Port Of Longview v. London Market Insurers ( 2016 )

Filed
Washington State
Court of Appeals
Division Two
August 2, 2016
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION II
THE PORT OF LONGVIEW, a Washington No. 46654-6-II
municipal corporation
Respondent,
v. UNPUBLISHED OPINION
ARROWOOD INDEMNITY COMPANY;
MARINE INDEMNITY INSURANCE
COMPANY OF AMERICA;
Defendants,
and
ASSICURAZIONI GENERALI S.P.A.;
BALOISE INSURANCE COMPANY, LTD.;
BISHOPSGATE INSURANCE COMPANY,
LTD.; COMMERCIAL UNION
ASSURANCE COMPANY, P.L.C.;
CONTINENTAL ASSURANCE OF
LONDON, LTD.; DRAKE INSURANCE
COMPANY LTD.; ECONOMIC
INSURANCE COMPANY; EDINBURGH
ASSURANCE COMPANY, LTD.; ELDERS
INSURANCE COMPANY, LTD.; EXCESS
INSURANCE COMPANY, LTD.; FUJI FIRE
AND MARINE INSURANCE COMPANY
(U.K.) LTD.; HANSA MARINE
INSURANCE COMPANY (U.K.) LTD.;
INDEMNITY MARINE ASSURANCE
COMPANY, LTD.; INTERESTED
UNDERWRITERS AT LLOYD’S, LONDON;
LA REUNION FRANCAISE S.A.
d’ASSURANCES ET DES
No. 46654-6-II
REASSURANCES; LONDON & OVERSEAS
INSURANCE COMPANY, LTD.; NIPPON
FIRE & MARINE INSURANCE COMPANY
(UK) LTD.; NIPPON FIRE AND MARINE
INSURANCE COMPANY U.K.W. LTD.;
NORTHERN ASSURANCE COMPANY
LTD.; NORTHERN MARITIME
INSURANCE COMPANY, LTD.; OCEAN
MARINE INSURANCE COMPANY, LTD.;
ORION INSURANCE COMPANY LTD.;
PEARL ASSURANCE P.L.C.; PHOENIX
ASSURANCE COMPANY LTD.;
PROVINCIAL INSURANCE COMPANY,
LTD.; PRUDENTIAL ASSURANCE
COMPANY, LTD.; RIVER THAMES
INSURANCE COMPANY, LTD.; SCOTTISH
LION INSURANCE COMPANY, LTD.;
SKANDIA U.K. INSURANCE PLC; SPHERE
INSURANCE COMPANY LTD.;
SWITZERLAND GENERAL INSURANCE
COMPANY (LONDON) LTD.;
THREADNEEDLE INSURANCE
COMPANY, LTD.; VESTA (U.K.)
INSURANCE COMPANY LTD.;
WURTTEMBERGISCHE
FEUERVERSICHERUNG A.G.A.W. A/C;
YASUDA FIRE & MARINE INSURANCE
COMPANY (UK) LTD.,
Appellants.
MAXA, J. – The Port of Longview filed an insurance coverage action against certain
London market insurers (LMI)1 that issued several primary and excess liability insurance policies
to the Port between 1977 and 1985.2 The Port sought a declaration that LMI had an obligation to
1
“LMI” is a collective descriptor for certain interested underwriters at Lloyd’s, London and
certain interested London market insurance companies.
2
The Port also filed suit against Arrowood Indemnity Company and other insurers. All insurers
other than LMI were dismissed before trial.
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provide coverage under its policies for groundwater contamination at two different sites on Port
property: the TWP (treated wood products) site and the TPH (total petroleum hydrocarbon) site.
A mistrial occurred in the first trial when the Port found undisclosed documents. After
the second trial, the jury entered a special verdict finding that (1) LMI did not prove that it
suffered actual and substantial prejudice resulting from the Port’s late notice to LMI of its
insurance claims (relating to the prompt notice provisions in the primary policies), (2) the Port
proved that it did not expect or intend groundwater contamination at either the TWP site or the
TPH site before issuance of any of the LMI primary and excess policies (relating to the
“occurrence “ requirement in the policies), and (3) the Port proved that it did not expect or intend
the release of contamination to groundwater before issuance of any of the LMI excess policies
(relating to the exception to the qualified pollution exclusion in the excess policies). Based on
the special verdict and multiple pretrial rulings, the trial court entered declaratory judgment
orders ruling that LMI was obligated under its primary policies to defend and indemnify the Port
and under its excess policies to indemnify the Port against all claims arising out of liability at the
TWP and TPH sites. The trial court later awarded attorney fees to the Port under Olympic
Steamship.3
LMI appeals certain trial court rulings, arguing that the trial court erred by (1) imposing
sanctions against LMI for delayed discovery responses and denying its motion to vacate the
sanctions after the mistrial; (2) making three rulings regarding late notice prejudice: denying its
summary judgment motions on late notice prejudice for the TWP and TPH sites, improperly
limiting the evidence it could present at trial on late notice prejudice at the TPH site, and
3
Olympic S.S. Co. v. Centennial Ins. Co., 117 Wash. 2d 37, 811 P.2d 673 (1991).
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No. 46654-6-II
improperly instructing the jury on late notice prejudice; (3) ruling as matter of law that the
known loss principle did not preclude coverage for the TWP site; (4) denying its motions for
judgment as a matter of law on the occurrence requirement because the Port did not present
sufficient evidence that it did not expect or intend groundwater contamination; (5) denying its
motions for judgment as a matter of law on the qualified pollution exclusion because the Port did
not present sufficient evidence that it did not expect or intend the release of contaminants into the
groundwater; and (6) awarding attorney fees to the Port under Olympic Steamship and
determining the amount of the fee award.
We reject LMI’s substantive arguments and hold that the trial court did not err in granting
and denying the motions at issue or in entering the declaratory judgment orders. We also hold
that the trial court erred in awarding attorney fees for the Port’s claims under the primary policies
because under established law, the Port’s late notice precluded its recovery of Olympic
Steamship attorney fees. But we hold that the Port is entitled to recover attorney fees for its
excess policy claims because the Port did not breach the notice provisions in those policies.
Accordingly, we affirm the trial court’s declaratory judgment orders but reverse the trial court’s
attorney fee order and remand for the trial court to determine the amount of attorney fees that
should be awarded for the Port’s claims under the excess policies.
FACTS
TWP Site
International Paper (IP) originally owned the TWP site, which included two adjacent
areas: the maintenance facility area (MFA) and the IP plant area. IP operated a wood treating
plant on the IP plant area from the 1950s through 1982 using chemical preservatives, creosote
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and pentachlorophenol. The adjacent MFA consisted of vacant land and some maintenance
operations. The IP plant area contained an open ditch (referred to as the “lineament ditch”) that
conveyed the wood treating wastewater from the treatment area to seepage ponds, where the
wastewater was contained. This lineament ditch ran across the MFA and was in use until the
mid-1960s, when IP began discharging wastewater into ponds in the IP plant area. The Port
purchased the MFA from IP in two transactions in 1963 and 1965, while the lineament ditch was
still in use.
In 1981, the Washington Department of Ecology (DOE) sampled groundwater and
discovered hazardous waste contamination in the groundwater at the IP plant area. IP worked
with the DOE for several years to investigate and remediate the IP plant area. In 1997, IP
entered into a consent decree with DOE in which IP agreed to assume complete responsibility for
remediating the contaminated groundwater at the IP plant area.
Contaminated soil was discovered in the MFA in 1997 when IP installed an underground
barrier wall around the IP plant area. Subsequent testing in 1998 revealed groundwater
contamination at the MFA. DOE determined that contamination at the MFA should be
investigated under the consent decree for the IP plant area.
In 1999, the Port purchased the IP plant area. Under the purchase agreement, IP
remained responsible for continued investigation and remediation of the groundwater
contamination. The Port was aware that it became automatically liable under the Washington
Model Toxics Control Act (MTCA) for contamination at the IP plant area once it completed the
purchase.
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No. 46654-6-II
In 2005, DOE sent the Port a letter indicating the Port was a potentially liable person
(PLP) under MTCA for the TWP site because it was the site’s owner.4 The letter referenced both
the IP plant area and the MFA. However, by agreement IP continued to be responsible for the
TWP site and to date DOE has not required the Port to conduct any investigation or remediation
of the TWP site.
TPH Site
The TPH site is located in the Port’s rail yard, and the Port leased portions of the property
to various entities between 1926 and 1985. The groundwater at this site became contaminated
because of petroleum hydrocarbon releases from various operations, including Standard Oil (now
Chevron) pipelines and Longview Fibre pipelines, loading racks, and associated above ground
storage tanks. Contamination also occurred because of leaking from a small underground
storage tank on property leased to Calloway Ross, a construction company.
The Port discovered the groundwater contamination at the TPH site in 1991, when it
removed the Calloway Ross underground storage tank and noticed a small hole in the tank. The
Port then conducted wider testing and discovered more extensive groundwater contamination at
the TPH site beyond the Calloway Ross area, which likely came from leaking pipelines and
larger storage tanks.
4
Under the MTCA, all current and past owners and operators at a contaminated facility are
strictly liable and jointly and severally liable for all investigation and remediation costs. RCW
70.105D.040.
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No. 46654-6-II
The Port continued to investigate the TPH site contamination and identified those who it
suspected would be PLPs under MTCA.5 In 1998, the Port entered into a cost-sharing agreement
with Chevron and Longview Fibre (“the Chevron agreement”). This agreement provided that
Chevron would compensate the Port for past expenditures and would contribute 50 percent of
future expenses related to investigation and remediation, up to a certain date.6 The Port agreed to
contribute 20 percent of future costs (up to certain limits) and Longview Fibre agreed to cover
the remaining 30 percent. DOE has not been involved in the TPH site investigation or
remediation activities and it has not designated the Port a PLP under MTCA.
