Safeco Insurance Co., Appellant V. Cobalt Boats, Llc., Respondent

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
No. 74622-7-1	SAFECO INSURANCE CO. OF
AMERICA, a New Hampshire
corporation,
Appellant,
v.
COBALT BOATS, LLC, a Delaware
limited liability company,
Respondent.
DIVISION ONE
UNPUBLISHED OPINION
FILED: 	January 30, 2017
C.
Leach, J. — In September 2012, Albert Duenas's boat sank while it was
moored at a 	Kirkland 	marina. 	After 	Safeco Insurance Company of America
reimbursed 	Duenas, 	it brought this 	insurance subrogation action against the
boat's 	manufacturer, 	Cobalt 	Boats 	LLC. 	Safeco 	appeals 	the 	trial 	court's
summary dismissal 	of 	its 	breach 	of express warranty claim 	against Cobalt.
Safeco fails to demonstrate any genuine issue of material fact about the scope of
the warranty or identify any structural defect required for the warranty to apply.
Accordingly, we affirm.
FACTS
In August 2007, Albert Duenas purchased a 2007 Cobalt 232, a 23-foot
recreational boat. 	Cobalt had outfitted the boat with a sterndrive manufactured
by Mercury Marine.

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A sterndrive combines features of both 	inboard and outboard engines.
The engine sits forward of the stern, inside the hull, while the outboard drive lies
outside the hull. 	The transom forms the back of the hull and separates the
inboard and outboard components. 	The transom 	housing 	is the part of the
sterndrive attached to the transom and 	helps to secure the sterndrive to the
boat.1
When Deunas bought the boat, Cobalt gave him a certificate of limited
warranty, which states as follows,
Ten 	(10) 	Year 	Limited 	Transferrable 	Warranty 	on 	Hull 	and
Deck. 	Cobalt warrants 	that the 	hull and 	deck 	including floor,
stringers, bulkheads, motor mounts, transom and deck/hull joints of
a 	new Cobalt boat are free from structural defects in material and
workmanship under normal, 	non-racing and 	non-commercial use
for a period of (10) years from the date of delivery to the original
retail purchaser.
Two (2) Year Limited Transferable Warranty on Gelcoat Finish,
Upholstery, 	Components 	Not 	Separately 	Warranted 	by 	the
Manufacturer 	and 	All 	Components 	Manufactured 	by Cobalt
Other Than the Hull and Deck. 	Cobalt warrants that the gelcoat
finish, 	upholstery, 	components 	not separately warranted 	by 	the
manufacturers thereof and all components manufactured by Cobalt
with respect to a new Cobalt boat are free from structural defects in
material 	and 	workmanship 	under 	normal, 	non-racing 	and 	non
commercial 	use for a 	period of two (2) years from 	the date of
delivery of such Cobalt boat to the original retail purchaser.
1 The 	parties 	also 	call the 	transom 	housing 	the 	transom 	shield, 	the
transom assembly, and the gimbal housing. 	For purposes of deciding this case,
these terms are interchangeable.
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NO. 74622-7-1 / 3
The warranty also contains a limitation-of-remedies clause. 	It provides, in
part,
COBALT'S ONLY RESPONSIBILITY, AND THE OWNER'S ONLY
REMEDY, 	IS 	REPAIR AS 	DESCRIBED 	IN THIS WARRANTY.
COBALT 	SHALL 	NOT 	BE 	LIABLE 	FOR 	INCIDENTAL,
CONSEQUENTIAL, INDIRECT OR SPECIAL DAMAGES.
In September 2012, Duenas's boat sank. 	Experts retained by Safeco and
Cobalt agree that the bolts connecting the transom housing to the transom were
loose. 	An 	expert 	retained 	by 	Cobalt's 	insurer 	concluded, 	"Based 	on 	my
investigation, it appears the sinking was caused by the transom shield being
loose and flexing during usage resulting in the deterioration of the transom shield
gasket and water ingress." 	Safeco's expert similarly concluded that bolts used
on the transom housing were loose, finding also that the bolts had likely been
loose 	since the time 	of 	manufacture. 	Thus, 	for 	purposes of the 	summary
judgment motion, the parties agree that water leaked into the boat due to the
loose transom housing and caused it to sink.
