Court Opinion

ID: 4155854
Source: CourtListenerOpinion
Date Created: 2017-03-27 19:16:58.357146+00
Date Added: 2024-06-11T14:03:05.274516
License: Public Domain

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          IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON                     C7)

EDWARD AND MAYA ELEAZER,              )        No. 75097-6-1
husband and wife,                     )
                                      )       DIVISION ONE
                        Appellants,   )
                                      )
                V.                    )
                                      )
FIRST AMERICAN TITLE INSURANCE)
COMPANY, a foreign insurer; THE       )        UNPUBLISHED OPINION
TALON GROUP, a domestic               )
Washington corporate entity or        )
partnership, d/b/a Talon Group Escrow )
and/or Talon Title; DOE PERSONS 1-5;)
and ROE ENTTITIES 6-10,               )
                                      )
                        Respondents. )         FILED: March 27, 2017

      SCHINDLER, J. — Edward and Maya Eleazer appeal summary judgment dismissal

of their lawsuit against escrow agent The Talon Group and First American Title

Insurance Company. We affirm.

Nordstrom Property

      Loyal Mary Nordstrom owned two adjoining lots in Index, Washington. A 12-

room hotel and restaurant, the Bush House Hotel and Restaurant, was on one lot and a

3-bedroom house was on the other lot.

      In 1993, Nordstrom installed a commercial-grade on-site septic system (OSS)for

the Bush House in the front yard of the lot with the three-bedroom house. The
No. 75097-6-1/2

Snohomish Health District(SHD)approved the OSS on the condition that "[a]ll

components of onsite sewage facility on separate tax lots from the Bush House

Restaurant must be tied to Bushhouse [sic] via recorded easements" and that the SHD

"conditional approval letter" is "recorded on the property title."

       Nordstrom recorded a copy of the SHD conditional approval letter for the OSS.

Instead of an easement, Nordstrom recorded a "Declaration of Restrictive Covenants."

The May 24, 1993 Declaration of Restrictive Covenants states that the parcels of

property "are to be considered as one total building lot."

Purchase and Sale Agreement

       In 2007, Edward and Maya Eleazer entered into negotiations with Nordstrom to

purchase the three-bedroom house. The Eleazers knew the "front yard contained a

septic drain field" for "the neighboring Bush House" and the backyard contained a septic

system for the house.

       According to Nordstrom, the Eleazers "knew that they needed to grant an OSS

easement" for the Bush House. Nordstrom states that after SHD approved the

easement, the Declaration of Restrictive Covenants "could be cancelled." In her

declaration, Nordstrom states:

       When.. . my real estate agent in 2007 ... came to me with the Eleazer
       offer, the entire idea was that Eleazers would prepare an OSS easement,
       seek approval of the form of the easement from SHD and then, after the
       SHD-approved OSS easement was granted and recorded, the Declaration
       of Restrictive Covenants could be cancelled. Eleazers knew the
       commercial drainfield for the Bush House was in their front yard before
       they purchased it. They also knew that they needed to grant an OSS
       easement so the Bush House Hotel and Restaurant could continue to use
       and maintain that commercial drain[ ]field.

                                              2
No. 75097-6-1/3

      The Eleazers submitted a residential real estate purchase and sale agreement

(REPSA)on February 25, 2007. Because the offer did not address the easement,

Nordstrom's listing agent prepared a "Form 34" addendum. The Form 34 addendum to

the RESPA states the Eleazers agree to grant an easement for the OSS.

      IT IS AGREED BETWEEN THE SELLER AND BUYER AS FOLLOWS:

      Buyer agrees to grant access for maintenance of OSS to Bush House
      [Bed & Breakfast]. Access to be granted in the form of a recorded
      easement agreeable to both parties.

