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Paula Kay Stone v. Safeco Ins. Co.

The Court of Appeals of Washington, Division Two
Mar 20, 2007
137 Wn. App. 1047 (Wash. Ct. App. 2007)


No. 34214-6-II.

March 20, 2007.

Appeal from a judgment of the Superior Court for Clark County, No. 02-2-04464-0, John F. Nichols, J., entered November 23, 2005.

Counsel for Appellant(s) Daniel Stanert Mcmonagle Jr. Law Offices of Daniel S. McMonagle Seattle, WA.

Counsel for Respondent(s) Cecil Reniche-smith Hoffman Hart Wagner Portland, OR.

Affirmed by unpublished opinion per Bridgewater, J., concurred in by Houghton, C.J.; Penoyar, J., dissenting.

Paula Kay Stone and John Fanning appeal from a summary judgment in favor of Safeco Insurance Company of America because they did not timely report an accidental water release as required by Safeco's insurance policy. We affirm.


In January 1996, an accidental water release caused damage to the hall bathroom in the house of Paula Stone and John Fanning. Stone submitted a claim to Safeco, which paid for the repair of the pipes under the hall bathroom sink.

In October 2001, an accidental water release again caused damage to the appellants' hall bathroom. Stone described the accident by stating:

[Fanning] was in the bathroom, and there was sort of a popping noise or sound in the tub, and then water started coming out of the tub. It was — not out of the tub, but out of the pipe that had broke. It was just gushing out of there.

2 CP at 204. According to Stone, the water was gushing "into the wall." 2 CP at 204. And:

Well, we couldn't get it shut off there, so [Fanning] went out to the street. He couldn't get the water shut off, so he had to come into the garage to get a key and come back out to the street. . . . And you use this key, and it turns off all the water, so that it would — so the water would stop flowing.

2 CP at 204.

After turning off the water, Fanning ultimately repaired the pipe. But in response to whether they took any other remedial steps to "clean up" the water, Stone said, "It was in the wall." "We couldn't get to it." 2 CP at 205. Nevertheless, Stone and Fanning did not report this accident and did not submit a claim to Safeco. "We fixed it. We didn't think it needed to be reported. We fixed it. We stopped the problem, according to what we saw." 2 CP at 205.

In April 2002, Stone "linked a growing pattern of nagging health problems with visual observation of mold in the master bedroom bathroom at the home." Br. of Appellant at 4. In May 2002, Stone and Fanning submitted a claim to Safeco for the mold damage in this bathroom.

Safeco sent Scott Hess to investigate the claim. As he understood his responsibilities, he was to investigate the mold damage in the master bedroom bathroom; it was not "[his] job to go through the entire structure hunting for mold." 3 CP at 534. Once in the bathroom, Hess examined the ceiling, where he noticed mold growth, and the vinyl flooring, where he noticed discoloration and wetness. Although Hess had little work investigating mold claims, he concluded that inadequate ventilation in the master bedroom bathroom was causing a moist environment that was conducive for mold growth. At that time Stone denied any known sudden water leak or broken pipe.

Approximately two weeks after Hess's investigation, Safeco denied the claim for the mold damage, as it does not insure for any loss resulting from mold. In that denial letter Safeco stated, "There is no known sudden, accidental water loss that precipitated this mold." 3 CP at 428. Nevertheless, Safeco invited and encouraged Stone and Fanning to present additional facts or analysis supporting their claim. Stone and Fanning did not do so.

In August 2002, at the request of Stone and Fanning, Energy Options Northwest and American Management Associates inspected and tested the entire house. Both companies discovered an array of water damage and mold growth. Based on this inspection, Energy Options Northwest began removing the damaged and contaminated materials.

In September 2002, counsel for Stone and Fanning wrote a letter to Safeco, advising that the damage to the house resulted from accidental water releases. They further advised Safeco, "On or about October 25, 2001, a valve broke in the Fanning's bathtub and [water] ran down behind the inside of the wall between the bathtub and the master bath shower." 3 CP at 450. Counsel for Stone and Fanning urged Safeco to withdraw its denial letter and accept the claim.

The letter also advised Safeco, "In a separate loss on or about June, 2002 a significant amount of water was discharged from the kitchen plumbing, most likely the dishwasher vent, into the cavity behind the dishwasher and under the sink." 3 CP at 450.

