Zurich American Ins., Et Al., Resp/cross-apps vs. Ledcor Industries, Inc., Et Al., App/cross-resp

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
ZURICH AMERICAN INSURANCE
COMPANY, a foreign insurance
company,
Respondent/Cross-Appellant,
V.
LEDCOR INDUSTRIES (USA) INC., a
Washington corporation,
ADMIRAL WAY, LLC, a Washington
limited liability company, and SQl, INC.,
a Washington corporation,
Appellants/Cross-Respondents.
No. 76490-0-I
DIVISION ONE
ORDER DENYING MOTION
FOR CLARIFICATION!
RECONSIDERATION,
WITHDRAWING &
SUBSTITUTING OPINION
LEDCOR INDUSTRIES (USA) INC., a
Washington corporation,
V.
Appellants,
AMERICAN INTERNATIONAL
SPECIALTY LINES INSURANCE
COMPANY, INC., a foreign insurance
company; CAMBRIDGE INTEGRATED
SERVICES GROUP, INC., a foreign
corporation; LIBERTY INSURANCE
UNDERWRITERS, INC., a foreign
insurance company; AIU
COMMERCIAL INSURANCE
COMPANY OF CANADA, a foreign
insurance company; LEXINGTON
INSURANCE COMPANY, a foreign
insurance company; LIBERTY
SURPLUS INSURANCE

No. 76490-0-1/2
CORPORATION, a foreign insurance
company; HARTFORD PROPERTY
AND CASUALTY COMPANY, a foreign
insurance company; and
CONTINENTAL WESTERN
INSURANCE COMPANY, a foreign
insurance company,
Third-Party Defendants,
VIRGINIA SURETY COMPANY, INC., a
foreign insurance company;
TRANSPORTATION INSURANCE
COMPANY, a foreign insurance
company; TRANSCONTINENTAL
INSURANCE COMPANY, a foreign
insurance company; NORTH PACIFIC
INSURANCE COMPANY, a foreign
insurance company; and FIRST
MERCURY INSURANCE COMPANY, a
foreign insurance company,
Respondents.
Appellants/cross respondents Ledcor Industries (USA) Inc, Admiral Way LLC,
and SQl, Inc. have filed a motion for clarification and/or reconsideration of our opinion
issued December 10, 2018. The court has considered the motion and determined that
the motion for clarification and/or reconsideration should be denied with the exception of
the following amendments, and that the opinion filed on December 10, 2018 should be
withdrawn and an unpublished substitute opinion filed.
The opinion should be amended as follows:
(1) Add a paragraph to page 38 which reads:
“D. Attorney Fees on Appeal
2

No. 76490-0-1/3
Ledcor requests attorney fees under the Olympic Steamship
doctrine. Olympic S.S. Co., Inc. v. Centennial Insur. Co., 117
Wn.2d 37, 53, 811 P.2d 673 (1991). Because several claims
remain to be resolved on remand as to VSC and Transportation, we
conclude that an award of fees on appeal is premature and should
await the outcome of the proceedings on remand, to be determined
by the trial court. ~ Mut. of Enumclaw v. T&G Constr. Inc., 165
Wn.2d 255, 274, 199 P.3d 376 (2008) (“Inasmuch as we are
remanding two coverage issues to the coverage trial court, the
award of Olympic Steamship attorney fees must abide by that
court’s ultimate rulings.”)”
(2) Page 4, third sentence of the third full paragraph shall be amended to
provide:
“The sale of condominiums began in April 2013 soon thereafter.”
(3) Page 15, third sentence of the first full paragraph shall be amended to
provide:
“Zurich provided the attorney of for Ledcor’s own choosing for their
defense.”
(4) Page 16, first sentence of the first full paragraph shall be amended to
provide:
“Ledcor remained independently represented by counsel of
its choice, funded by Zurich, and Ledcor does did not contend ~t
that time its defense counsel was ineffective.”
(5) Page 20, first sentence of the first full paragraph shall be amended to
provide:
“Strictly construing the exception against VSC, because the
date of completion falls within the term of VSC’s policy, VSC had a
duty to investigate and give Admiral Way Ledcor the benefit of the
doubt.”
3

No. 76490-0-1/4
Now, therefore, it is hereby
ORDERED that motion for clarification and/or reconsideration is denied.
It is further
ORDERED the amendments to the opinion are hereby adopted.
It is further
ORDERED that the opinion of this court filed December 10, 2018 is withdrawn
and a unpublished substitute opinion be filed.
Datedthis _____ dayof ________ 2019.
( •1

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
ZURICH AMERICAN INSURANCE 	No. 76490-0-I
COMPANY, a foreign insurance
company,
Respondent/Cross-Appellant,
DIVISION ONE
V.
LEDCOR INDUSTRIES (USA) INC., a UNPUBLISHED OPINION
Washington corporation,
ADMIRAL WAY, LLC, a Washington
limited liability company, and SQl, INC., FILED: March 18, 2019
a Washington corporation,
Appellants/Cross-Respondents.
LEDCOR INDUSTRIES (USA) INC., a
Washington corporation,
Appellants,
V.
AMERICAN INTERNATIONAL
SPECIALTY LINES INSURANCE
COMPANY, INC., a foreign insurance
company; CAMBRIDGE INTEGRATED
SERVICES GROUP, INC., a foreign
corporation; LIBERTY INSURANCE
UNDERWRITERS, INC., a foreign
insurance company; AIU

