Opinion
No. 61221-2-I.
April 27, 2009.
Appeal from a judgment of the Superior Court for King County, No. 05-2-27899-4, Joan E. DuBuque, J., entered November 30, 2007.
Affirmed by unpublished opinion per Lau, J., concurred in by Cox, J.; Dwyer, A.C.J., concurring separately.
After the Ballard Condominiums began experiencing water intrusion problems, the Ballard Condominiums Owners Association (COA), as assignee of the general contractor, sued the subcontractors, including Pacific Rim Framing, for breach of contract and duty to defend and indemnify. The trial court dismissed Pacific Rim on its motion for summary judgment, denied the COA's cross motion for summary judgment, and ruled that Pacific Rim did not breach its contractual obligations and the contract did not obligate Pacific Rim to defend or indemnify the COA. We affirm.
FACTS
The Ballard Condominium (Project) is a five-story, 162-unit residential building located in the Ballard neighborhood in Seattle. General contractor Occidental Construction, Inc., entered into written contracts with several subcontractors to provide labor, services, and construction materials for the project. On September 5, 2000, Occidental assigned all rights and responsibilities under these contracts to developer Ballard Residential, LLC. The project was completed and occupied in 2001.
But in 2004, the project began experiencing water intrusion problems. The COA retained experts who began investigating and documenting the problems. In February 2005, the COA sent a statutory notice of construction defect claim to Ballard Residential with a request to conduct a neutral inspection. In April 2006, expert JRP Engineering, Inc., issued a site investigation report that further documented evidence of water intrusion and construction defects.
This included Bob Stiemer in 2004 and Interface Management, Inc./Building Design Enclosure Inspection Corporation (IMI/BEDIC) in 2005.
RCW 64.50.020 requires notice of claim in construction defect actions.
In August 2005, the COA filed suit against Ballard Residential alleging numerous claims based on construction defects. In September 2006, Ballard Residential served Pacific Rim and other subcontractors with a tender letter demanding that they defend and indemnify it. However, Pacific Rim did not respond.
In January 2007, Ballard Residential served a third party complaint on several subcontractors, including Pacific Rim. The third party complaint against Pacific Rim alleged breach of contract and duty to indemnify and defend Ballard Residential.
On February 14, 2007, Ballard Residential sent a letter to Pacific Rim and other subcontractors in response to several requests for documents regarding alleged defects at the project. The letter also enclosed (1) a JRP Engineering site investigation report dated April 17, 2006, (2) a scope of repair prepared by Kilburn Architects, (3) Ballard Residential's discovery requests served on the COA, and (4) a case schedule. The letter also offered the subcontractors access to Ballard Residential's case files.
In March 2007, Ballard Residential sought to pursue its own coverage as an additional insured under Pacific Rim's insurance policies. But both of Pacific Rim's insurance carriers denied Ballard Residential's tender of defense.
In July 2007, Pacific Rim filed an answer to Ballard Residential's third party complaint in which it denied the allegations regarding the breach of contract and duty to indemnify and defend claims based on lack of sufficient knowledge and the complaint's vague and undefined allegations.
In October 2007, the COA settled with Ballard Residential. As part of that settlement, Ballard Residential assigned all of its contractual claims against the subcontractors, including Pacific Rim, to the COA.
On November 2, 2007, Pacific Rim moved for summary judgment against the COA seeking dismissal of all claims. On the same date, the COA (proceeding with the rights of Ballard Residential) moved for summary judgment against Pacific Rim on the issues of failure to procure insurance and failure to indemnify and defend. Following oral argument, the trial court granted Pacific Rim's motion for summary judgment and denied the COA's motion for partial summary judgment, ruling that Pacific Rim was entitled to summary judgment on all issues. The trial court subsequently denied the COA's motions for reconsideration. The COA now appeals.
In a series of unappealed rulings, the trial court struck several items of evidence submitted by the COA, including a document from Kilburn Architects' Scope of Repair and declarations of experts Bob Steimer, Todd Kilburn, and Mark Jobe. The admissibility of these reports and declarations is not an issue on appeal. McKee v. Am. Home Prods. Corp., 113 Wn.2d 701, 705, 782 P.2d 1045 (1989).