      The Talon Group (Talon) acted as escrow agent for the transaction Talon is a

division of First American Title Insurance Company (First American). Neither the

Eleazers nor Nordstrom provided a copy of the REPSA Form 34 addendum to Talon or

First American. On April 9, 2007, First American issued a commitment for title

insurance. The commitment for title insurance does not list the 1993 SHD letter or

Declaration of Restrictive Covenants.

       On May 8, 2007, the Eleazers signed the "Closing Agreement and Escrow

Instructions"(Escrow Instructions). On May 9, Nordstrom conveyed title to the house to

the Eleazers by statutory warranty deed. The Eleazers did not enter into an easement

for the OSS as agreed in the Form 34. On May 10, First American issued the "Policy of

Title Insurance"(Title Policy).

2011 Title Insurance Claim

       The Eleazers renovated the house between 2007 and 2010. In 2010, the

Eleazers learned about the recorded 1993 SHD letter and restrictive covenants.

       Without disclosing that they knew the OSS was located in their front yard or that

they had agreed to grant an easement for the OSS, on May 3, 2011, the Eleazers

                                            3
No. 75097-6-1/4

submitted a claim to First American. The letter to First American states the Eleazers

"acquired copies of two recorded documents which they believe affect the marketability

of their title." The letter asserts the 1993 recorded documents "make the title

unmarketable" and "are, or could be construed to be, encumbrances on the title." The

Eleazers requested First American "D]nitiate legal action to remove the restrictive

covenants, and nullify the Snohomish Health District letter."

       On July 14, First American Regional Claims Manager and attorney Daryl Lyman

denied the claim. The letter from First American states that although the 1993 recorded

documents "may perhaps impair the market value of the property," the documents did

not make the property unmarketable. "[W]hile the undisclosed declaration of restrictive

covenant may constitute an encumbrance on your title," First American was not

obligated to indemnify because the Eleazers had "sustained no present loss."

       On October 17, the Eleazers' attorney sent First American a lengthy letter

challenging the decision to deny the claim. The attorney states that if First American did

not agree to a settlement, the Eleazers would file a lawsuit for damages.

       In response, First American requested the Eleazers provide a copy of the "Form

17" seller disclosure statement that Nordstrom provided the Eleazers before closing.

The letter states, in pertinent part:

              Presumably Ms. Nordstrom provided the Eleazers the required
       Form 17 pursuant to RCW 64.06.020, which specifically asked, among
       other things:

                      Are there any zoning violations, nonconforming uses,
                      or any unusual restrictions on the property that would
                      affect future construction or remodeling?

                      Are there any covenants, conditions, or restrictions
                      recorded against the property?

                                             4
No. 75097-6-1/5

              At your convenience, please provide me a copy of the completed
       Form 17. If Ms. Nordstrom disclosed the subject issues to the Eleazers,
       such disclosure prior to closing would provide for another exception under
       the policy. Exclusion 4.a. provides that the Eleazers are not insured
       against loss resulting from risks that are created, allowed, or agreed to,
       whether or not they appear in the Public Records.

       The Eleazers' attorney sent First American a copy of pages two through five of

Form 17. The attorney told First American that although the "questions soliciting

information on encumbrances, easements, and restrictive covenants are on page one of

the seller disclosure statement," he had "never seen page 1 of this document."

       In December 2011, Nordstrom sold the Bush House to Bush House LLC.

Sometime between 2010 and late 2011, the backyard septic system for the Eleazers'

house failed. The Eleazers submitted an application to connect to the Bush House OSS

in their front yard.

       On February 3, 2012, SHD sent the Eleazers a letter denying the application

because the 1993 Declaration of Restrictive Covenants created uncertainty about "who

has ownership/control of the OSS pressure bed and the immediate area." The letter

states, in pertinent part:

       Although the Declaration of Restrictive Covenants may just be some sort
       of cloud on the title of Lots 25 thru 28, it also may be a legal instrument
       granting dominant control of the existing OSS pressure bed and portions
       of Lots 25 thru 28 to the property owner of Lots 29 thru 33. Until this
       situation can be adequately resolved, it is not readily clear who has
       ownership/control of the OSS pressure bed and the immediate area. As
       such SHD cannot demonstrate that the requirements contained in WAC
       246-272A have been met for permit issuance.

