Court Opinion

ID: 9964448
Source: CourtListenerOpinion
Date Created: 2024-04-29 22:15:55.329787+00
Date Added: 2024-06-11T08:25:28.404732
License: Public Domain

IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

 LESCHI PARTNERS, LLC,
                                                  No. 84319-2-I
                      Plaintiff,                  (Consolidated with
                                                  84654-0-I)
      v.
                                                  DIVISION ONE
 FC LESCHI, LLC, dba BLUWATER
 BISTRO,                                          UNPUBLISHED OPINION

                      Defendant.

 ZACHARY FLEET; BART EVANS; AND
 FC LESCHI, LLC, D/B/A BLUWATER
 BISTRO – LESCHI,

                      Respondents,

      v.

 SENTINEL INSURANCE COMPANY
 LTD; a foreign insurance company, part
 of the HARTFORD FIRE & CASUALTY
 GROUP,

                      Petitioners.

       COBURN, J. — Central in this dispute between BluWater Bistro (BluWater) and its

insurer is how the insurer handled claims related to an electrical panel and wiring in the

building’s basement-level garage after an electrical arc resulted in a fire. The landlord
84319-2-I/2

blamed BluWater for negligently causing the fire and maintained that the cost of

repairing the electrical panel and wiring 1 was covered as a first-party claim 2 under

BluWater’s insurance policy. The insurer disagreed that the electrical panel met the

definition of business personal property and suggested that the repairs could be

covered by the landlord’s own insurance policy. The landlord sued BluWater and

BluWater 3 sued its insurer as a third-party defendant. In a series of partial summary

judgment motions, BluWater moved for declaratory judgment that its insurance policy

covered the electrical panel and that its insurer failed its duty to defend. BluWater also

asserted that the insurer breached its contract, acted in bad faith, and violated the

Consumer Protection Act (CPA). 4 BluWater also moved for various damages, costs

and fees. The superior court granted the motions and awarded damages as well as

costs and attorney fees to BluWater. In addition, the court imposed sanctions on the

insurer after finding it violated discovery rules.

       We hold that, under the policy, the electrical panel and the relevant fans and

ducts in the same vicinity is part of the “building” and that the policy explicitly does not

provide coverage for the building with the exception of property that qualifies as “tenant

improvement and betterments.” Because there remains a genuine issue of material fact

as to whether the electrical panel is covered under that provision or under additional

       1
          Any future reference to the electrical panel and wiring will be referred to as simply
electrical panel.
        2
          Third-party insurance involves protection for the policyholder for liability it incurs to
someone else, while first-party insurance involves protection for losses to the policyholder’s own
property. Olds-Olympic, Inc. v. Com. Union Ins. Co., 129 Wn.2d 464, 479, 918 P.2d 923 (1996).
        3
          The plaintiffs in the third-party complaint included the operators of the restaurant
Zachary Fleet and Bart Evans.
        4
          BluWater also claimed Hartford violated the Insurance Fair Conduct Act (IFCA) and
committed constructive fraud. Those claims are not at issue in this discretionary appeal.
                                                2
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coverage provisions, we reverse the trial court’s summary judgment order concluding

the electrical panel was covered as a first-party claim. However, we affirm the court’s

summary judgment ruling that the insurer acted in bad faith, violated claim-handling

regulations and the CPA when it failed to investigate the landlord’s negligence claim

against BluWater. We affirm in part and reverse in part the court’s award of damages.

We reverse the award of costs and attorney fees. Lastly, we affirm the trial court’s

finding that Hartford committed discovery violations, but reverse in part the trial court’s

sanctions that relinquish the court’s discretion to BluWater’s counsel. We affirm in part,

reverse in part, and remand.

                                             FACTS

       BluWater is a restaurant owned by FC Leschi, LLC and operated by Zachary

Fleet and Bart Evans. BluWater leases its space in a building owned by Leschi

Partners, LLC (the landlord). 5 BluWater purchased a commercial insurance policy from

Hartford Fire Insurance Company where the insurer is Sentinel Insurance Company,

Limited (collectively Hartford). 6 BluWater purchased both first-party and third-party

coverages. On August 26, 2021 a fire began in an electrical panel located in a

basement-level garage under the restaurant. As a result of the fire, the restaurant was

forced to close from August 26 to September 9.

       5
           The owner of the building is also referred to in the record as “Alco Investment
Company.” Because the parties do not suggest any relevant distinction between Alco
Investment and Leschi Partners, LLC as it relates to these matters, we refer to Leschi Partners,
LLC and Alco Investment Company collectively as the landlord.
         6
           The insurance policy identifies the insurer as Sentinel Insurance Company, Limited
located in Hartford, Connecticut, but also uses the logo “The Hartford.” The insurer’s claims
adjuster identifies his employer as “Harford Fire Insurance Company.” Petitioners identify the
responding third-party defendants as Sentinel and Hartford Fire Insurance Company, but
clarifies that “Hartford Fire & Casualty Group” is a non-existent entity. Petitioners admit Hartford
Fire employs the personnel working for Hartford Fire and Sentinel.
                                                 3
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       BluWater submitted a claim to its insurer, Hartford, the day of the fire. The next

day, Evans spoke to the first claims adjuster assigned, Steve Penner. During the

conversation, Penner asked if the landlord was taking care of the electrical panel

damage and Evans said, “Yeah. I believe they are. Yeah. They better be.” Penner

told Evans that Hartford would be looking into whose fault it was as they “always look

into the potential of subrogation.” Penner told Evans that BluWater was covered for its

loss and Penner would be sending him information on what documents were needed

related to food, inventory and income loss. On August 30, BluWater’s claim was

reassigned to Ryan Brichetto.

       On September 8, Hartford sent a forensic investigator to the restaurant to

examine the premises and determined in a one-page report that the fire “originated at

an electrical service panel located in a locked garage on the basement level located

below BluWater. This space was not part of the restaurant, but rather housed

equipment controlled by the owner of the business complex.” The investigator

concluded that the “ignition source was errant electrical activity which led to an

explosion of the service equipment” and that the “Cause Classification” of the fire is

“accidental.” The investigator reported that its file will be closed but may be reopened

upon request. On October 18, BluWater called Brichetto explaining that his landlord

seemingly expects BluWater to pay for the fire damages to the building. Brichetto

advised that based on his review of BluWater’s lease, BluWater has no responsibility to

fix repairs and that Brichetto would draft and send a partial denial.

       On October 29, Hartford sent a letter to BluWater denying coverage for the

electrical panel because it was part of the building and the policy did not provide

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coverage for the building. The letter also stated that Hartford did not find that the panel

met the definition of any covered provision as a “tenant improvements” or “business

personal property.” BluWater passed along this response to the landlord. The

landlord’s attorneys sent a November 9 letter to BluWater disagreeing with Hartford’s

interpretation of BluWater’s policy, providing its own policy analysis that the electrical

panel is covered as BluWater’s business personal property, but if Hartford disagrees,

then the electrical panel is still covered under BluWater’s business liability coverage.

The landlord asserted that BluWater’s negligence caused an accident that resulted in

the property damage. Specifically, the landlord alleged that BluWater “committed

permissive waste because it negligently permitted a broken condensation line to drip

water onto the electrical equipment causing an electrical arc and fire.” 7 The landlord

concluded

       Again, we urge [BluWater] to promptly confer with its own Insurance
       coverage lawyers about [Hartford’s] denial of coverage and take
       immediate steps to challenge [Hartford’s] bad faith denial.
       If [BluWater] fails to secure insurance coverage for this claim, then [the
       landlord] will be forced to take legal action against [BluWater] for the
       property damage it negligently caused.

On November 19, BluWater wrote Hartford and included a copy of the November 9

letter from the landlord, BluWater wrote

       Please find enclosed/attached a letter from the attorneys for our landlord.
       As you can see, they have a different analysis of Hartford’s obligations
       and the coverage under our policy.
       We again demand that Hartford provide coverage for the damages caused
       by the fire, and to protect our company from all exposures resulting
       therefrom.

       7
         The landlord included a photograph of the scene showing a broken condensation line,
presumably from BluWater’s refrigerator, that was not connected to a drain and instead
redirected into a tray in an area of the kitchen floor that allegedly did not have
waterproofing/lashing and was above the electrical panel.
                                              5
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Hartford responded in a December 22 letter disagreeing with the landlord’s policy

analysis, maintaining that the electrical panel was not covered as BluWater’s property.

As to the referenced liability coverage, Hartford wrote, “Please be advised that this letter

is in response to the first-party portion of the policy you have with Hartford. Please

advise if you would like us to also open a claim under your general liability policy.”