ANALYSIS
We review summary judgment orders de novo, engaging in the same inquiry as the trial court. Wilson v. Steinbach, 98 Wn.2d 434, 437, 656 P.2d 1030 (1982). Summary judgment is proper if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. CR 56(c); Huff v. Budbill, 141 Wn.2d 1, 7, 1 P.3d 1138 (2000). The court must consider all facts submitted and all reasonable inferences in the light most favorable to the nonmoving party. Graff v. Allstate Ins. Co., 113 Wn. App. 799, 802, 54 P.3d 1266 (2002). When the moving party meets the initial burden of showing the absence of an issue of material fact, the burden shifts to the nonmoving party to make a showing sufficient to establish the existence of an essential element of the case. Young v. Key Pharm., Inc., 112 Wn.2d 216, 225-26, 770 P.2d 182 (1989). The purpose of summary judgment is to avoid unnecessary trials where insufficient evidence exists. Pelton v. Tri-State Mem'l Hosp., Inc., 66 Wn. App. 350, 355, 831 P.2d 1147 (1992).
Breach of Contract — Tyvek
The COA argues that the trial court erred in granting Pacific Rim's summary judgment motion on the issue of whether it breached its contractual obligation to properly install Tyvek as required by its subcontract with Ballard Residential. The COA's argument focuses on one line in the subcontract specifying that Pacific Rim's scope of work included "[s]tapeling [sic] and taping ends of Panelizer installed Tyvek vapor barrier."
The COA contends that the deposition testimony of Al Gonzales, owner and president of Pacific Rim, supports its theory that Pacific Rim breached the contract by failing to properly install the Tyvek. Gonzales testified about his understanding of Pacific Rim's scope of work. "It seems like, to me, we were going to try to — anywhere we could access and get a hold of that loose Tyvek, we would pull it to the building and staple it so it wouldn't continue to just kind of blow around." Gonzales acknowledged that there could have been some Tyvek his workers did not staple or tape because they could not reach it from the inside. The COA further relies on photographs from expert Mark Jobe showing Tyvek without tape or staples on it and from experts Pearce Company Architects showing sheets of loose Tyvek falling off the exterior of the unfinished project after a windstorm.
For the first time in its reply brief, the COA cited the declaration of Todd Kilburn as evidence of breach and causation. The trial court struck this evidence prior to its summary judgment ruling, but considered it in ruling on the COA's motion for reconsideration. The COA, however, assigned no error to the order granting Pacific Rim's motion to strike or to the order denying the COA's motion for reconsideration. We decline to consider it. RAP 10.3; Cowiche Canyon Conservancy v. Bosley, 118 Wn.2d 801, 809, 828 P.2d 549 (1992); McKee, 113 Wn.2d at 705.
Although the trial court struck Jobe's declaration, it allowed certain photographs of the jobsite taken during construction.
We conclude that the trial court properly dismissed this breach of contract claim against Pacific Rim. The COA fails to acknowledge the limits of Pacific Rim's contractual duty with respect to Tyvek. The record shows that Pacific Rim was hired to perform the wood framework at the project, using wall panels that had been prefabricated offsite by a different subcontractor. The panels arrived at the jobsite with Tyvek preinstalled on the exterior side. Pacific Rim erected the panels and secured them into place, then installed floor joists on top of the panels to create the second floor. This process was repeated up to the top floor. Pacific Rim, working from the inside, stapled the 10-to 12-inch Tyvek overlap at the top of the exterior panels and to the joists above. Pacific Rim's workers did not have access to "spider staging" that would allow them to access the exterior of the project.
"Spider staging" is a type of staging hung from booms on the structures' roof, similar to platforms used by window washers. This staging allows the workers to reach the outside structure above where the workers could reach from the ground or from the inside of the structured. Brief of Respondent n. 5.
Lone Pine Siding, LLC was the subcontractor in charge of siding on the project. Lone Pine's contract required it to install all siding, building paper, flashing, and accessories "to insure proper protection from weather, insects and other elements in which exterior siding is intended to protect." Lone Pine was responsible for tying "all Tyvek joints together with staples using proper laps." Lone Pine was also required to tape tears or holes, to have the vapor barrier inspected, to "apply a layer of 60 minute building paper over the Tyvek prior to installation of siding," and to tape all flashing from all trades. And unlike Pacific Rim, Lone Pine's contract stated that Ballard Residential would provide Lone Pine with spider staging.
