MKB Constructors v. American Zurich Insurance
49 F. Supp. 3d 814
W.D. Wash.2014Background
- This is an insurance coverage dispute under a Builders Risk policy for Phase I of a Yukon project; LYSD contracted MKB, which bid based on distorted site drawings and topography; geotechnical reports predicted settlement, leading to notice of potential overrun and settlement claims; MKB sought coverage for various cost items and asserted an IFCA claim; Zurich denied coverage and the case was litigated with cross-motions for summary judgment; the court applies Washington law for bad faith/IFCA/CPA and Alaska/ Washington choice-of-law issues for other claims; material disputes exist regarding causation, fortuity, and exclusions; the court grants partial, denies partial relief on multiple issues and addresses procedural prerequisites for IFCA.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does MKB need full performance to trigger coverage? | MKB argues no full performance proof is required. | Zurich argues some proof of loss is needed and seeks to distinguish performance from loss. | MKB need not prove full performance but must show direct physical loss or damage to covered property. |
| Are policy exclusions applicable, and is earth movement the dominant cause? | Earth movement was the dominant cause of loss. | Exclusions apply; dominant cause is not discussed in denial as a basis. | Exclusions require jury resolution; dominant cause issue treated as exception, not denial basis; exclusions disputed and to be determined by jury. |
| Are the policy exclusions 3(c), 2(a), and 2(f) dispositive? | Exclusions do not apply if earth movement is dominant cause. | Exclusions negate coverage if costs arose from planning/design faults or consequential losses. | Exclusions must be resolved by fact-finder; not granted on summary judgment. |
| Is fortuity satisfied for coverage under earth movement? | Settlement beyond two inches could be fortuitous. | Evidence shows potential probability of greater settlement; fortuity is fact-intensive. | Fortuity issue reserved for jury; not disposed on summary judgment. |
| Does RCW 48.30.015 pre-suit notice (IFCA) apply? | April 4, 2013 letter satisfied the 20-day pre-suit notice. | Notice requirements may be lacking or mis-timed; must be evaluated. | IFCA pre-suit notice satisfied; procedural prerequisites granted. |
Key Cases Cited
- Dombrosky v. Farmers Ins. Co., 928 P.2d 1127 (Wash. App. 1997) (indemnity principle; no windfall recovery for unincurred costs)
- Pub. Util. Dist. No. 1 v. Int'l Ins. Co., 881 P.2d 1020 (Wash. 1994) (insurer must show insured's knowledge of substantial probability to bar coverage (fortuity))
- Aluminum Co. of Am. v. Aetna Cas. & Sur. Co., 998 P.2d 856 (Wash. 2000) (fortuity and policy coverage limitations in all-risk policies)
- Frank Coluccio Constr. Co., Inc. v. King Cnty., 150 P.3d 1147 (Wash. 2007) (fortuity principle; fact-intensive inquiry)