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ORDER - 1

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF WASHINGTON

AT SEATTLE

SNOQUALMIE SUMMIT INN, INC., a

Washington corporation A/K/A FIRST

WESTERN INVESTMENTS, 

Plaintiff,

v.

TRAVELERS PROPERTY AND CASUALTY

COMPANY OF AMERICA F/K/A

TRAVELERS INDEMNITY COMPANY OF

ILLINOIS, 

Defendant.

No. CV06-0517 MJP

ORDER ON TRAVELERS’ MOTION

FOR PARTIAL SUMMARY

JUDGMENT

This matter comes before the Court on Defendant Travelers Property and Casualty Company

of America (“Travelers”) motion for partial summary judgment. (Dkt. No. 9). The parties dispute

how much Travelers, as Plaintiff’s insurer, must pay to cover Plaintiff’s loss. Having reviewed the

papers and pleadings submitted by the parties, the Court GRANTS Defendant’s motion. 

Background

Plaintiff Snoqualmie Summit Inn, Inc., aka First Western Investments owned the Rock Chalet,

a building located at Snoqualmie Pass in Washington. Sometime during the winter of 1998-1999,

excessive snow loads damaged the Rock Chalet, and the building was a total loss. The parties agree

that the loss was covered under a policy (the “Policy”) issued by Defendant on June, 30, 1998,

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ORDER - 2

effective until July 30, 1999. (Bennett Decl., Ex. A). The parties also agree that the Policy entitled

Plaintiff to the replacement cost of the Rock Chalet. (Id. at 24). Plaintiff acquired a different

building—Stewart Lodge—as a replacement for the Rock Chalet, and notified Defendant of the

purchase by January 3, 2005. (Winchell Decl., Ex. F at 2-6). Plaintiff seeks reimbursement for the

replacement cost of the Rock Chalet, including the increased cost of construction attributable to newly

enacted building codes. 

Defendant raises three issues in its motion for summary judgment. First, whether Plaintiff is

entitled to current reconstruction costs or the cost of reconstruction on the date of loss. Second,

whether Plaintiff is entitled to coverage under the Policy’s Ordinance or Law provision. Plaintiff has

responded and cross-moved on the issue of coverage under the Ordinance or Law provision. (Dkt.

No. 13). The final issue is whether Defendant is estopped from denying coverage. 

Analysis

This matter is before the Court on Defendants’ motion for summary judgment. Summary

judgment is not warranted if a material issue of fact exists for trial. Warren v. City of Carlsbad, 58

F.3d 439, 441 (9th Cir. 1995), cert. denied, 516 U.S. 1171 (1996). The underlying facts are viewed in

the light most favorable to the party opposing the motion. Matsushita Elec. Indus. Co. v. Zenith

Radio Corp., 475 U.S. 574, 587 (1986). “Summary judgment will not lie if . . . the evidence is such

that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby,

Inc., 477 U.S. 242, 248 (1986). The party moving for summary judgment has the initial burden to

show the absence of a genuine issue concerning any material fact. Adickes v. S.H. Kress & Co., 398

U.S. 144, 159 (1970). Once the moving party has met its initial burden, the burden shifts to the

nonmoving party to establish the existence of an issue of fact regarding an element essential to that

party’s case, and on which that party will bear the burden of proof at trial. Celotex Corp. v. Catrett,

477 U.S. 317, 323-24 (1986). To discharge this burden, the nonmoving party cannot rely on its

pleadings, but instead must have evidence showing that there is a genuine issue for trial. Id. at 324. 

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ORDER - 3

For issues involving the interpretation of an insurance contract, summary judgment is appropriate

unless relevant terms of the contract are ambiguous, and to clarify the ambiguity, the parties introduce

conflicting evidence. Nat’l Gen. Ins. Co. v. Sherouse, 76 Wn. App. 159, 162, 882 P.2d 1207 (1995). 

1. Increased Construction Costs from the Date of Loss

Defendant argues that Plaintiff is not entitled to reimbursement of current construction costs

because any reimbursement under the Policy’s replacement cost coverage should be the cost of

replacement on the date of loss. The Policy’s valuation provision plainly states that in the event of loss

or damage, the value of the property will be “the replacement cost . . . as of the time of loss or

damage...” (Bennett Decl., Ex. A, at 25). Plaintiff agrees that the Policy measures damages for

replacement costs as of the date of loss. (Resp. at 18). Because Plaintiff does not dispute Defendant’s

reading of the plain language of the contract, Defendant is entitled to summary judgment. See State

Farm Mutual Auto. Ins. Co. v. Ruiz, 134 Wn.2d 713, 721, 952 P.2d 157 (1998) (holding that the

court must enforce an insurance policy as written if the language is clear and unambiguous). However,

the Court reserves holding on the increased cost of construction on the remaining causes of action in

tort. 