LMI Insurance Policies
LMI issued four primary liability policies to the Port between 1979 and 1985: MC 5757,
MC 5998, MC 6016, and MC 6027. Neither the Port nor LMI had complete copies of the four
primary policies at issue. But the Port had broker’s certificates and insuring agreements for the
first three policies. The insuring agreements for these policies contained identical terms,
including a coverage clause, insuring clause, and notice clause. For the fourth policy – MC 6027
– the Port did not have a broker’s certificate or insuring agreement, but there was a handwritten
notation on the MC 6016 broker’s certificate indicating that MC 6027 had replaced MC 6016.
5
PLP status extends to any person who operated the facility at the time of the release of
hazardous substances. RCW 70.105D.040(1)(b).
6
There was some uncertainty when the Chevron agreement terminated. However, the agreement
apparently terminated before the trial court entered judgment and the allocation of responsibility
does not apply to ongoing investigation and remediation costs.
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No. 46654-6-II
The portions of primary policies in the Port’s possession required that the Port give LMI
notice “as quickly as possible” after anyone made a claim against the Port and “as soon as may
be practicable” of any occurrence that is apt to be a claim. Pl.’s Ex. 107 (MC 5757), Pl.’s Ex. 44
(MC 5998), Pl.’s Ex. 46 (MC 6016). These portions of the primary policies also required that
the Port’s liability arise from an “occurrence.” Pl.’s Ex. 107 (MC 5757), Pl.’s Ex. 44 (MC
5998), Pl.’s Ex. 46 (MC 6016). None of the portions of the primary policies in the Port’s
possession contained a pollution exclusion.
LMI also issued seven excess liability policies to the Port between 1977 and 1985. These
policies provided coverage only after the underlying primary policies had been exhausted. The
policies required the Port to give notice as soon as practicable after an occurrence that could
result in liability or damages in an amount necessary to implicate the excess policies. But the
policies stated that the failure to give notice of an occurrence that did not initially appear to
implicate the excess policies would not prejudice such claims. All of the excess policies required
that the Port’s liability arise from an “occurrence.” See, e.g., Pl.’s Ex. 40 (JSL 1021). Six of the
excess policies contained a qualified pollution exclusion, which excluded coverage for the
discharge or release of contaminants unless the discharge or release was sudden and accidental.
Delayed Notice of Claim to LMI
The Port was aware of groundwater contamination at the TWP site by at least 1999 and at
the TPH site by 1991. However, the Port did not give notice to LMI of any potential claims at
either site. The Port stated that at those times, it was not aware that anyone would assert a claim
based on groundwater contamination against the Port and it did not know that there would be
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No. 46654-6-II
insurance coverage for such a claim. The Port also did not give notice of a claim when it
received a PLP letter in 2005 from DOE for the TWP site.
In 2009, the Port unsuccessfully attempted to give formal notice to LMI of its insurance
claims under the primary policies. But the first formal notice LMI received on the primary
policies was when the Port filed this action. The Port provided notice to LMI on the excess
policies on August 6, 2010.
Coverage Lawsuit
In August 2010, the Port filed suit against LMI, seeking (1) a declaratory judgment that
LMI’s policies provided coverage for the TWP and TPH groundwater contamination, (2)
recovery of environmental response costs the Port had incurred at the TWP and TPH sites, and
(3) reasonable attorney fees incurred by the Port in bringing the suit. The trial court granted the
Port’s motion to bifurcate the trial – Phase 1 would deal with coverage and Phase 2 would deal
with damages. The Phase 1 trial was scheduled for February 2013.
Summary Judgment Motions
Both parties filed multiple motions for partial summary judgment on various issues. The
trial court ruled as a matter of law that the Port had provided untimely notice on the TWP and
TPH sites. However, the trial court denied LMI’s summary judgment motion and granted the
Port’s summary judgment motion and ruled that late notice caused no prejudice at the TWP site.
The trial court also originally ruled that late notice caused no prejudice at the TPH site except for
the Port’s 2008 agreement with Chevron. But after additional discovery the trial court ruled that
there was a question of fact regarding prejudice at the TPH site and denied renewed summary
judgment motions filed by both LMI and the Port.
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No. 46654-6-II
LMI and the Port both filed summary judgment motions regarding the TWP site that
addressed the Port’s purchase of the IP plant area in 1999 with knowledge that the area was
contaminated. LMI relied in part on the “known loss” principle of insurance coverage and the
occurrence requirement in the policies. The trial court ruled that because the Port already was
liable for the TWP site based on its ownership of the MFA, the Port’s purchase of the IP plant
area did not increase the Port’s liability for the TWP site and therefore did not affect coverage
for that site. As a result, the trial court granted summary judgment in favor of the Port on
liability at the TWP site.
Neither party filed summary judgment motions on the occurrence requirement (other than
relating to the purchase of the IP plant area) or the pollution exclusions in the excess policies.
Discovery Sanctions Against LMI
The Port did not possess complete copies of the LMI primary policies, but it did have
broker’s certificates and insuring agreements for three of the four policies. LMI disputed that the
broker’s certificates contained the full language of the primary policies and argued that the Port
could not prove the terms of the policies.
The Port had the burden of proving the terms of coverage in the policies at issue.
Therefore, the Port focused discovery efforts on obtaining information related to the language of
the primary policies and how the broker’s certificates related to the policy terms. The Port also
sought information about which specific underwriting syndicates signed on to each policy
because LMI contended that the identity of the syndicates was an essential part of the policy.
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To obtain information on the primary policies and the underwriting syndicates, the Port
propounded requests for documents and scheduled CR 30(b)(6) depositions. However, there
were numerous delays caused by LMI that failed to meet deadlines for document production.
LMI also struggled to provide CR 30(b)(6) witnesses and repeatedly rescheduled depositions.
In November 2012, the trial court ordered LMI to search for and produce certain
documents relating to its policies by November 27, before the scheduled CR 30(b)(6)
depositions. LMI failed to meet this deadline. The trial court deferred its ruling on sanctions but
ordered that the documents be produced by December 28, shortly before the scheduled February
4, 2013 trial date. LMI failed to produce all responsive documents by that deadline, but
produced those documents a week later. The trial court sanctioned LMI by ruling that the policy
language in the Port’s broker’s certificates and insuring agreements was consistent with the
actual policy terms and that LMI was precluded from arguing otherwise.
Mistrial and Motion for Relief on Sanctions
Trial began in February 2013, but ended in a mistrial when the Port found previously
undiscovered relevant documents that, if disclosed earlier, could have affected the trial court’s
summary judgment decisions. The new information also necessitated additional depositions.
After the mistrial, LMI filed a CR 60(b) motion seeking relief from the trial court’s
discovery sanction against LMI in light of the fact that the Port now had ample time to review
the documents that LMI produced shortly before the mistrial. The trial court denied LMI’s
motion and the sanction remained in place for the retrial.
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Second Trial
The second trial took place in November 2013. The jury completed a special verdict
form and found in favor of the Port on each issue. The jury found that (1) the Port proved the
insuring language of primary policy MC 6027 by clear, cogent, and convincing evidence and
LMI failed to show by clear, cogent, and convincing evidence that MC 6027 contained language
excluding coverage for pollution, (2) the Port proved that it did not subjectively expect or intend
groundwater contamination before each primary and excess policy period for each site, (3) the
Port proved that it did not subjectively expect or intend the release of contaminants to the
groundwater before each excess policy period for each site, and (4) LMI failed to prove that it
suffered actual and substantial prejudice from the Port’s late notice of its TPH claims.
LMI filed CR 50 motions for judgment as a matter of law on the Port’s expectation of
groundwater contamination at both sites, and the Port’s expectation of a release of contaminants
to the groundwater at both sites. The trial court denied all CR 50 motions. LMI did not file any
CR 50 motions regarding late notice prejudice.
On January 8, 2014, the trial court entered an order for partial declaratory judgment in
favor of the Port on LMI’s primary policies. The trial court ruled that LMI was obligated under
its primary policies to defend and indemnify the Port against all claims arising out of
environmental liability at the TWP and TPH sites. On May 20, the trial court entered an order
for partial declaratory judgment in favor of the Port on LMI’s excess policies. The trial court
ruled that LMI was obligated under its excess policies to indemnify the Port against all claims
arising out of environmental liability at the TWP and TPH sites, subject to the Port’s obligation
to prove exhaustion of the primary policies.
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After trial, the Port moved to voluntarily dismiss its claim for damages with prejudice.
The trial court granted the motion.
The trial court entered a final judgment under CR 54(b) and certified the January 8, 2014
and May 20, 2014 orders for appeal. The trial court retained jurisdiction over the Port’s request
for attorney fees.
Attorney Fee Award
The Port subsequently requested attorney fees and litigation expenses under Olympic
Steamship. The Port requested approximately $2.75 million in fees and expenses, which it
argued represented the actual cost of litigating to establish coverage under LMI’s primary and
excess policies less certain categories of fees. LMI opposed any attorney fee award and also
challenged certain aspects of the requested attorney fees.
The trial court granted the Port’s request and awarded just under $2.54 million in attorney
fees and litigation expenses. The trial court disallowed roughly $214,000 in costs requested by
the Port because those expenses related to unproductive time, excessive time, excessive costs, or
fees associated with the mistrial that was caused by the Port.
LMI appeals various trial court rulings and the trial court’s attorney fee award.
ANALYSIS
A. DISCOVERY VIOLATION SANCTION
LMI argues that the trial court erred both by imposing the sanction of issue preclusion for
LMI’s discovery violation and by failing to modify the sanction after the mistrial. We disagree.
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1. Imposition of Sanctions
LMI argues that the trial court erred in imposing a sanction that prevented LMI from
contradicting the terms of the broker’s certificates for the primary policies. We disagree.
a. Legal Principles
CR 37 allows the trial court to impose sanctions against a party who fails to comply with
a discovery order. CR 37(b)(2) states that the trial court “may make such orders in regard to the
failure as are just.” The rule provides a nonexhaustive list of possible sanctions, including
ordering that matters at issue “shall be taken to be established for the purposes of the action” and
ordering that the disobedient party is prohibited from introducing evidence to support or oppose
certain claims or defenses. CR 37(b)(2)(A)-(B). The trial court generally should impose the
least severe sanction that will adequately serve the purposes of sanctions, which are to
compensate the harmed party, deter, punish, and educate the wrongdoer, and ensure that the
wrongdoer does not profit from the wrong. Barton v. Dep’t of Transp., 178 Wash. 2d 193, 215, 308
P.3d 597 (2013).