In October 2002, Safeco agreed to review the additional information, complete its investigation, and determine the applicability of coverage. But Stone and Fanning filed a complaint for breach of contract, bad faith, violation of the Consumer Protection Act, and damages.

See chapter 19.86 RCW.

In the meantime, Stone's past exposure to the mold "impacted her immune system causing anaphylaxis and allergic reactions and intolerances to many things including food, medication and even the environment around her." 2 CP at 324. During the depositions in this case, Stone was "quarantined" to her mother's house because of her poor health. 1 CP at 181. In fact, Stone and Fanning sought a continuance because of her poor health. The trial court issued the continuance and later struck the trial date.

In March 2004, the city of Vancouver found appellants' house to be a dangerous building and ordered the house to be vacated, repaired, or demolished.

Ultimately, Safeco moved for summary judgment, arguing that Stone and Fanning did not timely report the 2001 accidental water releases as required by the insurance policy. After hearing argument on the motion in September 2005, the trial court issued its written opinion, concluding:

Except for this breach of contract claim, Stone and Fanning do not discuss any other claims or issues on appeal.

The undisputed material facts are that the plaintiffs were aware of the water intrusion in October of 2001. While they may not have known of the consequences of the leak, the fact that water had leaked into the wall was acknowledged. The experts agree that this exposure of water will promote the growth of mold if not treated within the first few days of the leak. The issue is whether the failure to notify the defendant's insurance company prejudiced the ability of Safeco to mitigate their potential loss.

. . . .

In the case at bar, the plaintiffs' failure to notify or take immediate remediation action exposed defendant to a substantial increase in damages. Thus defendant was substantially prejudiced by the lack of notice and would not be able to mitigate any potential loss.

4 CP at 643-44. The trial court then granted Safeco's motion for summary judgment.

In December 2005, Stone and Fanning filed a motion for reconsideration. In part, they claimed that Stone's deposition testimony "was misleading because . . . she was testifying based upon the facts which she knew at the time of the incident, combined with the facts that she subsequently learned . . . in August 2002." 4 CP at 625. Stone and Fanning each provided a declaration that "more accurately portrays what occurred on the day of the incident." 4 CP at 625. The trial court, noting that the declarations were "substantially similar to self-impeachment" and not a defense to a motion for summary judgment, denied the motion for reconsideration. 4 CP at 652.

Stone and Fanning appeal the trial court's summary judgment ruling.

Although Stone and Fanning reference the motion for reconsideration, they do not specifically assign error to the trial court's ruling on this motion. Stone and Fanning have waived this assignment of error and we do not consider it.

ANALYSIS I. Standard of Review

On review of an order for summary judgment, we perform the same inquiry as the trial court. Hisle v. Todd Pac. Shipyards Corp., 151 Wn.2d 853, 860, 93 P.3d 108 (2004). Thus, the standard of review is de novo. Morton v. McFall, 128 Wn. App. 245, 252, 115 P.3d 1023 (2005). Summary judgment is appropriate only if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." CR 56(c). A party cannot use self-serving affidavits or declarations to create an issue of material fact. McCormick v. Lake Wash. Sch. Dist., 99 Wn. App. 107, 111, 992 P.2d 511 (1999). But we consider the facts and all reasonable inferences from them in the light most favorable to the non-moving party. Scott v. Pac. W. Mountain Resort, 119 Wn.2d 484, 502-03, 834 P.2d 6 (1992). Summary judgment is appropriate only if reasonable persons could reach but one conclusion from all the evidence. Vallandigham v. Clover Park Sch. Dist. No. 400, 154 Wn.2d 16, 26, 109 P.3d 805 (2005).

Summary judgment for an insurance company is proper when an insured breaches the insurance policy provisions and the insurance company is prejudiced as a result. Tran v. State Farm Fire Cas. Co., 136 Wn.2d 214, 224, 228, 961 P.2d 358 (1998); Herman v. Safeco Ins. Co. of Am., 104 Wn. App. 783, 788, 17 P.3d 631 (2001).