After 	Safeco 	paid 	Duenas 	for 	the 	loss 	of 	the 	boat, 	it brought 	this
subrogation action against Cobalt. 	Safeco claimed that Cobalt breached the
express 10-year warranty on the hull and deck.
Cobalt moved for summary judgment. 	The trial court initially decided that
an issue of fact existed about the application of the warranty to the transom
housing. 	But the court still granted the motion because it found the warranty's
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NO. 74622-7-1 / 4
limitation 	of 	remedies 	provision 	enforceable 	and 	Safeco's 	delay 	in seeking
repairs barred Safeco's claims under the doctrine of laches. 	Both parties moved
for reconsideration. 	The trial court denied Safeco's motion for reconsideration.
But it granted Cobalt's motion and again granted summary judgment in Cobalt's
favor, this time holding that no material issue of fact existed about the application
of the warranty to the transom 	housing. 	Safeco appeals the order granting
summary judgment, the order denying its motion for reconsideration, and the
order granting Cobalt's motion for reconsideration.
STANDARD OF REVIEW
A party moving for summary judgment has the initial burden to show no
genuine issue of fact exists.2 	The burden then shifts to the nonmoving party to
"set forth specific facts to rebut the moving party's contentions and show that a
genuine issue as to a material fact exists."3 	Summary judgment is proper if,
viewing the facts and reasonable inferences in the light most favorable to the
nonmoving party, no genuine issues of material fact exist and the moving party is
entitled to judgment as a matter of law.4 A genuine issue of material fact exists if
reasonable minds could differ regarding the facts controlling the outcome of the
2 Young v. Key Pharm., Inc., 112 Wn.2d 216, 225, 770 P.2d 182 (1989).
3 Allard v. Bd. of Regents of Univ. of Wash., 25 Wn. App. 243, 247, 606
P.2d 280 (1980).
4 CR 56(c); Michak v. Transnation Title Ins. Co.. 148 Wn.2d 788, 794-95,
64 P.3d 22 (2003).
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NO. 74622-7-1 / 5
litigation.5 	We review summary judgment orders de novo, engaging in the same
inquiry as the trial court.6 	We may, however, affirm summary judgment on any
basis established by the pleadings and supported by the proof.7
ANALYSIS
The 	10-year 	warranty 	covers 	"structural 	defects 	in 	material 	and
workmanship" to the "hull and deck." 	Cobalt claims that this warranty does not
cover the condition that caused the boat to sink. We agree.
Washington 	follows 	the 	objective 	manifestation 	theory 	of 	contract
interpretation.8 	The court's primary goal in interpreting a contract is to ascertain
the parties' intent from the ordinary meaning of the words in the contract.9 "'An
interpretation which gives effect to all of the words in a contract provision is
favored 	over 	one 	which 	renders 	some 	of 	the 	language 	meaningless 	or
ineffective.'"10 	In addition, a reasonable interpretation of a contract must prevail
over an unreasonable one.11
5 Hulbert v. Port of Everett. 159 Wn. App. 389, 398, 245 P.3d 779 (2011).
6 Michak, 148 Wn.2d at 794.
7 LaMon v. Butler, 112Wn.2d 193, 200-01, 770 P.2d 1027(1989).
8 Hearst Commc'ns, Inc. v. Seattle Times Co., 154 Wn.2d 493, 503, 115
P.3d 262 (2005).
9 Hearst, 154 Wn.2d at 503.
10 GMAC v. Everett Chevrolet, Inc., 179 Wn. App. 	126, 135, 317 P.3d
1074 (2014) (quoting Seattle-First Nat'l Bank v. Westlake Park Assocs., 42 Wn.
App. 269, 274, 711 P.2d 361 (1985)).
11 Bvrne v. Ackerlund, 108 Wn.2d 445, 453-54, 739 P.2d 1138 (1987).
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Here, 	summary judgment is proper because Safeco 	has 	not supplied
evidence that the condition that caused the boat to sink was a structural defect.
Even if it had, that condition did not involve a part of the "hull and deck" covered
by the warranty
First, we note that according to its plain language, the 10-year warranty
covers only structural defects. 	A structural defect is a defect that concerns the
design or fabrication of a boat component as opposed to its installation. 	Safeco
alleges that the transom 	housing 	bolts were 	not 	adequately tightened. 	But
Safeco makes no claim that bolts or any other parts of the boat were defective in
design or manufacture. 	Safeco only alleges improper tightening of bolts during
the 	installation 	of 	the 	transom 	housing. 	Thus, 	Safeco 	has 	not 	introduced
evidence of a structural defect.