No. 76490-0-1/2
COMMERCIAL INSURANCE
COMPANY OF CANADA, a foreign
insurance company; LEXINGTON
INSURANCE COMPANY, a foreign
insurance company; LIBERTY
SURPLUS INSURANCE
CORPORATION, a foreign insurance
company; HARTFORD PROPERTY
AND CASUALTY COMPANY, a foreign
insurance company; and
CONTINENTAL WESTERN
INSURANCE COMPANY, a foreign
insurance company,
Third-Party Defendants,
VIRGINIA SURETY COMPANY, INC., a
foreign insurance company;
TRANSPORTATION INSURANCE
COMPANY, a foreign insurance
company; TRANSCONTINENTAL
INSURANCE COMPANY, a foreign
insurance company; NORTH PACIFIC
INSURANCE COMPANY, a foreign
insurance company; and FIRST
MERCURY INSURANCE COMPANY, a
foreign insurance company,
Respondents.
MANN, A.C.J. — This is one of two closely connected insurance coverage appeals
arising out of the construction of “The Admiral,” a mixed use condominium building in
West Seattle.1 The appellant in this case was the general contractor, Ledcor Industries
(USA), Inc. (Ledcor). The building owner and developer, Admiral Way LLC (Admiral
Way), contracted with Ledcor for construction of the building. Ledcor in turn contracted
with several subcontractors, including The Painters, Inc. (The Painters) and SQl, Inc.
(SQl).
1 See Admiral Way, LLC v. Zurich American Ins. Co., No. 76405-5-I (Wash. Ct. App. Dec. 10,
2018) (unpublished).
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No. 76490-0-1/3
After the Admiral Way Condominium Owners’ Association (COA) sued Admiral
Way and Ledcor in 2007 for construction defects, Ledcor tendered the claim to its
insurers and its subcontractors’ insurers. After responding and defending against the
COA’s claims under a reservation of rights, Zurich American Insurance Company
(Zurich) filed a declaratory judgment action against Ledcor claiming it did not owe
coverage under its policies. Ledcor responded by filing counterclaims and third-party
causes against multiple insurers claiming bad faith and violations of the Consumer
Protection Act (CPA)2, and the Insurance Fair Conduct Act (IFCA)3.
Ledcor appeals the trial court’s decision granting summary judgment and
dismissing Zurich, Virginia Surety Company (VSC), First Mercury Insurance Company
(FMIC), North Pacific Insurance Company (North Pacific), and Transportation Insurance
Company (Transportation). We reverse dismissal of Ledcor’s claims against VSC and
Transportation. We affirm dismissal of Zurich, FM IC, and North Pacific.
FACTS
Admiral Way is the owner and developer of “The Admiral” a mixed use, four-story
building in West Seattle with street level retail, 60 condominiums and an underground
parking garage. On April 3, 2001, Admiral Way and Ledcor entered into a construction
contract for construction of the building. Ledcor was the general contractor. Ledcor in
turn contracted with various specialty subcontractors. Relevant to this appeal, Ledcor
subcontracted with SQl to install the original roof, and in 2005, Ledcor again
subcontracted with SQl to conduct substantial roofing repair. Ledcor subcontracted with
2 Ch. 19.86 RCW
~ RCW 48.30.O1O-.015
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No. 76490-0-1/4
The Painters to provide labor, materials, and equipment for a “Gacoflex” waterproofing
system on the balconies and courtyards of The Admiral.
The contract between Ledcor and Admiral Way required Ledcor to obtain
commercial general liability (CGL) insurance naming Admiral Way as an additional
insured. The contract between Ledcor and its subcontractors required that the
subcontractors each obtain CGL insurance naming Ledcor as an additional insured.
Ledcor purchased a CGL insurance policy from VSC for the policy period of
December 1, 2003 through December 1, 2004. Ledcor also purchased two consecutive
annual CGL policies from Zurich, for the policy periods from December 1, 2005 through
December 1, 2007. SQl purchased three consecutive annual CGL policies from
Transportation covering the period from May 1, 2000 through May 1, 2003. SQl also
purchased CGL policies from FMIC for the policy period of May 1, 2006 to May 1, 2008.
The Painters purchased CGL policies from North Pacific for the period of December 26,
2001 to December 26, 2002.
Construction of The Admiral began in 2001. The City of Seattle issued a
certificate of occupancy in March 2003. The sale of condominiums began soon
thereafter. After a contract dispute, on February 10, 2004, Ledcor and Admiral Way
executed a contract addendum that resolved their remaining disputes about payment
and performance of Ledcor’s work. The parties agreed in the addendum that the project
was complete other than specific items in an attached punch list that were to be
completed by February 20, 2004.
In 2001, Admiral Way retained Morrison Hershfield (Morrison) as a building
envelope consultant to provide recommendations to the project architect on balcony and
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No. 76490-0-1/5
wall interlace details. Ledcor also retained Morrison and received a report from the firm
in December 2002. Morrison concluded there were significant areas where there was
“inappropriate design, and to a lesser degree inappropriate construction that in our
opinion makes the building high risk for premature building envelope failure.” In March
2003, Morrison recommended substantial repairs to the building’s brick veneer and pre
cast column caps. Morrison believed that if the recommended work was not done, the
walls would “remain susceptible to water entry” that “would lead to deterioration of the
sheathing and corrosion of the framing,” and “result in a compromise of the structural
integrity.” Morrison further reported, “[w]e are of the opinion that if not address[ed] at
this time, these as-built details will require remediation within the next five years.”
Morrison expressed similar concerns with other recommended work.
On February 28, 2007, the COA sent Admiral Way a notice of construction defect
claim alleging that the building, or components of the building, were defectively
designed and/or constructed, resulting in water intrusion that affected residential units,
commercial spaces, and common areas throughout the project. This notice was
followed by the filing of a complaint in the King County Superior Court. In its complaint,
the COA alleged that damage to the building began after the completion of construction:
As a result of Declarant’s acts and omissions, property damage to
the Condominium has occurred to that part of real property on which
contractors or subcontractors working on Declarant’s behalf have
completed their operations. Such property damage has also occurred to
that part of real property that must be restored, repaired or replaced
because of the work of others performed on Declarant’s behalf. The
property damage is continuous and ongoing throughout the Condominium.
Damage may have commenced at or shortly after the completion of each
building or element of infrastructure, and may be continuing to the present.
-5-