Before a trial court imposes one of the “harsher remedies” under CR 37(b), it must first
consider the Burnet7 factors on the record. Magaña v. Hyundai Motor Am., 167 Wash. 2d 570, 584,
220 P.3d 191 (2009). The trial court record must clearly show that (1) one party willfully or
deliberately violated the discovery rules and orders, (2) the opposing party was substantially
prejudiced in its ability to prepare for trial, and (3) the trial court explicitly considered whether a
7
Burnet v. Spokane Ambulance, 131 Wash. 2d 484, 494, 933 P.2d 1036 (1997).
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No. 46654-6-II
lesser sanction would have sufficed. Id. The Supreme Court has recognized that the “harsher
remedies” include those sanctions described in CR 37(b)(2)(A)-(B). Mayer v. Sto Indus., Inc.,
156 Wash. 2d 677, 688, 132 P.3d 115 (2006).
We review the trial court’s order of discovery sanctions for abuse of discretion. Barton,
178 Wash. 2d at 214. The trial court has wide latitude in fashioning the appropriate sanction for
discovery abuse. Id. at 215. “A trial court exercises broad discretion in imposing discovery
sanctions under CR 26(g) or 37(b), and its determination will not be disturbed absent a clear
abuse of discretion.” Mayer, 156 Wash. 2d at 684. A finding of abuse of discretion requires a clear
showing that the trial court was manifestly unreasonable in exercising its discretion or exercised
its discretion on untenable grounds or for untenable reasons. Barton, 178 Wash. 2d at 215.
b. Sanction Analysis
The record indicates that the trial court considered the Burnet factors before issuing the
sanction. The trial court looked to the first factor – willfulness in violating the discovery order –
and determined that this factor was met because LMI failed to use a computer specialist to search
the database it was ordered to search and instead had 60 people search the records by hand. A
large, sophisticated company’s failure to maintain and fully utilize a document retrieval system
may constitute a willful violation. See Magaña, 167 Wash. 2d at 585-86.
The trial court found that the second factor – substantial prejudice – was met because the
Port received over 100 responsive documents a week after the December 28 deadline, which was
significant in light of the fact that the trial was scheduled to begin a month later. The trial court
stated:
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I set a deadline for December 28th. My recollection is that I indicated that it was
pretty serious about that deadline. A good deal of information showed up a week
later. Well, what’s a week? In the context of this case, in the context of a trial
date looming a month later, I think a week is pretty important.
Report of Proceedings (RP) (Feb. 4, 2013) at 74. LMI’s delayed disclosure meant that the Port
had little time to use the underwriting syndicate information in its trial preparation. The Port
also had less time to properly prepare for its CR 30(b)(6) depositions of LMI witnesses.
Finally, the trial court considered the third factor – whether a lesser sanction would
suffice – and concluded that the sanction it imposed was the least serious sanction that would
address the problem. The trial court rejected a simple monetary sanction because it did not
believe money “really fixes the problem.” RP (Feb. 4, 2013) at 75. The trial court also
considered lowering the burden of proof on the Port in proving the lost policy language, but it
rejected that idea out of concern that changing the burden would confuse the jury. The trial court
concluded that the only available option was to prevent LMI from contradicting the language of
the broker’s certificates.
The record shows that the trial court thoroughly considered the Burnet factors. And we
give the trial court wide latitude in making the sanction determination. Barton, 178 Wash. 2d at
215. Accordingly, we hold that the trial court did not abuse its discretion in imposing the CR 37
sanction against LMI.
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2. Denial of CR 60(b) Motion for Relief
LMI argues that the trial court erred by failing to grant its CR 60(b) motion seeking relief
from the discovery sanction after the mistrial.8 We disagree.
a. Legal Principles
We review a trial court’s denial of a CR 60(b) motion for an abuse of discretion. Union
Bank, NA v. Vanderhoek Assocs., LLC, 191 Wash. App. 836, 842, 365 P.3d 223 (2015). A trial
court abuses its discretion if it makes its decision based on untenable grounds or for untenable
reasons. Id.
CR 60(b) provides a list of reasons that permit a court to grant relief from a final
judgment or order. CR 60(b)(11) provides a catchall provision that allows a court to relieve a
party from an order for “any other reason justifying relief from the operation of the judgment.”
However, use of CR 60(b)(11) should be confined to situations involving “ ‘extraordinary
circumstances, which constitute irregularities extraneous to the proceeding.’ ” Union Bank, 191
Wash. App. at 845 (internal quotation marks omitted) (quoting In re Det. of Ward, 125 Wash. App.
374, 379, 104 P.3d 751 (2005)).
b. Analysis
LMI argues that the trial court’s only reason for imposing sanctions was that the week
delay in producing documents prejudiced the Port in its preparations for the trial scheduled for a
month later. However, the trial court expressly explained that although the timing of LMI’s
8
In its reply brief, LMI asserts that the trial court could have granted relief under CR 60(b)(4),
which allows for relief when the adverse party commits misconduct. However, we do not
consider CR 60(b)(4) because LMI did not assert that theory in the trial court.
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No. 46654-6-II
discovery violation in relation to the impending trial date was a major factor in imposing the
sanction initially, it was not the only factor.
The pendency of the trial date was one of the factors that I had to keep in mind in
determining the least severe effective sanction at the time. So does the absence of
that trial date dictate a change? I think it’s incumbent on me to say it wasn’t the
only consideration at the time I imposed that sanction. Certainly there was a lot of
discussion, a lot of controversy surrounding the search of the LIDS database, the
following markets, all those issues.
RP (May 22, 2013) at 156. Because the impending trial was not the trial court’s only
consideration in awarding sanctions, the mistrial did not automatically require that the sanctions
be modified. The change in trial date did not negate what the trial court found to be LMI’s
willful violation and obstructive approach to discovery.
The postponement of the trial arguably reduced the Port’s prejudice. If the trial court had
imposed the original sanctions after the mistrial, application of the Burnet factors may not have
supported the sanctions. But LMI does not cite any authority for – or even argue – the
proposition that a trial court must apply the Burnet factors when considering a CR 60(b) motion
to vacate a sanctions order.
Further, because LMI filed a motion to vacate the sanctions order under CR 60(b), LMI is
entitled to relief only if the requirements of CR 60(b) are satisfied. The only question is whether
the granting of the mistrial is an extraordinary circumstance justifying relief. The trial court
found that the mistrial did not justify relief under CR 60(b), stating, “My position is that it does
not justify modification of that prior order because I believed then and I believe now that that
order was the minimum effective sanction in the context of all that had gone on.” RP (May 22,
2013) at 157.
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The standard of review under CR 60(b) is abuse of discretion. Union Bank, 191 Wn.
App. at 842. Because the trial court was not required to reapply the Burnet factors and because
the trial court noted that there were other factors supporting the discovery sanction, we hold that
the trial court did not abuse its discretion by denying LMI’s CR 60(b) motion for relief.
B. PREJUDICE FROM LATE NOTICE
The Port first discovered groundwater contamination at the TPH site in 1991. The Port
became aware of groundwater contamination at the MFA in 1997, and the Port purchased the IP
plant area with knowledge of that area’s groundwater contamination in 1999. Yet the Port did
not give LMI formal notice under the primary policies of potential claims at these sites until
filing suit in August 2010. The trial court ruled as a matter of law that the Port provided
untimely notice for the primary policies on both the TWP and TPH sites.
LMI argues that as a matter of law the Port’s late notice precludes the Port from obtaining
coverage for either site under the primary policies9 because the late notice prejudiced LMI.
Therefore, LMI argues that the trial court erred in denying its summary judgment motions on late
notice prejudice.10 LMI also argues that the trial court erred in limiting the evidence that it could
9
LMI did not argue in the trial court and does not argue on appeal that the Port breached the
notice provisions of the excess policies. The excess policies required the Port to provide notice
only if the claim could result in liability or damages in an amount necessary to implicate the
excess policies. LMI does not argue that this condition had been satisfied before the Port filed
suit in 2010.
10
At trial, the Port moved for a judgment as a matter of law on late notice prejudice at the TPH
site regarding the 1998 Chevron agreement and with respect to the Calloway Ross tank removal.
But LMI did not file a CR 50(a) motion for judgment as a matter of law regarding late notice
prejudice in general. Therefore, our review is limited to the trial court’s denial of LMI’s
summary judgment motion on this issue.
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present at trial on late notice prejudice and in instructing the jury that it could consider three
specified types of evidence in deciding the prejudice issue.
We hold that the trial court did not err in (1) denying LMI’s summary judgment motion
on late notice prejudice for the TWP site, (2) denying LMI’s summary judgment motion on late
notice prejudice for the TPH site, (3) limiting the evidence LMI could present regarding
prejudice, and (4) instructing the jury on late notice prejudice at the TPH site.
1. Policy Language
The primary policies contain two separate notice provisions. First, the broker’s
certificates provide:
In the event of any claim being made hereunder the Assured shall give, as quickly
as possible, written notice thereof together with fullest particulars possible to the
undersigned.
Pl.’s Ex. 107 (MC 5757), Pl.’s Ex. 44 (MC 5998), Pl.’s Ex. 46 (MC 6016).
Second, the insuring agreements contain specific notice of loss provisions:
Upon being known to Assured’s management, notice of the occurrence of any and
all losses which are apt to be a claim under this policy shall be given Assurers by
Assured as soon as may be practicable, and the said Assured shall deliver to
Assurers as particular an account thereof as the nature of the case will admit stating
the cause if known, the extent thereof, and the nature of the interest of the Assured.