Hartford went on to explain that it was under the impression that the landlord had a first-

party property policy and that its “insurer had previously agreed to cover and repair the

damage to the electrical panel. We are unsure why those circumstances have

changed.” Hartford did not provide any explanation on how the landlord’s allegations of

negligence against BluWater could trigger the policy’s liability provision and what that

would entail. Nor did Hartford ask the investigator to reopen its investigation to

determine the cause of the electrical arc.

       In January 2022, the landlord sued BluWater seeking payment for the cost of

repairs to the electrical panel. BluWater then sued Hartford as a third-party defendant

and sought a declaratory judgment to determine if BluWater’s insurance policy covered

the electrical panel. BluWater also claimed breach of contract, insurance bad faith,

violations of the CPA and violations of the Insurance Fair Conduct Act (IFCA), and

constructive fraud.

                                PROCEDURAL HISTORY

       In its first motion for partial summary judgment filed on May 12, BluWater claimed

Hartford breached the insurance policy, committed bad faith, and violated the CPA.

Specifically, BluWater asserted Hartford failed to explain how the policy’s additional

coverage provision covered the electrical panel. BluWater also asserted that Hartford

                                             6
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failed to investigate the cause of the fire and explain or address the policy’s liability

coverage. To support its motion, BluWater submitted excerpts from the April 7, 2022

deposition of Hartford’s insurance adjuster, Brichetto.

       Brichetto conceded that Hartford did not request that its investigator determine

whether the electrical explosion was caused by dripping water and explained that it did

not matter because ultimately the electrical panel was not covered under the policy’s

business personal property provision. The adjuster said that he never explained the

liability coverage to BluWater because he was not a “liability adjuster” and BluWater had

filed a property claim. The adjuster said he knew that the landlord had sued BluWater

claiming it negligently caused the fire, but did not know if any liability adjuster had been

assigned. The adjuster admitted that he reviewed BluWater’s November 19 letter with

the leadership team that consisted of two home office consultants, including Derek

Hyde. The adjuster also admitted that it was Hyde who drafted the December 22 denial

letter that the adjuster read and signed without making any changes. The adjuster

could not explain why Hartford, to date, had not contacted BluWater or its attorney to

discuss the liability claim after BluWater got sued. The landlord on May 13 filed a

motion for partial summary judgment and joinder in third-party plaintiff’s motion for

partial summary judgment.

       Four days before the hearing on the motion, the landlord filed a notice of

settlement and withdrawal noting that all its claims against all parties have been

resolved. The court granted BluWater’s partial summary judgment motion. The court

ruled that the electrical panel was covered under BluWater’s insurance policy. The

court also found that Hartford violated the fair claims practices regulations found in

                                              7
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Chapter 284-30 of the WACs which constituted a per se violation of the CPA, chapter

19.86 RCW. The court additionally found Hartford committed insurance bad faith. The

court ruled that Hartford owed at least $274,617 for the repair of the electrical panel and

related structures. The court denied Hartford’s subsequent motion for reconsideration.

       In September 2022 BluWater filed a second motion for partial summary judgment

seeking damages regarding business personal property (inventory), business income,

attorney fees and costs of investigation. Its request included $9,371.25 for new fans

and ducts located in exactly the same place as the electrical panel. BluWater also

requested a finding that Hartford violated specific claim-handling regulations: WAC

284-30-370, WAC 284-30-330, and WAC 284-30-330(1).

       In its October 28 order, the court granted BluWater’s second partial summary

judgment motion and awarded $91,855 for business personal property; $64,635 for

business income loss (reserving the remaining requested amount for trial); $9,371.25

for fans and ducts; $35,220.58 for cost of investigation; and $378,852.50 in attorney

fees. “[A]s to the damages claimed in this motion,” the court also ruled that Hartford

violated, WAC 284-30-370 (failure to complete investigation within 30 days); WAC 284-

30-350 (failure to explain coverages); and WAC 284-30-330(1) (misrepresentation of

policy benefits). The court awarded attorney fees to BluWater under the ABC rule, 8 the

       8
          The ABC rule is an equitable rule under which attorney fees are compensable as
consequential damages in certain situations. LK Operating, LLC v. Collection Grp, LLC, 181
Wn.2d 117, 123, 330 P.3d 190 (2014). The rule has three elements: “‘(1) a wrongful act or
omission by A . . . toward B . . .; (2) such act or omission exposes or involves B . . . in litigation
with C . . .; and (3) C was not connected with the initial transaction or event . . ., viz., the
wrongful act or omission of A toward B.’” Id. (alterations in original) (internal quotation marks
omitted) (quoting Blueberry Place Homeowners Ass’n v. Northward Homes, Inc., 126 Wn. App.
352, 359, 110 P.3d 1145 (2005)). The party seeking attorney fees as damages under this rule
must meet all three elements for the rule to apply. Id. at 124.
                                                   8
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CPA, Olympic Steamship, and under common law bad faith.

       The court also, on October 28, granted BluWater’s motion to compel discovery

and imposed sanctions.

       Hartford sought discretionary review of both summary judgment orders, 9 the

denial of its motion for reconsideration, and the order compelling discovery and

imposing sanctions. A commissioner of this court granted review.

                                        DISCUSSION

                                      Contractual Claims

A. Electrical Panel as First-Party Claim

       The trial court granted BluWater’s first partial summary judgment motion

declaring that the insurance policy covered the electrical panel under multiple

provisions. The court determined that the electrical panel met the policy’s definition of

“Property of others in your care, custody or control” and “Tenant Improvements and

Betterments.” The court also ruled that the policy provided coverage under the

“Equipment Breakdown,” “Water and Molten Material Damage,” and “Extra Expense”

provisions. Hartford maintains that the electrical panel is part of the building, which is

       9
          Hartford had filed a cross-motion for summary judgment after BluWater filed its motion
for partial summary judgment as to breach of insurance policy, bad faith, and CPA violations. At
issue in the motion was the interpretation of the policy and the extracontractual claims by
BluWater. But Hartford noted its motion for a hearing on August 5 after the June 17 hearing to
address BluWater’s motion. The court granted BluWater’s motion for partial summary
judgment, but did not rule on Hartford’s cross-motion for summary judgment. At oral argument
on appeal Hartford asks us to grant summary judgment in its favor. Wash. Court of Appeals
oral argument, Hartford Fire Ins. Co. v. FC Leschi, LLC, No. 84319-2-I (Nov. 1, 2023), at 2 min.,
40 sec. to 3 min., 3 sec., video recording by TVW, Washington State’s Public Affairs Network,
https://www.tvw.org/watch/?clientID=9375922947&eventID=2023111105. We decline to
consider an argument that Hartford did not brief. See RAP 10.3(a)(6) (requiring an appellant’s
brief to provide “argument in support of the issues presented for review, together with citations
to legal authority and references to relevant parts of the record”); see also Jackson v. Quality
Loan Serv. Corp., 186 Wn. App. 838, 845, 347 P.3d 487 (2015).
                                               9
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not covered under the policy.

       We review summary judgments de novo. Strauss v. Premera Blue Cross, 194

Wn.2d 296, 300, 449 P.3d 640 (2019). Summary judgment is appropriate when “‘there

is no genuine issue as to any material fact and . . . the moving party is entitled to a

judgment as a matter of law.’” Id. (alteration in original) (internal quotation marks

omitted) (quoting Rangers Ins. Co. v. Pierce County, 164 Wn.2d 545, 552, 192 P.3d 886

(2008)); CR 56(c). We must construe all facts and inferences in favor of the nonmoving

party. Scrivener v. Clark College, 181 Wn.2d 439, 444, 334 P.3d 541 (2014). “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. No. 400, 172

Wn.2d 471, 484, 258 P.3d 676 (2011).

       The party moving for summary judgment bears the initial burden of showing that

there is no disputed issue of material fact. Haley v. Amazon.com Services, LLC, 25 Wn.

App. 2d 207, 216, 522 P.3d 80 (2022) (citing Young v. Key Pharms., Inc., 112 Wn.2d

216, 225, 770 P.2d 182 (1989)). The burden then shifts to the nonmoving party to

present evidence that an issue of material fact remains. Id. The nonmoving party may

accomplish this by setting forth facts and documents that would be admissible as

evidence through depositions, answers to interrogatories, and admissions. CR 56(e).

The trial court must construe all evidence and reasonable inferences from that evidence

in favor of the nonmoving party. Id. at 217 (citing Boyd v. Sunflower Props. LLC, 197

Wn. App. 137, 142, 389 P.3d 626 (2016)). In the instant case, the nonmoving party is

Hartford. The trial court may not weigh the evidence, assess credibility, consider the

likelihood that the evidence will be proven true, or otherwise resolve issues of material

                                             10
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fact. Id.

       Interpretation of an insurance contract is a question of law this court reviews de

novo. Kalles v. State Farm Mut. Auto. Ins. Co., 7 Wn. App. 2d 330, 333, 433 P.3d 523

(2019) (citing Woo v. Fireman’s Fund Ins. Co., 161 Wn.2d 43, 52, 164 P.3d 454 (2007)).