       On February 7, the Eleazers informed First American that SHD denied the

application to connect to the front yard OSS. The attorney asserts the 1993 restrictive
No. 75097-6-1/6

covenants were an encumbrance on the Eleazers' title and a covered risk under the

Title Policy.

       First American agreed the 1993 recorded documents constituted a covered risk

under the Title Policy. The letter states, in pertinent part:

       The Declaration of Restrictive Covenants and the SHD letter recorded in
       1993 have an ambiguous impact on the Eleazers' use of their property;
       solely for purposes of the present claim, however, First American accepts
       that they are recorded documents within the scope of Covered Risk Nos. 5
       and 9 in that they limit the location where the Eleazers can install a septic
       system.

       The February 22 letter states that under the terms of the policy, First American

would pay the Eleazers their actual loss based on the property's diminution in value

"caused by the limitation on siting a drain[ "field to serve the residence." First American

notes a "diminution-in-value appraisal can take some time" and offered to pay the

difference in price between a lower cost low-pressure septic system and a more

expensive high-pressure septic system that could be located in the back yard.

       On February 23, the Eleazers' attorney told First American he would "analyze

your settlement plan, discuss it with my client, and respond later." The letter also states

the Eleazers planned to resolve "issues involving title or possession of real property. ..

in Superior Court."

Quiet Title Action

       In April, the Eleazers filed a quiet title action against Bush House LLC and SHD.

The Eleazers alleged the 1993 SHD letter and restrictive covenants were invalid and

Nordstrom breached the statutory warranty deed. Bush House LLC and Nordstrom filed

a counterclaim against the Eleazers for breach of the Form 34 addendum agreement to

grant an OSS easement.

                                              6
No. 75097-6-1/7

          On cross motions for summary judgment, the trial court dismissed the quiet title

action. The court ruled the Eleazers "are in breach of the Form 34 promise to grant an

OSS easement to the Bush House." The May 23, 2013 order states the Eleazers had

"actual knowledge of the OSS in the front yard of their property" and "contractually

promised to grant an OSS easement" before they purchased the property. The order

states, in pertinent part:

                 5. Facts That Appear Without Substantial Controversy

                 C. Even if Eleazers did not have actual notice of the SHD letter
          and Covenants, they did have actual knowledge of the OSS in the front
          yard of their property before they purchased.
                 D. Eleazers contractually promised to grant an OSS easement,
          which was the direct underlying purpose of the SHD letter and Covenants.

          The trial court appointed a special master and ordered the Eleazers to grant and

record an OSS easement. The order attached the easement with a detailed legal

description. The Eleazers filed an appeal.

          In an unpublished opinion, we concluded the court erred in drafting the

easement. Eleazer v. Bush House, LLC, 183 Wash. App. 1007, 2014 WL 4198384, at *8.

We held the Form 34 addendum imposed an implied duty of good faith on the Eleazers

and on remand, if the Eleazers did not make a good faith "offer of easement terms to

Nordstrom," Nordstrom could seek damages or rescission. Eleazer, 2014 WL 4198384,

at *8.1

          We held, in pertinent part:
                  If, on remand, the Eleazers fail to make a "good faith" offer, then Nordstrom may
        seek either damages from the Eleazers or rescission of the REPSA. If the Eleazers do
        make a good faith offer, however, then Nordstrom must either accept the offer, entice the
        Eleazers to accept a counteroffer, seek rescission of the REPSA, or forego a remedy.
Eleazer, 2014 WL 4198384, at *8. There is no indication in the record that the Eleazers have made a
good faith offer for an easement.

                                                  7
No. 75097-6-1/8

Denial of Coverage

       After receiving a copy of the court order in the quiet title action, First American

learned for the first time that the Eleazers knew the OSS was located in their front yard

and agreed to grant an easement to Nordstrom.