Pl.’s Ex. 107 (MC 5757), Pl.’s Ex. 44 (MC 5998), Pl.’s Ex. 46 (MC 6016).
2. Legal Principles
The insured’s breach of a prompt notice provision in an insurance policy does not allow
an insurer to avoid its coverage obligations unless the late notice causes “actual and substantial
prejudice.” Mut. of Enumclaw Ins. Co. v. USF Ins. Co., 164 Wash. 2d 411, 426, 191 P.3d 866
(2008). And the insurer has the burden of proving actual and substantial prejudice from the late
20
No. 46654-6-II
notice. Id. at 427. The insurer cannot meet this burden by merely alleging prejudice – the
insurer must produce affirmative proof of actual prejudice. Canron, Inc. v. Fed. Ins. Co., 82 Wn.
App. 480, 491, 918 P.2d 937 (1996).
To prove prejudice, the insurer must show that the insured’s late notice “had an
identifiable and material detrimental effect on its ability to defend its interests.” Mut. of
Enumclaw, 164 Wash. 2d at 430. The insurer must present “ ‘affirmative proof of an advantage lost
or disadvantage suffered as a result of the delay, which has an identifiable detrimental effect on
the insurer’s ability to evaluate or present its defenses to coverage or liability.’ ” Id. at 429
(quoting Canron, 82 Wash. App. at 491-92).
Such a detrimental effect may include interference with the insurer’s ability to investigate
the insured’s liability or coverage defenses because of lost witnesses or documents or changes to
the physical site. Canron, 82 Wash. App. at 491. In that situation, the insurer must show that
“what is lost or changed must be material, and not otherwise available or subject to reasonable
reconstruction.” Id.; see also Mut. of Enumclaw, 164 Wash. 2d at 430 (stating that when the
claimed prejudice involves the ability to investigate, the insurer must show that “the kind of
evidence that was lost would have been material to its defense”).
The Supreme Court in Mutual of Enumclaw noted that Washington courts have relied on
many factors when evaluating prejudice from late notice, and provided a nonexhaustive list of
these factors:
[1] Were damages concrete or nebulous?
[2] Was there a settlement or did a neutral decision maker calculate damages; what
were the circumstances surrounding the settlement?
[3] Did a reliable entity do a thorough investigation of the incident?
[4] Could the insurer have eliminated liability if given timely notice?
[5] Could the insurer have proceeded differently in the litigation?
21
No. 46654-6-II
164 Wash. 2d at 429-30 (citations and parentheticals omitted).
Whether late notice prejudiced an insurer is a question of fact, which “will seldom be
decided as a matter of law.” Id. at 427. Similarly, prejudice is presumed only in extreme cases.
Id. at 428.
3. Summary Judgment Standard
We review a trial court’s order granting or denying summary judgment de novo. Lyons v.
U.S. Bank Nat’l Ass’n, 181 Wash. 2d 775, 783, 336 P.3d 1142 (2014). We review the evidence in
the light most favorable to the nonmoving party and draw all reasonable inferences in that
party’s favor. Lakey v. Puget Sound Energy, Inc., 176 Wash. 2d 909, 922, 296 P.3d 860 (2013).
Summary judgment is appropriate where there is no genuine issue of material fact and the
moving party is entitled to judgment as a matter of law. CR 56(c). “A genuine issue of material
fact exists when reasonable minds could differ on the facts controlling the outcome of the
litigation.” Dowler v. Clover Park Sch. Dist., 172 Wash. 2d 471, 484, 258 P.3d 676 (2011). If
reasonable minds can reach only one conclusion on an issue of fact, that issue may be
determined on summary judgment. Failla v. FixtureOne Corp., 181 Wash. 2d 642, 649, 336 P.3d
1112 (2014), cert. denied, 135 S. Ct. 1904 (2015).
The moving party bears the initial burden of showing that there is no genuine issue of
material fact. Lee v. Metro Parks Tacoma, 183 Wash. App. 961, 964, 335 P.3d 1014 (2014). A
moving defendant can meet this burden by showing that there is an absence of evidence to
support the plaintiff’s case. Id. The burden then shifts to the plaintiff to come forward with
sufficient evidence to establish the existence of each element of the plaintiff's case. Id. If the
plaintiff does not submit such evidence, summary judgment is appropriate. Id.
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No. 46654-6-II
4. Late Notice Prejudice for TWP Site
LMI argues that the trial court erred in denying its summary judgment motion on late
notice prejudice at the TWP site.11 We disagree.
In the trial court, LMI’s initial summary judgment motion on late notice prejudice
focused almost exclusively on the TPH site. LMI’s motion contained only one paragraph
regarding prejudice for the TWP site.
LMI now argues that the Port’s late notice caused prejudice for the TWP site because (1)
LMI was unable to investigate DOE’s allegations and assert defenses that could have mitigated
the Port’s liability when the Port received its PLP letter from DOE in 2005, and (2) witnesses
with knowledge regarding the Port’s expectation of polluting events and groundwater
contamination in the 1960s and 1970s had died before LMI received notice. The second
argument refers to Bob McNannay, the Port general manager from 1974 to 1986, and Bob
Foster, the Port director of engineering from sometime before 1980 to 1991. Both died in the
early 2000s, before the Port gave LMI notice.
Regarding the first argument, LMI fails to explain why late notice has prevented it from
asserting defenses to the Port’s liability under MTCA. DOE identified the Port as a PLP, but that
is merely a preliminary designation – potentially liable person. Nothing in the record indicates
that the Port entered into a consent decree with DOE or that DOE obtained an adjudication of the
Port’s liability before LMI received notice. As a result, LMI currently remains able to assert all
MTCA defenses on the Port’s behalf despite the late notice.
11
In addition to denying LMI’s summary judgment motion on the TWP site, the trial court also
granted summary judgment in favor of the Port on that site. LMI does not assign error to that
summary judgment order.
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No. 46654-6-II
Further, in the trial court the only MTCA defense LMI suggested had been lost was the
so-called “plume defense” now codified at RCW 70.105D.020(22)(iv).12 But the trial court ruled
as a matter of law on a different motion that the Port did not meet the requirements of the plume
defense for the TWP site. LMI did not appeal that ruling.
Regarding the second argument, the fact that certain witnesses are deceased is not
sufficient to create a question of fact regarding prejudice because LMI failed to allege what
evidence could have been produced by those witnesses. When asserting prejudice based on lost
witnesses, the insurer must show what information the lost witnesses possessed and that the
information was material. Canron, 82 Wash. App. at 489, 491. “It is not sufficient merely to
allege prejudice; an insurer must demonstrate specifics.” Id. at 491. In the trial court, LMI did
not allege what testimony McNannay and Foster would have given, other than to say that they
possessed “pertinent knowledge.” Clerk’s Papers (CP) at 7759. LMI did not produce any
evidence that McNannay and Foster would have supported a defense to coverage or would have
assisted in the investigation and defense of DOE’s MTCA claim.
The fact that McNannay and Foster could have had knowledge about the Port’s
expectation of groundwater contamination might show potential prejudice. But in order avoid
summary judgment, LMI was required to come forward with some evidence of actual prejudice.
Mut. of Enumclaw, 164 Wash. 2d at 426.
12
On appeal, LMI argues for the first time that it also could have asserted the third party defense
under RCW 70.105D.040(3)(a)(iii) on behalf of the Port in any action pursued by DOE. Because
LMI did not argue that before the trial court, we do not consider whether LMI’s inability to argue
the third party defense caused actual and substantial prejudice. In any event, as discussed above
nothing prevents LMI from raising that defense in any DOE action.
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No. 46654-6-II
In any event, even if the deaths of McNannay and Foster were enough to create an
inference of actual prejudice, at best that inference would create a question of fact regarding
prejudice. Without more specific information about what these witnesses knew, the fact that
they are unavailable could not establish prejudice as a matter of law. Because LMI is appealing
only the denial of its summary judgment motion, a question of fact means that LMI was not
entitled to summary judgment.
We hold that the trial court did not err in denying LMI’s summary judgment motion on
late notice prejudice for the TWP site.
5. Late Notice Prejudice for TPH Site
The trial court denied LMI’s motions for summary judgment on late notice prejudice at
the TPH site on September 11, 2012, December 21, 2012, and November 5, 2013. In its
November 5 order, the trial court ruled that there were material issues of fact regarding late
notice prejudice at the TPH site. LMI argues that the trial court erred in denying its pretrial
motions for summary judgment on late notice prejudice at the TPH site. We disagree.
a. Review of Pretrial Denial of Summary Judgment
We cannot review the trial court’s pretrial denial of summary judgment if the denial was
based on the presence of material, disputed facts and there has been a subsequent trial on the
merits. Weiss v. Lonnquist, 173 Wash. App. 344, 354, 293 P.3d 1264 (2013). The proper
procedure for reasserting at trial the issues raised in the previously denied summary judgment
motion is a motion for judgment as a matter of law under CR 50(a) and/or CR 50(b).
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No. 46654-6-II
Here, LMI lists a number of consequences of the Port’s late notice for the TPH site: (1)
the Calloway Ross underground storage tank and two other tanks were removed and destroyed,
(2) key witnesses have died or have faded memories, (3) the Port assumed partial responsibility
for contamination and made voluntary payments, (4) the Port did not file suit against other
polluters like Calloway Ross, and (6) the Port foreclosed any opportunity to seek contribution
under MTCA.
LMI also discusses what it could have done differently if it had received prompt notice:
(1) properly investigated and made an informed decision regarding its obligation to provide
coverage, (2) considered whether it needed to retain an expert to address missing information
and conduct interviews, (3) conducted its own soil and groundwater sampling and undertaken its
own evaluation of the pollution, (4) mitigated the Port’s liability and expenses, (5) prevented the
Port from entering into prejudicial cost sharing agreements; and (6) pursued other PLPs who
caused or contributed to the contamination while evidence was still available.