II. Notice

For the purposes of its summary judgment motion, Safeco agreed with Stone, Fanning, and their experts that the 2001 accidental water release proximately caused the mold growth in the house, for which Stone and Fanning submitted a claim to Safeco in May 2002. In fact, Safeco noted that under the terms of its policy it possibly would have paid for the repairs. And as Stone and Fanning note, Washington courts have applied the "efficient proximate cause" rule to allow coverage "even if subsequent events in the causal chain are specifically excluded from coverage." Findlay v. United Pac. Ins. Co., 78 Wn. App. 17, 20, 895 P.2d 32 (1995), aff'd, 129 Wn.2d 368 (1996); see also Bowers v. Farmers Ins. Exch., 99 Wn. App. 41, 47-48, 991 P.2d 734 (2000) (court held that tenants' vandalism, which was a covered peril, and not mold, which was an excluded peril, was the proximate cause of insured's loss).

But Safeco notes that Stone and Fanning "presented no evidence of a causal link between the 1996 incident and their May 2002 claim. The June 2002 leak took place after plaintiffs filed their mold claim." Br. of Resp't at 6 n. 5. Stone and Fanning agree that only the 2001 incident was the "central focus" of the motion for summary judgment. Br. of Appellant at 4.

At this time, there is no dispute about the scope of coverage. And it is beyond dispute that after the 1996 accidental water release, Stone and Fanning knew when and how to promptly notify Safeco of a property loss. Yet it is also beyond dispute that after the 2001 accidental water release, Stone and Fanning waited more than 10 months before notifying Safeco of this property loss.

Thus, the essential question is whether Stone and Fanning breached the policy's notice provisions. Among other things, the policy requires that an insured must "give immediate notice to [Safeco] or our agent" after a property loss. 2 CP at 233. Safeco argues that Stone and Fanning failed to comply with this requirement when it did not give notice of the October 2001 accidental water release until 10 months later. On the other hand, Stone and Fanning argue that "[a] jury should determine whether the ten month time period which it took for the facts to become fully uncovered was reasonable under the circumstances of this claim." Br. of Appellant at 13.

Washington courts have held that the meaning of the word "immediate"in insurance policies does not necessarily mean "upon the instant," "forthwith," or "without any intervening lapse of time." Foley v. New World Life Ins. Co., 185 Wash. 89, 94, 52 P.2d 1264 (1936). Instead, it may mean "direct" or "within a reasonable time." Foley, 185 Wash. at 94; see also Sears, Roebuck Co. v. Hartford Accident Indem. Co., 50 Wn.2d 443, 450, 313 P.2d 347 (1957). And, under a proper showing of circumstances, an insured may be excused for a delay or a failure to notify the insurance company of an accident or occurrence. State Farm Mut. Auto. Ins. Co. v. Erickson, 5 Wn. App. 688, 691-92, 491 P.2d 668 (1971).

Generally, whether an insured breaches its duties and obligations under the insurance policy is a factual question that the trier of fact resolves. Pederson's Fryer Farms, Inc. v. Transamerica Ins. Co., 83 Wn. App 432, 437-38, 922 P.2d 126 (1996), review denied, 131 Wn.2d 1010 (1997). But where the evidence is not materially disputed, it is a legal question that a court resolves. Tran, 136 Wn.2d at 228; Pilgrim v. State Farm Fire Cas. Ins. Co., 89 Wn. App. 712, 722-23, 950 P.2d 479 (1997).

Here, the evidence is not materially disputed. Stone failed in her late attempt to raise a genuine issue of material fact by stating that she "could not observe" that water had leaked into the wall, thereby contradicting her previous, unambiguous deposition testimony. 4 CP at 629. "When a party has given clear answers to unambiguous [deposition] questions which negate the existence of any genuine issue of material fact, that party cannot thereafter create such an issue with an affidavit that merely contradicts, without explanation, previously given clear testimony." Robinson v. Avis Rent a Car Sys., 106 Wn. App. 104, 121, 22 P.3d 818 (quotation and citation omitted), review denied, 145 Wn.2d 1004 (2001). To the extent that Stone's subsequent declaration contradicts her prior deposition testimony, a genuine issue of material fact does not arise. Klontz v. Puget Sound Power Light Co., 90 Wn. App. 186, 192, 951 P.2d 280 (1998).