       On June 10, First American notified the Eleazers that based on the order in the

quiet title action, the exclusion for risks allowed and agreed to by the insured barred

coverage.

              It appears from the Court's ruling that the Eleazers expressly
       agreed to grant an easement to The Bush House for the septic system
       located in their front yard. Under those circumstances, our preliminary
       conclusion is that the Eleazers' claim falls within the scope of Exclusion
       No. 4(a) and is not covered by First American's title policy.

       On June 25, First American denied coverage because the "presence of the septic

system and The Bush House's right of access. . . are matters that were allowed or

agreed to by the Eleazers." First American also notes that the Eleazers did not disclose

"material information."

       The Snohomish County Superior Court has ruled that the Eleazers
       expressly agreed in the REPSA to grant an easement so The Bush House
       could maintain the septic system located on their property. The Eleazers
       closed on their purchase knowing that the septic system was located, and
       would remain, in their front yard; they did not demand before closing that
       Nordstrom remove the septic system. The presence of the septic system
       and The Bush House's right of access for maintenance, therefore, are
       matters that were allowed or agreed to by the Eleazers. Accordingly, the
       Eleazers' claim falls within the scope of Exclusion No. 4(a) and is not
       covered by First American's title policy.

               Moreover,... in all the correspondence between the Eleazers and
       First American over the last two years, they never disclosed their pre-
       closing knowledge of the septic system in their front yard or the REPSA's
       provision to grant an easement for access to that system until your June 4,
       2013, letter enclosing the Superior Court's order on summary judgment.

                                              8
No. 75097-6-1/9

       This studied [sic] avoidance of patently material information indicates an
       intentional effort to mislead First American. Accordingly, the withholding
       of material information provides an additional ground for denying
       coverage.

Lawsuit against Talon and First American

       The Eleazers filed a lawsuit against the escrow agent Talon and First American.

The Eleazers alleged Talon breached the Escrow Instructions and its fiduciary duty by

not searching for and disclosing the 1993 SHD letter and restrictive covenants. The

Eleazers alleged First American breached the Title Policy and acted in bad faith by

denying their claim for "covered losses." The Eleazers also alleged First American

violated the Insurance Fair Conduct Act(IFCA), RCW 48.30.010-.015.

       First American filed a counterclaim alleging the Eleazers'"claims are not covered

by the Title Policy."

Summary Judgment Dismissal of Lawsuit against Talon and First American

       Talon and First American filed a motion for summary judgment dismissal of the

lawsuit. Talon argued it did not breach the Escrow Instructions or its fiduciary duty

because it had no duty to discover and disclose the 1993 SHD letter and restrictive

covenants. First American argued there was no loss and the coverage claims were

excluded because the Eleazers knew about the OSS, agreed to grant an easement for

it, and withheld information.

       In support, Talon submitted the declaration of First American Regional Claims

Manager Daryl Lyman. Lyman states, "The Form 34 relating to the drainfield easement

. . . does not appear anywhere in the Escrow File. That document was never provided

to Talon by the Eleazers, Nordstrom, or their agents." First American submitted a

number of documents including the commitment for title insurance, the Escrow

                                            9
No. 75097-6-1/10

Instructions, the Title Policy, numerous letters between First American and the

Eleazers, declarations filed by the Eleazers and Nordstrom in the quite title action, and

the May 2013 order dismissing the quite title action.

       The Eleazers filed a cross motion for summary judgment. The Eleazers argued

Talon had a duty under the Escrow Instructions to obtain and provide "a written

statement from Ms. Nordstrom regarding the 1993 encumbrances." The Eleazers

argued the 1993 SHD letter and restrictive covenants were covered risks under the Title

Policy and First American breached the policy by not paying damages.

       In support, the Eleazers submitted declarations and a number of documents.