LMI argues that all these factors establish prejudice. However, as noted above, whether
an insurer can prove prejudice generally is a question of fact. Mut. of Enumclaw, 164 Wash. 2d at
427. All of these factors necessarily involve the resolution of factual issues and the trial court
denied LMI’s summary judgment motion on late notice prejudice at the TPH site based on the
existence of questions of fact. As a result, we decline to review the trial court’s pretrial denial of
summary judgment that involved consideration of these factors.
When a pretrial denial of summary judgment is based on a question of law, we can
review that order even after a trial on the merits. Weiss, 173 Wash. App. at 354. LMI argues that
although the trial court found factual issues regarding late notice prejudice, that finding was
26
No. 46654-6-II
based on two errors of law: (1) the conclusion that prejudice can be based only on a lost ability to
investigate the sites and (2) the failure to apply the Mutual of Enumclaw standard for
determining prejudice. However, any denial of summary judgment based on the type of
evidence that can be presented to prove prejudice and the application of Washington law to the
facts of this case still involves the application of facts. Therefore, we decline to review these
issues as well.
b. Presumed Prejudice
LMI also argues that the trial court should have granted its pretrial summary judgment
motions by finding prejudice as a matter of law based solely on the length of the Port’s delay in
giving notice. A failure to grant a pretrial summary judgment motion based on a legal issue is
reviewable following trial. Weiss, 173 Wash. App. at 354. LMI essentially argues that we should
presume prejudice even if there are factual issues as to whether LMI sustained actual and
substantial prejudice. We disagree.
The parties debate when the Port was required to give notice of potential claims at the
TWP and TPH sites. But there is no question that the delay was substantial. The Port certainly
knew when it entered into the Chevron agreement in 1998 that it had liability for costs incurred
at the TPH site. And the Port knew when it purchased the IP plant area in 1999 that it was now
liable for contamination at the TWP site. But the Port did not give LMI notice of these claims
until 2010. The question is whether such a significant delay in giving notice for environmental
claims should constitute prejudice as a matter of law even if the insurer cannot prove actual
prejudice.
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No. 46654-6-II
Washington courts repeatedly have emphasized in the late notice context that prejudice
will be presumed only in extreme cases. Mut. of Enumclaw, 164 Wash. 2d at 428; Pub. Util. Dist.
No. 1 of Klickitat County v. Int’l Ins. Co., 124 Wash. 2d 789, 805, 881 P.2d 1020 (1994)
[hereinafter Klickitat]; Pederson’s Fryer Farms, Inc. v. Transamerica Ins. Co., 83 Wash. App. 432,
438, 922 P.2d 126 (1996); Canron, 82 Wash. App. at 490. In Mutual of Enumclaw, the Supreme
Court did not presume prejudice even though the insurer did not receive notice of a claim against
its insured until four years after a complaint was filed and after the insured had settled with other
insurers. 164 Wash. 2d at 431. In Pederson’s, this court did not presume prejudice even though the
insured did not give notice to its insurer of a pollution claim until after the contaminated soil and
groundwater had been cleaned up. 83 Wash. App. at 436, 441-43.
No Washington appellate court has presumed prejudice based on the length of the delay
in providing notice of a claim. Given the strong language in several cases that prejudice is rarely
presumed and in the absence of contrary authority, we hold that prejudice cannot be presumed in
this case.
6. Restriction of Evidence
LMI argues that the trial court erroneously limited the type of evidence LMI could use to
show prejudice. LMI addresses this argument in only three sentences in its opening brief, and in
one sentence in its reply brief. However, LMI does not cite to any orders issued by the trial court
limiting the evidence that it could present at trial. Instead, LMI appears to refer to the trial
court’s November 5, 2013 summary judgment order, which stated, “There is a question of fact
regarding whether the Port’s late notice has prejudiced LMI’s ability to investigate the TPH
site.” CP at 16865.
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No. 46654-6-II
We reject LMI’s argument because LMI does not show in the record that the trial court
expressly limited the evidence it could present at trial on the late notice prejudice issue. To the
extent that the trial court’s summary judgment orders or other orders had the effect of limiting
evidence, LMI was required to address this issue in the appeal of those orders.
7. Prejudice Jury Instruction
LMI argues that the trial court erred in giving jury instruction 10 because it improperly
limited the evidence that the jury could consider when deciding whether the Port’s late notice
prejudiced LMI. We disagree.
We review the trial court’s choice in jury instruction for an abuse of discretion. Fergen v.
Sestero, 182 Wash. 2d 794, 802, 346 P.3d 708 (2015). A jury instruction is sufficient if it properly
informs the jury of the applicable law, allows each party to argue their theory of the case, and is
supported by substantial evidence. Id. at 803. The facts of the case govern the propriety of a
jury instruction. Id.
In order to preserve a challenge to a jury instruction for review, a party must make a
proper objection. Millies v. LandAmerica Transnation, 185 Wash. 2d 302, 313, 372 P.3d 111
(2016). CR 51(f) requires a party objecting to a jury instruction to “state distinctly the matter to
which counsel objects and the grounds of counsel’s objection.” On appeal, the pertinent inquiry
is “ ‘whether the exception was sufficient to apprise the trial judge of the nature and substance of
the objection.’ ” Washburn v. City of Fed. Way, 178 Wash. 2d 732, 746, 310 P.3d 1275 (2013)
(quoting Crossen v. Skagit County, 100 Wash. 2d 355, 358, 669 P.2d 1244 (1983)).
29
No. 46654-6-II
The trial court instructed the jury on the late notice defense in instruction 10, stating that
it had determined with regard to the TPH site that the Port’s notice to LMI was late and that LMI
had the burden of proving that the late notice caused actual and substantial prejudice. The
instruction also stated:
In determining whether LMI has proved their affirmative defense of late notice of the
TPH site, you should consider the following:
1) Whether LMI was actually and substantially prejudiced by LMI’s alleged inability to
pursue Calloway Ross for additional contribution towards cleanup costs at the TPH site;
2) Whether LMI was actually and substantially prejudiced by the change in site
conditions;
3) Whether LMI was actually and substantially prejudiced by the Port’s signing
of the May 19, 1998 Chevron Agreement.
CP at 18644. LMI objected to this paragraph but did not state the basis of the objection.
Instruction 10 lists three things that the jury “should” consider when deciding whether
LMI suffered actual and substantial prejudice – LMI’s inability to pursue Calloway Ross, the
change in site conditions, and the Port’s signing of the Chevron agreement. But the instruction
does not state that the jury could consider only those factors. Nothing in the language of
instruction 10 prevented LMI from arguing that is was prejudiced based on other evidence. In
addition, the phrase “change of site conditions” is broad enough a allow consideration of a wide
range of evidence.
Arguably, instruction 10 is ambiguous because it could be interpreted as instructing the
jury that they could consider only these three factors. But LMI did not articulate this potential
ambiguity in its objection to instruction 10. LMI simply stated without further explanation, “The
Court’s number ten we object to because of adding the second paragraph and paragraphs
30
No. 46654-6-II
numbered one, two and three.” RP (Nov. 19, 2013) at 2008. This objection was not sufficient to
“ ‘apprise the trial judge of the nature and substance of the objection.’ ” Washburn, 178 Wash. 2d
at 746 (quoting Crossen, 100 Wash. 2d at 358.). Therefore, LMI did not preserve any challenge to
the instruction on that basis.
Instruction 10 did not prevent either party from arguing its theory of the case. The
instruction highlighted three factors, but did not expressly preclude LMI from arguing that other
evidence showed prejudice. Accordingly, we hold that the trial court did not abuse its discretion
by giving instruction 10.
C. KNOWN LOSS PRINCIPLE
The Port purchased the IP plant area in 1999 with knowledge that the property purchased
was contaminated. LMI argues that (1) the Port had no liability for contamination at the IP plant
area apart from this purchase, and (2) the known loss principle precludes the Port from obtaining
coverage for contamination it knew existed at the time it purchased the IP plant area.13 We hold
that the 1999 purchase of the IP plant is immaterial to coverage because whether the known loss
principle applies is based on the insured’s knowledge at the time LMI’s insurance policies were
issued.
1. Legal Principles
Under the known loss principle, an insured cannot obtain insurance coverage for a loss if
the insured subjectively knew, at the time the insurance policy was issued, that there was a
substantial probability that the loss would occur. Klickitat, 124 Wash. 2d at 805. For liability
insurance, a “loss” refers to the insured’s liability to a third party. See id. at 806, 808 (approving
13
LMI does not make a known loss argument regarding the TPH site.
31
No. 46654-6-II
jury instruction applying known risk only if the insureds knew they would be sued for securities
violations).
The known loss principle does not preclude coverage simply because that insured may
know when an insurance policy is issued that some unspecified loss might occur.
The knowledge that some loss may occur in the future is the driving force behind
the purchase of insurance. A finding that this general knowledge precludes
coverage would be much too broad.
Id. at 808.
Because the known loss principle has the effect of an exclusion, the insurer has the
burden of proving that the insured knew the particular loss would occur. Alum. Co. of Am. v.
Aetna Cas. & Surety Co., 140 Wash. 2d 517, 556, 562, 998 P.2d 856 (2000) [hereinafter ALCOA].14
Application of the known loss principle generally presents a question of fact. Klickitat, 124
Wash. 2d at 805.
2. No Knowledge When Policies Were Issued
LMI argues that the known loss principle should apply because the Port purchased the IP
plant area in 1999 knowing that it was contaminated. But as noted above, the known loss
principle applies only if the insured had knowledge of the loss at the time the insurance policies
were issued. Klickitat, 124 Wash. 2d at 805; see also Overton v. Consol. Ins. Co., 145 Wash. 2d 417,
426, 38 P.3d 322 (2002) (stating that “the issue is whether [the insured] knew of the loss prior to
purchasing the insurance”). LMI’s policies here were issued between 1977 and 1984. The
14
ALCOA involved application of Pennsylvania law, and the Supreme Court was attempting to
predict how a Pennsylvania court would rule on the issue. 140 Wash. 2d at 557. However, the
court gave no indication that it would apply a different rule under Washington law.