No. 76490-0-1/6
In response to the COA complaint Admiral Way filed a third-party complaint
against Ledcor alleging Ledcor and its subcontractors were responsible for the defective
work.
Ledcor initially tendered defense of the action to its own insurers Zurich and
VSC. Zurich accepted Ledcor’s tender and assigned counsel. Zurich defended Ledcor
in the underlying case, from 2007 through settlement in July 2009, while expressly
reserving its right to contest coverage under a reservation of rights.
Ledcor also tendered the action to FMIC, Transportation, and North Pacific, for
defense and indemnity for damages arising from SQl’s and The Painters’ work. FMIC
accepted SQl’s tender under a reservation of rights and contributed to SQl’s defense.
FMIC did not defend nor indemnify Ledcor. Transportation and North Pacific denied
coverage. VSC originally denied coverage, then agreed to defend Ledcor under a
reservation of rights just as the final settlement was being reached. VSC did not pay
any defense costs and did not indemnify.
Zurich filed the underlying action in March 2009 seeking declaratory judgment of
its obligations to defend and indemnify its named insured, Ledcor, and the additional
insured Admiral Way. Ledcor filed counterclaims for declaratory relief, insurance bad
faith, and violations of the CPA and the IFCA. Ledcor’s counterclaims included third
parties FMIC, Transportation, North Pacific, and VSC, as well as multiple other insurers.
Meanwhile, the COA, Admiral Way, and Ledcor settled their dispute over the
condominium damage on July 28, 2009. The COA’s claims against Admiral Way and
Ledcor settled for $4,700,000. The settlement was contingent upon AIG, another of
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No. 76490-0-117
Ledcor’s insurers funding $2,550,000. Ledcor agreed to pay $150,000, and Marc Gartin
on behalf of Admiral Way agreed to pay $2,000,000.
The underlying declaratory judgment action proceeded with discovery and
motions. In June 2010, the trial court granted Zurich’s motions for partial summary
judgment on (1) coverage under the policy in effect between December 1, 2006 and
December 1, 2007 and (2) dismissing Ledcor’s counterclaims for insurance bad faith,
CPA, and IFCA violations. The trial court also denied Ledcor’s motion for partial
summary judgment against Zurich for insurance bad faith and CPA violations. At the
same time, the trial court granted VSC’s motion for summary judgment and dismissed
Ledcor’s claims against VSC.
In March 2011, the trial court dismissed Ledcor’s remaining counterclaims
against Zurich, concluding that Zurich had no duty to defend or indemnity Ledcor with
respect to the COA’s construction detect claims.
In April 2011, the trial court granted FMIC’s motion for summary judgment
concluding Ledcor was not entitled to coverage under the policy issued by FMIC to SQl
as a matter of law.
In July 2011, the trial court granted North Pacific’s motion for summary judgment
and dismissed Ledcor’s third party claims related to its policy issued to The Painters.
In February 2014, the trial court granted Transportation’s motion for partial
summary judgment and dismissed Ledcor’s breach of contract claims for policies issued
to SQl.
In a separate action, Ledcor sued its subcontractors. Through a settlement
between Ledcor and SQl, Ledcor took assignment ot SQl’s direct claims against FMIC.
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No. 76490-0-1/8
On October 31, 2016, the trial court granted FM IC’s motion for summary judgment
agreeing that FMIC did not have an obligation to cover SQl’s defense against Ledcor’s
claim and that the policy FMIC issued to SQl was not applicable, and even if it were, the
continuous or progressive injury or damage exclusion barred recovery.
Ledcor appeals.
ANALYSIS
We review summary judgment orders de novo, engaging in the same inquiry as
the trial court. Keck v. Collins, 184 Wn.2d 358, 370, 357 P.3d 1080 (2015). Summary
judgment is proper if, after viewing all facts and reasonable inferences in the light most
favorable to the nonmoving party, there are no genuine issues as to any material fact
and the moving party is entitled to judgment as a matter of law. CR 56(c); Elcon Const.
Inc. v. E. Wash. Univ., 174 Wn.2d 157, 164, 273 P.3d 965 (2012). “The moving party
on summary judgment must produce factual evidence showing that it is entitled to
judgment as a matter of law. The burden then shifts to the nonmoving party to set forth
facts showing that there is a genuine issue of material fact in dispute.” Hartford Ins. Co.
v. Ohio Cas. Ins. Co., 145Wn. App. 765, 779, 189 P.3d 195 (2008).
A party opposing a motion for summary judgment may not rely on speculation,
argumentative assertions that unresolved factual issues remain, or its affidavits
considered at face value. Rather, “the nonmoving party must set forth specific facts that
sufficiently rebut the moving party’s contentions and reveal that a genuine issue as to a
material fact exists.” Herman v. Safeco Ins. Co. of Am., 104 Wn. App. 783, 787-88, 17
P.3d 631 (2001). “Ultimate facts, conclusions of fact, conclusory statements of fact or
legal conclusions are insufficient to raise a question of fact.” Ainsworth v. Progressive
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No. 76490-0-119
Cas. Ins. Co., l8OWn. App. 52, 61, 322 P.3d 6(2014) (quoting Snohomish Countyv.
Rucici, 115 Wn. App. 218, 224, 61 P.3d 1184 (2002)). “On summary judgment review,
we may affirm the trial court’s decision on any basis within the record.” Davidson Series
& Assocs. v. City of Kirkland, 159 Wn. App. 616, 624, 246 P.3d 822 (2011).
The outcome of this case depends on a proper interpretation of the various
insurance policies issued to Ledcor and its subcontractors. Interpretation of insurance
policies is a question of law we review de novo. Overton v. Consol. Ins. Co., 145 Wn.2d
417, 424, 38 P.3d 322 (2002). We construe insurance policies as contracts.
Weyerhaeuser Co. v. Commercial Union Ins. Co., 142 Wn.2d 654, 665, 15 P.3d 115
(2000). “Every insurance contract shall be construed according to the entirety of its
terms and conditions as set forth in the policy, and as amplified, extended, or modified
by any rider, endorsement, or application attached to and made a part of the policy.”
RCW 48.18.520. We consider the policy as a whole, giving it a “fair, reasonable, and
sensible construction as would be given to the contract by the average person
purchasing insurance.” Am. Nat’I Fire Ins. Co. v. B & L Truckinci & Constr. Co., 134
Wn.2d 413, 427-28, 951 P.2d 250 (1998). Where possible, we harmonize clauses that
seem to conflict in order to give effect to all of the contract’s provisions. Realm, Inc. v.
City of Olympia, 168 Wn. App. 1, 5, 277 P.3d 679 (2012).
“If the policy language is clear and unambiguous, we must enforce it as written;
we may not modify it or create ambiguity where none exists.” Quadrant Corp. v. Am.
States Ins. Co., 154 Wn.2d 165, 171, 110 P.3d 733 (2005). If a term is defined in a
policy, “the term should be interpreted in accordance with that policy definition.” Kitsap
County v. Allstate Ins. Co., 136 Wn.2d 567, 576, 964 P.2d 1173 (1998). A clause is
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No. 76490-0-1/10
ambiguous only “when, on its face, it is fairly susceptible to two different interpretations,
both of which are reasonable.” Quadrant, 154 Wn.2d at 171. If a clause is ambiguous,
we may rely on extrinsic evidence of the intent of the parties to resolve the ambiguity.
Weyerhaeuser, 142 Wn.2d at 666 (citing B & L Trucking, 134 Wn.2d at 427-28). Any
ambiguity remaining after examination of the applicable extrinsic evidence is resolved
against the insurer and in favor of the insured. Weyerhaeuser, 142 Wn.2d at 666.
However, while exclusions should be strictly construed against the drafter, a strict
application should not trump the plain, clear language of an exclusion such that a
strained or forced construction results. Weyerhaeuser Co., 142 Wn.2d at 666.
Zurich
Ledcor contends that the trial court erred in concluding that Zurich did not have a
duty to defend under the CGL policies and in dismissing Ledcor’s claims for insurance
bad faith, and for violations of the CPA and the IFCA. We disagree.
A. Dutyto Defend
The duty to defend is different from and broader than the duty to indemnify. Am.
Best Food, Inc. v. Alea London, 168 Wn.2d 398, 404, 229 P.3d 693 (2010); Expedia,
Inc. v. Steadfast Ins. Co., 180 Wn.2d 793, 802, 329 P.3d 59 (2014). The duty to defend
is one of the main benefits of an insurance contract. Safeco Ins. Co. of Am. v. Butler,
118 Wn.2d 383, 392, 823 P.2d 499 (1992). “While the duty to indemnify exists only if
the policy covers the insured’s liability, the duty to defend is triggered if the insurance
policy conceivably covers allegations in the complaint.” Expedia, 180 Wn.2d at 802.
“The duty to defend arises when a complaint against the insured, construed liberally,
alleges facts that could, if proven, impose liability upon the insured within the policy’s
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No. 76490-0-I/li
coverage.” Expedia, 180 Wn.2d at 803 (quoting Am Best Food, 168 Wn.2d at 404-05).
Exclusionary clauses in the policy are “strictly construed against the insurer.” Expedia,
180 Wn.2d at 803. “If the complaint is ambiguous, it will be liberally construed in favor
of triggering the insurer’s duty to defend.” Truck Ins. Exch. v. Vanport Homes, 147
Wn.2d 751, 760, 5 P.3d 276 (2002).
The duty to defend is generally determined by looking at the “eight corners” of
the insurance contract and the underlying complaint. The insurer is permitted to utilize
the “eight corners” rule to determine whether, on the face of the complaint and the
insurance policy, there is an issue of fact or law that could conceivably result in
coverage under the policy. Expedia, 180 Wn.2d at 803. “There are two exceptions to
this rule, and both favor the insured.” Expedia, 180 Wn.2d at 803. First, “if it is not clear
from the face of the complaint that the policy provides coverage, but coverage could
exist, the insurer must investigate and give the insured the benefit of the doubt that the
insurer has a duty to defend.” Woo v. Fireman’s Fund Ins. Co., 161 Wn.2d 43, 53, 164
P.3d 454 (2007). Second, “if the allegations in the complaint conflict with facts known to
the insurer or if the allegations are ambiguous, facts outside the complaint may be
considered.” Expedia, 180 Wn.2d at 803-04 (citing Woo, 161 Wn.2d at 54).
Ledcor was directly insured by Zurich under two general liability insurance
policies. The first was effective from December 1, 2005 to December 1, 2006. The
second was effective from December 1, 2006 to November 30, 2007. Each Zurich
policy contained two endorsements that Zurich argues barred coverage for the COA’s
claims: a residential building exclusion and an exclusion for continuing damage that
began before the policy was issued. The burden is on the insurer to show that the loss
—11—