The Eleazers admit they knew the Bush House OSS was located in their front yard

when they purchased the property. But according to the Eleazers, Nordstrom's real

estate agent "told us that the drain field in the bungalow's front yard was designed to be

large enough for the bungalow's use as well as the Bush House's use, in case the

bungalow's current on-site septic system ever failed." The Eleazers state they "would

have expected any easement for our consideration to have been consistent" with the

representation that the OSS drain field was large enough to serve both properties. The

Eleazers state they asked the escrow agent at closing "about the Bush House septic

system easement issue." According to the Eleazers, the "Talon escrow agents looked

through all the paperwork 'to see if they had missed anything'"and told the Eleazers

they "did not find anything in the paperwork that mentioned the Bush House septic

system."

       The court granted the motion of Talon and First American and dismissed the

lawsuit.

                                            10
No. 75097-6-1/11

Appeal

      The Eleazers contend the court erred in dismissing the lawsuit against Talon and

First American on summary judgment.

       We review an order of summary judgment dismissal de novo and engage in the

same inquiry as the trial court. Kut Suen Lui v. Essex Ins. Co., 185 Wash. 2d 703, 709-10,

375 P.3d 596 (2016). Summary judgment is appropriate when there is no genuine

issue as to any material fact and the moving party is entitled to judgment as a matter of

law. CR 56(c); Scrivener v. Clark Coll., 181 Wash. 2d 439, 444, 334 P.3d 541 (2014). We

consider all facts and make all reasonable factual inferences in the light most favorable

to the nonmoving party. Young v. Key Pharms., Inc., 112 Wash. 2d 216, 226, 770 P.2d

182(1989). Where reasonable minds could reach but one conclusion from the

admissible facts in evidence, summary judgment should be granted. Allen v. State, 118
Wash. 2d 753, 760, 826 P.2d 200(1992); LaMon v. Butler, 112 Wash. 2d 193, 199, 770 P.2d

1027(1989).

       We interpret contracts, including insurance policies, de novo as a matter of law.

Quadrant Corp. v. Am. States Ins. Co., 154 Wash. 2d 165, 171, 110 P.3d 733(2005);

Black v. Nat'l Merit Ins. Co., 154 Wash. App. 674, 680, 226 P.3d 175(2010). A contract

"should be construed as a whole and, if reasonably possible, in a way that effectuates

all of its provisions." Colo. Structures, Inc. v. Ins. Co. of the W., 161 Wash. 2d 577, 588,

167 P.3d 1125(2007).2 We give words in a contract an "ordinary, usual, and popular

meaning unless the agreement as a whole clearly demonstrates a contrary intent."

4105 1st Ave. S. lnvs., LLC v. Green Depot WA Pac. Coast, LLC, 179 Wash. App. 777,

       2 Footnote   omitted.

                                            11
No. 75097-6-1/12

784, 321 P.3d 254 (2014); Hearst Commc'ns, Inc. v. Seattle Times Co., 154 Wash. 2d 493,

504, 115 P.3d 262(2005).

Dismissal of Claims against Talon

      The Eleazers assert that under the Escrow Instructions, Talon had a contractual

and fiduciary duty to search for the 1993 restrictive covenants and SHD letter. Talon

contends it had no duty to search for the 1993 recorded documents.

       The existence of a duty is a question of law we review de novo. Washburn v.

City of Fed. Way, 178 Wash. 2d 732, 753, 310 P.3d 1275 (2013). The "duty to identify or

disclose title defects. .. is owed only in preparing an abstract of title." Centurion Props.

III, LLC v. Chicago Title Ins. Co., 186 Wash. 2d 58, 69-70, 375 P.3d 651 (2016). The

duties and limitations of an escrow agent are defined by the escrow instructions.