32
No. 46654-6-II
Port’s 1999 purchase of the IP plant property obviously occurred long after those policies were
issued. Therefore, the known loss principle does not apply to that property.
LMI briefly argues on appeal that the known loss principle should apply to the MFA
because the Port knew in the 1960s that the area contained an unlined ditch into which IP had
been discharging contaminated wastewater. But LMI did not make any known loss arguments
regarding the MFA in the trial court. Accordingly, we decline to address this argument. In any
event, LMI does not show or even argue that the Port knew that they had potential liability at the
MFA before LMI issued its policies.
D. OCCURRENCE REQUIREMENT
LMI argues that the Port’s liability did not arise from an “occurrence” as a matter of law
as required under the LMI primary and excess policies because (1) at the IP plant area, the Port
expected and intended groundwater contamination when it purchased that property in 1999; and
(2) at both the TWP and TPH sites, the Port did not present sufficient evidence at trial to prove
that it did not expect or intend groundwater contamination before the last LMI policy was issued
in 1984. Therefore, LMI argues that the trial court erred in denying its CR 50 motions for
judgment as a matter of law.
We hold that (1) the Port’s 1999 purchase of the IP plant area is immaterial because
whether the insured expected or intended property damage is determined at the time the policies
are issued, and (2) the trial court did not err in denying LMI’s motions for judgment as a matter
of law because the evidence was sufficient to support the jury’s finding that the Port did not
expect groundwater contamination before LMI issued its policies.
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No. 46654-6-II
1. Policy Language
The insuring clauses of LMI’s primary insurance policies state that LMI will provide
coverage for damage to property of others as a result of an accident or occurrence. The primary
policies do not define “occurrence”.
LMI’s excess policy AN 5707 provides coverage for damage to property of others caused
by an occurrence. That policy states that the term “occurrence” will have the same meaning as in
the primary policies underlying that policy.
LMI’s other excess policies also provide coverage for property damage caused by or
arising out of an occurrence. The policies define “occurrence” as “an accident or a happening or
event or a continuous or repeated exposure to conditions which unexpectedly and unintentionally
results in . . . property damage.” Pl.’s Ex. 40 (JSL 1021), Pl.’s Ex. 105 (JSL 1041), Pl.’s Ex. 15
(JSL 1065), Pl.’s Ex. 16 (JSL 1087), Pl.’s Ex. 17 (JSL 1136), Def.’s Ex. 340 (JSL 1055).
2. Unchallenged Jury Instructions
Despite the absence of the definition of “occurrence” in the primary policies and one of
the excess policies, the trial court provided jury instructions on the occurrence requirement.
Instruction 8 provided:
In order to prove that the Port’s claims are covered by the London Market
Insurers’ policies, the Port must prove by a preponderance of the evidence, that
there has been an occurrence under the policies.
The term “occurrence” as used in the Port of Longview’s insurance policies
means: a continuous or repeated exposure to conditions, which results in property
damage neither expected nor intended from the standpoint of the insured.
The Port of Longview has the burden of proving by a preponderance of the
evidence that it did not expect or intend the contamination for which it alleges it is
entitled to insurance coverage.
34
No. 46654-6-II
CP at 18642. Instruction 9 provided:
Property damage is “expected or intended” by an insured if the insured had
knowledge, prior to purchasing the insurance policy, indicating that there was a
substantial probability the property damage (here, groundwater contamination
exceeding MTCA cleanup standards) would occur.
CP at 18643 (emphasis added).
The trial court’s instructions are generally consistent with Washington law on the
occurrence requirement. The insured has the burden of proving that the property damage was
not expected or intended. Queen City Farms, Inc. v. Central Nat’l Ins. Co. of Omaha, 126
Wash. 2d 50, 70-72, 882 P.2d 703, 891 P.2d 718 (1994). The trial court’s “substantial probability”
standard derives from Overton, 145 Wash. 2d at 425.
LMI objected to portions of instructions 8 and 9 in the trial court. But LMI has not
assigned error to these instructions on appeal. Therefore, they are the law of this case. Campbell
v. City of Bellevue, 85 Wash. 2d 1, 6, 530 P.2d 234 (1975).
3. No Expectation for IP Plant Area When Policies Were Issued
LMI argues that the Port cannot satisfy the occurrence requirement because it purchased
the IP plant area in 1999 expecting and knowing that the property was contaminated. But as with
the known loss principle and as stated in instruction 9, the occurrence requirement addresses
whether the insured expected property damage at the time the insurance policies were issued.
See Overton, 145 Wash. 2d at 431. LMI’s policies here were issued between 1977 and 1984. The
Port’s 1999 purchase of the IP plant property obviously occurred long after those policies were
issued. Therefore, whether the Port expected property damage at the IP plant area when it
purchased that property in 1999 is immaterial to the occurrence requirement.
4. Sufficiency of the Evidence
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No. 46654-6-II
LMI argues that the Port did not present sufficient evidence to support the jury’s finding
that the Port did not expect or intend property damage at both the TWP and TPH sites. We
disagree.
We review the trial court’s denial of a motion for judgment as a matter of law de novo.
Washburn, 178 Wash. 2d at 752-53. On review, we engage in the same inquiry as the trial court.
Mut. of Enumclaw Ins. Co. v. Gregg Roofing, Inc., 178 Wash. App. 702, 725, 315 P.3d 1143
(2013). In reviewing the motion, we admit the truth of the nonmoving party’s evidence and all
reasonable inferences that can be drawn from it. Id. A motion for judgment as a matter of law
should be granted if we can find, as a matter of law, that there is no substantial evidence or
reasonable inference to sustain a verdict for the nonmoving party. Id
a. O’Hollaren Testimony
The Port’s primary evidence that it did not expect or intend groundwater contamination
before any of the policy periods (1977-1985) came from the testimony of Kenneth O’Hollaren,
who was employed at the Port from 1980 until 2012. O’Hollaren worked as the assistant
operations manager, supervising day-to-day marine terminal operations, from 1980 until 1982.
He testified that his work as assistant operations manager required him to drive around the Port
docks regularly to supervise activities. He also testified that this work put him in regular contact
with the engineering and facilities department. O’Hollaren then was the assistant to the Port
general manager from 1982 until 1988, when he became the Port’s executive director.
In summary, O’Hollaren testified that he did not personally have any expectation or
intention of groundwater contamination at either TWP or TPH between 1980 and 1987. He also
testified that he did not recall any discussion about groundwater contamination between 1980
36
No. 46654-6-II
and 1987 with respect to either site. And he testified that based on his positions at the Port
during that time period, if groundwater contamination was a concern, he would have been aware
of that fact.
O’Hollaren first had contact with the Port and became familiar with Port facilities while
working as a steamship agent between 1977 and 1979. He testified that he did not recall any
conversations about contamination at either the TWP or TPH sites during that period.
When he joined the Port, O’Hollaren had conversations with Port personnel. He did not
recall any conversations at that time about expectation or intention regarding contamination
before 1980.
O’Hollaren also testified that he did not recall any conversations about contamination as
part of his close work with the engineering and facilities department.
Q. . . . When you testified earlier, you talked about close operation between the
engineering and facilities departments and operations. Do you recall that
testimony?
A. Yes.
Q. Do you recall ever having discussions about groundwater contamination
between 1980 and 1987 as part of that work?
....
[A.] No, I don’t recall any discussion like that.
[Q.] Is that the kind of thing that you would have been discussing when you talked
about the operations between these departments?
A. Any matters of importance to the physical plant typically would, you know, just
come up in the normal course of conversation that would affect operations, could
affect planning, and so that would be something that would come up to the extent
that it affected that, but I don’t recall any discussion like that.
....
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No. 46654-6-II
A. Any matters or issues or developments pertaining to the Port itself, the physical
plant of the Port, having to do with the facilities, the roadways, the land, these are
just all topics of conversation between engineering and operations and the executive
leadership as well that could impact, you know, existing operations or future
operations.
Q. So if there had been some concern about expectations or intentions about
groundwater contamination between 1980 and 1987 at the Port, would that have
been the kind of thing that would have been in that - - those types of conversations?
A. Yes, they would have been.
RP (Nov. 7, 2013) at 577-79.
O’Hollaren stated that he did not recall any conversations about contamination at either
site:
Q. . . . With respect to the TPH site, do you recall ever having such discussions or
hearing mention of an expectation or intention of groundwater pollution between
1980 and 1987?
....
[A.] No, I don’t have any recollection of that, no.
[Q.] Okay. And then with respect to the TWP site, do you recall, do you ever --
do you have any such recollections about those types of conversations with respect
to the TWP site during that time period?
....
[A.] I have no recollection of anything to do with the TWP site.
RP (Nov. 7, 2013) at 579-80.
Finally, O’Hollaren indicated on cross examination that the Port had first discovered
contamination at the TPH site in 1991.
Q. [The TPH] site was discovered by the Port in 1991, is that correct?
A. That’s correct.
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No. 46654-6-II
Q. And it was discovered when the Port was pulling an underground gasoline
storage tank from the Calloway Ross leasehold, right?
A. That’s correct.
RP (Nov. 7, 2013) at 592.
O’Hollaren’s testimony provides some direct evidence, and creates at least an inference,
that the Port was not aware of groundwater contamination at either the TWP site or the TPH site
before 1987. And his testimony on cross examination creates at least an inference that the Port
did not know of groundwater contamination at the TPH site until 1991.
LMI argues that O’Hollaren’s testimony is insufficient to establish the Port’s lack of
knowledge because he was not working for the Port in the 1960s and 1970s. However, this type
of argument relates to the weight of the Port’s evidence, not the sufficiency.
b. Krehbiel Testimony
The Port also presented evidence regarding the MFA from Norm Krehbiel, who became
the Port’s director of facilities and engineering in 1993. Krehbiel testified that he did not
personally expect or intend or hear any discussions about groundwater contamination at the
MFA between 1993 and 1996. Although Krehbiel joined the Port after the relevant time period,
if the Port was aware of groundwater contamination at the MFA, the director of facilities and
engineering presumably would have been aware of that fact. Therefore, this testimony could
create an inference that the Port did not know about groundwater contamination at the MFA until
at least 1996.