Insurance policies are construed as contracts. Id. (citing Findlay v. United Pac. Ins. Co.,

129 Wn.2d 368, 378, 917 P.2d 116 (1996)). The insurance contract is construed as a

whole, with the policy given a “fair, reasonable, and sensible construction as would be

given to the contract by the average person purchasing insurance.” Id. (quoting Key

Tronic Corp. v. Aetna (CIGNA) Fire Underwriters Ins. Co., 124 Wn.2d 618, 627, 881

P.2d 201 (1994)). Defined terms of the contract are applied as written so long as they

comport with Washington law. Xia v. ProBuilders Specialty Ins. Co., 188 Wn.2d 171,

182, 400 P.3d 1234 (2017). Undefined terms are given their “plain, ordinary, and

popular meaning.” Hill and Stout, PLLC v. Mut. of Enumclaw Ins. Co., 200 Wn.2d 208,

218, 515 P.3d 525 (2022) (quoting Xia, 188 Wn.2d at 182)). “If the policy language is

clear and unambiguous, we must enforce it as written; we may not modify it or create

ambiguity where none exists.” Id. (quoting Quadrant Corp. v. Am. States Ins. Co., 154

Wn.2d 165, 171, 110 P.3d 733 (2005)).

       The insurance policy purchased by BluWater specifically excluded coverage for

the building owned by the landlord. The policy defines “covered property” as “the

following types of property for which a Limit of Insurance is shown in the Declarations.”

The declarations included in the policy describe “building and business personal

property limits of insurance.” Next to “BUILDING,” the limit states “NO COVERAGE.” 10

        According to the policy’s special property coverage form, “Buildings” includes
       10

permanently installed fixtures, machinery and equipment, as well as personal property that is
                                              11
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       The policy does, however, provide coverage for “business personal property”

located in or on the building. According to the policy, business personal property

includes “property of others that is in your care, custody or control” and “tenant

improvements and betterments.”

(i) Tenant Improvements and Betterments

       BluWater’s policy defines “tenant improvements and betterments” as “fixtures,

alterations, installations or additions made a part of the Building you occupy but do not

own and that you cannot legally remove; and (a) Which are made at your expense; or

(b) That you acquired from the prior tenant at your expense.” The prior tenant before

BluWater was a BaDa restaurant. BaDa Restaurants, Inc. and the other BaDa entities

(collectively BaDa) transferred all of their restaurants, property and leasehold contents

to BluWater.

       Brichetto, Hartford’s insurance adjuster, testified in his deposition that in order for

the tenant improvement and betterment provision to apply

       we have to be looking at this like we’re the previous tenant. So if we were
       BaDa Leschi, we would have had to have said, ‘All right, we’re going to
       install our own electrical panels here. We’re going to – we’re going to
       make these at our expense.’ That, therefore, is a tenant improvement
       made by BaDa Leschi.
               Now, BluWater comes in and purchases the business from BaDa
       Leschi. If they purchased the tenant improvements with that and if – if the
       electrical panels were a tenant improvement, yes, then we would have
       acquired them from the previous tenant improvements at our expense.
       But if BaDa Leschi didn’t install those electrical panels, those by definition
       then are not tenant improvements made by BaDa Leschi. Therefore,
       they’re not tenant improvements that we acquired because they’re not
       tenant improvements to begin with.

BluWater does not claim that it installed the electrical panel, but, instead, claims that it

owned by the tenant that is used to maintain or service the buildings or structures on the
premises.
                                               12
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purchased the electrical panel as a “tenant improvement and betterment” completed

by the previous tenant, BaDa, and that BluWater acquired the panel when it purchased

the restaurant from BaDa. To support its claim, BluWater submitted the purchase and

sale agreement and an agreement that “Bada Entities hereby assign and transfer all of

the BaDa Entitites’ respective rights, title, and interests in and to the Collateral to”

BluWater. The description of the Collateral includes all of BaDa’s

       chattels, furniture, fixtures, goods, equipment, inventory, prepaid assets,
       and general intangibles (including goodwill and going concern value), and
       all of the same located on or about or used or usable or resulting from the
       business and restaurant operations of any of BaDa [entities] . . . all keys,
       plans and specifications, use or license agreements, and the like, personal
       property of every kind belonging to BaDa [entitites] . . . which shall be
       construed to include all such property now or to be located, affixed,
       owned, bought for use or used or usable at or in any way related to or on
       or in connection with the business and restaurant operations, whether
       real, personal, tangible, or intangible and whether used on any of the
       above-listed premises, or stored away from any of said premises.

The documents BluWater provided does not specifically list the electrical panel.

Based on the record before us, whether Bada installed the electrical panel as a tenant

improvement remains a genuine issue of material fact. Neither party presented any

evidence to the superior court as to who installed the electrical panel. 11 BluWater fails

to establish that the electrical panel, as a matter of law, meets the definition of “tenant

improvements and betterments.”

(ii) Care, Custody, or Control

       Although the policy does not define, “care, custody, or control,” the Washington

       11
           At oral argument, Hartford’s counsel first indicated that the electrical panel was
installed by the previous tenant of the space. Wash. Ct. of Appeals oral arg., supra, at 5 min. 42
sec. through 6 min. 48 sec. Counsel later clarified that it did not know who had installed the
electrical panel and the record was not clear on the issue, but argued that the record was clear
that BluWater neither installed nor acquired the panel. Id. at 32 min., 37 sec. to 33 min., 15 sec.
                                                13
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Supreme Court has previously held that these terms are “words of common usage and

connotation in the vocabulary of laymen” and “are unambiguous and must be given their

plain and ordinary meaning.” Madden v. Vitamilk Dairy, Inc., 59 Wn.2d 237, 239, 367

P.2d 127 (1961). This court has previously held that where a vehicle was left to the

defendants to store and keep safe from vandalism, it was in the defendant’s “care,

custody, and control” because they “undertook affirmative duties” to store it and exclude

it from anyone but its owner. Cashmere Pioneer Growers, Inc. v. Unigard Sec. Ins. Co.,

77 Wn. App. 436, 440, 891 P.2d 732 (1995). Similarly, this court has previously found

that where a company “undertook contractual duties to care for the apples in a particular

manner, to maintain them in an atmosphere with a specified temperature and chemical

composition,” the apples were in the “care, custody, and control” of that company. Id.

       Hartford maintains that the policy expressly defines “covered property” as the

types of property for which “a Limit of Insurance is shown in the Declarations,” and that

the declarations expressly state that there is “NO COVERAGE” for the “BUILDING.”

Thus, Hartford argues, “[p]roperty of others that is in your care, custody or control,”

reaches property that meets that definition that does not qualify as the building.

BluWater counters that the “NO COVERAGE” indication simply reflects that they did not

purchase coverage for the building, but that does not bar coverage of the electrical

panel under the “care, custody or control” provision which is part of its purchased policy.

Hartford has the better argument.

       Courts avoid interpreting contracts in ways that lead to absurd results. Hartford

Fire Ins. Co. v. Columbia State Bank, 183 Wn. App. 599, 608, 334 P.3d 87 (2014).

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Rather, contracts are to be construed to give effect to all parts of the contract and not

interpreted in ways that render some of the language meaningless or ineffective, or

render contract obligations illusory. Pelly v. Panasyuk, 2 Wn. App. 2d 848, 413 P.3d

619 (2018); Taylor v. Shigaki, 84 Wn. App. 723, 930 P.2d 340 (1997).

       The policy did not simply reflect that BluWater chose not to purchase coverage

for the building, it expressly defined “covered property” and specifically excluded the

building. Notably, the “tenant improvements and betterments” provision, which, by

definition, covered “fixtures, alterations, installations or additions made a part of the

Building you occupy but do not own and that you cannot legally remove.” This provision

plainly functions as an exception to the exclusion of building coverage. The “care,

custody, or control” is not similarly defined. Interpreting that provision to reach any part

of the building that is in the care, custody or control of the tenant would be an exception

that would swallow the exclusion and lead to absurd results. In order to give non-

contradictory plain meaning to this provision and the policy’s exclusion, the property of

others that is in BluWater’s care, custody or control must be read to reach property that

does not meet the definition of Building. For example, this would provide coverage for

restaurant customers’ coats and jackets that BluWater may take temporary care,

custody or control of while they dine in the restaurant, but exclude any property claims

for damage to the building despite the fact BluWater may have “control” of the building

by virtue of possessing the keys to it.