Gonzales's testimony that Pacific Rim's workers may not have stapled some of the Tyvek ends that were out of reach does not establish that it breached its contract. Gonzales testified that Pacific Rim did what it could to staple the Tyvek ends from the inside as required by the contract. And photographs of loose Tyvek on the exterior of the structure, with no expert testimony to explain them, do not establish that any of the subcontractors breached their contracts with respect to Tyvek installation.
Moreover, the COA provided no evidence demonstrating that the water damage was caused by Pacific Rim's alleged failure to meet its contractual obligations regarding Tyvek. A breach of contract claim may be dismissed when there is no evidence of damages caused by the breach. Jacob's Meadow Owners Assoc. v. Plateau 44 II, LLC, 139 Wn. App. 743, 754, 162 P.3d 1153 (2007).
At summary judgment, the COA asserted, "His Tyvek is here. Water got behind it. It had to get behind there somehow." Report of Proceedings (Nov. 30, 2007) at 142. In granting Pacific Rim's motion for summary judgment, the trial court ruled,
I do not have anything that says the work of Pacific Rim was the cause or was defective in any fashion whatsoever. In fact, to the contrary.
. . . [W]e have nothing to provide the causal link to prove that your contract was breached in any way.
There is no factual evidence in front of me so I am going to grant [Pacific Rim's] motion for summary judgment.
Id. at 145.
As more fully discussed above, Pacific Rim, the framing subcontractor, was not the sole entity contractually obligated to install Tyvek. Its scope of work relating to Tyvek was limited to stapling and taping the ends of the Tyvek vapor barrier. The Tyvek was preinstalled, and the panels were prefabricated offsite by a different subcontractor. Pacific Rim did all of its work from inside the structure. Gonzales testified that Pacific Rim's workers stapled the loose ends of Tyvek that they could reach from the inside. Lone Pine was principally responsible under its subcontract to perform the weatherproofing work on the exterior of the structure, including tying all Tyvek joints together and repairing holes. The record shows that windstorms damaged the Tyvek after Pacific Rim completed its work but before the siding was completed. Ballard Residential paid Lone Pine an additional $89,492 to repair and replace the windstorm-damaged Tyvek. There is simply no evidence that Pacific Rim breached the contract or that the alleged breach caused the water damage. Accordingly, the trial court did not err in dismissing the COA's breach of contract claim against Pacific Rim.
Duty to Defend and Indemnify
The COA argues that the express terms of the contractual indemnity clause plainly obligated Pacific Rim upon tender to act as an insurer in defending Ballard Residential against any claims. An insurer's duty to defend "'arises when a complaint against the insured, construed liberally, alleges facts which could, if proven, impose liability upon the insured within the policy's coverage.'" Truck Ins. Exch. v. Vanport Homes, Inc., 147 Wn.2d 751, 760, 58 P.3d 276 (2002) (quoting Unigard Ins. Co. v. Leven, 97 Wn. App. 417, 425, 983 P.2d 1155 (1999)). The COA further contends that Ballard Residential was not contractually required to establish Pacific Rim's liability at the time of tender to trigger the duty to defend. Rather, the tender letter merely needed to notify Pacific Rim that if the facts alleged by the COA were proved, it could impose liability on Pacific Rim. We disagree.
The parties briefed this issue in terms of both the duty to indemnify and the duty to defend. These two duties, however, are separate and distinct. "[T]he duty to defend arises when the facts indicate that liability would eventually fall upon the indemnitor. The duty to indemnify arises when the plaintiff in the underlying action prevails on facts that fall within coverage." George Sollitt Corp. v. Howard Chapman Plumbing Heating, Inc., 67 Wn. App. 468, 475, 836 P.2d 851 (1992). Because we affirm the trial court's ruling dismissing the COA's breach of contract claim, we need not address the indemnification or statute of repose issues.
"Interpretation of the terms of a contract is a question of law and is reviewed de novo by the appellate court." Knipshield v. C-J Recreation, Inc., 74 Wn. App. 212, 215, 872 P.2d 1102 (1994). "Indemnification clauses are subject to the fundamental rules of contractual construction, which require '"reasonable construction so as to carry out, rather than defeat, the purpose."'" Nunez v. Am. Bldg. Maint. Co. W., 144 Wn. App. 345, 350, 190 P.3d 56 (2008) (quoting Cont'l Cas. Co. v. Mun. of Metro. Seattle, 66 Wn.2d 831, 835, 405 P.2d 581 (1965)). "Indemnity agreements are to be viewed realistically as efforts by businessmen to allocate as between them the cost or expense of the risk of accidents. In so interpreting indemnity agreements, causation and not negligence is the touchstone." Parks v. W. Wash. Fair Ass'n, 15 Wn. App. 852, 857, 553 P.2d 459 (1976). "Because we construe indemnity clauses realistically, we must address the intent of the parties to allocate the risk of loss or damages arising out of a contract." Nunez, 144 Wn. App. at 351.