No. 76490-0-1/12
is excluded under the policy. Diamaco, Inc. v. Aetna Cas. & Sur. Co., 97 Wn. App. 335,
337, 983 P.2d 707 (1999).
The policies issued by Zurich to Ledcor contain an exclusion for designated work
on residential buildings. The first policy (December 1, 2005 through December 1, 2006)
excluded coverage for property damage caused by “your work” and defined “your work”
as:
This exclusion only applies to “your work” in connection with the
construction, reconstruction, remodeling, or repair of any “residential
building”. For the purpose of this endorsement, “residential building”
means: 1. Any single-family dwelling, including town homes or
townhouses, other than military base housing, and 2. Any multi-family
dwelling, including condominiums or cooperatives, duplexes, triplexes or
four-plexes; and 3. Any apartments, assisted living facilities or resort
timeshares, if made of wood frame, or partially made of wood frame
construction; and 4. Any other structure which is attached to any such
“residential building.” The determination as to the type of structure will be
made at the time a claim is made or suit is brought.[41
The endorsement in Zurich’s second policy (December 1, 2006 through
December 1, 2007) defined “your work” as follows:
This exclusion only applies to “your work” in connection with the
construction, reconstruction, remodeling, or repair of any “residential
building”. For the purpose of this endorsement, “residential building”
means:..
1. Any single-family dwelling, including but not limited to houses, town
homes or townhouses, or
2. Any multi-family dwelling, including but not limited to condominiums,
cooperatives, duplexes, triplexes or fourplexes; or
3. Any structure that combines any other use with residential dwellings
including but not limited to, those listed in 1. or 2. above, or
4. Any other structure or improvement which is attached to or ancillary to
any structure identified in 1., 2., or 3. Above, constructed,
reconstructed, remodeled, or repaired with the intent that title to each
individual dwelling or dwelling unit will be transferred separately to
each owner.
~‘ (Emphasis added.)
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No. 76490-0-1/13
Notwithstanding the above, “residential building” does not include any
structure that functions as apartments, time shares, a hotel, a motel, a
nursing home, an assisted living senior housing care facility, a college
campus dormitory, or government housing on military bases.~51
Ledcor argues that The Admiral was not a residential building, but was instead a
“mixed use” building that included street level retail and thus did not fall under the
designated work exclusion. However, the plain language of the residential building
exclusion includes “condominiums” and “[a}ny other structure which is attached to any
such ‘residential building.” The Zurich policy language was broad enough to include
residential buildings that incorporate other “structures.” The Admiral, even with the
attached commercial units at the base, qualifies as a residential building.
Ledcor also argues that because The Admiral includes apartment units, the
residential building exclusion does not apply. While The Admiral does allow 25 percent
of the owners to rent their units out as “apartments,” the units are still within the legal
definition of a condominium. The “intent that title to each individual dwelling or dwelling
unit will be transferred separately to each owner” is still in place, even if some
condominiums are later sublet out as apartments. Ledcor’s argument fails. Because
The Admiral is a defined residential building under both policies, Zurich did not have a
duty to defend or indemnify.
B. Bad Faith
An insurer acts in bad faith if its breach of the duty to defend was unreasonable,
frivolous, or unfounded. See St. Paul Fire & Marine Ins. Co. v. Onvia, Inc., 165 Wn.2d
122, 130, 196 P.3d 664 (2008). Whether an insurer acted in bad faith is generally a
question of fact. Van Nov v. State Farm Mut. Auto. Ins. Co., 142 Wn.2d 784, 796, 16
~ (Emphasis added.)
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No. 76490-0-1/14
P.3d 574 (2001). Accordingly, an insurer is only entitled to dismissal on summary
judgment of a policyholder’s bad faith claim if there are no disputed material facts
pertaining to the reasonableness of the insurer’s conduct under the circumstances, or
the insurance company is entitled to prevail as a matter of law on the facts construed
most favorably to the nonmoving party. Smith v. Safeco Ins. Co., 150 Wn.2d 478, 484,
78 P.3d 1274 (2003).
“An action for bad faith handling of an insurance claim sounds in tort.” Mut. of
Enumclaw Ins. Co. v. Dan Paulson Constr., Inc., 161 Wn.2d 903, 915, 169 P.3d 1,
(2007). Claims of insurer bad faith “are analyzed applying the same principles as any
other tort: duty, breach of that duty, and damages proximately caused by any breach of
duty.” Smith, 150 Wn.2d at 485. “In order to establish bad faith, an insured is required
to show the breach was unreasonable, frivolous, or unfounded.” Kirk v. Mt. Airy Ins.
Co., 134 Wn.2d 558, 560-61, 951 P.2d 1124 (1998).
Ledcor first contends Zurich committed bad faith by denying coverage and
defending under a reservation of rights. Washington law has long favored defending
under a reservation of rights “when the facts or the law affecting coverage is disputed,”
until coverage is settled in a declaratory action. Am. Best Food, 168 Wn.2d at 405.
When defending under a reservation of rights, “the insured receives the defense
promised and, if coverage is found not to exist, the insurer will not be obligated to pay.”
Mut. of Enumclaw, 161 Wn.2d at 914. However, an insurer defending its insured under
a reservation of rights has “an enhanced obligation of fairness toward its insured.” Tank
v. State Farm Fire & Cas. Co., 105 Wn.2d 381, 388, 715 P.2d 1133 (1986). This
enhanced obligation requires that the insurer must: (1) “thoroughly investigate” the claim
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No. 76490-0-1/15
against the insured, (2) “retain competent defense counsel for the insured,” (3) fully
inform the insured of “all developments relevant to his policy coverage and the progress
of his lawsuit,” and (4) “refrain from engaging in any action which would demonstrate a
greater concern for the insurer’s monetary interest than for the insured’s financial risk.”
Tank, 105 Wn.2d at 388.
After Ledcor tendered the claim to Zurich, Zurich agreed to defend Ledcor in the
underlying case under a reservation of rights. Zurich defended Ledcor from 2007
through the settlement in July of 2009. Zurich provided the attorney for Ledcor’s
defense. There is no evidence that Ledcor was unsatisfied with its defense during this
period. The record further demonstrates that Zurich fully investigated the incident,
retained separate counsel to represent both Ledcor and Admiral Way, and fully
informed and participated in settlement activity.6 The only criteria in dispute in this case
is whether Zurich engaged “in any action which would demonstrate a greater concern
for the insurer’s monetary interest than for the insured’s financial risk” during the course
of its defense of Ledcor, and in making its later coverage decision. On this record, we
hold they did not.
Ledcor argues next that Zurich acted in bad faith by filing its declaratory
judgment action before the underlying case brought by the COA was fully resolved. Our
Supreme Court has said, “[t]he insurer ‘may defend under a reservation of rights while
seeking a declaratory judgment that it has no duty to defend,’. . . but it must avoid
seeking adjudication of factual matters disputed in the underlying litigation because
advocating a position adverse to its insured’s interests would ‘constitute bad faith on its
6 Ledcor at one point argues that Zurich did not do an adequate investigation, however that was
related to coverage and not related to its defense of Ledcor. Moreover, Ledcor’s arguments only
demonstrate it disagrees with Zurich’s interpretation of its “residential” clause.
-15-