Safeco 	maintains 	that 	a 	"structurally 	sound" 	transom 	does 	not 	leak.
Safeco relies on the undisputed fact that the water entered the boat through a
hole in the transom. 	But Cobalt attached the outdrive to the hull through a hole in
the transom, so a transom with a 	hole is not necessarily defective. 	Further,
Safeco's expert admitted that the transom "was not deformed at all" and "looked
pristine." 	Thus, although the water that caused the sinking entered the boat
through the transom, Safeco has raised no question of fact as to whether the
transom itself was defective.

NO. 74622-7-1 / 7
Second, even if we considered the condition of the loose transom housing
bolts a structural defect, the 10-year warranty would not apply because the bolts
and transom housing are not part of the "hull and deck." 	The warranty states,
"Cobalt 	warrants 	that 	the 	hull 	and 	deck 	including . . . motor 	mounts 	[and]
transom ... of a new Cobalt boat are free from structural defects." 	Safeco fails
to show that the transom housing is either a "transom" or a "motor mount."
Safeco claims that the warranty includes anything permanently bolted to
the transom, such as the transom housing. 	But the text of the warranty does not
support Safeco's interpretation. 	The "hull and deck" warranty lists equipment that
the warranty covers. 	Cobalt does not claim that the list is exclusive, but the list
indicates what equipment Cobalt intended the warranty to cover. 	Significantly,
Cobalt manufactures each item listed. 	Mercury Marine, however, manufactures
the 	transom 	housing. 	We 	conclude 	that 	under 	the 	plain 	language 	of the
warranty, Cobalt did not intend the 10-year warranty to cover equipment that it
did not 	manufacture when the warranty lists 	only equipment that Cobalt did
manufacture. 	Therefore, we disagree with Safeco's assertion that "transom"
includes features that are permanently bolted to the transom, like the transom
housing.
Safeco's contention that the transom housing is a "motor mount" fails for a
similar reason. 	According to Safeco, because the transom housing helps mount
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NO. 74622-7-1 / 8
the engine to the boat, it is a motor mount and is thus covered by the warranty.
However, while Cobalt manufactured the motor mounts, those are installed in the
hull forward 	of the transom 	and 	the engine is bolted to 	them. 	It does 	not
manufacture the transom housing, and it does not secure the engine to the hull.
Thus, the transom housing and its attendant bolts cannot be considered "motor
mounts" in this case.
Further, Safeco's contention that the 10-year warranty covers items that
are attached to the hull or deck would make the 2-year warranty superfluous.
"An interpretation of a contract that gives effect to all provisions is favored over
an 	interpretation that renders a 	provision ineffective."12 	The 	2-year warranty
covers 	"components 	not 	separately 	warranted 	by 	the 	manufacturer" 	and
"components manufactured by Cobalt other than the hull and deck." 	(Emphasis
omitted.) An interpretation of the 10-year warranty that covers components other
than the "hull and deck" which are attached to the hull and deck—such as the
transom housing—would mean that much of the boat's equipment falls 	under
both the 10-year and 2-year warranties. 	This interpretation is not reasonable.
Because Safeco has not identified a structural defect or shown that the
10-year warranty covers the transom housing, we conclude that the warranty
does not apply to the condition that caused the boat to sink. 	Because we resolve
12 Snohomish County Pub. Transp. Benefit Area Corp. v. FirstGroup Am.,
Inc., 173 Wn.2d 829, 840, 271 P.3d 850 (2012).
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NO. 74622-7-1 / 9
this case on this basis, we do not reach the questions involving laches, the
limitation-of-remedies clause, or Safeco's motion for reconsideration, which only
addressed 	the 	laches 	issue. 	Because we 	agree with 	the trial 	court's final
decision about the scope of the warranty, it properly granted Cobalt's motion for
reconsideration.
Because 	Safeco 	has 	not 	raised 	an 	issue 	of material fact, 	we 	affirm
summary judgment in favor of Cobalt.
WE CONCUR:
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