And Fanning failed in his late attempt to raise a genuine issue of material fact. Fanning presented his declaration to the trial court for the first time in their motion for reconsideration. But a declaration presented to a trial court for the first time in a motion for reconsideration without a showing that the party was unable to obtain the declaration earlier does not qualify as newly discovered evidence. Go2Net, Inc. v. C I Host, Inc., 115 Wn. App. 73, 91, 60 P.3d 1245 (2003). Although Fanning clearly knew the circumstances surrounding the accident at the time of summary judgment, he gave no explanation why his counsel did not obtain his declaration earlier. Thus, his declaration could not be considered; and a genuine issue of material fact does not arise. See Morinaga v. Vue, 85 Wn. App. 822, 831, 935 P.2d 637, review denied, 13 Wn.2d 1012 (1997).

Therefore, after viewing the evidence in the light most favorable to Stone and Fanning, they knew as of October 2001 that water had gushed into the wall of the hall bathroom and that they had failed to take any remedial steps to "clean up" the water. 2 CP at 205. Stone admitted that they did not think that they needed to report this accident to Safeco. And it is undisputed that Stone and Fanning did not even attempt to report this accident until September 2002, after Safeco had denied their initial claim for mold damage in May 2002.

Thus, there is no issue as to whether Stone and Fanning breached the policy's provisions. No reasonable trier of fact could conclude that Stone and Fanning gave "immediate notice" of the 2001 accidental water release to Safeco or its agents. Their failure to give notice, therefore, breached the policy as a matter of law. See Tran, 136 Wn.2d at 228; Herman, 104 Wn. App. at 789; Pilgrim, 89 Wn. App. at 723.

B. Prejudice

Nevertheless, even where an insured breaches an insurance policy, the insurance company is not relieved of its duty to pay unless it can prove actual and substantial prejudice caused by the insured. Pederson's, 83 Wn. App. at 437. As Division One of this court has stated, "To establish actual prejudice resulting from delayed notice, an insurer must adduce affirmative proof of an advantage lost or disadvantage suffered as a result of the delay, which has an identifiable detrimental effect on the insurer's ability to evaluate or present its defenses to coverage or liability." Canron, Inc. v. Fed. Ins. Co., 82 Wn. App. 480, 491-92, 918 P.2d 937 (1996), review denied, 131 Wn.2d 1002 (1997).

And our Supreme Court has indicated that other relevant factors in making a prejudice determination include:

(1) when the insured discovered its loss; (2) whether the delay in making a claim left the insurer without an opportunity to pursue a claim against the tortfeasor, to adequately defend the insured in an underlying action brought by a third party, or to pursue subrogation claims against other entities; (3) whether the insured destroyed evidence relevant to a policy exclusion; and (4) whether the insured failed to control remediation costs.

Schwindt v. Commonwealth Ins. Co., 140 Wn.2d 348, 359 n. 7, 997 P.2d 353 (2000).

Again, whether an insurance company is prejudiced is a factual question that the trier of fact resolves. Or. Auto. Ins. Co. v. Salzberg, 85 Wn.2d 372, 376-77, 535 P.2d 816 (1975); Felice v. St. Paul Fire Marine Ins. Co., 42 Wn. App. 352, 358, 711 P.2d 1066 (1985), review denied, 105 Wn.2d 1014 (1986); Pulse v. Nw. Farm Bureau Ins. Co., 18 Wn. App. 59, 60-61, 566 P.2d 577, review denied, 89 Wn.2d 1011 (1977). But where no genuine issue exists as to any material fact by virtue of the pleadings, affidavits, and other documents on file, a court may presume prejudice as a matter of law. Herman, 104 Wn. App. at 790; Pederson's, 83 Wn. App. at 437-38. A court presumes prejudice only in extreme cases. Pederson's, 83 Wn. App. at 438.

Stone and Fanning argue that Safeco presented "no evidence of specifics and no evidence of actual harm." Br. of Appellant at 22. They claim that Safeco's claim of prejudice is "simply Monday morning quarterbacking." Br. of Appellant at 22. But Safeco contends that it was prejudiced because it was deprived of the opportunity to investigate the accident in a timely manner and it was therefore exposed to a potentially larger claim. Safeco maintains that if Stone and Fanning had notified it of the accident, it could have recommended appropriate courses of mitigation and remediation. In fact, Safeco submitted expert testimony that early remediation can completely prevent or greatly minimize any resulting mold after a water release. Stone and Fanning offered no evidence to refute Safeco's expert.