No. 76490-0-1/16
part.” Mut. of Enumclaw, 161 Wn.2d at 914-15 (quoting 	1 ALLAN D. WINDT, INSURANCE
CLAIMS & DISPUTES: REPRESENTATION OF INSURANCE COMPANIES AND INSUREDS § 8:3, at 8-
11 to -12 (5th ed. 2007)). The court did not go so far as to bar filing a motion for
summary judgment during the course of representation.
In this case, Zurich did not file its summary judgment motion until discovery in the
underlying litigation with the COA was complete and the parties had mediated. The
summary judgment motion was not argued nor decided until long after the final
settlement had been entered. There is no evidence that Zurich’s action filing its motion
for summary judgment interiered with, or sought to adjudicate a factual matter in dispute
in the underlying action to the detriment of Ledcor. Ledcor remained independently
represented by counsel funded by Zurich, and Ledcor did not contend at that time its
defense counsel was ineffective.
Ledcor also argues that Zurich committed bad faith in reaching its coverage
decision. Specifically, Ledcor contends that Zurich’s insurance adjuster transferred
information obtained in the underlying claim to coverage counsel, and utilized it to
Ledcor’s detriment. Ledcor has failed, however, to identify any case law that prohibits
using the same adjuster for both claims. Ledcor has also failed to demonstrate any
confidential or privileged evidence that was provided to Zurich. Zurich provided a
detailed list showing that it was entitled to all of the evidence it received, most of which
was obtainable through the public record. Even on appeal, Ledcor does not identify any
confidential documents that were relied on by Zurich in reaching its coverage decision,
citing the “Morrison Report” and depositions, which were all publically available and
discoverable by Zurich.
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No. 76490-0-1/17
Finally, Ledcor raises Zurich’s pretrial failure to provide the complete defense tile.
Zurich argues that some of the evidence was privileged, however, the trial court
eventually fined Zurich for failing to provide this evidence, and Zurich paid that fine.
Failure to provide this evidence was a discovery violation, however Zurich provided
good faith reasons for its failure to provide the documents in question, and the issue
was resolved by the trial court. A single discovery violation does not rise to the level of
bad faith.7 The insured may not base a bad faith or CPA claim on an insurer’s good
faith mistake. Werlinqer v. Clarendon Nat. Ins. Co., 129 Wn. App. 804, 808, 120 P.3d
593 (2005).
C. CPAandIFCA
Ledcor also asserts that Zurich violated the CPA and the IFCA. To successfully
bring an action under the CPA, a private plaintiff must prove five elements: “(1) unfair or
deceptive act or practice; (2) occurring in trade or commerce; (3) public interest impact;
(4) injury to plaintiff in his or her business or property; and (5) causation.” Ledcor Indus.
(USA), Inc. v. Mut. of Enumclaw Ins. Co., 150 Wn. App. 1, 12, 206 P.3d 1255 (2009). A
denial of coverage does not constitute an unfair or deceptive act or practice and does
not violate the CPA as long as it is based on reasonable conduct of the insurer, even if
the denial ultimately is proved incorrect. Overton, 145 Wn.2d at 417.
~ Admiral Way and Ledcor make much of Zurich’s attempt to recoup defense costs it paid in the
COA lawsuit. In 2013, the Washington Supreme Court disallowed such reimbursement, holding
“[d]isallowing reimbursement is most consistent with Washington cases regarding the duty to defend,
which have squarely placed the risk of the defense decision on the insurer’s shoulders.” Nat’l Sur. Corp.
v. Immunex Corp., 176 Wn.2d 872, 884, 297 P.3d 688 (2013). While reimbursement has been found to
be unavailable, neither Admiral Way nor Ledcor make it clear how Zurich briefly requesting such
reimbursement in 2009 contributes to a bad faith claim. There is no evidence that Zurich pursued these
costs in an unreasonable or frivolous way, or that any damage arose out of this minor addition to Zurich’s
claim. Zurich also argues that Ledcor’s counsel at one point offered to allow Zurich to cover defense
costs.
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No. 76490-0-1/18
The IFCA also does not create an independent cause of action for alleged
regulatory violations in the absence of an unreasonable denial of coverage or benefits.
Perez-Crisantos v. State Farm Fire & Cas. Co., 187 Wn.2d 669, 680, 389 P.3d 476
(2017). Since Ledcor did not demonstrate Zurich’s actions were unreasonable or in bad
faith, its extra-contractual claims against Zurich were properly dismissed.
vsc
Ledcor next contends that the trial court erred in granting summary judgment and
dismissing its claims against VSC. We agree.
Ledcor’s CGL policy from VSC was effective December 1, 2003 to December 1,
2004. Ledcor tendered the COA’s notice of construction defect to VSC on March 23,
2007. Cambridge Integrated Services Group, Inc., a third-party administrator of VSC,
acknowledged receipt of the claim on April 13, 2007 and indicated it was investigating
the matter. On May 16, 2007, VSC responded denying coverage based on several
policy exclusions. After the COA filed its complaint, Ledcor re-tendered the matter to
VSC on September 21, 2007. On July 20, 2009, VSC notified Ledcor that it would be
sending a follow up letter agreeing to participate in Ledcor’s defense under a
reservation of rights. The subsequent letter was never sent. The COA’s claim was
resolved on July 28, 2009.
VSC moved for summary judgment in May 2010 seeking a declaratory judgment
that it had no duty to defend Ledcor. At the same time, Ledcor moved for summary
judgment against VSC. The trial court granted VSC’s motion for summary judgment as
to Ledcor and denied Ledcor’s motion.8
8 Relying on RAP 9.12, VSC moved to strike references in Ledcor’s brief to materials not
specifically listed in the trial court’s order on summary judgment. Generally, “evidence called to the
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No. 76490-0-1/19
A. Duty to Defend
VSC maintains that it did not have a duty to defend nor indemnify under the
“progressive, continuous or intermittent property damage exclusion” (progressive
damage exclusion) and the “other insurance” clause of its policy. We disagree. We
address each in turn, strictly construing the exclusion against VSC. Exredia, 180
Wn.2d at 803.
The progressive damage exclusion has three requirements. For the exclusion to
apply, VSC was required to demonstrate that (1) the property damage “existed or
commenced prior to the inception date of th[e] policy,” or (2) “arose out of any damage,
defect, deficiency, inadequacy or dangerous condition which existed prior to the
inception date of th[e] policy,” and (3) that the damage was included under the defined
“Products—Completed Operations Hazard.” Work under the Products—Completed
Operations Hazard would be deemed completed: ‘When all of the work to be done at
the job site has been completed” or “When that part of the work done at a job site has
been put to its intended use by any person or organization other than another contractor
or subcontractor working on the same project.”
Ledcor’s CGL policy with VSC was effective December 1, 2003 to December 1,
2004. Thus, the progressive damage exclusion would exclude damage that existed or
commenced, or arose out of a condition that existed, prior to December 1, 2003. The
attention of the trial court is properly before us, whether or not it was considered by the trial court.”
Goodwin v. Wright, 100 Wn. App. 631, 648, 6 P.3d 1 (2000). At the time the trial court considered VSC’s
motion it was also reviewing motions and cross motions related to Ledcor’s claims against Zurich. Due to
the complex nature of this case, we decline to apply RAP 9.12 in a manner that would assume that the
trial court granted summary judgment for VSC in a vacuum without considering Ledcor’s own summary
judgment motion or any other evidence. The appellate “rules will be liberally interpreted to promote
justice and facilitate the decision of cases on the merits. Cases and issues will not be determined on the
basis of compliance or noncompliance with these rules except in compelling circumstances where justice
demands.” RAP 	1 .2. We deny VSC’s motion to strike.
-19-

No. 76490-0-1/20
COA’s complaint is vague about when the damage began. The complaint lists multiple
claims of water intrusion damages and defects, and states “the property damage is
continuous and ongoing throughout the Condominium. Damage may have commenced
at or shortly after the completion of each building or element of infrastructure, and may
be continuing to the present.”9 Thus, the relevant date is the “completion” of each
building. It is undisputed that the certificate of occupancy for The Admiral was issued
by the City of Seattle on March 14, 2003, and sale of the condominiums began in April
2003. It is also undisputed that Ledcor and Admiral Way contractually agreed that The
Admiral was not substantially complete until February 2004.
Strictly construing the exception against VSC, because the date of completion
falls within the term of VSC’s policy, VSC had a duty to investigate and give Ledcor the
benefit of the doubt. Woo, 161 Wn.2d at 53. Because a reasonable interpretation of
the facts could result in coverage, the progressive damage exclusion does not apply.
The other insured condition in Ledcor’s policy from VSC provides that the
insurance is excess over “[a]ny other primary insurance available to you covering
liability for damages arising out of the premises or operations for which you have been
added as an additional insured by attachment of an endorsement.” And further,
When this insurance is excess, we will have no duty under CO VERAG ES
A or B to defend the insured against any “suit” if any other insurer has a
duty to defend the insured against that “suit.” If no other insurer defends,
we will undertake to do so, but we will be entitled to the insured’s rights
against all those other insurers.
Ledcor was listed as an additional insured under multiple insurance policies, and
was being represented by two insurance companies that undertook its defense at no
cost to Ledcor. However, there is no evidence that VSC investigated whether other
~ (Emphasis added.)
-20-

No. 76490-0-1/21
insurers were “available” for Ledcor at the time of its initial denial, or that VSC even
believed this provision applied when it denied Ledcor’s claim. VSC did not rely on this
provision in its denial, and VSC did not rely on this provision when it later suggested it
would join the defense alongside the other carriers. If it is not clear from the face of the
complaint that the policy provides coverage, but if coverage could exist, the insurer
must investigate and give the insured the benefit of the doubt that the insurer has a duty
to defend. Woo, 161 Wn.2d at 53. A question of fact remains whether VSC did the
requisite investigation into whether other insurance was available for Ledcor before it
denied coverage. Because there is at least a question of fact whether the progressive
loss exclusion and other insurance provision apply, summary judgment and dismissal of
Ledcor’s claims against VSC was not appropriate.
B. Extra Contractual Claims
Ledcor maintains that VSC acted in bad faith. At the outset, Washington courts
have long held the “insured may maintain an action against its insurer for bad faith
investigation of the insured’s claim and violation of the CPA regardless of whether the
insurer was ultimately correct in determining coverage did not exist.” Coventry
Associates v. Am. States Ins. Co., 136 Wn.2d 269, 279, 961 P.2d 933 (1998). Only if
the alleged claim is clearly not covered by the policy is the insurer relieved of its duty to
defend. Kirk, 134 Wn.2d at 561. The insured bears the burden of demonstrating the
insurer acted in bad faith when it refused to defend its insured by demonstrating that
refusal is “unreasonable, frivolous, or unfounded.” Truck, 147 Wn.2d at 777; Smith, 150
Wn.2d at 486. The insurer is entitled to summary judgment “if reasonable minds could
-21-