2. Additional Coverage Under the Policy’s Ordinance or Law Provision

The parties have filed cross-motions for summary judgment on the issue of whether Plaintiff is

entitled to coverage under part A(4)(g) of the Policy, the “Ordinance or Law” provision. Under the

Policy, damages resulting from the enforcement of any ordinance or law regulating construction or

repair are excluded from coverage, unless the insured qualifies for coverage under the separate

Ordinance or Law provision. (Bennett Decl., Ex., A, at 22). The applicable portions of the disputed

Ordinance or Law provision are as follows:

g. Ordinance or Law Coverage

(1) If a Covered Cause of Loss occurs to a Covered Building we will pay:

...

(b) When the Covered Building is insured for replacement cost, the

increased cost to repair, rebuild or construct the property caused by

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ORDER - 4

enforcement of building, zoning or land use ordinance or law. If the

property is repaired or rebuilt, it must be intended for similar occupancy

as the current property, unless otherwise required by zoning or land use

ordinance or law.

(4) We will not pay for increased construction costs under this coverage:

(a) Until the property is actually repaired or replaced, at the same

location or elsewhere; and

(b) Unless the repairs or replacements are made as soon as reasonably

possible after the loss or damage, not to exceed 2 years. We may

extend this period in writing during the 2 years.

(5) The most we will pay for increased construction cost under this coverage is

the increased cost of construction of a building of the same size:

(a) at the same premises; or

(b) if the ordinance or law requires relocation to another premises, the

cost at the new premises.

The most we will pay for loss under the Additional Coverage is $250,000 in any

one occurrence.

(Id. at 19-20).

If a contract provision is susceptible to at least two different reasonable interpretations, the

provision is ambiguous. See Weyerhaeuser Co. v. Aetna Cas. & Sur. Co., 123 Wn.2d 891, 897, 874

P.2d 142 (1994). If an unresolved ambiguity exists, the court must construe it in favor of the insured. 

Id. However, determining whether an insurance contract is ambiguous is a question of law to be

resolved by the court. See id. If the court finds that the contract is unambiguous, it must enforce it as

written. State Farm, 134 Wn.2d at 721.

Defendant argues that part A(4)(g)(1)(b) (the “coverage subsection”) of the Ordinance or Law

provision, is unambiguous because it explicitly states that the insurer will only pay for a loss resulting

from “the increased cost to repair, rebuild or construct the property caused by enforcement of . . . [an]

ordinance or law.” (Bennett Decl., Ex. A, at 20) (emphasis added). Defendant argues that because

Plaintiff purchased an existing structure to replace The Rock Chalet instead of repairing, rebuilding or

constructing a replacement, Plaintiff is not covered under the Ordinance or Law provision.

Plaintiff disputes Defendant’s interpretation, arguing that when construed in light of two other

subsections in the Ordinance or Law provision, the coverage subsection is ambiguous. First, although

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ORDER - 5

the coverage subsection limits payment for increased construction cost to repaired, rebuilt or

constructed replacements, part A(4)(g)(4) provides as follows:

We will not pay for increased construction costs under this coverage: 

(a) Until the property is actually repaired or replaced, at the same location or

elsewhere . . . .

(Id.) (emphasis added). Plaintiff argues that it should receive increased construction costs when the

building is replaced, regardless of whether Plaintiff built the replacement or purchased a pre-existing

structure at a different location. Plaintiff claims that the discrepancy between the use of the word

“replace” in subsection (g)(4), and “repair, rebuild, or construct” in the coverage subsection, creates

an ambiguity because it is unclear whether Plaintiff must construct a replacement in order to qualify

for coverage or whether Plaintiff may simply purchase a pre-existing structure. 

However, a court’s determination regarding whether a term is ambiguous may vary depending

on the context in which the term is used in the policy. Queen City Farms, Inc. v. Cent. Nat’l Ins. Co.,

126 Wn.2d 50, 81-82, 882 P.2d 703 (1994). In the context of the entire Ordinance or Law provision,

the word “replace” does not create any ambiguity. The Policy uses the word “replace” only after

explicitly stating in the coverage subsection that the insurer will only pay for the increased cost to

“repair, rebuild or construct” the property. In addition, subsection (g)(4) expressly applies to payment

of “increased construction costs under this coverage.” In the context of the entire Ordinance or Law

provision, the word “replace” is modified by the repeated references to construction. Therefore,

“replace” should be interpreted in harmony with these other terms in order to avoid creating an

ambiguity where none exists. See Am. Star Ins. Co. v. Grice, 121 Wn.2d 869, 874, 854 P.2d 622

(1993) (holding that to the extent possible, a policy should be harmonized so that all of its parts and

provisions can be enforced); W. Am. Ins. Co. v. State Farm Mut. Auto. Ins. Co., 80 Wn.2d 38, 44,

491 P.2d 641 (1971) (holding that a court may not interpret a policy to create non-existent ambiguities

that result in the policy being construed in favor of the insured). 

