. v. Immunex Corp. , 176 Wash.2d 872, 885, 297 P.3d 688 (2013) (internal quotations and emphasis omitted).
Ohio moves for summary judgment, arguing that it had no duty to defend because the Auto Exclusion "clearly excludes coverage for the claims alleged in the Underlying Action." Dkt. 14 at 11. It argues that the Auto Exclusion is clear and unambiguous and precludes liability coverage. It seeks an order declaring that Ohio had no duty to defend or indemnify Garage Plus, Danny, or Jeremy in the Underlying Action. Id. at 21. The Estate's opposition repeats its request for discovery on its bad faith argument. Dkt. 23. It additionally asserts that the Auto Exclusion is not indisputably applicable from the face of the Underlying Action's Fourth Amended Complaint and the Policies because it is not clearly established that the vehicle was rented or loaned to Garage Plus. Dkt. 23 at 2.
By the plain terms of Ohio Security Policy Exclusion 2.g, the Policy does not apply when two conditions are met: (1) the injury at issue arises out of the ownership, maintenance, use or entrustment to others of any "auto;" and (2) the "auto" is owned or operated by or rented or loaned to any insured. Dkt. 1-1 at 60.
a. Ownership, Maintenance, Use or Entrustment of an Auto
Ohio argues that, irrespective of which potential insured is alleged to be liable, it is clear from the face of the Fourth Amended Complaint that the allegations arose out of the ownership, use, or entrustment to others of the Chevrolet pickup. Dkt. 14 at 13–15. The Fourth Amended Complaint asserts four theories of liability against the insureds at issue: (1) that Jeremy was negligent in operating the pickup; (2) that Danny and Perdue were vicariously liable for Jeremy's negligence under the family car doctrine; (3) that all defendants in the Underlying Action (including Danny and Garage Plus) were jointly and severally liable for Jeremy's negligence under the negligent entrustment doctrine; and (4) that Garage Plus was vicariously liable for Jeremy's conduct. Dkt. 1-3 at 8–12. The Court agrees that all four claims arise out of the ownership, use, or entrustment of the pickup truck within the meaning the Auto Exclusion.
It is undisputed that the 1986 Chevrolet K-10 pickup truck qualifies as an "Auto" within the meaning of the Policies. See Dkt. 1-1 at 70.
First, the ordinary negligence claim against Jeremy arises out of the use of an auto within the plain language of the exclusion. The Washington State Supreme Court has held that, for an injury to "arise out of" vehicle use, "the facts must establish that the accident involved some causal relationship between a condition of the vehicle, a permanent attachment thereto, or some aspect of its operation." Kroeber v. GEICO Ins. Co. , 184 Wash.2d 925, 932, 366 P.3d 1237 (2016) (en banc) (internal quotations omitted). The Fourth Amended Complaint clearly alleges that Jeremy was operating the pickup truck when he struck and hit Mrs. Rainwater, causing her injuries and ultimate death. See Dkt. 1-3, ¶¶ 3.1–3.10.
Similarly, the Estate's vicarious liability claim against Garage Plus falls within the exclusion. The Fourth Amended Complaint alleges that Garage Plus is liable because Jeremy was "was an agent and within the scope of his employment and acting in furtherance of Garage Plus’ interest when he struck and killed Susan Rainwater ...." Id. ¶ 9.2. Under the doctrines of vicarious liability and respondeat superior, Garage Plus would be liable for Jeremy's conduct if his use of the auto can be attributed to it. See, e.g. , Niece v. Elmview Grp. Home , 131 Wash.2d 39, 48, 929 P.2d 420 (1997) ("Vicarious liability, otherwise known as the doctrine of respondeat superior, imposes liability on an employer for the torts of an employee who is acting on the employer's behalf."). The Fourth Amended Complaint alleges as much, thus bringing this claim within the meaning of the exclusion.
The remaining two claims—negligent entrustment and liability under the family car doctrine—also fall within the Auto Exclusion because they contemplate entrustment. "The general negligent entrustment rule for automobiles is that the owner of a vehicle is liable for entrusting it to an intoxicated person." Mortensen v. Moravec , 1 Wash. App. 2d 608, 625, 406 P.3d 1178 (2017) (internal citation omitted). Likewise, "[a]n automobile owner may incur liability under the family car doctrine for injuries caused by a third person to whom a family member has entrusted the car if the car was used for the pleasure and convenience of a family member." Cameron v. Downs , 32 Wash. App. 875, 880, 650 P.2d 260 (1982). Although the Ohio Security Policy does not define the term "entrustment," undefined terms are given "their plain, ordinary, and popular meaning." Int'l Marine Underwriters v. ABCD Marine, LLC , 179 Wash.2d 274, 284, 313 P.3d 395 (2013) (en banc) (internal quotation and citations omitted). "Entrust" means "to commit to another with confidence." The Court thus agrees that neither Garage Plus nor Danny could be held liable for negligent entrustment or under the family car doctrine without proof that they entrusted the pickup to Jeremy. Consequently, these claims also "arise out of" the entrustment to others of any auto within the meaning of the Auto Exclusion.
Entrust , Merriam-Webster, https://www.merriam-webster.com/dictionary/entrust (last visited Apr. 22, 2022).