No. 76490-0-1/22
not differ that its denial of coverage was based upon reasonable grounds.” Smith, 150
Wn.2d at 486.
Ledcor retained a policy with VSC for primary general liability effective from
December 1, 2003 to December 1, 2004. The Admiral was substantially completed on
either April 2003, or February 2004. The original claim provided to VSC did not state a
specific date as to when damages began, or when the defects developed. It can hardly
be said that the alleged claim was “clearly not covered” by policy. “If the insurer is
unsure of its obligation to defend in a given instance, it may defend under a reservation
of rights while seeking a declaratory judgment that it has no duty to defend.” Truck, 147
Wn.2d at 761. VSC should have done so in this case.
As discussed above, it appears that Ledcor may have been covered under VSC’s
CGL policy, and there remains at least a question of fact as to whether VSC reasonably
investigated whether the two exclusions it relies upon actual excluded coverage.
Dismissal of Ledcor’s bad faith and CPA claim on summary judgment was erroneous.
North Pacific
Ledcor next contends that the trial court erred in dismissing its claims against
North Pacific for coverage under its policy with The Painters. We disagree.
A. Additional Facts
The subcontract between Ledcor and The Painters required Ledcor be named as
an additional insured on The Painters’ insurance:
11.1 SUBCONTRACTOR’ S INSURANCE. Prior to the start of the
Subcontract Work, the Subcontractor shall procure for the Subcontract
Work and maintain in force Workers’ Compensation Insurance, Employer’s
Liability Insurance, Comprehensive Automobile Liability Insurance,
Comprehensive or Commercial General Liability Insurance on an
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No. 76490-0-1/23
occurrence basis, and any other insurance required of Subcontractor
under the Subcontract.
[T]he Contractor, Owner and other parties as required shall be named
as additional insureds on each of these policies except for Workers’
Compensation.
The Subcontractor’s insurance shall include contractual liability insurance
covering the Subcontractor’s obligations under this Subcontract.
The Painters obtained a CGL policy from North Pacific for the policy period from
December 26, 2001, through December 26, 2002. The declarations did not name
Ledcor as an additional insured under the policy. The policy included an automatic
additional insured endorsement that provided:
AUTOMATIC ADDITIONAL INSUREDS
INCLUDING COMPLETED OPERATIONS TO THE EXTENT
REQUIRED BY AN INSURED CONTRACT
This endorsement modifies insurance provided under the following:
COMMERCIAL GENERAL LIABILITY
COVERAGE PART
The following is added to WHO IS INSURED (Section II):
1. To the extent it is required by the terms of an “insured contracV’ which
requires you to add by endorsement as an additional insured or
organization, WHO IS AN INSURED (Section II) is amended to include
as an insured such person or organization (“additional insured”) but
only with respect to:
(a) Vicarious liability arising out of your ongoing operations
performed for the additional insured; or
(b) Liability arising out of any act or omission of the additional
insured for which you have entered into an enforceable “insured
contract” which obligates you to indemnify the additional insured, or
to furnish insurance coverage for the additional insured, and arising
out of your ongoing operations for that additional insured.
With respect to the insurance afforded these additional insureds, the
following additional exclusions apply:
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No. 76490-0-1/24
2. This insurance does not apply to “bodily injury,” or “property damage”
occurring after:
(a) All work, including materials, parts or equipment furnished in
connection with such work, on the project (other than service,
maintenance or repairs), to be performed by or on behalf of the
additional insured at the site of the coverage operations has been
completed; or
(b) That portion of “your work” out of which the injury or damage
arises has been put to its intended use by any person or
organization other than another contractor or subcontractor
engaged in performing operations for a principal as a part of the
same project.
This exclusion does not apply to the extent that an “insured contract”
requires that you assume the tort liability of the additional insured arising
out of a risk that would otherwise be excluded by this exclusion.~10~
Ledcor tendered the COA’s claim to North Pacific on March 10, 2009. North
Pacific did not respond. On May 24, 2010, Ledcor’s counsel sent a 20-day notice letter
under the IFCA, demanding that North Pacific defend and indemnify Ledcor for the
underlying construction defect claims as an additional insured under The Painters’ CGL
policy. On May 28, 2010, North Pacific responded stating they had no record of the
March 2009 tender, and that there was no coverage under The Painters’ CGL policy
because Ledcor was not identified as an additional named insured and the automatic
additional insured endorsement only applied to “ongoing operations.”
In June 2010, Ledcor amended its third-party complaint to name North Pacific as
a third-party defendant, alleging claims for declaratory relief, breach of contract, breach
of the obligation of good faith and fair dealing, bad faith refusal to defend, and IFCA and
CPA violations.
10 (Emphasis added.)
-24-

No. 76490-0-1/25
North Pacific subsequently moved for summary judgment and dismissal of
Ledcor’s third-party claims. On July 8, 2011, the trial court granted North Pacific’s
motion on each contractual and extra-contractual claim and dismissed North Pacific
from the lawsuit.
B. Dutyto Defend
North Pacific contends that their policy with The Painters only provided automatic
additional insured coverage for “ongoing operations” and not “completed operations.”
Consequently, because Ledcor was not a named additional insured, North Pacific had
no duty to provide a defense to Ledcor as an additional insured because the operations
performed by The Painters were completed operations. We agree with North Pacific.
North Pacific relies on this court’s decision in Hartford Ins. Co. v. Ohio Cas. Ins.
Co., 145 Wn. App. 765, 778, 189 P.3d 195 (2008), where we concluded that the term
“ongoing operations” was an express coverage limitation in the policy and endorsement
language that was intended to avoid “broad coverage for an additional insured.”
Specifically, we held “ongoing operations” language excludes “completed operations”
coverage and limits coverage to the “subcontractors’ work in progress only.” Hartford,
145 Wn. App. at 778. The plain language of the North Pacific policy contains this same
limitation.
Section one of the “additional insured” endorsement in The Painters’ policy limits
additional insured coverage to when it “is required by the terms of an ‘insured contract”
and includes as an insured such person or organization “only with respect to: (a)
Vicarious liability arising out of your ongoing operations performed for the additional
insured; or (b) Liability arising out of any act or omission of the additional insured . .
-25-

No. 76490-0-1/26
arising out of your ongoing operations for that additional insured.”11 Thus, as in
Hartford, the plain language of the first section explicitly limits coverage to “ongoing
operations.” See Absher Const. Co. v. N. Pac. Ins. Co., 861 F. Supp. 2d 1236, 1244
(W.D. Wash. 2012) (considering a similar North Pacific policy).
The COA’s complaint in the underlying action alleged damages occurring after
completion of the buildings, long after the Painters ceased their “ongoing operations.”
Accordingly, we agree with the trial court that the policy did not cover those claims and
North Pacific’s denial of a defense and coverage based on this language was not
“unreasonable, frivolous, or unfounded.” We affirm summary judgment.
Transportation
Ledcor next contends that the trial court erred in dismissing its claims against
Transportation12 based on the policy Transportation provided subcontractor SQl. We
agree.
Ledcor contracted with subcontractor SQl to install a roofing system.
Transportation issued policies to SQl for the period from May 1, 2000 to May 1, 2003. It
is undisputed that SQl was required to name Ledcor as an additional insured under
those policies. Paragraph 11.1 of the subcontract between Ledcor and SQl is the same
as the subcontract with The Painters, and describes the requirements that SQl name
certain parties as additional insureds:
11.1 SUBCONTRACTOR’S INSURANCE. Prior to start of the
Subcontract work, the Subcontractor shall procure for the Subcontract
Work and maintain in force Workers’ Compensation Insurance,
Employer’s Liability Insurance, Comprehensive Automobile Liability
Insurance, Comprehensive or Commercial General Liability Insurance on
an occurrence basis, and any other insurance required of Subcontractor
11 (Emphasis added.)
12 Ledcor refers to the Transportation Insurance Company as CNA.
-26-

No. 76490-0-1/27
under the Subcontract. If required by the Subcontract Documents, the
Contractor, Owner and other parties as required shall be named as
additional insureds on each of these policies except for Workers’
Compensation. The Subcontractor’s insurance shall include contractual
liability insurance covering the Subcontractor’s obligations under this
SubcontractJ13~
Paragraph 11 .2 of the subcontract states the “Subcontractor’s Comprehensive or
Commercial General Liability Insurance and Comprehensive Automobile Liability
Insurance, as required by Paragraph 11.1, shall be written with limits of liability not less
than the following:
A. Comprehensive General Liability Insurance including completed
operations:
1. Combined Single Limit Bodily Injury and Property Damage:
$1 ,000,000 Each Occurrence $ 2,000,000 Aggregate
or
2. Bodily Injury: $ 1.000,000 Each Occurrence $ 2,000,000
Aggregate
3. Property Damage: $ 1,000,000 Each Occurrence $ 2,000,000
Aggregate
B. Commercial General Liability Insurance
1. Each Occurrence Limit: $ 1,000,000
2. General Aggregate: $2,000,000
3. Products/Completed Operations Aggregate: $2,000,000.
Paragraph 11 .4 states the requirements for what insurance policies the
subcontractors must obtain, and provisions for cancellation and renewal of those
policies. This paragraph includes the requirement that “The Subcontractor shall
maintain completed operations liability insurance for one year after acceptance of the
Subcontract Work, substantial completion of the Project, or to the time required by the
Subcontract Documents, whichever is longer.” The Subcontractor shall furnish the
13 (Emphasis added.)
14 (Emphasis added.)
-27-