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ORDER - 6

Plaintiff also incorrectly relies on cases addressing replacement cost coverage. See, e.g., Hess

v. N. Pac. Ins. Co., 122 Wn.2d 180, 184-85, 859 P.2d 586 (1993) (holding that the insured is entitled

to replace at an alternate location, and that the reimbursement amount is the cost to rebuild the

original structure). Neither party disputes that Plaintiff is entitled to full replacement cost coverage,

even if Plaintiff elects to purchase a pre-existing structure as a replacement. The dispute concerns

additional coverage under the Ordinance or Law provision, and Plaintiff does not explain why the

Policy’s replacement cost coverage is analogous to the Ordinance or Law provision. At oral

argument, Plaintiff compared section F(7)(k), found in the replacement cost valuation section of the

Policy, and section A(4)(g)(4), which is a subsection to the Ordinance or Law provision. The former

contemplates valuation (“[w]e will not pay more for loss... than...), while the latter places conditions

on payment for a loss (“[w]e will not pay... until”). The provisions are not analogous, and therefore

the replacement cost cases cited by Plaintiff are inapposite. Furthermore, unlike the Policy’s

replacement cost coverage, coverage under the Ordinance or Law provision is expressly limited to

repaired, rebuilt or constructed property. (Bennett Decl., Ex. A, at 20). 

Finally, Plaintiff argues that if Defendant’s interpretation of the Policy prohibits coverage for

increased construction costs when Plaintiff elects to purchase a pre-existing structure as a

replacement, then subsection (g)(5) of the Ordinance or Law Provision (the “valuation subsection”) is

rendered superfluous. See Wolstein v. Yorkshire Ins. Co., 97 Wn. App. 201, 215, 985 P.2d 400

(1999) (holding that each clause of an insurance contract is to be given effect and no clause should be

rendered superfluous). The valuation subsection provides as follows: 

The most we will pay for increased construction cost under this coverage is the

increased cost of construction of a building of the same size: 

(a) at the same premises; or

(b) if the ordinance or law requires relocation to another premises, the

cost at the new premises.

(Bennett Decl., Ex. A, at 20). Plaintiff claims that the valuation subsection contemplates a comparison

of costs because it calculates valuation as “the most we will pay . . .” between two alternatives. 

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ORDER - 7

Neither alternative contemplates voluntary relocation of the structure. Plaintiff concludes that if it

cannot elect to rebuild at a different location, there would never be a comparison between costs, and

the valuation subsection would become superfluous.

Plaintiff takes a very narrow reading of the valuation subsection. Under a broader reading of

the subsection, Plaintiff could elect to rebuild on a different site but would receive the same

reimbursement for ordinance or law related cost increases that it would have received if it had rebuilt

on the original site. A broader reading of the valuation subsection is also consistent with use of the

term “construct” in the coverage subsection, because it suggests that the Ordinance or Law provision

contemplates replacement by construction instead of the purchase of an existing structure. 

The initial burden is on the plaintiff to establish coverage. See Am. Star Ins., 121 Wn.2d at

875. A policy should be interpreted in a manner consistent with how it would be understood by the

average person purchasing insurance. See Queen City Farms, 126 Wn.2d at 77. It would be illogical

for Plaintiff to receive additional funds to pay for the increased cost of construction when nothing is

actually built. Under Plaintiff’s interpretation, it could theoretically purchase an identical structure

directly adjacent to the original structure, made to the same specifications, and retain the increase for

ordinance or law upgrades as a windfall. It would also be illogical for Plaintiff to receive additional

funds when Plaintiff has not cited any ordinance or law that has caused an increase in the cost of

reconstruction. As a matter of law, Plaintiff cannot meet its burden of proving coverage under the

Ordinance or Law provision because the terms of the provision are unambiguous.

3. Equitable Estoppel

Plaintiff argues that Defendant should be estopped from denying coverage under the Ordinance

or Law provision because Plaintiff justifiably relied on Defendant’s failure to deny the additional

coverage. However, estoppel may not be applied to extend the coverage of an insurance policy. 

Rizzuti v. Basin Travel Serv. of Othello, Inc., 125 Wn. App. 602, 614, 105 P.3d 1012 (2005). 

Therefore, because Plaintiff is not entitled to coverage under the Ordinance or Law provision, the

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ORDER - 8

Court must deny Plaintiff’s estoppel claims. However, the Court reserves holding on the issue of

estoppel on the remaining causes of action in tort.

Conclusion

The terms of the insurance agreement are unambiguous and Plaintiff is not entitled to the

increased cost of construction attributable to the passage of time or the hypothetical cost of ordinance

or law upgrades. Because Plaintiff is not entitled to coverage under the Ordinance or Law provision,

Plaintiff may not extend the coverage of the insurance agreement by estoppel. Therefore, the Court

GRANTS Defendant’s motion for summary judgment on the three issues presented. The Court’s

ruling on summary judgment is limited to Plaintiff’s contract claims and does not preclude Plaintiff

from raising any claims or defenses arising under tort theory. 

The Clerk is directed to send copies of this order to all counsel of record.

Dated: March 5, 2007.

s/Marsha J. Pechman 

Marsha J. Pechman

United States District Judge

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