       Even if we were to consider whether the electrical panel was under the care,

custody or control of BluWater, that premise is a disputed fact. BluWater submitted a

declaration stating that the electrical panel was located in a locked garage contained

                                             15
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within the space leased by BluWater. An investigator for Hartford reported that the “fire

originated at an electrical service panel located in a locked garage on the basement

level located below Bluwater Bistro. This space was not part of the restaurant, but rather

housed equipment controlled by the owner of the business complex.” Evans,

BluWater’s manager, in a declaration disputed that fact, asserting that the garage is part

of BluWater’s leased space. It is undisputed that BluWater leased its space from Leschi

Partners, LLC, who owned the building. According to the lease agreement, the garage

and common electrical service are considered common areas and the landlord shall

maintain the common areas. Based on this record, there remains a genuine issue of

material fact as to whether the electrical panel was in the care, custody, or control of

BluWater.

       We hold that the superior court erred in concluding as a matter of law that the

electrical panel was covered under the “care, custody or control” provision of the policy.

(iii) Additional Coverages

       The trial court also found coverage under the policy’s “equipment breakdown,”

“water and molten material damage” and “extra expense” provisions.

       Each of these provisions appear under the policy’s “Additional Coverages”

section. Under “Equipment Breakdown,” Hartford “will pay for direct physical loss or

physical damage caused by or resulting from an equipment breakdown accident to

equipment breakdown property.” “Equipment Breakdown Property means Covered

Property built to operate under vacuum or pressure, other than weight of contents, or

used for generation, transmission or utilization of energy.” As previously discussed,

there remains a genuine issue of material fact as to whether the electrical panel

                                            16
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qualifies as covered property.

       Next, under “n. Water Damage, Other Liquid, Powder or Molten Material

Damage,”

       If direct physical loss or physical damage caused by or resulting from
       covered water or other liquid, powder or molten material damage loss
       occurs, we will also pay the cost to tear out and replace any part of the
       building or structure to repair damage to the system or appliance from
       which the water or other substance escapes.
       We will not pay the cost to repair any defect that caused the direct
       physical loss or physical damage except as provided in paragraph A.5.c.,
       Equipment Breakdown of this coverage form.

The plain language of this provision provides coverage to the cost of tearing out and

replacing any part of the building or structure to repair damage to the system or

appliance from which the water or other substance escapes when there is a covered

loss that was a direct result of water or other liquid, powder or molten material damage.

BluWater submitted a declaration from an electrical engineer who concluded that an

electrical arc caused molten material to escape from the electrical panel and ignite both

plastic and other combustible items, thereby causing the fire. Whether the damage to

the electrical panel that was caused by molten material is covered turns on whether the

electrical panel is a covered loss, which, as discussed above, remains a genuine issue

of material fact. Thus, the trial court erred in concluding that as a matter of law the

electrical panel was covered under the molten material damage provision.

       The policy’s “Extra Expense” provision provides:

       (1) We will pay reasonable and necessary Extra Expense you incur during
       the “period of restoration” that you would not have incurred if there had
       been no direct physical loss or physical damage to property at the
       “scheduled premises”, including personal property in the open (or in a
       vehicle) within 1,000 feet, caused by or resulting from a Covered Cause of
       Loss.

                                             17
84319-2-I/18

When BluWater filed its first motion for partial summary judgment, it was apparent that it

was the landlord who initially incurred the expense of repairing the electrical panel and

was suing BluWater to cover the cost of the repairs. In other words, BluWater’s claim

was not for a reimbursement for the cost of repairing the electrical panel as an extra

expense that it had incurred. BluWater argues that it does not matter that the landlord

had paid for the repairs because Hartford knew about it and did not explain the

coverage or extend benefits. However, that argument relates more to the duty to

defend which relates to a third-party claim, which we address below, not a first-party

claim. The trial court erred in determining that the cost of repairing the electrical panel

was covered as a matter of law under the policy’s extra expense provision.

       BluWater does not meet its burden to establish that as a matter of law the

electrical panel is covered under these additional coverage provisions.

B. Damages

       Hartford maintains that the trial court improperly awarded some of the damages

as a matter of law in its October 28 order.

       “Damage determinations are a classic example of the type of questions which

are traditionally decided by a jury.” Brust v. Newton, 70 Wn. App. 286, 293, 852 P.2d

1092 (1993) (citing Sofie v. Fibreboard Corp., 112 Wn.2d 636, 645-46, 771 P.2d 711

(1989)). However, where there is no genuine issue of material fact as to the amount of

damages, the trial court may award them on summary judgment. The purpose of

summary judgment is to avoid an unnecessary trial. Jacobsen v. State, 89 Wn.2d 104,

108, 569 P.2d 1152 (1977).

                                              18
84319-2-I/19

(i) Electrical Panel and Related Structures

       The trial court in its first summary judgment order ruled that Hartford “owes at

least $274,617 for the repair of the electrical panel and related structures.” Hartford

does not directly argue that the court erred in this regard but notes that the trial court did

not state to whom Hartford owes this amount and that BluWater never incurred this

expense.

       In its motion for partial summary judgment, BluWater submitted documentation to

support that the landlord’s bills for repairs to the electrical panel and related structures

were not in dispute and totaled $274,617. Although the trial court was aware of the

notice of settlement, Hartford did not present documentation of actual payment at the

time of oral argument. In fact, Hartford did not issue its $315,000 settlement check 12 to

the landlord until the day the court issued its summary judgment order on June 27.

       It is not apparent in the record whether Hartford’s check was issued before or

after the court issued its order on June 27. But at the motion hearing BluWater asserted

that nothing had been paid and Hartford did not present any evidence of actual

payment. Based on the information available to the trial court at the time it issued its

ruling, it did not err in declaring that Hartford owed the cost of the repair.

(ii) Business Income Loss

       In its second partial summary judgment motion, BluWater had requested

$273,016 in business income loss. By the time of oral argument, the parties agreed that

Hartford would pay $64,635 and leave the remaining amount as an issue for trial. The

       12
          BluWater had asserted in its written partial summary judgment motion that the landlord
claimed a total of $330,055.50, which included the $274,617 repair costs as well as claimed
attorney fees, costs and prejudgment interest.
                                              19
84319-2-I/20

trial court granted that request. Now, Hartford contends on appeal that because it had

concerns that BluWater was “double dipping” and disputed the originally claimed

amount, it was error for the court to award the $64,635 because genuine issue of

material fact remains.

       By agreeing to pay the $64,635 at the motion hearing, Hartford waived any

challenge to that award. We “may refuse to review any claim of error which was not

raised in the trial court.” RAP 2.5(a); Roberson v. Perez, 156 Wn.2d 33, 39, 123 P.3d

844 (2005).

(iii) Repair Costs for Fans and Ducts

       In BluWater’s second motion for partial summary judgment, it simply listed under

relief requested $9,371.25 in damages for repair costs for fans and ducts destroyed by

the fire. It is undisputed that the fan and ducts are located in the exact same place as

the electrical panel. Just as it did with the electrical panel, Hartford contends the fans

and ducts are part of the building and not covered under the policy. BluWater argues

that the fans and ducts are covered in the policy in the same way as the electrical panel

is covered. The trial court ruled that the fans and ducts were recoverable as business

personal property under the “care, custody or control” and the “Tenant Improvements

and Betterments” provisions, as well as under additional coverage for “Equipment

Breakdown” and “Extra Expense.”

       Nothing in the record suggests that fans and ducts are anything but part of the

building. Just as it was improper for the court to determine as a matter of law that the

electrical panel was covered as business personal property, the same reasoning applies

to the fans and ducts. The court also erred in ruling that they are covered under the

                                             20
84319-2-I/21

“care, custody, or control” provision for the same reasons the electrical panel are not

covered under that policy. The trial court also erred in ruling as a matter of law that the

fans and ducts qualify as “Tenant Improvements and Betterments” because genuine

issue of material fact remain as to whether BaDa installed the fans and ducts and

whether BluWater acquired them from BaDa, the previous tenant. Because Equipment

Breakdown only reaches covered property, the court also erred in finding coverage

under that provision as a matter of law.

       However, unlike the electrical panel, the landlord did not pay for the replacement

of the ducts and fans. As to whether that cost is covered under the Extra Expense

provision of the policy, Hartford argues that this provision is “dependent upon whether

the property at issue was Covered Property.” The “Extra Expense" provision is under

the policy’s “Coverage Extensions.” But the policy expressly provides a “Limitation” to

that extended coverage. It states

       This Extra Expense Coverage does not apply to:
             (a) Any deficiencies in insuring building or business personal
                 property . . .

BluWater provides no argument to address this limitation on the application of the Extra

Expense Coverage. The policy expressly states that it does not cover “Buildings” and

the meaning of “Buildings” include permanently installed fixtures. Accordingly, the court

erred in awarding BluWater $9,371.25 in damages for the fans and ducts as a matter of

law because a genuine issue of material fact remains as to whether the fans and ducts

are “Tenant Improvements and Betterments” so that they would qualify as business

personal property under the policy.