No. 76490-0-1/28
Contractor evidence of such insurance at the time of completion of the Subcontract
Work.
The issue is whether Ledcor, as an additional insured under SQl’s policy with
Transportation, had completed operations coverage. Of the three annual policies that
Transportation issued to SQl, only the third (May 1, 2002 through May 1, 2003) contains
an endorsement addressing completed operations. The policy includes an
endorsement that modifies the “commercial general liability coverage.” The
endorsement provides an additional-insured coverage for completed operations only if
that coverage is required by written contract:
The coverage provided to the additional insured by this endorsement and
paragraph f. of the definition of “insured contract” under DEFINITIONS
(section V) do not apply to “bodily injury” or “property damage” arising out
of the “products-completed operations hazard” unless required by the
written contract or written aqreement.~15~
Under the policies, “products-completed operations hazard,”
a. Includes all “bodily injury” and “property damage” occurring away from
premises you own or rent and arising out of “your product” or “your work”
except:
(1) Products that are still in your physical possession; or
(2) Work that has not yet been completed or abandoned. However,
“your work” will be deemed completed at the earliest of the
following times:
(a) When all of the work called for in your contract has been
completed.
(b) When all of the work to be done at the job site has been
completed if your contract calls for work at more than one
job site.
(c) When that part of the work done at a iob site has been
put to its intended use by any person or organization other
than another contractor or subcontractor working on the
same project.
15 (Emphasis added).
-28-

No. 76490-0-1/29
Work that may need service, maintenance, correction, repair or
replacement, but which is otherwise complete, will be treated as
completed.[161
In construing a written contract, a court will not read an ambiguity into a contract
that is otherwise clear and unambiguous. Mayer v. Pierce County Med. Bureau, Inc., 80
Wn. App. 416, 420, 909 P.2d 1323 (1995). When interpreting a contract, the contract
will be given a practical and reasonable interpretation that fulfills the object and purpose
of the contract rather than a strained or forced construction that leads to an absurd
conclusion, or that renders the contract nonsensical or ineffective. Washinc~ton Pub.
Util. Districts’ Utilities Sys. v. Pub. Util. Dist. No. 	1 of Clallam County, 112 Wn.2d 1, 11,
771 P.2d 701 (1989). Transportation’s interpretation of the contract asks us to do just
that.
Paragraph 11 .1 of the subcontract required that SQl obtain several forms of
insurance, including “Comprehensive or Commercial General Liability Insurance on an
occurrence basis.” The subcontractor was also to name “the Contractor, Owner and
other parties. . . as additional insureds on each of these policies.” It is undisputed this
paragraph fulfills the requirement of requiring Ledcor to be named as an additional
insured.
Paragraph 11 .2 provided the minimum limits of liability for “The Subcontractor’s
Comprehensive or Commercial General Liability Insurance and Comprehensive
Automobile Liability Insurance, as required by Paragraph 11.1.” This reference back to
11.1 is not a limitation, but merely referencing that “Comprehensive or Commercial
General Liability Insurance” had been required in 11.1. The minimums required under
paragraph 11.2 for CGL insurance include a “product/completed operations aggregate
16 (Emphasis added.)
-29-

No. 76490-0-1/30
of $2 million. Because paragraph 11.1 required CGL insurance, paragraph 11.2
required the insurance include completed operations coverage.
In addition, paragraph 11.4 of the subcontract provided the coverage time limits
required under the contract. 11 .4 includes the requirement that the Subcontractor shall
“maintain in effect all insurance coveracje rec~uired under this Subcontract,” and that the
“Subcontractor shall maintain completed operations liability insurance for one year after
acceptance of the Subcontract Work, substantial completion of the Project, or to the
time required by the Subcontract Documents, whichever is longer.”17
When read together, and giving effect to paragraphs 11.1, 11.2, and 11.4, SQL’s
subcontract required Ledcor to be named as an additional insured on the CGL policy,
required the CGL policy to include completed project coverage, and required the
coverage extend through the term of the CGL policies issued by Transportation. The
trial court erred in granting summary judgment and dismissing Ledcor’s claims against
Transportation.
FMIC
Ledcor contends next that the trial court erred in dismissing its direct claims
against third party FMIC, another insurer for subcontractor SQl. We disagree.
We first address whether Ledcor was covered under the policies issued by FMIC
to SQl. FMIC issued a CGL policy from May 1, 2006 to May 1, 2007. That policy was
subsequently renewed from May 1, 2007 to May 1, 2008. Both policies contained
separate endorsements for ongoing operations and completed operations. Both
policies also contain nearly identical “additional insured ongoing operations”
endorsements. That endorsement provides as follows:
17 (Emphasis added.)
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No. 76490-0-1/31
A. Section II - Who Is An Insured is amended to include as an additional
insured any person or organization for whom you are performing
operations when you and such person or organization have agreed in
writing in a contract or agreement that such person or organization be
added as an additional insured on your policy. Such person or
organization is an additional insured only with respect to liability for “bodily
injury”, “property damage” or “personal and advertising injury” caused, in
whole or in part, by:
1. Your acts or omissions; or
2. The acts or omissions of those acting on your behalf;
in the performance of your ongoinci operations for the additional insured.
A person’s or organization’s status as an additional insured under this
endorsement ends when your operations for that additional insured are
completed.
B. With respect to the insurance afforded to these additional insureds, the
following additional exclusions apply:
This insurance does not apply to:
2. “Bodily injury” or “property damage” occurring after:
a. All work, including materials, parts or equipment furnished
in connection with such work, on the project (other than
service, maintenance or repairs) to be performed by or on
behalf of the additional insured(s) at the location of the
covered operations has been completed; or
b. That portion of “your work” out of which the injury or
damage arises has been put to its intended use by any
person or organization other than another contractor or
subcontractor engaged in performing operations for a
principal as a part of the same project.[18]
Thus, the only question is whether SQl was engaged in any “ongoing operations”
for the additionally insured—Ledcor—at the time the original policy began on May 1,
18 (Emphasis added).
-31-

