Washington Court of Appeals Rules in Favor of Insurance Company on Application of Exclusion

On October 9, 2013, the Washington Court of Appeals, Division 1, issued an unpublished decision in American States Ins. Co. v. Delean’s Tile and Marble, LLC, Wash. Ct. of App., Div. 1, Case No. 69634-3-I (Dec. 9, 2013), a construction liability case addressing the applicability of an exclusion for work performed on multi-unit dwellings.  Six townhouse owners contracted with Lawless Construction to repair construction deficiencies at their property.  In turn, Lawless contracted with Delean’s Tile & Marble to assist in repairing some of the damage to the structure.  Delean was insured by American States, and Lawless was named as an additional insured under the applicable policy.  Some of the work performed by Delean was defective.  When Delean refused to return to repair the defective work, Lawless was forced to hire another company to complete the work.  Lawless sued Delean, and they ultimately settled their suit.  In the meantime, Lawless tendered a claim to American States under Delean’s insurance policy.  American States denied the claim and brought a declaratory judgment action to resolve the coverage issue.  The trial court granted American States’ motion for summary judgment based upon an exclusion in the policy.  The Court of Appeals affirmed the trial court’s ruling.

The insurance policy at issue included an exclusion for “construction operations” that involve a “multi-unit residential building.”  American States argued the work performed by Delean fell within the parameters of this exclusion.  Lawless and Delean countered the argument by citing to an exception to the exclusion, which applied to any “detached single family dwelling.”  The Court of Appeals analyzed each of the key terms in the exclusion and exception and determined that the work performed by Delean was excluded under the policy, and that the exception did not apply to the facts in the case.  Because the key terms at issue were not defined in the policy, the Court of Appeals applied the plain meaning of the terms used policy to conclude that the work performed by Delean constituted a “construction operation, on a “multi-unit residential building, and that those units did not constitute “detached single family dwellings.”  Accordingly, the Court of Appeals affirmed the trial court’s grant of summary judgment in favor of the insurance company.

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