                                            21
84319-2-I/22

                                    Extra-Contractual Claims

       The court agreed with BluWater in its first partial summary judgment motion

focused on the electrical panel that Hartford had acted in bad faith, and violated 11

claims-handling regulations 13 and the CPA. The court also agreed with BluWater in its

second partial summary judgment motion focused on damages that Hartford violated

three specific claims-handling regulations14 related to the damages requested in that

motion.

A. Bad Faith

       On appeal, Hartford argues that it did not act in bad faith as to the first-party

electrical panel claim, but does not otherwise address whether it acted in bad faith as to

the lack of investigation of the liability claim. 15

       “An insurer has a duty of good faith to its policyholder and violation of that duty

may give rise to a tort action for bad faith.” Leahy v. State Farm Mut. Auto. Ins. Co., 3

Wn. App. 2d 613, 631, 418 P.3d 175 (2018) (quoting Indus. Indem. Co. of the N.W. v.

Kallevig, 114 Wn.2d 907, 917, 792 P.2d 520 (1990)). The policyholder is required to

show that the insurer’s breach of the insurance contract was unreasonable, frivolous, or

unfounded in order to succeed on a claim of bad faith. Id. If there is no reasonable

justification for the insurer’s denial of coverage, the denial constitutes bad faith. Id. An

insurer has not acted in bad faith if “reasonable minds could not differ that its denial of

       13
             The court found that Hartford violated: WAC 284-30-330(1), WAC 284-30-330(2),
WAC 284-30-330(3), WAC 284-30-330(4), WAC 284-30-330(7), WAC 284-30-330(13), WAC
284-30-350(1), WAC 284-30-350(2), WAC 284-30-360(3), WAC 284-30-360(4), WAC 284-30-
370.
          14
             The court found that Hartford violated: WAC 284-30-370, WAC 284-30-350, and WAC
284-30-330(1).
          15
             On June 27, 2022, Hartford paid $315,000 to the landlord to settle the landlord’s
liability claims against BluWater.
                                                22
84319-2-I/23

coverage was based upon reasonable grounds.” Id. (quoting Smith v. Safeco Ins. Co.,

150 Wn.2d 478, 484, 78 P.3d 1274 (2003)).

       Additionally, an insured “may maintain an action against its insurer for bad faith

investigation of the insured’s claim and violation of the CPA regardless of whether the

insurer was ultimately correct in determining coverage did not exist.” Coventry Assocs.

v. Am. States Ins. Co., 136 Wn.2d 269, 279, 961 P.2d 933 (1998). In other words, “a

first-party insured has a cause of action for bad faith investigation even where there is

ultimately no coverage.” St. Paul Fire and Marine Ins. Co. v. Onvia, Inc., 165 Wn.2d

122, 131, 196 P.3d 664 (2008) (citing Coventry, 136 Wn.2d at 279)). This duty has

been extended to third-party liability claims as well. St. Paul Fire and Marine, 165

Wn.2d at 131. An insurer’s duty to indemnify where coverage exists is separate from its

duty of good faith. Coventry, 136 Wn.2d at 279. An insurer can be found to have acted

in bad faith where they have failed to “fulfill its contractual and statutory obligation to

fully and fairly investigate the claim.” Id. An insurer who fails to fulfill this obligation

“plac[es] the insured in the difficult position of having to perform the insurer’s statutory

and contractual obligations.” Id.

       Because genuine issues of material fact remain in determining whether the

electrical panel is covered as a first-party claim under the policy, it follows that, based

on what was presented to the trial court in the challenged summary judgment motions,

finding Hartford acted in bad faith in denying such coverage also cannot be determined

as a matter of law. However, BluWater also asserted Hartford acted in bad faith

regarding Hartford’s lack of investigation into the landlord’s claims of negligence.

       Hartford summarily argues that it acted reasonably in its treatment of BluWater’s

                                               23
84319-2-I/24

liability claim, where, on summary judgment all facts and reasonable inferences are

viewed in the light most favorable to Hartford as the nonmoving party. Hartford argues

that the trial court should have denied summary judgment when Hartford raised material

issues of fact. But Hartford does not discuss what those facts are or cite to the record.

RAP 10.3(a)(6) (appellate brief should contain argument supporting issues presented

for review, citations to legal authority, and references to relevant parts of the record).

       The landlord alleged that BluWater acted negligently in permitting a “broken

condensation line to drip water onto the electrical equipment causing an electrical arc

and fire.” BluWater on November 19, 2021 forwarded to Hartford the landlord’s letter

that included the negligence allegations and warned that “[i]f [BluWater] fails to secure

insurance coverage of this claim, then [the landlord] will be forced to take legal action

against [BluWater] for the property damage it negligently caused.” In forwarding that

information to Hartford, BluWater stated, “[w]e again demand that Hartford provide

coverage for the damages caused by the fire, and to protect our company from all

exposures resulting therefrom.” Despite this information, Hartford did not investigate

the cause of the electrical arc that lead to the fire and did not settle the landlord’s claim

against BluWater until more than seven months after BluWater’s November 19 letter

demanding protection. Moreover, in an April 7, 2022 deposition, more than four months

after BluWater’s November 19 letter to Hartford, adjuster Brichetto could not explain

why Hartford, as of that date, had not contacted BluWater or its attorney to discuss the

liability claim after the landlord sued BluWater. This was despite the fact Brichetto had

reviewed the November 19 letter with Hartford’s leadership team. These are

undisputed facts.

                                             24
84319-2-I/25

       On this basis, we affirm the trial court’s conclusion that Hartford acted in bad faith

as a matter of law.

B. Consumer Protection Act

       The CPA prohibits “unfair methods of competition and unfair or deceptive acts or

practices in the conduct of any trade or commerce.” RCW 19.86.020. Under the CPA,

any person “who is injured in his or her business or property” by a violation of the act

may sue. RCW 19.86.090. In creating the CPA, the legislature intended that it “be

liberally construed [so] that its beneficial purposes may be served.” RCW 19.86.920.

Remedies available under the CPA include injunctive relief, damages, attorney fees and

costs, and treble damages up to $25,000. RCW 19.86.090.

       The plaintiff must prove five elements to succeed in a CPA claim: (1) an unfair or

deceptive act or practice, which (2) occurs in trade or commerce, and (3) affects the

public interest, for which (4) the plaintiff suffered injury to business or property, and was

(5) caused by the act in question. Merriman v. Am. Guar. & Liab. Ins. Co., 198 Wn.

App. 594, 627, 396 P.3d 351 (2017) (citing Hangman Ridge Training Stables, Inc. v.

Safeco Title Ins. Co., 105 Wn.2d 778, 784-85, 719 P.2d 531 (1986)).

       The first two elements required to prove a violation of the CPA may be

established by showing that the alleged act constitutes a per se unfair trade practice.

Id. Where the legislature has declared that violation of a statute constitutes an unfair or

deceptive act in trade or commerce, a per se unfair trade practice exists. Id. An

insured can show an unfair or deceptive practice that impacts the public interest by

establishing a violation of the regulations related to unfair insurance company practices

as set forth in WAC 284-30. Shields v. Enterprise Leasing Co., 139 Wn. App. 664, 675,

                                             25
84319-2-I/26

161 P.3d 1068 (2007) (citing Dombrosky v. Farmers Ins. Co., 84 Wn. App. 245, 260,

928 P.2d 1127 (1996)). An insured party may bring an action for violation of the CPA

based on a single violation of a claims-handling regulation. Indus. Indem. Co., 114

Wn.2d at 921.

(i) June 27 Summary Judgment Order

       Hartford maintains that the trial court erred in ruling on the CPA claims which

flowed from its error on first-party coverage. Though we reverse as to the court’s ruling

on first-party coverage as to the electrical panel, BluWater’s first summary judgment

motion also raised extra-contractual claims as to how Hartford responded to its duty to

defend BluWater from the landlord’s negligence claims.

       BluWater argues that Hartford has waived any argument as to the court’s

determination that it violated WAC 284-30-360(3) and WAC 284-30-360(4). We agree.

See RAP 10.3(a); Kadoranian v. Bellingham Police Dep’t, 119 Wn.2d 178, 191, 829

P.2d 1061 (1992) (assignment of error not briefed is deemed waived).

       Hartford does not address these two bases for which the court found Hartford

violated the CPA, RCW 19.86.010 as a matter of law. Instead, Hartford argues that

BluWater did not prove that Hartford violated “any of the three regulations, particularly

where [Hartford]’s conduct was reasonable.” But a single claims-handling violation can

support a violation of the CPA, and on summary judgment review, we may affirm the

trial court’s decision on any basis within the record. Davidson Serles & Assocs. v. City

of Kirkland, 159 Wn. App. 616, 624, 246 P.3d 822 (2011).