No. 76490-0-1/32
2006. It is undisputed that SQl’s final maintenance at The Admiral concluded on May
10, 2005. Ledcor does not argue any other “ongoing operations” were continuing at that
time, nor provide any evidence that further operations took place during that period.
The contract unambiguously provides, “A person’s or organization’s status as an
additional insured under this endorsement ends when your operations for that additional
insured are completed.” Consequently, Ledcor has not demonstrated that it qualifies as
an additional insured for ongoing operations under either policy.
Turning to the completed operations endorsement, the 2006 to 2007 and 2007 to
2008 policies differ. The 2006 to 2007 policy specifically identifies each entity covered
as an additional insured for completed operations. Ledcor was not identified as an
additionally insured for completed operations on the 2006 to 2007 policy. Ledcor
offered no evidence to the contrary.
The 2007 to 2008 policy, however, includes an additional listing for: “Any person
or organization, . . .to whom or to which the Named Insured is obligated, by virtue of
written contract to provide Insurance, such as is afforded by this policy.”19
The same Ledcor and SQl subcontract is at issue here as in the claims brought
against Transportation. As discussed above, when read together, paragraphs 11.1,
11.2, and 11 .4 required SQl to maintain completed operations coverage and identify
Ledcor as an additionally named. SQl’s obligation, however, was limited in time.
Paragraph 11 .4 of the subcontract requires that: “The Subcontractor shall maintain
completed operations liability insurance for one year after acceptance of the
Subcontract Work, substantial completion of the Project, or to the time required by the
Subcontract Documents, whichever is longer.” Under this provision, the latest
19 (Emphasis added.)
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No. 76490-0-1/33
reasonable interpretation of this provision is May 2006, one year after SQl performed
maintenance on The Admiral.
We hold that Ledcor was not an additionally insured under the policy issued to
SQl by FMIC. In addition, because Ledcor was not covered as an additional insured
under the policies, Ledcor has failed to demonstrate that FMIC’s denial of coverage was
“unreasonable, frivolous, or unfounded.” Overton, 145 Wn.2d at 433.
Ledcor’s Assigned Claims Against FMIC
SQl assigned its direct claim against FMIC to Ledcor. Ledcor asserts finally that
the trial court erred in dismissing its assigned claims against FM IC. We disagree.
A. Additional Facts
On August 29, 2008, while the COA’s construction defect action was pending,
Ledcor filed a separate lawsuit against all subcontractors involved in The Admiral
project (subcontractor action). SQl was named in the subcontractor action. The
subcontractor action sought to recover against the subcontractors any amounts that
Ledcor was ultimately obligated to pay to the COA.
SQl tendered that lawsuit to FMIC seeking defense and indemnity as a Named
Insured under the FMIC Policies. FMIC agreed to defend SQl pursuant to a reservation
of rights. One of SQl’s other insurers, Cornhusker Insurance Company (Cornhusker),
also agreed to participate in SQl’s defense. Cornhusker and FMIC jointly provided SQl
with a fully funded and complete defense. Ledcor sent a settlement demand letter in
March 2014. Beginning in February 2014, FMIC participated in mediations and offered
to contribute to settlement demands on behalf of SQl. No settlement was reached at
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this time. After the mediations failed to reach a settlement, FMIC sent letters requesting
updates on the settlement negotiations.
On April 8, 2014, FMIC was informed by the assigned defense counsel that SQl,
through its personal counsel, had reached a settlement agreement with Ledcor. On
April 11, 2014, FMIC was provided with a copy of the consent judgment that was
entered against SQl in the subcontractor action. The consent judgment indicated that it
was filed in compliance with a March 21, 2014 settlement agreement between Ledcor
and SQl. FMIC sent a follow up letter requesting information about the letter, and
expressing concern that it had not been included in the settlements, or been asked to
contribute to the settlement. After entering into the consent judgment settlement,
Ledcor pursued all contractual and extra-contractual causes of action against FMIC as
the assignee of SQl.
In November 2013, FMIC filed a declaratory judgment action in federal court
seeking a judicial determination that it was not obligated to cover SQl in the
subcontractor action. After the case was remanded to the King County Superior Court,
FMIC was granted leave to file a third-party complaint in this action seeking declaratory
judgment against SQl. SQl (through Ledcor) responded adding counter claims for
breach of duty, bad faith, and violations of the CPA and the IFCA.
On October 28, 2016, the trial court granted FM IC’s motion for summary
judgment dismissing SQI/Ledcor’s counter claims. On October 31, 2016, the court
granted FMIC’s motion for summary judgment agreeing that the policy FMIC issued to
SQl was not applicable, and even if it were, the continuous or progressive injury or
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damage exclusion barred recover. The trial court subsequently denied Ledcor’s
motions for reconsideration.
B. Dutyto Defend
The FMIC policy issued to SQl provides coverage for “property damage” caused
by an “occurrence” during the FMIC policy period, so long as the insured does not
know, in whole or in part, about the “property damage” or any continuation, change, or
resumption of such “property damage” prior to the inception of the FMIC policy.
Specifically, the policy states,
a. We will pay those sums that the insured becomes legally obligated to pay as
damages because of “bodily injury” or “property damage” to which this
insurance applies. We will have the right and duty to defend the insured
against any “suit” seeking those damages. However, we will have no duty to
defend the insured against any “suit” seeking damages for “bodily injury” or
“property damage” to which this insurance does not apply. .
b. This insurance only applies to “bodily injury” and “property damage” only if:
1) The “bodily injury” or “property damage” is caused by an “occurrence”
that takes place in the “coverage territory”; and
2) The “bodily injury” or “property damage” occurs during the policy
period; and
3) Prior to the policy period, no insured listed under Paragraph 	1 of
Section II — Who Is An Insured and no “employee” authorized by you to
give or receive notice of an “occurrence” or claim, knew that the “bodily
iniury” or “property damage” had occurred, in whole or in part. If such
a listed insured or authorized “employee” knew, prior to the policy
period, that the “bodily injury” or “property damage” occurred, then ~jjy
continuation, change or resumption of such “bodily iniurv” or “property
damage” during or after the policy period will be deemed to have been
known prior to the policy period.
d. “Bodily injury” or “property damage” will be deemed to have been known to
have occurred at the earliest time when any insured listed under Paragraph 1.
of Section II - Who Is An Insured or any “employee” authorized by you to give
or receive notice of an “occurrence” or claim:
1) Reports all, or any part, of the “bodily injury” or “property damage” to
us or any other insurer;
2) Receives a written or verbal demand or claim for damages because of
the “bodily injury” or “property damage”; or
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No. 76490-0-1/36
3) Becomes aware by any other means that “bodily injury” or “property
damage” has occurred or has begun to occur.~20~
As discussed above, in determining coverage, this court considers a two-step
process. First, the insured must establish that the loss falls within the “scope of the
policy’s insured losses.” Then, the burden shifts to the insurer to show that the loss is
excluded by specific language in the policy. Diamaco, 97 Wn. App. at 337. Although
this policy uses exclusionary language, the burden is still on SQl to demonstrate the
damage took place during the coverage period, and that SQl did now know of the
damage before the policy period.
FMIC provided substantial evidence that SQl knew, at least in part, that the
damage to the roofing had occurred at The Admiral as of at least 2004. FMIC further
provided evidence that SQl failed to repair the damage that it was asked to repair in
2005, and that some of the claims arose of that damage. SQl only presented evidence
that SQl may have believed that they had fixed all of the damage when they returned to
do further maintenance in 2005.21 Moreover, the evidence showed the damage
occurring after 2005 would have been a “continuation, change or resumjtion” of the
original damages.22 Because there is no reasonable dispute that SQl knew of the
damages before it purchased the FMIC policies in 2006 and in 2007, summary
judgment was appropriate concluding that SQl’s damages were not covered under the
FMIC policies.
20 (Emphasis added.)
21 Ledcor cites several cases considering the common law “known loss” principal, however these
cases do not support his argument. See Pub. Util. Dist. No. 	1 of Klickitat County v. Int’l Ins. Co., 124
Wn.2d 789, 806, 881 P.2d 1020 (1994).
22 (Emphasis added.)
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C. Extra Contract Claims
Again, to succeed on a bad faith claim, the policyholder must show the insurer’s
breach of the insurance contract was unreasonable, frivolous, or unfounded. Overton,
145 Wn.2d at 433. “The insured may not base a bad faith or CPA claim on an insurer’s
good faith mistake, which occurs when the insurer acts honestly, bases its decision on
adequate information, and does not overemphasize its own interest.” Werlincier, 129
Wn. App. at 808.
Here, based on the allegations in the subcontractor action, FMIC accepted the
defense of SQl under a reservation of rights. FMIC then assigned counsel, participated
in settlement negotiations, and finally brought a declaratory relief action. SQl did not
pay any defense fees or incur damages. FMIC did not act in bad faith in its defense of
SQl. See Truck, 147 Wn.2d at 761.
SQl also raised various CPA violations, including that FMIC failed to investigate
its claims, and again that FMIC “commingled” the coverage and defense claims. Even if
these actions rise to the level of “(1) unfair or deceptive act or practice,” under the CPA,
there is no presumption of harm. SQl needed to prove it was harmed by FM IC’s
actions, and SQl did not present evidence of harm. SQl did not pay defense fees or
incur any costs.
Finally, in the absence of an unreasonable denial of coverage or benefits, the
IFCA does not create an independent cause of action for alleged regulatory violations.
Perez-Crisantos, 187 Wn.2d at 680.
Summary judgment and dismissal of Ledcor’s assigned claims against FMIC was
appropriate.
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D. Attorney Fees on Appeal
Ledcor requests attorney fees under the Olympic Steamship doctrine. Olympic
S.S. Co., Inc. v. Centennial Insur. Co., 117 Wn.2d 37, 53, 811 P.2d 673 (1991).
Because several claims remain to be resolved on remand as to VSC and
Transportation, we conclude that an award of fees on appeal is premature and should
await the outcome of the proceedings on remand, to be determined by the trial court.
See Mut. of Enumclaw v. T&G Constr. Inc., 165 Wn.2d 255, 274, 199 P.3d 376 (2008)
(“Inasmuch as we are remanding two coverage issues to the coverage trial court, the
award of Olympic Steamship attorney fees must abide by that court’s ultimate rulings.”)
We reverse the dismissal of Ledcor’s claims against VSC and Transportation.
We affirm in all other respects.
WE CONCUR:
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