The indemnification clause in the subcontract provided in part as follows.
The parties also entered into an "indemnification addendum" after the original subcontract was executed. The parties do not dispute the trial court's ruling that the addendum is not binding absent new consideration. Moreover, the indemnification addendum is functionally similar to the original subcontract regarding the issue before us.
Subcontractor agrees to defend, indemnify and hold Contractor, Owner, Architect, Architect's consultants, and agents and employees of any of them harmless from any and all claims, demands, losses and liabilities to or by any and all persons or entities including without limitation any subcontractors, suppliers or sub-tier subcontractors and their respective employees, agents, licensees or representatives, arising out of, resulting from, or connected with the work performed or to be performed under this Subcontract by Subcontractor or Subcontractor's agents or employees to the fullest extent permitted by law and subject to the limitations provided below.
Subcontractor's duty to defend and indemnify shall not apply to liability for damages arising out of bodily injury to persons or damage to property caused by or resulting from the sole negligence of the Contractor, Owner, Architect, Architect's consultants and agents or employees of any of them.
Subcontractor's duty to indemnify for liability for damages arising out of bodily injury to persons or damage to property caused or resulting from the concurrent negligence of (a) Contractor, Owner, Architect, Architect's consultants, agents and employees of any of them, and (b) Subcontractor or Subcontractor's agents and employees shall apply only to the extent of the negligence of Subcontractor or Subcontractor's agents or employees.
. . . .
. . . . Upon tender of defense under this indemnity provision, Subcontractor agrees to retain counsel of Contractors and Owner's choice to defend Contractor or Owner against third party claim(s).
In Jones v. Strom Constr. Co., 84 Wn.2d 518, 521-22, 527 P.2d 1115 (1974), the Washington Supreme Court held that a construction subcontract containing an agreement to indemnify for claims "'arising out of,' 'in connection with,' or 'incident to' [the Subcontractor's] 'performance'" did not obligate the subcontractor to indemnify the general contractor. The court rejected the general contractor's argument that the subcontractor had agreed to act as an insurer.
[I]t does not appear reasonable or in keeping with the overall purpose and intent of the subcontract to isolate and read the indemnity clause in such a fashion as to virtually cast Belden into the role of an insurer of Strom's performance of its separate and nondelegated contractual obligations. . . . Such an interpretation does not appear to us to square with a realistic effort on the part of the parties to logically allocate as between them the risk of loss arising out of the construction project and the subcontract in question.
Jones, 84 Wn.2d at 522. The court reasoned that because indemnity turns on the subcontractor's performance of the contract, "it is clear that unless an overt act or omission on the part of [the subcontractor] in its performance of the subcontract in some way caused or concurred in causing the loss involved, indemnification would not arise." Jones, 84 Wn.2d at 521-22 (footnote omitted). See also George Sollitt Corp. v. Howard Chapman Plumbing Heating, Inc., 67 Wn. App. 468, 472, 836 P.2d 851 (1992) (rejecting general contractor's attempt to apply principles from the insurance context in interpreting a contractual indemnity provision).
Similarly, the indemnity provision in this case cannot reasonably be construed to mean that Pacific Rim, acting as one of several subcontractors on a large construction project, agreed to act as an insurer for Ballard Residential. "The insurer's duty to defend is one of the main benefits of the insurance contract." Safeco Ins. Co. of Am. v. Butler, 118 Wn.2d 383, 392, 823 P.2d 499 (1992). In contrast, the primary purpose of the Pacific Rim and Ballard Residential subcontract was to provide framing work for the Ballard Condominium project. The indemnity clause provides that Pacific Rim agreed to defend and indemnify Ballard Residential against any and all claims "arising out of, resulting from, or connected with the work performed or to be performed under this Subcontract by Subcontractor or Subcontractor's agents or employees. . . ." It specifies that Pacific Rim's duty to defend and indemnify would not apply to liability for damage caused by the negligence of others. This was not an agreement to insure, but rather a logical allocation of the risk of loss arising from Pacific Rim's scope of work on the project.