       BluWater claimed that Hartford, in violation of WAC 284-30-360(3), failed to

respond to pertinent communications from a claimant within 10 days; and, in violation of

                                            26
84319-2-I/27

WAC 284-30-360(4), refused to provide reasonable assistance to the insured. These

claims are supported for the same reasons we affirmed the trial court’s determination

that Hartford acted in bad faith. Hartford does not present any argument or evidence to

establish that a genuine issue of material fact exists as to the court’s finding that

Hartford violated subsections (3) and (4) of WAC 284-30-360. BluWater has

established that Hartford has violated regulations related to unfair insurance company

practices, which constitutes a per se unfair or deceptive practice that impacts public

interest. Hartford argued in the motion hearing that the Hartford’s lack of investigation

and response to the landlord’s negligence claim caused BluWater to incur expenses to

have to conduct its own investigation. An insured can establish harm under the CPA by

having to conduct its own investigation when its insurer conducts bad faith investigation

of the claim. See Coventry, 136 Wn.2d at 282. Hartford does not dispute on appeal

that BluWater incurred expenses in having to defend the landlord’s claim.

       Hartford has not shown that a genuine issue of material fact remains as to

BluWater’s CPA claim based on Hartford’s failure to investigate the landlord’s

allegations of negligence against BluWater. Accordingly, we affirm the court’s

determination that Hartford violated the CPA as a matter of law. However, because we

reverse the trial court’s ruling that the electrical panel was covered as a first-party claim

under the policy, it follows that any of the court’s finding of claims-handling regulations

related to the first-party claim also is reversed.

                                              27
84319-2-I/28

(ii) October 28 Summary Judgment Order

       Hartford maintains that the trial court erred in finding that Hartford violated WAC

284-30-370, WAC 284-30-350, and WAC 284-30-330(1) in BluWater’s second partial

summary judgment motion.

       First, BluWater argued below that Hartford’s objection to damages for the fans

and ducts was incorrectly grounded in the same reasons it failed to recognize that the

electrical panel is covered under the policy. And for that reason, BluWater argues,

Hartford violated WAC 284-30-330(1) (“Misrepresenting pertinent facts or insurance

policy provisions.”) and WAC 284-30-350(1) (failure to explain coverages). Because we

hold, as discussed above, that the court erred in finding the fans and ducts were

covered under the policy as a matter of law, it follows that finding Hartford violated the

relevant WACs based on the same also was improper and requires reversal.

       Next, BluWater contends Hartford violated WAC 284-30-350(1) and WAC 284-

30-370 in handling of BluWater’s business income loss claims.

       WAC 284-30-370 requires that “[e]very insurer must complete its investigation of

a claim within thirty days after notification of claim, unless the investigation cannot

reasonably be completed within that time.” BluWater alleged that it had provided all the

necessary documentation to Hartford that allowed it to evaluate its claim, including

dates of closure, “payroll, sales histories, a spreadsheet of inventory losses with

accompanying invoices” and a summary of losses for items destroyed in the fire and

accompanying generators. BluWater does not state when these documents were

provided to Hartford. Emails between Evans and Brichetto show that Brichetto initially

requested these documents on August 31. Evans answered on September 1 stating he

                                             28
84319-2-I/29

was “collecting invoices and inventories to get over to you.” On September 21,

Brichetto sent an email requesting further information on the items submitted as part of

BluWater’s claims for business income and inventory loss. Evans responded on

September 27 by stating his bookkeeper had been out of the office and expected her

back soon. Brichetto sent two follow up emails requesting the additional information in

early October and mid-November. The emails do not show that Evans provided the

requested information after each email. Hartford submitted a declaration from a claims-

handling expert who reviewed the claim file and deposition transcripts. The expert

concluded that Hartford’s actions in investigating the inventory and business income

claims complied with insurance industry standards.

       Although WAC 284-30-370 requires an insurance company to complete its

investigation within 30 days of notification of the claim, there is an exception where the

investigation cannot be reasonably completed in that time. WAC 284-30-370. The

record reflects that there is a genuine issue of material fact as to whether the

investigation could have reasonably been completed within 30 days. We reverse the

trial court’s grant of summary judgment as to the violation of WAC 284-30-370.

       BluWater also argues that Hartford violated WAC 284-30-350(1) because it had

failed to explain the coverage provided by the business income loss provision in the

insurance contract and failed to explain to BluWater how such a claim would be

evaluated. BluWater asserts that despite submitting requested information for its claim

for business income and lost inventory claim, it received no explanation in return as to

the status of that claim. Evans submitted a declaration that in October 2021, Hartford

acknowledged coverage for business income and lost inventory and asked that Evans

                                            29
84319-2-I/30

send banking information for the purpose of wiring money to BluWater. But when no

money came, Evans in November reminded Brichetto of the previously sent documents

and requested confirmation for business income and property loss. No response was

received other than the December 22 letter denying coverage of the electrical panel.

BluWater argues it had to hire its own expert to calculate economic damages incurred

by BluWater.

       In response to BluWater’s motion, Hartford submitted a declaration from its

expert in general claim handling issues. That expert concluded that the insurance

industry standard for explaining the pertinent coverages is to give an overview of the

coverage, type of benefits, and the claim process the insured can expect to receive.

The expert explained that Hartford’s first adjuster Penner complied with industry

standards for providing an explanation of pertinent coverages. Because it is a disputed

fact whether Hartford violated WAC 284-30-350(1) by failing to explain coverage

provided by the business income loss provision, the trial court erred in ruling in favor of

BluWater as a matter of law.

       It is undisputed that BluWater did not receive any payments for its undisputed

business personal property losses until after it instigated legal action. 16 But the issue

before us in this discretionary review is restricted to the specific claims asserted in the

two challenged summary judgment orders. BluWater asserts on appeal that Hartford

violated WAC 284-3-330(4) because it did not question significant portions of the claim

       16
          At the hearing on the second summary judgment ruling, Hartford conceded that it got
the claim for inventory and lost food items wrong, but that the $92,400 had been paid. In
explaining why Hartford still may not have received the $92,400 payment, Hartford noted that at
a recent mediation it became aware that there may have been a typo in the address for
BluWater’s counsel.
                                              30
84319-2-I/31

that included lost property, food, inventory and related expenses, but nevertheless failed

to pay it. However, BluWater asserted a violation of WAC 284-30-330(4) in its first

motion for partial summary judgment that centered around coverage of the electrical

panel, not damages of the undisputed lost property and inventory.

       In its second motion for partial summary judgment, BluWater did request

damages for lost property and inventory and requested the court find violations of three

claims-handling regulations. But WAC 284-30-330(4) was not one of the three WACs

asserted in that motion. Similarly, BluWater argues on appeal that WAC 284-30-330(7)

prohibits “compelling a first party claimant to initiate or submit to litigation, arbitration, or

appraisal to recover amounts due under an insurance policy by offering substantially

less than the amounts ultimately recovered in such actions or proceedings.” But

violation of WAC 284-30-330(7) was asserted in the first summary judgment motion

centered around the electrical panel and violation of that WAC was not asserted in

BluWater’s second summary judgment motion related to damages of lost property and

inventory.

       Trial has yet to be held in this matter. The only issues before us are the matters

that were presented to the trial judge related to the two summary judgment orders and

the order compelling discovery and imposing sanctions.

                                   Attorney Fees and Costs

       BluWater also moved for attorney fees and investigative expenses in its second

motion for partial summary judgment. BluWater argued that because of Hartford’s lack

of response to defend BluWater against the landlord’s claim, it had to engage in experts

that Hartford should have provided. The trial court awarded costs and fees as

                                               31
84319-2-I/32

consequential damages under the ABC rule, the CPA and Olympic S.S. Co. v.

Centennial Ins. Co., 117 Wn.2d 37, 811 P.2d 673 (1991).

       Hartford does not dispute that it is liable for the costs and fees related to

BluWater having to defend against the landlord, but argues that the submitted invoices

relate to BluWater’s first-party claims and not the third-party claims. BluWater argues

that any distinction in fees and costs related to defending against the landlord or

litigating against Hartford as a first-party claimant is warrantless because BluWater may

seek costs and fees for both.

       “‘An insured who is compelled to assume the burden of legal action to obtain the

benefit of its insurance contract is entitled to attorney fees, regardless of whether the

duty to defend is at issue.’” McGreevy v. Oregon Mut. Ins. Co., 128 Wn.2d 26, 28, 904

P.2d 731 (1995) (quoting Olympic S.S., 117 Wn.2d at 54)). Where the duty to defend is

at issue, an insured has the right “to recoup attorney fees that it incurs because an

insurer refuses to defend or pay the justified action or claim of the insured, regardless of

whether a lawsuit is filed against the insured.” Olympic S.S., 117 Wn.2d at 52.