The claims asserted against Garage Plus, Danny, and Jeremy in the Fourth Amended Complaint therefore fall within the Auto Exclusion because the allegations arose out of the ownership, use, or entrustment to others of an auto.
b. Owned or Operated by or Rented or Loaned to Any Insured
Ohio argues that it is additionally undisputed that the Chevrolet pickup was owned or operated by or rented or loaned to any insured because the allegations in the Fourth Amended Complaint assert that both Danny and Jeremy were insureds who owned and operated the pickup, respectively, and that they loaned it to Garage Plus on the day of the accident. Dkt. 14 at 15–19.
The Court first notes that the Auto Exclusion uses the term "any insured." See Dkt. 1-1 at 60. Ohio argues that an exclusion for injury arising out of the use or entrustment to others of an auto "owned or operated by or rented or loaned to any insured" excludes coverage for all insureds, irrespective of which particular insured owned or operated or rented or loaned the auto. Dkt. 14 at 16. The Estate argues, in brief and with no supporting authority, that Ohio cannot show that the Fourth Amended Complaint clearly established that the vehicle was rented or loaned to Garage Plus. Dkt. 23 at 2.
The Court agrees with Ohio on this issue. In Caroff v. Farmers Insurance Co. of Washington , for example, the court held that an exclusion for injury arising out of child molestation by any insured barred coverage for the insured parents of an alleged abuser even though the parents did not themselves engage in an act of abuse. 155 Wash. App. 724, 729–30, 261 P.3d 159 (1999). Persuasively, other courts around the country have reached this same conclusion in considering the term "any insured" specific to auto exclusions. See, e.g. , BP Am., Inc. v. State Auto Prop. & Cas. Ins. Co. , 148 P.3d 832, 839 (Okla. 2005) ("[T]he term ‘any insured’ in an ‘Auto Exclusion’ clause of a commercial general liability policy excludes from coverage all automotive occurrences attributable to any of the insureds."). The term "any insured" in the Auto Exclusion encompasses the conduct of all insureds and thus excludes coverage regardless of which insured engaged in the excluded conduct. It is not a condition of the exclusion that only the insured was rented or loaned the auto.
With this in mind, it is clear and unambiguous from the face of the Fourth Amended Complaint that the pickup truck was operated by any insured. The Fourth Amended Complaint alleges that Jeremy was employed by Garage Plus and "was an agent and within the scope of his employment and acting in furtherance of Garage Plus’ interest when he struck and killed Susan Rainwater ...." Dkt. 1-3, ¶ 9.2. As alleged, Jeremy was an employee acting within the scope of his employment with Garage Plus when operating the pickup truck, making him an insured and triggering the Auto Exclusion. See Dkt. 1-1 at 66 (extending insured status to employees "for acts within the scope of their employment by [the business] or while performing duties related to the conduct of [the] business").
Ohio posits two additional arguments that the pickup truck was owned or operated by or rented or loaned to any insured: (1) that Danny owned the pickup and qualified as an insured as a member of Garage Plus and (2) that the pickup truck was loaned to Garage Plus. Dkt. 14 at 17–19. But because the Court has concluded that the Auto Exclusion was triggered by the fact that the Fourth Amended Complaint alleged that Jeremy was an employee of the insured acting within the scope of his employment, it need not address these alternative theories.
In sum, the Fourth Amended Complaint in the Underlying Action, which Garage Plus tendered to Ohio for defense and indemnity, clearly and unambiguously triggered the Auto Exclusion because (1) the injury at issue arose out of the ownership, maintenance, use or entrustment to others of any "auto" and (2) the "auto" was operated by any insured, i.e., Jeremy. Ohio's motion for summary judgment is, therefore, GRANTED on the narrow issue of whether Ohio had a duty to defend or indemnify Defendants Garage Plus, Danny Simon, or Jeremy Simon in the Underlying Action.
C. Remaining Issues
While the Court has concluded that, as a matter of law, Ohio did not have a duty to defend or indemnify Defendants Garage Plus, Danny Simon, or Jeremy Simon in the Underlying Action, there are still issues and counterclaims to be resolved. Ohio's proposed order on its motion for summary judgment seeks a declaratory judgment that it correctly denied the claims for liability coverage, that it had no obligation to accept or respond to the Estate's settlement offers, and that it did not breach its Policies with Garage Plus. See Dkt. 14-1. As discussed above, Defendants have raised the issue of bad faith, and "an insurer that, in bad faith, refuses or fails to defend is estopped from denying coverage." Vanport Homes , 147 Wash.2d at 759, 58 P.3d 276.
The Court will not enter judgment and close the case until the counterclaim of bad faith and coverage by estoppel are resolved. Accordingly, discovery should commence on these issues, if it has not already begun, and Ohio's motion for a protective order that it need not respond to the Estate's first set of interrogatories and requests for production is DENIED as moot.
III. ORDER
Therefore, it is hereby ORDERED that Plaintiffs Ohio Casualty Insurance Company and Ohio Security Insurance Company's motion for summary judgment, Dkt. 14, is GRANTED , that Plaintiffs’ motions to strike and dismiss Defendants’ affirmative defenses, Dkts. 25, 46, are GRANTED in part and DENIED in part , and that Plaintiffs’ motion for protective order, Dkt. 30, is DENIED as moot .
It is hereby further ORDERED that Defendant Alan Rainwater's Rule 56(d) motion to continue, Dkt. 18, is DENIED and that Defendants shall file their amended Answers within fourteen days of this Order.