Court Opinion

ID: 9499803
Source: CourtListenerOpinion
Date Created: 2023-08-05 17:58:15.246696+00
Date Added: 2024-06-11T17:59:44.393886
License: Public Domain

WARD LAW, Circuit Judge,
concurring in part and dissenting in part:
I agree that the mutual mistake doctrine is applicable, the contract should be reformed, and that the district court properly excluded Cook’s affidavits. However, I dissent because both the district court and the majority have erred by using extrinsic evidence to create ambiguity where none exists. Nothing in the policy language supports the majority’s view that “5.00% deductible” meant a percentage of the total insured value (“TIV”) of properties af*1086fected by the earthquake, or that the TIV would be adjusted during the policy term for appreciation or depreciation of the covered properties.
This is a diversity action, which requires us to apply Washington State’s law. When interpreting insurance contracts, “[t]he pertinent rules are simple enough. If the policy language is clear and unambiguous, the court may not modify the contract or create an ambiguity where none exists.” E-Z Loader Boat Trailers, Inc. v. Travelers Indem. Co., 106 Wash.2d 901, 726 P.2d 439, 443 (1986). Here, the insurance policy expressed the deductible in terms of a percentage per occurrence. The policy does not expressly define “deductible.” Under Washington law, “[w]e give undefined terms in a policy their popular and ordinary meaning, turning to dictionaries if the plain meaning of the term is not clear.” State Farm Fire & Cas. Co. v. English Cove Ass’n, Inc., 121 Wash.App. 358, 88 P.3d 986, 989 (2004) (footnotes omitted). Only after Washington courts examine the dictionary meaning of a term is ambiguity evaluated. See id. at 989-91. The Washington Supreme Court has examined both standard and insurance-specific dictionaries in order to divine the plain meaning of terms in an insurance contract. See Boeing Co. v. Aetna Cas. & Sur. Co., 113 Wash.2d 869, 784 P.2d 507, 511 (1990). The term “deductible” is defined by one insurance dictionary cited by the Washington Supreme Court as the “[ajmount of loss that insured pays in a claim.” Barron’s Dictionary of Insurance Terms 124 (4th ed.2000). Similarly, the Insurance Information Institute defines deductible as “[t]he amount of loss paid by the policyholder. Either a specified dollar amount, [or] a percentage of the claim amount.” http://www.iii.0rg/media/gl0ssary/alfa.D; see also Black’s Law Dictionary 444 (8th ed.2004) (“Under an insurance policy, the portion of the loss to be borne by the insured before the insurer becomes liable for a payment.”). Each definition of deductible defines the term only in relation to the amount of loss suffered, which is the same as the claim amount, and we should do the same.
A commonsense reading of the policy dictates that the deductible was expressed as a percentage because it could only be determined by reference to a claim made against the policy — and thus that the deductible was a percentage of the claimed loss. The insured value of the various properties was known, and if a fixed deductible based on those values was intended, it could easily have been expressed in the contract. The majority goes astray by failing to follow Washington State rules of interpretation and incorporating the ambiguity it finds in the term “occurrence” into what should be a straightforward analysis of the plain meaning of “deductible.”