Here, by failing to notify Safeco of the 2001 accidental water release, Stone and Fanning put the nature and the extent of the loss beyond Safeco's ability to fully investigate. And this failure hampered Safeco's ability to determine the validity of the May 2002 claim and hampered Safeco's ability to control remediation costs. If an insurance company is inhibited in its effort to process claims due to the insured's uncooperativeness, it suffers prejudice. See Tran, 136 Wn.2d at 231.

It is undisputed that the actions and omissions of Stone and Fanning hindered Safeco's ability to complete a legitimate investigation in order to determine whether coverage should be provided. Safeco offered proof of prejudice; Stone and Fanning did not offer any evidence to create a genuine issue of material fact regarding prejudice. Thus, there was no issue: Safeco was prejudiced.

III. Estoppel

Stone and Fanning argue that the trial court erred in summarily dismissing their equitable estoppel claim when it concluded, "The fact that Safeco may have delayed or misled plaintiffs regarding liability after notice of claim was received is irrelevant to the issue of prejudice." 4 CP at 643. We disagree.

The doctrine of equitable estoppel precludes an insurance company from asserting a right where it would be inequitable to permit the assertion. Buchanan v. Switz. Gen. Ins. Co., 76 Wn.2d 100, 108, 455 P.2d 344 (1969). "It arises by operation of law, and rests upon acts, statements or conduct on the part of the insurer or its agents which lead or induce the insured, in justifiable reliance thereupon, to act or forbear to act to his prejudice." Buchanan, 76 Wn.2d at 108.

Stone and Fanning are correct that Safeco, on several occasions, encouraged them to provide additional facts that could affect the coverage determination. Safeco even stood "ready to review any additional facts or analysis you wish to provide us." 3 CP at 430. But there is no evidence that the doctrine of equitable estoppel should preclude Safeco from asserting that Stone and Fanning breached the notice provision of the policy.

In fact, in communicating with Stone, Safeco explicitly stated, "No waiver or estoppel of any kind is intended nor may be inferred." 3 CP at 505. Moreover, Stone and Fanning made no argument how any of Safeco's acts, statements, or conduct led them to change their position or refrain from acting. And finally, as Safeco notes, the failure of Stone and Fanning to give timely notice of the 2001 accidental water release did not result from any reliance on Safeco's acts, statements, or conduct. All the acts and statements relied on by Stone and Fanning in support of their equitable estoppel argument occurred after they filed their claim in May 2002.

No reasonable trier of fact could conclude that the doctrine of equitable estoppel precluded Safeco from asserting that Stone and Fanning breached the notice provision of the policy. Thus, whether equitable estoppel applies in this case is not a factual question for the trier of fact, but is a legal question for the court. Cf. Colonial Imps. v. Carlton Nw., 121 Wn.2d 726, 737, 853 P.2d 913 (1993). We conclude, as a matter of law, that the doctrine of equitable estoppel does not apply in this case.

Therefore we hold that the trial court did not err when it summarily dismissed the claims of Stone and Fanning.


A majority of the panel having determined that this opinion will not be printed in the Washington Appellate Reports, but will be filed for public record pursuant to RCW 2.06.040, it is so ordered.

Houghton, C.J., concur:

I respectfully dissent. The insurance policy requires Stone and Fanning to report a "loss" not an accident. Clerk's Papers (CP) at 234. The record does not contain undisputed facts that demonstrate that Stone and Fanning knew or even should have known that the water in the wall caused any damage or required any action on their part to protect their home. There is no showing that the affected wall contained insulation or that the water would not have immediately drained out the bottom of the wall without leaving any damage.

I would let a jury decide whether a "loss" occurred.

Summaries of

Paula Kay Stone v. Safeco Ins. Co.

The Court of Appeals of Washington, Division Two
Mar 20, 2007
137 Wn. App. 1047 (Wash. Ct. App. 2007)
Case details for

Paula Kay Stone v. Safeco Ins. Co.

Case Details


Court:The Court of Appeals of Washington, Division Two

Date published: Mar 20, 2007


137 Wn. App. 1047 (Wash. Ct. App. 2007)
137 Wash. App. 1047