Therefore, under the express terms of the indemnity provision, Pacific Rim's duty to defend is triggered only if Ballard Residential's claim arose from, resulted from, or was connected with Pacific Rim's scope of work under the subcontract. As discussed above, the COA failed to provide evidence of a causal connection between Pacific Rim's narrow scope of work regarding Tyvek and the documented water damage.
The COA cites MacLean Townhomes, LLC v. American First Roofing Builders, Inc., 133 Wn. App. 828, 138 P.3d 155 (2006) and Continental Casualty Company, 66 Wn.2d 831, 405 P.2d 581 (1965) in support of its argument that the contractual indemnity provision plainly obligated Pacific Rim to defend Ballard Residential. In MacLean, the court held that the subcontractor's indemnification agreement did not limit the subcontractor's duty to tort actions. MacLean, 133 Wn. App. at 833. And in Continental, the court held that an indemnification clause in a contract between a municipal corporation and a general contractor obligated the general contractor to defend actions in which the claimants did not allege that their damage occurred through negligence. Continental, 66 Wn.2d at 836. Neither case supports a finding that Pacific Rim is obligated to defend Ballard Residential in the absence of evidence that the COA's claims arose from, resulted from, or were connected with Pacific Rim's work.
Moreover, unlike an insurance company, the mere potential for liability to fall upon Pacific Rim does not trigger a duty to defend. In Washington, under a contractual indemnity provision, "the duty to defend is determined by the facts known at the time of tender of defense. '[T]he facts at the time of the tender of defense must demonstrate that liability would eventually fall upon the indemnitor, thereby placing it under a duty to defend.'" George Sollitt, 67 Wn. App. at 472 (citation omitted) (quoting Dixon v. Fiat-Roosevelt Motors, Inc., 8 Wn. App. 689, 694, 509 P.2d 86 (1973)).
The COA argues that there is no need to demonstrate that liability would eventually fall upon Pacific Rim. Rather, to make an effective tender of defense, Ballard Residential was only required to notify Pacific Rim (1) of the pendency of the suit, (2) that the COA would look to Pacific Rim for indemnity, (3) that the notice constitutes a formal tender of the right to defend the action, and (4) that if Pacific Rim refused to defend, it would be bound in subsequent litigation between them to the factual determination necessary to the original judgment. Mastro v. Kumakichi Corp., 90 Wn. App. 157, 164-65, 951 P.2d 817 (1998) (quoting Dixon, 8 Wn. App. at 692). But even assuming that an indemnitor is given adequate notice of defense, the duty to defend is not triggered unless the facts at the time of the tender demonstrate that liability will eventually fall upon the indemnitor. Dixon, 8 Wn. App. at 694.
In Sollitt, 67 Wn. App. at 472-73, the general contractor alleged that the subcontractor had a duty to defend it after an improperly grounded pump electrocuted one of the subcontractor's employees. The subcontractor argued that it had no duty to defend because the accident resulted solely from the employee's negligence. The appellate court examined the allegations in the pleadings, the responses to plaintiff's discovery, and the subcontractor's acknowledgement that the improperly grounded pump was a contributing factor in determining that the duty to defend had been triggered. And in Parks, 15 Wn. App. at 853, the plaintiffs sued the Fair Association to recover for injuries sustained when they slipped and fell in what appeared to be ice. The court held that the facts alleged in the complaint were insufficient to obligate the fair's snow cone vendor to defend the Fair Association under the terms of their indemnity agreement.
The Parks merely alleged that the negligent failure of the Fair Association to maintain the grandstands was the sole and proximate cause of the injuries sustained. There is no allegation whatsoever which would link the Lamkens, as exclusive 'snow cone' concessionaires, to the events leading to the filing of the complaint.
Parks, 15 Wn. App. at 856.
The COA argues that even under the expansive Parks analysis, Ballard Residential sufficiently tendered its defense to Pacific Rim through (1) the September 25, 2006 tender letter to Pacific Rim, (2) the January 8, 2007 third party complaint against Pacific Rim and other subcontractors, and (3) the February 14, 2007 letter and attached materials. We disagree.