Centurion Props., 186 Wash. 2d at 70; Denaxas v. Sandstone Court of Bellevue, L.L.C.,

148 Wash. 2d 654, 663,63 P.3d 125(2003). An escrow agent has a duty to exercise

"'ordinary skill and diligence, and due or reasonable care.'" Denaxas, 148 Wn.2d at

6633(quoting Nat'l Bank of Wash. v. Equity Inv'rs, 81 Wash. 2d 886, 910, 506 P.2d 20

(1973)). The escrow agent has a fiduciary duty to"'conduct the affairs with which [it] is

entrusted with scrupulous honesty, skill, and diligence.'" Nat'l Bank, 81 Wash. 2d at 910

(quoting 30A C.J.S. ESCROW § 8(1965)).

       The Escrow Instructions direct Talon to obtain a preliminary commitment for title

insurance. The Escrow Instructions unequivocally state Talon can "rely on the

[preliminary commitment for title insurance] in the performance of its duties" and Talon

"shall have no responsibility or liability for any title defects or encumbrances which are

       3 Interne   quotation marks omitted.

                                              12
No. 75097-6-1/13

not disclosed in the [preliminary commitment for title insurance]." The Escrow

Instructions state, in pertinent part:

       Title Insurance. The closing agent is instructed to obtain and forward to
       the parties a preliminary commitment for title insurance on the property. . .
       (referred to herein as "the title report"). The closinp agent is authorized to
       rely on the title report in the performance of its duties and shall have no
       responsibility or liability for any title defects or encumbrances which are
       not disclosed in the title report.[4]

       The undisputed record establishes the preliminary commitment for title insurance

does not include the 1993 restrictive covenants or SHD letter. Under the plain and

unambiguous terms of the Escrow Instructions, Talon had "no responsibility or liability

for any title defects or encumbrances which are not disclosed in the title report."

       The Eleazers also argue the "Title Contingency Addendum" in the REPSA

imposed a duty on Talon to search for the 1993 recorded documents. The Title

Contingency Addendum states, in pertinent part:

       Title Contingency. This Agreement is subject to Buyer's review of a
       preliminary commitment for title insurance, together with easements,
       covenants, conditions and restrictions of record, which are to be obtained
       by Buyer, to determine they are consistent with Buyer's intended use of
       the Property.[61

The Title Contingency Addendum imposes no duty on Talon to search for and disclose

recorded documents. The addendum clearly states the listed encumbrances "are to be

obtained by Buyer."6 And because the undisputed record also shows neither the

Eleazers nor Nordstrom provided the Form 34 addendum to Talon, there was no duty to

       4  Emphasis added.
       5  Emphasis added.
        6(Emphasis added.) The Eleazers argue Talon violated its fiduciary duty because it did not
include the restrictive covenants and 1993 SHD letter on the statutory warranty deed executed by
Nordstrom. But nothing in the Escrow Instructions directs Talon to do so.

                                                  13
No. 75097-6-1/14

obtain verification of the status of the Form 34 easement agreement.7

       The court did not err in dismissing the claim against Talon for breach of contract

or fiduciary duty.

Dismissal of Claims against First American

       The Eleazers assert the court erred in concluding their claims are not covered by

the Title Policy. First American contends the undisputed record establishes coverage is

barred by the policy exclusion for risks allowed or agreed to by the insured.

       "The party seeking to establish coverage bears the initial burden of proving

coverage under the policy has been triggered." Pleasant v. Regence BlueShield, 181
Wash. App. 252, 261, 325 P.3d 237(2014); Diamaco, Inc. v. Aetna Cas. & Sur. Co., 97
Wash. App. 335, 337, 983 P.2d 707(1999). "The insurer bears the burden of establishing

an exclusion to coverage." Pleasant, 181 Wash. App. 262; Diamaco, 97 Wash. App. at 337.

"We construe any ambiguity in an exclusion against the insurer." Pleasant, 181 Wn.

App. 262; McDonald v. State Farm Fire & Cas. Co., 119 Wash. 2d 724, 733, 837 P.2d
1000 (1992).