       Also, an insured party has the right to recover its attorney fees when an insurer

“refuses to defend or pay the justified action or claim of the insured.” Id. Under Olympic

Steamship, an award of attorney fees is authorized where the claims are for coverage,

rather than for the value of the claim. Woo, 150 Wn. App. at 175-76. Coverage

disputes include issues regarding the “application of an insurance policy,” and the

“scope” or “extent of the benefit” in an insurance contract. Colorado Structures, Inc. v.

Ins. Co. of the W., 161 Wn.2d 577, 606, 167 P.3d 1125 (2007); Leingang v. Pierce

County Med. Bureau, Inc., 131 Wn.2d 133, 147, 930 P.2d 288 (1997). Where coverage

                                             32
84319-2-I/33

is at issue, all that is necessary to recover fees under Olympic Steamship, is that the

“insurer compels the insured to assume the burden of legal action to obtain the full

benefit of the insurance contract.” Leingang, 131 Wn.2d at 148-49.

       BluWater maintains that segregation of attorney fees is not required because

Hartford denied coverage for the electrical panel as a first-party claim. However, we

reversed summary judgment as to that claim. Thus, the question remains as to whether

BluWater’s attorney fees and costs can be segregated between fees associated with

defending the landlord’s claims and those litigating its first-party claims against Hartford

if it turns out that the electrical panel does not meet the requirements of the tenant

improvement and betterments provision.

       Where attorney fees are recoverable for some of a party’s claims, the award

must segregate the time spent on issues for which fees are authorized from time spent

on other issues. Mayer v. City of Seattle, 102 Wn. App. 66, 79-80, 10 P.3d 408 (2000).

Segregation is required even if the claims overlap or are interrelated. Loeffelholz v.

Citizens for Leaders with Ethics & Accountability Now (C.L.E.A.N.), 119 Wn. App. 665,

690, 82 P.3d 1199 (2004). However, if “the trial court finds the claims to be so related

that no reasonable segregation of successful and unsuccessful claims can be made,

there need be no segregation of attorney fees.” Hume v. Am. Disposal Co., 124 Wn.2d

656, 673, 880 P.2d 988 (1994).

       BluWater maintains that it had submitted a reimbursement request to Hartford

relating to legal fees, stating it was “impossible to segregate any of the services or

expert fees.” But that was under the court’s prior ruling that the electrical panel was

covered under the policy as a first-party claim, which may be why the court did not

                                             33
84319-2-I/34

address the issue of segregating attorney fees.

       Because a genuine issue of material fact remains as to the coverage status of

the electrical panel and fans and ducts, it has yet to be determined if the costs and

attorney fees should or could be segregated. Accordingly, we reverse the court’s

summary judgment award of costs and attorney fees. 17 18

                               Discovery Violation and Sanctions

       Discovery was heavily contested leading to multiple discovery orders. BluWater

moved to compel depositions arguing that Hartford had been unnecessarily delaying

discovery by refusing to provide firm dates on which BluWater could take depositions of

Hartford employees. On May 27 the trial court ordered Hartford to provide dates that

BluWater would be able to depose Hartford employees, and overruled Hartford’s

objections to the categories of questions posed by BluWater. The court noted that

BluWater had already agreed to a stipulated protective order that protects confidential

materials. On June 13, the court entered the agreed stipulation and protective order.

On June 24, BluWater served an amended CR 30(b)(6) notice to Hartford designating

28 topics for deposition. The court, following a status conference on July 25, ordered

on July 28 that the CR 30(b)(6) deposition of Hartford shall occur on September 23. As

the court observed, these

       17
             Because we reverse the award of attorney fees and costs, we need not address
Hartford’s arguments challenging the trial court’s application of authority supporting attorney
fees.
          18
             Hartford also suggests that the approximately $172,000 it already paid to BluWater’s
counsel should have been excised from the trial court’s judgment. Hartford did not pay that sum
until after court’s October 28 ruling. The only information before the court prior to its ruling on
October 28 was that Hartford acknowledged that it owed nearly $172,000 in fees related to the
liability claim and that it intended to pay it. The lower court’s entry of judgment is not part of this
appeal.
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       deposition topics were developed in consultation with Elliott Flood,
       BluWater’s insurance expert, to get information relevant to Hartford's
       policies that impact its compliance with Washington insurance law. These
       policies are directly relevant to BluWater's claims in this case arising out of
       the Washington Consumer Protection Act, RCW 19.86, and the
       Insurance Fair Claims Act, RCW 48.30.

On September 16, Hartford designated either Derek Cole or Ryan Brichetto to address

the first 20 topics and indicated it would not make any designation for topics 21 through

28.

       Following the subsequent depositions, BluWater filed a motion to compel and for

sanctions. The motion included a chart by topic of how Hartford failed to appear by

either failing to produce any witness or producing witnesses that did not prepare for the

topic and therefore had no knowledge. The trial court granted BluWater’s motion on

October 28. The court ruled that “[Hartford] unilaterally announced it would not produce

a witness on deposition topics 21 through 27” without seeking a protection order19 from

the court and produced only “two low-level employees” for the CR 30(b)(6) depositions

noted by BluWater and that those employees had “done almost no preparation.”

       Hartford appeals the October 28 order, but none of the previous discovery orders

by the trial court.

       We review sanctions for noncompliance with discovery orders for an abuse of

discretion. Rivers v. Wash. State Conf. of Mason Contractors, 145 Wn.2d 674, 684, 41

P.3d 1175 (2002) (citing Burnet v. Spokane Ambulance, 131 Wn.2d 484, 494, 933 P.2d

1036 (1997)). “[D]iscretionary determination should not be disturbed on appeal except

       19
          During oral argument Hartford suggested that it did seek a protection order as to these
topics. Wash. Ct. of Appeals oral arg., supra, at 12 min., 40 sec. to 13 min., 11 sec. However,
it was about a week after the court entered its October 28 order that Hartford sought a
protective order requesting the court grant its request to not allow the deposition of six
individuals. The court granted Hartford’s motion in part and denied it in part.
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on a clear showing of abuse of discretion, that is, discretion manifestly unreasonable, or

exercised on untenable grounds, or for untenable reasons.” Id. at 684-85 (quoting

Burnet, 131 Wn.2d at 494). A ruling based on an error of law is an abuse of discretion.

Casper v. Esteb Enterprises, Inc., 119 Wn. App. 759, 768, 82 P.3d 1223 (2004) (citing

King v. Olympic Pipeline Co., 104 Wn. App. 338, 355, 16 P.3d 45 (2000)).

       A notice of deposition made by a party under CR 30(b)(6) requires the

corporation to produce one or more officers to testify with respect to matters set out in

the deposition notice. Flower v. T.R.A. Indus., Inc., 127 Wn. App. 13, 39, 111 P.3d

1192 (2005). Because CR 30(b)(6) and Fed. R. Civ. P. 30(b)(6) are nearly identical,

“federal cases interpreting the federal rule are highly persuasive.” Casper, 119 Wn.

App. at 767. The party seeking discovery need only “designate with reasonable

particularity the matters on which examination is requested.” CR 30(b)(6). Upon such a

request, the corporation “must not only produce such number of persons as will satisfy

the request, but more importantly, prepare them so that they may give complete,

knowledgeable and binding answers on behalf of the corporation.” Flower, 127 Wn.

App. at 39 (quoting Marker v. Union Fid. Life Ins. Co., 125 F.R.D. 121, 126 (M.D.N.C.

1989)).

       Hartford first argues that the court erred in ruling that Hartford had violated

discovery rule CR 30(b)(6). It rests its entire argument on one sentence: “A review of

BluWater’s CR 30(b)(6) notice indicates its incredible breadth.” Hartford cites generally

to BluWater’s notice of all 28 topics and does not provide any specificity as to how

BluWater failed to designate with reasonable particularity the matters on which

examination was requested. We conclude that Hartford has waived any assignment of

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error related to its claim that BluWater’s CR 30(b)(6) notice was too broad. RAP

10.3(a)(6) (requiring appellant’s brief to include “argument in support of the issues

presented for review”); see also Smith v. King, 106 Wn.2d 443, 451-52, 722 P.2d 796

(1986) (assignment of error is waived if unsupported by argument or authority).

       BluWater requested a sanction of finding Hartford in default, or in the alternative

a sanction of $500,000. Finding a party in default is one of the “harsher remedies”

under CR 37(b) and requires the court to consider the Burnet factors. Casper, 119 Wn.

App. at 768-69 (quoting Burnet v. Spokane Ambulance, 131 Wn.2d 484, 494, 933 P.2d

1036 (1997)).