Ballard Residential's perfunctory tender letter did not demonstrate that liability would eventually fall upon Pacific Rim. That letter, which was largely duplicated to each subcontractor without supporting detail, stated,
Counsel for the Home Owners Association of Ballard Condominiums (the "Association") has written Ballard Residential alleging that construction work on the Project was defective, including work that you performed. The Association has filed a lawsuit against Ballard Residential seeking damages to repair such allegedly defective work. Based on our initial assessment of the Project, some of the alleged defects are within your scope of work.
The letter did not include evidence in support of the allegations against Pacific Rim. It did not specify how Pacific Rim's work was allegedly defective. And it did not make a causal link between Pacific Rim's work and the alleged construction defects and water damage.
Similarly, the third party complaint did not meet the required standard to trigger Pacific Rim's duty to defend. The complaint alleged in part,
62. The Pacific Rim Framing Contract required Pacific Rim Framing to perform all work in "strict accordance with the Contract Documents, free of defects and in a manner consistent with industry standards."
63. To the extent that the Association's allegations are true, then Pacific Rim Framing's conduct, acts, errors, omissions, and failures constitute a material breach of the Pacific Rim Framing Contract.
. . . .
68. As a result of Pacific Rim Framing's alleged breach of contract, the Association lodged a claim against Ballard LLC.
. . . .
71. Pacific Rim Framing's refusal to defend or indemnify Ballard LLC is a breach of the Pacific Rim Framing Contract.
The third party complaint did not specify how Pacific Rim's work was allegedly defective. It did not explain or document the alleged causal connection between Pacific Rim's work and the alleged defects. Rather, it implicated Pacific Rim's entire scope of work as a potential basis for liability.
The COA argues that even if the tender letter and third party complaint were insufficient, then Pacific Rim's duty to defend accrued on February 14, 2007, when Ballard Residential responded to the subcontractors' request for documents regarding alleged construction defects. Again, we disagree. Even if we consider the February 14, 2007 letter and attached documents in conjunction with the original tender letter and third party complaint, Ballard Residential still fails to demonstrate that liability would eventually fall upon Pacific Rim. The reports and photographs contain evidence of water damage involving flaws in the weather-resistive barrier (including Tyvek). But to trigger the duty to defend, the claims alleged against Pacific Rim must arise out of Pacific Rim's scope of work. There is no evidence or testimony linking Pacific Rim's work with the water damage. As discussed above, the mere fact that the gypsum sheathing was damaged does not prove that Pacific Rim breached its very limited contractual duty with respect to Tyvek.
Although the Kilburn Scope of Repair was stricken by the trial court prior to its rulings on summary judgment, we may consider it for the purposes of determining whether the facts known at the time of tender triggered the duty to defend.
Insurance
The COA argues that the trial court erred in denying its motion for summary judgment against Pacific Rim for failing to insure Ballard Residential on a "completed operations" policy as required by the following clause in the subcontract:
Subcontractor will pay all premiums and carry One Hundred Thousand Dollars ($100,000.00) Employer's Liability Insurance and One Million Dollars ($1,000,000.00) Comprehensive General Liability insurance including Contractor's Protective, Completed Operations, Contractual and XCU coverage, and Automobile Comprehensive insurance during the term of this Contract, and larger amounts if required by the Specifications. Subcontractor is to provide [Ballard Residential LLC] with a certificate of insurance including automobile coverage, with [Ballard Residential] and lender named as additional insured. . . .
In February 2007, Capitol Indemnity Corporation denied Ballard Residential's tender because "Capitol's policy was not issued until after the end of the project in question, and Capitol's policy did not carry either Ballard Residential LLC or Occidental Construction as a named insured or an additional insured on the policy." And in October 2007, General Security Indemnity Company of Arizona denied Ballard Residential's tender on the ground that it was not added as an additional insured on a "completed operations policy." According to the COA, summary judgment was not proper because the only evidence before the trial court affirmed that Ballard Residential was not named on a "completed operations policy."
We disagree. The record also contains photocopied certificates of insurance naming Ballard Residential as an additional insured on Pacific Rim's policies. The certificates of insurance refer to completed operations coverage. Moreover, Gonzales testified that Pacific Rim procured insurance as required by the terms of the subcontract. This evidence supports Pacific Rim's assertion that it met its contractual requirement to provide certificates of insurance naming Ballard Residential as an additional insured on a completed operations policy.