More significantly, Krehbiel testified that in 1992 the Port constructed a new million
dollar facility on the MFA that incorporated more environmentally friendly designs than the old
facility. This evidence creates an inference that the Port was unaware of any MFA
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No. 46654-6-II
contamination at that time because it would make little sense to construct a new building on
contaminated property.
c. Beard Testimony
The Port’s expert witness, Lawrence Beard, testified that the lineament ditch present on
both the IP plant area and the MFA was in use from the late 1940s until the 1960s to convey
wastewater. Beard testified that the use of unlined wastewater ditches was not a cause of
environmental concern until the mid to late 1970s. This testimony arguably creates an inference
that the Port had no reason to expect or intend groundwater contamination when the ditch was in
use.
d. Conclusion
Although the Port’s evidence is not overwhelming, we hold that it is sufficient. We must
make all reasonable inferences from the evidence and view the evidence in the light most
favorable to the Port. O’Hollaren’s and Krehbiel’s testimony give rise to inferences that the Port
was unaware of groundwater contamination before 1996 for the TWP site and 1991 for the TPH
site. The building of the new facility on the MFA area and the circumstances of the Port’s
discovery of the TPH contamination also allow inferences that the Port was unaware of any
groundwater contamination during the early 1990s. Those inferences, in turn, support the
inference that the Port did not expect or intent contamination before that time.
We hold that the Port presented sufficient evidence to persuade a rational and fair-minded
person that the Port did not expect or intent groundwater contamination before the relevant
policy periods. Accordingly, we hold that the trial court did not err in denying LMI’s motions
for judgment as a matter of law on the occurrence requirement.
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No. 46654-6-II
E. QUALIFIED POLLUTION EXCLUSION
LMI argues that the qualified pollution exclusions in the excess policies preclude
coverage under those policies. LMI claims that the trial court erred in (1) stating in a jury
instruction and the special verdict form that under the pollution exclusion, the Port was required
to prove that it did not expect or intend the release of contaminants to groundwater as opposed to
the release of contaminants more generally into the environment; and (2) denying LMI's motions
for judgment as a matter of law under CR 50(a) and (b) because the Port failed to present
sufficient evidence that it did not expect or intend the release of contaminants.
We hold that LMI waived its challenge to the trial court’s pollution exclusion jury
instruction and special verdict form because it did not object to the instruction and verdict form
in the trial court. We also hold that the trial court did not err in denying LMI’s motions for
judgment as a matter of law because the evidence was sufficient to support the jury’s finding that
the Port did not expect or intend the release of contaminants to the groundwater before the
applicable policy periods.
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No. 46654-6-II
1. Policy Language
Although LMI’s primary policies did not contain qualified pollution exclusions, LMI’s
excess policies contained identical pollution exclusions. These exclusions provided that the
insurance did not apply to property damage arising out of the “discharge, disbursal, release or
escape of . . . contaminants or pollutants into or upon land, the atmosphere or any watercourse or
body of water.” CP at 18602. But the pollution exclusions contained an exception to the
exclusion: “[T]his exclusion does not apply if such discharge, disbursal, release or escape is
sudden and/or accidental.” CP at 18602.
2. Pollution Exclusion Jury Instruction
The trial court instructed the jury on the pollution exclusion in instruction 11:
You are instructed that there is no dispute that the property damage alleged by
the Port arises out of the discharge, dispersal, release or escape of contaminants or
pollutants. Certain policies subscribed to by the London Market Insurers contain a
pollution exclusion which bars coverage for the Port’s claims unless the Port proves
by a preponderance of the evidence that the discharge, dispersal, release or escape
of contaminants or pollutants into the groundwater was sudden and accidental.
“Sudden and accidental” means “unexpected and unintended.”
The Port of Longview has the burden of proving that it did not expect the
discharge or release of contaminants into the groundwater.
You must determine whether the Port has met its burden of proving by a
preponderance of the evidence that it did not expect or intend the discharge,
dispersal, release or escape of contaminants or pollutants into the groundwater.
CP at 18645.
The special verdict form asked the jury for both the TWP and the TPH site “whether you
find by a preponderance of the evidence, that the Port of Longview has met its burden of proving
that the Port did not subjectively expect or intend the release of contamination to groundwater
prior to the policy period.” CP at 18650.
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No. 46654-6-II
Instruction 11 generally is consistent with Washington law. The Supreme Court in
Queen City Farms held that the term “sudden and accidental” in the exception to the pollution
exclusion clause means “unexpected and unintended.” 126 Wash. 2d at 86-87. And the pollution
exclusion focuses on the discharge or release of contaminants into the environment rather than
property damage. Id. at 87. Therefore, the exclusion does not apply if the discharge or release
of contaminants is unexpected or unintended. Id. Further, if contaminants are deposited in a
place of containment, the relevant release is the escape of contaminants from that place into the
environment. Id. at 79, 91. Finally, the instruction placed the burden of proof on the Port. No
Washington case has addressed who has the burden of proof on the “sudden and accidental”
exception to the qualified pollution exclusion, but courts in other jurisdictions have placed the
burden of proof on the insured. E.g., Aydin Corp. v. First State Ins. Co., 18 Cal. 4th 1183, 959
P.2d 1213, 1215-18 (1998).
Regardless of the specific details of Washington law, LMI did not object to instruction 11
in the trial court. Therefore, it is the law of this case. Millies, 185 Wash. 2d at 313.
3. Waiver of Jury Instruction/Special Verdict Form Challenges
LMI assigns error to the trial court’s giving of instruction 11 and giving the special
verdict form. However, LMI did not object to instruction 11 or the special verdict form in the
trial court. A party that fails to object to a jury instruction waives the ability to challenge that
instruction on appeal. RAP 2.5(a); Hudson v. United Parcel Serv., Inc., 163 Wash. App. 254, 269,
258 P.3d 87 (2011).
Accordingly, we decline to consider LMI’s arguments that the trial court erred in giving
instruction 11 on the pollution exclusion and in giving the special verdict form.
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4. Sufficiency of the Evidence
LMI argues that the Port did not present sufficient evidence to support the jury’s finding
that the Port did not expect or intend the discharge or release of contaminants into the
groundwater at both the TWP and TPH sites. We disagree.
To show the exception to the pollution exclusion applied, the Port had to prove that it did
not subjectively expect or intend the release of contaminants to the groundwater before the
relevant policy periods (1977-1985). Because the property damage for which the Port sought
coverage was the contamination of groundwater, the Port’s burden for the pollution exclusion
essentially was the same as its burden to prove an occurrence – that it did not expect or intend
the groundwater contamination. The Supreme Court acknowledged in Queen City Farms that
the inquiry might be the same for the occurrence requirement and the qualified pollution
exclusion:
We note that because we conclude that the relevant polluting event may be the
discharge, dispersal, release, or escape of material from a landfill or similar place
of containment, the damage/discharge distinction may be insignificant in many
cases as a practical matter.
126 Wash. 2d at 89.
As discussed above, the Port presented sufficient evidence to show that it did not expect
or intend groundwater contamination at the TWP site or the TPH site before LMI issued its
policies. That same evidence – the testimony of O’Hollaren, Krehbiel, and Beard – also supports
the jury’s finding that the Port met its burden to show that the Port did not expect or intend the
release of contaminants into groundwater at either site.
We hold that there was sufficient evidence that the Port did not expect or intend the
release of contaminants to the groundwater at either TWP or TPH before the relevant policy
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No. 46654-6-II
periods. Accordingly, we hold that the trial court did not err in denying LMI’s motions for
judgment as a matter of law on the pollution exclusion.
F. OLYMPIC STEAMSHIP ATTORNEY FEES
LMI argues the Port’s breach of the notice provision in LMI’s policies precludes the Port
from recovering attorney fees under Olympic Steamship. We agree with regard to the Port’s
claims under the primary policies but hold that the Port is entitled to recover attorney fees under
the excess policies.
1. Legal Principles
Generally, a party cannot recover attorney fees absent a contract term or statute allowing
for recovery. Klickitat, 124 Wash. 2d at 814. But in insurance coverage cases, the Supreme Court
in Olympic Steamship Co. v. Centennial Insurance Co. adopted an equitable exception to the
general rule. 117 Wash. 2d 37, 52-54, 811 P.2d 673 (1991). The court held that “[a]n insured who
is compelled to assume the burden of legal action to obtain the benefit of its insurance contract is
entitled to attorney fees.” Id. at 54.
The court premised its reasoning in Olympic Steamship on the fact that insurance
contracts are “substantially different from other commercial contracts” because of the disparity
of bargaining power between the insurer and the insured. Id. at 52. The court also noted that the
purpose of seeking insurance is to protect the insured from expenses, not to force the insured to
engage in time-consuming and expensive litigation with the insurer. Id. Finally, the court noted
that allowing the insured to recoup attorney fees expended to obtain the benefit of its insurance
would “encourage the prompt payment of claims” by insurers. Id. at 53.
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No. 46654-6-II
Whether a party is entitled to attorney fees under Olympic Steamship is a question of law
that we review de novo. Colo. Structures, Inc. v. Ins. Co. of the W., 161 Wash. 2d 577, 586, 167
P.3d 1125 (2007). Olympic Steamship applies where the insurer forces the insured to litigate
over questions of coverage. Cmty. Ass’n Underwriters of Am., Inc. v. Kalles, 164 Wash. App. 30,
40, 259 P.3d 1154 (2011). Coverage questions concern whether the insurance contract exists,
who is insured under the contract, and the type of risk insured against. Id.