       The court evaluated the Burnet factors and declined to grant BluWater’s

requested “harsher” sanctions. The court, nevertheless agreed that sanctions were

warranted under CR 37 for Hartford’s failure to appear by failing to produce an

adequately prepared designee in Cole and failing to designate any person to appear on

seven identified discovery topics. The trial court explained its concern that a mere

imposition of attorney fees awarded to BluWater for the expenditure required to litigate

these discovery matters would not adequately punish the behavior because Hartford

was “constantly seeking ways to delay and frustrate the discovery process in the hopes

that BluWater will eventually give up or, at least any payment to BluWater is delayed for

as long as possible.”

       In this case, the trial court imposed the following sanctions:

       (1) Hartford must provide for deposition a properly prepared, upper-
       executive level CR 30(b)(6) witness on each of the topics on BluWater’s
       list within 45 days of this order.

       (2) Hartford shall, within 20 days, place $50,000 in [BluWater’s attorney]’s
       trust account;

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      (3) [BluWater’s attorney] and his firm will bill Hartford monthly for his time
      working on the discovery issues in this case. He may redact entries that
      might describe attorney-client conferences to simply state: attorney-client
      conference.

      (4) Upon sending a monthly billing to Hartford, [BluWater’s attorney] may
      withdraw the amount of the billing from his trust account to pay his bill.

      (5) Whenever the balance in his trust account falls below $30,000,
      [BluWater’s attorney] may send a demand to Hartford to replenish the
      amount in his trust account. Hartford shall do so within 10 days.

      (6) Failure to Hartford to comply with (1) through (4) above will be a
      breach of this Court’s order. Upon [BluWater’s attorney]’s sworn
      statement that the Order has been breached, this Court will enter a default
      judgment against Hartford and in favor of BluWater in this case.

      (7) If the Court of Appeals takes discretionary review of this Order and
      affirms the Order, it should consider awarding BluWater its attorneys [sic]
      fees on appeal.

      First, Hartford takes issue with the court ordering that Hartford provide an “upper

executive level” CR 30(b)(6) witness on each of BluWater’s topics. Hartford argues that

“CR 30(b)(6) notice of deposition does not entitle a party to dictate whom the

corporation designates.” However, the court did not dictate whom Hartford designates,

it merely designated that Hartford provide an “upper-executive level” witness after

Hartford designated a lower-level representative who did not have the knowledge or

attempted to obtain the information requested. Hartford cites no authority to support its

argument that the court did not have the authority to require the designation of an

upper-level executive under these circumstances. In fact, CR 37(a)(2) provides that

when a deponent fails to answer a question propounded or submitted under rule 30 or a

corporation fails to make a designation under 30(b)(6), a party may move for an order

“compelling an answer or designation." Although it may have been preferable for the

                                            38
84319-2-I/39

court to order Hartford to instead designate a witness qualified to answer the topics

propounded by BluWater, it was not an abuse of discretion for the court to instead

require them to designate an “upper level executive.”

        The Washington Supreme Court recently declined to adopt the apex doctrine,

which requires the party seeking to depose a high-level witness to show both that the

witness has unique, nonrepetitive, firsthand knowledge of the facts and that the party

has exhausted less intrusive means, such as interrogatories and depositions of other

employees. Stratford v. Umpqua Bank, 2 Wn. 3d 112, 125, 534 P.3d 1195 (2023).

Adopting such a doctrine would be inconsistent with our state’s Civil Rules, which

“already protect potential deponents—including high-level officers—from unduly

burdensome discovery.” Id. at 124-27 (citing CR 26). In fact, after the court’s October

28 order, Hartford successfully challenged, in part, BluWater’s request to depose six

specific individuals.

       Next, Hartford challenges the court’s sanctions that, in essence, acquiesced the

court’s sanction authority to BluWater’s counsel. CR 37(b)(2) provides that the court

       shall require the party failing to obey the order or the attorney advising him
       or her or both to pay the reasonable expenses, including attorney fees,
       caused by the failure, unless the court finds that the failure was substantially
       justified or that other circumstances make an award of expenses unjust.

However, the sanction imposed by the trial court goes beyond imposing reasonable

attorney fees caused by the failure. Instead, the court ordered Hartford to timely

maintain a litigation fund in a trust account at the disposal of BluWater’s counsel without

limitation. Though BluWater’s attorney was required to send monthly billing to Hartford

in order to withdraw the amount from the trust account to pay his bill, whenever the

balance in the trust account fell below $30,000, BluWater’s counsel could send a

                                             39
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demand to Hartford to replenish and Hartford was required to do so within 10 days.

Because the billing was allowed for work on “discovery issues” without restrictions, the

court created a sanction of which the outer limits, if any, were controlled by BluWater’s

attorney, not the court. The trial court neither limited the fees to those that were

reasonable nor those caused by the failure to comply with the court’s discovery orders.

       Moreover, the attorney who was the recipient of the fees would be the one billing

his opposing party who was directly under the threat of default judgment for failing to

comply as ordered. Notably, the court pre-determined that a default judgment “will

enter” based simply on a sworn statement from BluWater’s attorney that Hartford failed

to comply with (1) through (4). 20 However, because a default judgment for discovery

violations raises due process concerns, the court must first find willfulness and

substantial prejudice before entering a default judgment. Smith v. Behr Process Corp.,

113 Wn. App. 306, 325, 54 P.3d 665 (2002). And the court must make Burnet findings

on the record when imposing the harsher remedies under CR 37 such as entering a

default judgment. 21 See Rivers, 145 Wn.2d at 694. Here, the trial court’s order

committed itself to enter a default judgment based only on the sworn assertion that

Hartford did not comply with the court’s order regardless if the noncompliance was

       20
          The order does not explain if Hartford is subject to this sanction for the violation of any
of provisions (1) through (4), or if it must violate all four in order to face the sanction of default
judgment.
       21
          When a trial court imposes one of the “harsher remedies” under CR 37(b), “it
must be apparent from the record that the trial court explicitly considered” what are
considered the Burnet factors: whether (1) a lesser sanction would probably have
sufficed and (2) whether the court found that the party’s refusal to obey a discovery
order was willful or deliberate and substantially prejudiced the opponent’s ability to
prepare for trial. Casper, 119 Wn. App. at 768-69 (quoting Burnet v. Spokane
Ambulance, 131 Wn.2d 484, 494, 933 P.2d 1036 (1997)). A violation of the discovery
rules is willful if done without reasonable excuse. Id. at 769 (citing Smith v. Behr
Process Corp., 113 Wn. App. 306, 327, 54 P.3d 665 (2002)).
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willful or created a substantial prejudice.

       It is the court, not opposing counsel, who may impose sanctions that are just in

regards to failure to comply with discovery orders. CR 37. While this court continues to

encourage trial courts to use their discretion in crafting appropriate sanctions, the

discretion in deciding whether an order has been violated and whether a sanction

should be imposed, must remain in the hands of the trial court. For these reasons, we

hold that the trial court abused its discretion in imposing sanctions three through six

against Hartford and reverse these sanctions.

                                        CONCLUSION

       We reverse the trial court’s ruling that the insurance policy covers the electrical

panel and the relevant fans and ducts as a matter of law. We affirm the trial court

awarding BluWater $64,635 in damages for business income loss. We reverse the trial

court’s summary judgment award of $9,371.25 in damages for the fans and ducts. We

affirm the trial court’s finding that Hartford acted in bad faith by failing to investigate the

landlord’s claims against BluWater. To the extent the court’s bad faith finding is based

on Hartford’s denial of BluWater’s first-party claim for the electrical panel, that finding is

reversed. We affirm the trial court’s June 27 summary judgment order that Hartford

violated the CPA based on two unchallenged claims-handling regulations. We reverse

the trial court’s October 28 summary judgment order that Hartford violated three claims-

handling regulations. Because, at this stage, genuine issues of material fact remain as

to whether the insurance policy covers BluWater’s first-party electrical panel claim, the

question of whether the attorney fees and costs should and could be segregated also is

unresolved. Accordingly, we reverse the trial court’s October 28 order awarding

                                              41
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BluWater attorney fees and costs. We affirm the trial court’s ruling that Hartford violated

CR 30(b)(6). We affirm the first and second sanctions imposed under CR 37(b)(2), but

reverse sanctions three through six.

       We affirm in part, reverse in part and remand. 22 23

WE CONCUR:

       22
          Because Hartford does not present argument regarding whether the trial court erred in
denying its motion for reconsideration, we do not address that issue. “We will not consider an
inadequately briefed argument.” Norcon Builders, LLC v. GMP Homes VG, LLC, 161 Wn. App.
474, 486, 254 P.3d 835 (2011).
       23
          BluWater requests attorney fees on appeal in accordance with RAP 18.1(b). Because
both parties prevailed as to substantive issues on appeal, we deny BluWater’s request for
attorney fees without addressing the basis of such requests.
                                              42