The COA argues that there is only one logical conclusion to be drawn from the evidence — If Pacific Rim had actually named Ballard Residential as an additional insured on its policies, its tender would have been accepted. It contends that a subcontractor should not be allowed to perpetuate fraud by lying about its insurance standing to obtain a job. This argument is purely speculative. There is nothing in the language of the subcontract stating that Pacific Rim guaranteed that its insurers would actually allow the claim.
In sum, the trial court properly dismissed all claims against Pacific Rim and denied Ballard Residential's motion for partial summary judgment. The COA produced no evidence that Pacific Rim breached the contract or caused the damages. The facts at the time of tender did not establish that liability would eventually fall upon Pacific Rim. Nor did Pacific Rim agree to act as an insurer for Ballard Residential. Finally, Pacific Rim fulfilled its contractual duty to provide certificates of insurance naming Ballard Residential as an additional insured. We affirm.
WE CONCUR.
I concur with the majority that Pacific Rim did not have a duty to defend Ballard Residential against the COA's claims. The COA's complaint did not directly allege that Pacific Rim negligently caused the water damage to the condominium. Nor has the COA shown how the materials extrinsic to the complaint set forth issues of material fact that, if proven true, would eventually impute liability to Pacific Rim. The COA's architectural consultant's report summarizes the scope of repairs and discusses improperly adhered Tyvek sheets to wall frames, but it does not contain an opinion about the cause of this alleged defect. More is required to raise an issue of material fact over whether Pacific Rim would eventually incur liability and thus have a duty to defend. I write separately, however, to further discuss those situations in which a subcontractor's duty to defend arises.
As the majority correctly notes, a contracting party's duty to defend is separate and distinct from a duty to indemnify. "The duty to indemnify arises when the plaintiff in the underlying action prevails on facts that fall within coverage." George Sollitt Corp. v. Howard Chapman Plumbing Heating, Inc., 67 Wn. App. 468, 475, 836 P.2d 851 (1992). Thus, for a contracting party to have a duty to indemnify, the plaintiff must have proved facts establishing liability. In contrast, a duty to defend "arises at the time an action is first brought, and is based on the potential for liability." Truck Ins. Exch. v. Vanport Homes, Inc., 147 Wn.2d 751, 760, 58 P.3d 276 (2002) (emphasis added) (citing Holland Am. Ins. Co. v. Nat'l Indem. Co., 75 Wn.2d 909, 911-12, 454 P.2d 383 (1969)). A duty to defend is broader than a duty to indemnify. Truck Ins., 147 Wn.2d at 760 (citing Hayden v. Mut. of Enumclaw Ins. Co., 141 Wn.2d 55, 64, 1 P.3d 1167 (2000)). In the context of a subcontract containing a defense and indemnification clause similar to this situation, we have explained that "the duty to defend is determined by the facts known at the time of the tender of defense." George Sollitt, 67 Wn. App. at 472 (citing Parks v. W. Wash. Fair Ass'n, 15 Wn. App. 852, 855, 553 P.2d 459 (1976)). And we have stated that "the facts at the time of the tender of defense must demonstrate that liability would eventually fall upon the indemnitor, thereby placing it under a duty to defend." Dixon v. Fiat-Roosevelt Motors, Inc., 8 Wn. App. 689, 694, 509 P.2d 86 (1973).
None of these statements should be read, however, to require a plaintiff to conclusively establish a subcontractor's liability during the pretrial stages of litigation to trigger a duty to defend. Before a trial on the merits is held, all that exists is a subcontractor's potential for liability. Our Supreme Court has made clear, as the majority emphasizes, that a subcontractor's duties to defend and indemnify are narrower than a general insurer's and depend on the subcontractor's performance. Jones v. Strom Constr. Co., 84 Wn.2d 518, 521-22, 527 P.2d 1115 (1974). But neither this pronouncement nor our earlier statements alter the general rule that a plaintiff need only adduce evidence of facts that, if proved true, establish a defendant's liability in order to trigger a contractual duty to defend. A plaintiff's evidence showing that a defendant would eventually be held liable establishes the defendant's potential for liability. In the absence of such evidence, all that remains is an unsupported assertion, which establishes nothing. Based on the record before us, the COA did not adduce evidence of facts that, if proved true, would establish Pacific Rim's liability. Therefore, it failed to trigger Pacific Rim's duty to defend. Accordingly, I concur.