Cincinnati Insurance Company v. Harry Johnson Plumbing & Excavating Co Inc
4:16-cv-05090
E.D. Wash.Sep 29, 2017Background
- HJPE, insured under CIC policy for contractors’ equipment (Dec 31, 2014–Dec 31, 2015), reported a stolen road grader on Sept 4, 2015; communications about the loss confused model (12G vs 14H) and included an incorrect serial number and erroneous purchase date/price on the Proof of Loss.
- HJPE could not produce a serial number, bill of sale, or contemporaneous maintenance/ownership records for a 14H; daily jobsite reports and later-deposition testimony were the primary evidence HJPE relied on to show a 14H existed and was stolen.
- CIC’s investigation (special investigations unit, third‑party experts, witness interviews, county records, site inspection) found evidence suggesting only a 12G was present at the jobsite, the 12G remained in HJPE’s possession, and county tax records showed a single unidentified grader with low value; CIC offered to extend coverage for a 12G subject to reservation of rights but later denied coverage for the claimed 14H.
- CIC denied coverage on July 1, 2016 for lack of proof of ownership/possession of a 14H and for material misrepresentations; CIC then filed a declaratory judgment action and HJPE counterclaimed for breach of contract, bad faith, violations of the Washington Consumer Protection Act (CPA) and Insurance Fair Conduct Act (IFCA), and injunctive relief.
- After discovery, CIC moved for partial summary judgment seeking dismissal of HJPE’s bad faith, CPA, IFCA, and injunctive relief counterclaims; the court reviewed the investigative record, expert opinions, depositions, and correspondence.
Issues
| Issue | HJPE's Argument | CIC's Argument | Held |
|---|---|---|---|
| Whether CIC acted in bad faith in denying the claim | CIC unreasonably denied coverage based on HJPE’s innocent errors (wrong year/price), lack of serial number, allegedly inadequate investigation, and filing suit | Denial followed a reasonable, months‑long investigation showing conflicting evidence, misstatements by insured, and insufficient proof of a 14H | Summary judgment for CIC — no genuine issue that denial was reasonable; bad faith claim dismissed with prejudice |
| Whether CIC violated Washington Consumer Protection Act | CIC engaged in unfair/deceptive practices in claims handling and delay, causing business injury | CIC’s conduct was reasonable evaluation of evidence; no unfair or deceptive act shown | Summary judgment for CIC — CPA claim dismissed with prejudice |
| Whether CIC violated Insurance Fair Conduct Act (IFCA) | IFCA violation based on unreasonable denial and handling | Denial was not unreasonable given investigatory findings and disputes over ownership/valuation | Summary judgment for CIC — IFCA claim dismissed with prejudice |
| Whether HJPE is entitled to injunctive relief | Requested to enjoin CIC’s suit/coverage position | CIC asserted declaratory judgment and suit were proper to resolve dispute | HJPE conceded injunctive relief; claim dismissed with prejudice |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment burden shifting principles)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (standard for genuine issue of material fact)
- Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (summary judgment and inferences)
- Erie R.R. Co. v. Tompkins, 304 U.S. 64 (federal court applies state substantive law in diversity)
- Smith v. Safeco Ins. Co., 150 Wash. 2d 478 (standard for insurer bad faith under Washington law)
- Van Noy v. State Farm Mut. Auto. Ins. Co., 142 Wash. 2d 784 (bad faith is question of fact; reasonableness standard)
- Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wash. 2d 778 (elements of a CPA claim)
- Gravquick A/S v. Trimble Navigation Int’l Ltd., 323 F.3d 1219 (applying state law as state supreme court would)
- Vestar Dev. II, LLC v. Gen. Dynamics Corp., 249 F.3d 958 (federal courts follow intermediate state appellate decisions absent contrary state supreme court guidance)