Court Opinion

ID: 7125175
Source: CourtListenerOpinion
Date Created: 2022-07-24 13:04:54.805466+00
Date Added: 2024-06-11T16:14:15.236480
License: Public Domain

MCKEOWN, Circuit Judge,
Dissenting in part.
I dissent with respect to the reversal of the district court’s award of damages to Holland America. The panel majority resolves this case by relying on the principle that an insured should receive “only that amount that will indemnify actual loss, not an additional windfall above this amount.” See Dombrosky v. Farmers Ins. Co., 84 Wash.App. 245, 928 P.2d 1127, 1136 n. 4 (Wash.Ct.App.1997). Whatever weight we should give this policy beyond its limited application by Washington state courts, the majority’s reliance on this principle overlooks our primary obligation to construe the contract itself and enforce it accordingly. Our starting point should be the contract entered into by these sophisticated parties, rather than the relative monetary outcome or equities. Any evaluation of loss is limited to the Period of Restoration, which concludes when the business is up and running after the business interruption — not at some later date.
The Period of Restoration — which the parties agree creates the relative scope of indemnity — is defined as “the length of time, commencing with the date of damage or destruction, which will be required, with the exercise of due diligence or dispatch, to repair, rebuild or replace the damaged or destroyed property.” This language is straightforward and directly supports the larger award of damages in this case. The remainder of the language in the definition is intended to give the insured broader, not lesser, protection in two instances that are inapplicable here: (1) when the policy expires before the above defined period has ended; and (2) when the insured is able to partially restore operations before the damaged property is completely restored. The final phrase of the definition merely ensures that the above two conditions of coverage will not be read to cover any losses incurred beyond the already-defined Period of Restoration. It, too, is inapplicable to this case, and does not support a reading that would expand the relevant period of restoration beyond the time it took to fully repair Holland America’s power supply.
To the extent that the contract language supports an alternative reading, Washington law is clear that ambiguous terms must be construed against the insurer. See Witherspoon v. St. Paul Fire and Marine Ins. Co., 86 Wash.2d 641, 548 P.2d 302, (Wash.1976) (“It is fundamental that ambiguities in the policy must be construed against the insurer and in favor of the insured.”). Likewise, we have underscored the importance of this rule. See *605Kunin v. Benefit Trust Life Ins. Co., 910 F.2d 534, 540 (9th Cir.1990) (quoted in Emter v. Columbia Health Serv., 819 P.2d 390, 394 (Wash.Ct.App.1991) (“insurer ... should not be allowed to take advantage of the very ambiguities that it could have prevented with greater diligence”)).
Fireman’s Fund has made too much of the language defining Period of Restoration in order to avoid liability under the contract. The real problem with the policy lies in its definition of Loss of Revenue, which fails to incorporate any sort of mitigation or “make-up” component. Although Washington courts have upheld explicit setoff clauses in policies to prevent double recoveries, see Keenan v. Indus. Indemnity Ins. Co., 108 Wash.2d 314, 738 P.2d 270, 272-73 (Wash.1987), the panel majority would have us expand this notion to include implied mitigation provisions into poorly-drafted policies. Because courts should neither override contract language nor usurp the insurer’s responsibility to ensure that the scope of coverage is clear and unambiguous, I respectfully dissent.