However, in Klickitat the Supreme Court indicated that not every insured who is
successful in litigation against its insurer is entitled to attorney fees under Olympic Steamship:
We cannot authorize the imposition of attorney fees, however, when an insured
has undisputedly failed to comply with express coverage terms, and the
noncompliance may extinguish the insurer’s liability under the policy. . . . [T]he
insureds in this case took actions inconsistent with the express coverage terms of
their policies. Although we have found they are nonetheless entitled to the
insurance proceeds because the insurers were not actually prejudiced by their
noncompliance, we cannot justify an attorney fees award under these
circumstances.
124 Wash. 2d at 815 (emphasis added). In Klickitat, the insured violated a policy term when it
settled with claimants without the consent of the insurer. Id. at 802-03.
Similarly, in Liberty Mutual Insurance Co. v. Tripp, the Supreme Court held that
regardless of whether the insurer was actually prejudiced, the insured was not entitled to Olympic
Steamship attorney fees when the insured failed to comply with the policy’s notice of settlement
provision. 144 Wash. 2d 1, 20, 25 P.3d 997 (2001). The court reasoned the insured could not
recover attorney fees because it was the insured’s actions – failing to notify the insurer of
settlement and allowing the destruction of the insurer’s subrogation rights – that precipitated the
litigation. Id.
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No. 46654-6-II
2. Recovery of Attorney Fees Under Primary Policies
No Washington appellate court has addressed whether an insured is precluded from
obtaining Olympic Steamship attorney fees by failing to provide prompt notice in violation of the
applicable insurance policies. But the holding in Klickitat is equally applicable to the Port’s
claim for coverage under the primary policies. The trial court ruled, and the Port does not
dispute, that the Port breached the notice provisions in the primary policies. As in Klickitat,
although LMI is obligated to provide coverage because it could not show prejudice, the Port
“undisputedly failed to comply with express coverage terms.” Klickitat, 124 Wash. 2d at 815.
Further, the Port’s failure to give prompt notice was an integral part of the litigation and trial in
this case.
We do not believe that Klickitat stands for the proposition that any violation of a late
notice provision, however minor, precludes an insured from recovering Olympic Steamship
attorney fees. But here, the Port does not dispute that it had actual knowledge that it potentially
was liable for groundwater contamination at both the TWP and TPH sites for many years before
attempting to give notice and that DOE actually asserted a claim against the Port at the TWP site
five years before it gave notice. Further, whether the Port’s late notice prejudiced LMI was one
of the major issues in this litigation.
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No. 46654-6-II
Klickitat has not been overruled or even questioned on this issue. Therefore, we are
constrained to hold that an attorney fee award in favor of the Port for obtaining coverage under
the primary policies is not justified under the circumstances of this case.15
3. Recovery of Attorney Fees Under Excess Policies
The analysis is different for LMI’s excess policies. The trial court did not hold that the
Port breached the notice provisions of the excess policies. With regard to those policies,
Klickitat is inapplicable because the Port did not “[fail] to comply with express coverage terms.”
Klickitat, 124 Wash. 2d at 815. And the Port successfully litigated on the seven excess policies as
well as on the four primary policies. Therefore, we hold that the Port is entitled to recover
Olympic Steamship attorney fees for obtaining coverage under the excess policies.
Because the Port is entitled to recover attorney fees for its claims under the excess
policies but not under the primary policies, the trial court must determine the amount of attorney
fees that should be awarded for the Port’s claims under the excess policies. We remand to the
trial court for that determination.
4. Obtaining Benefit of Insurance
LMI argues that even if the Port is entitled to recover Olympic Steamship attorney fees,
the trial court should have refused to award any attorney fees here because the Port did not
obtain any significant benefit under the policies from the litigation. Because this issue may arise
15
LMI also argues that the Port’s voluntary payments pursuant to the 1998 Chevron agreement
preclude recovery of Olympic Steamship attorney fees. But none of the primary policies or
excess policies contained provisions prohibiting voluntary payments. Therefore, the Port did not
fail to comply with express policy provisions in this regard.
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No. 46654-6-II
on remand, we address LMI’s argument with regard to the excess policies to give guidance to the
trial court. We disagree with LMI.
Olympic Steamship holds that an insured can recover attorney fees in a “legal action to
obtain the benefit of its insurance contract.” 117 Wash. 2d at 54. LMI claims that the Port did not
obtain any real benefit as a result of this litigation because it voluntarily dismissed its damages
claim and whether coverage exists for specific future claims still must be litigated. LMI also
points out that there is no pending claim against the Port on the TWP site and the Port is
voluntarily investigating and remediating the TPH site without government compulsion. Finally,
LMI notes that the Port still must show that the primary policies have been exhausted before it
can obtain any coverage under the excess policies.
However, the Port is strictly liable and jointly and severally liable under MTCA for
extensive groundwater contamination at both the TWP site and the TPH site. Based on the
evidence presented at trial, it appears that the Port’s potential liability at these sites is extensive
and could implicate the excess policies. In the face of this liability, the Port obtained a
declaration that LMI is obligated under the excess policies to indemnify the Port (if the primary
policies are exhausted) against all claims arising out of environmental liabilities at both sites.
There is no question that this declaration regarding the excess policies represents a significant
benefit to the Port.
LMI may be correct that the Port’s declaratory judgment does not automatically resolve
all coverage issues regarding future claims and that coverage will not even be triggered under the
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No. 46654-6-II
excess policies until the primary policies are exhausted. However, in any future litigation
involving the excess policies the Port will not need to address (1) the known loss principle,
(2) the occurrence requirement, and (3) the pollution exclusion. Resolving these significant
coverage issues constitutes a significant benefit to the Port.
We hold that as required in Olympic Steamship, the Port has obtained significant benefits
under the LMI excess policies in this litigation.16
5. Reasonableness of Attorney Fee Award
LMI argues that the trial court erred regarding the amount of attorney fees awarded
because the award included attorney fees (1) for duplicative, unproductive and excessive time,
(2) already awarded as sanctions, (3) incurred in the mistrial caused by the Port’s misconduct, (4)
incurred in litigation against other defendants, and (5) relating to administrative and clerical
tasks.17 Because the amount of reasonable attorney fees will be relevant on remand, we address
this argument to give guidance to the trial court. We disagree with LMI.
We review the reasonableness of the amount of attorney fees awarded for an abuse of
discretion. Gander v. Yeager, 167 Wash. App. 638, 647, 282 P.3d 1100 (2012). A trial court
abuses its discretion if its decision was manifestly unreasonable or based on untenable grounds
or untenable reasons. Barton, 178 Wash. 2d at 215.
16
By so ruling, we do not address whether the trial court can consider on remand, if appropriate,
the extent of the Port’s benefits under the excess policies in determining the amount of attorney
fees to award for the Port’s excess policy claims.
17
LMI also argues that attorney fees relating to the Port’s unsuccessful activities are not
recoverable even though the Port ultimately prevailed at trial. However, LMI did not raise this
issue in the trial court. Therefore, we decline to address this argument.
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No. 46654-6-II
A trial court’s award of attorney fees must be supported by findings of fact and
conclusions of law. Berryman v. Metcalf, 177 Wash. App. 644, 658, 312 P.3d 745 (2013). “Courts
must take an active role in assessing the reasonableness of fee awards, rather than treating cost
decisions as a litigation afterthought. Courts should not simply accept unquestioningly fee
affidavits from counsel.” Mahler v. Szucs, 135 Wash. 2d 398, 434-35, 957 P.2d 632, 966 P.2d 305
(1998). A trial court abuses its discretion when it enters conclusory findings that fail to explain
the court’s analysis and address specific objections to fee amounts. Berryman, 177 Wash. App. at
658-59.
Here, the trial court specifically addressed LMI’s arguments. The trial court (1)
disagreed that having four attorneys attend a motion hearing in December 2012 was duplicative;
(2) deducted $114,229 in fees for unproductive time, including fees relating to the Port’s
damages claim that was voluntarily dismissed; (3) disallowed a small amount for excessive time
and an amount for excessive costs; (4) explained that it was awarding attorney fees relating to
discovery even though it declined to award those fees as sanctions; (5) allowed a portion of fees
incurred for preparation of the first trial because they carried over to the second trial; (6) found
that the amount of time spent on matters exclusively relating to other defendants was
inconsequential; and (7) awarded amounts for administrative and clerical tasks under Panorama
Village Condominium Owners Association Board of Directors v. Allstate Insurance Co., 144
Wash. 2d 130, 144, 25 P.3d 910 (2001).
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No. 46654-6-II
LMI provides no meaningful argument supporting its challenge to these rulings. The trial
court’s findings indicate that it did not unquestioningly accept the Port’s fee requests, but instead
it carefully considered the reasonableness of the request and LMI’s objections. The trial court
excluded certain fees pursuant to LMI’s objections and explained why it allowed fees over LMI
objection. Therefore, we hold that the trial court did not abuse its discretion in determining the
gross amount of recoverable attorney fees. On remand, the trial court will have to determine
what portion of that amount should be allocated to the Port’s claims under the excess policies.
G. ATTORNEY FEES ON APPEAL
Pursuant to RAP 18.1 and Olympic Steamship, the Port requests reasonable attorney fees
incurred in defending against LMI’s appeal. RAP 18.1 allows a party to recover reasonable
attorney fees on review if applicable law grants the party the right to attorney fees. As discussed
above, under Olympic Steamship and Klickitat the Port is entitled to recover attorney fees for its
claims under the excess policies but not the primary policies. Therefore, we award to the Port
those reasonable attorney fees on appeal that relate to the Port’s claims under the excess policies.
CONCLUSION
We affirm the trial court’s declaratory judgment orders but reverse the trial court’s
attorney fee order and remand for the trial court to determine the amount of attorney fees that
should be awarded for the Port’s claims under the excess policies.
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No. 46654-6-II
A majority of the panel having determined that this opinion will not be printed in the
Washington Appellate Reports, but will be filed for public record in accordance with RCW 2.06.040,
it is so ordered.
MAXA, J.
We concur:
WORSWICK, J.
BJORGEN, C.J.
53