       The Title Policy insures "against actual loss, including any costs, attorneys'fees

and expenses provided under this Policy, resulting from the Covered Risks." The Policy

states, in pertinent part:

       OWNER'S COVERAGE STATEMENT
       This Policy insures You against actual loss, including any costs, attorneys'
       fees and expenses provided under this Policy, resulting from the Covered

       7 The  Escrow Instructions state, in pertinent part:
       Verification or Existing Encumbrances. The closing agent is instructed to request a
       written statement from the holder of each existing encumbrances on the property,
       verifying its status, terms, balance owing and, if it will not be removed at closing, the
       requirements that must be met to obtain a waiver of any due-on-sale provision. The
       closing agent is authorized to rely upon such written statements in the performance of its
       duties, without liability or responsibility for their accuracy or completeness.

                                                   14
No. 75097-6-1/15

       Risks set forth below, if the Land is an improved residential lot on which
       there is located a one-to-four family residence and each Insured named in
       Schedule A is a Natural Person.

       The policy lists a number of "Covered Risks" including "Someone else has a right

to limit Your use of the Land,""Someone else has an encumbrance on Your Title," and

"Your Title is unmarketable."8

       First American asserts the Eleazers cannot show an actual loss resulting from a

covered risk. The Eleazers argue there are material issues of fact on actual loss and

coverage. Even if there are questions of fact on actual loss, the undisputed record

establishes coverage is barred under the exclusion for risks allowed or agreed to by the

insured. Exclusion 4(a) of the Title Policy states, in pertinent part:

      EXCLUSIONS
      ... You are not insured against loss, costs, attorneys'fees, and expenses
      resulting from:

       4. Risks:
           a. that are created, allowed, or agreed to by You, whether or not they
              appear in the Public Records.

       There is no dispute the Eleazers knew the Bush House OSS was located in the

front yard before they purchased the property in 2007. There is no dispute the Eleazers

       8 Thepolicy states, in pertinent part:
       COVERED RISKS
       The Covered Risks are:

       5. Someone else has a right to limit Your use of the Land.

       9. Someone else has an encumbrance on Your Title.

       26. Your Title is unmarketable, which allows someone else to refuse to perform a
       contract to purchase the Land, lease it or make a Mortgage loan on it.

                                                 15
No. 75097-6-1/16

agreed to grant an easement for the OSS but did not do so. Because the Eleazers

allowed or agreed to the risk, exclusion 4(a) bars coverage.9

Dismissal of Bad Faith Claim

       The Eleazers contend the court erred in dismissing their bad faith claim against

First American. Because the exclusion bars coverage, the Eleazers cannot establish

bad faith. See Overton v. Consol. Ins. Co., 145 Wash. 2d 417, 433, 38 P.3d 322(2002)("If

the insurer's denial of coverage is based on a reasonable interpretation of the insurance

policy, there is no action for bad faith.").

Dismissal of IFCA Claim

       The Eleazers assert material issues of fact preclude dismissal of their IFCA

claims. The Eleazers claim First American did not comply with "statutory and regulatory

duties" under IFCA. The Eleazers cannot show First American acted unreasonably in

denying the claim for coverage. See Ainsworth v. Progressive Cas. Ins. Co., 180 Wn.

App. 52, 79, 322 P.3d 6(2014).19 And in a recent case, Perez-Crisantos v. State Farm

Fire and Casualty Co., No. 92267-5, 2017 WL 448991, at *6-*7(Wash. Feb. 2, 2017),

the Washington Supreme Court held that "IFCA does not create an independent cause

of action for regulatory violations."

        9 We reject the argument that the efficient proximate cause rule requires First American to
provide coverage. Because the decision to purchase the property was made after learning about the
OSS and the Eleazers agreed to grant an easement, the efficient proximate cause rule does not apply.
See Graham v. Pub. Emps. Mut. Ins. Co., 98 Wash. 2d 533, 538, 656 P.2d 1077(1983). Further, we need
not address the failure to cooperate provision. But as the undisputed record shows, the Eleazers did not
disclose that they knew about the OSS in 2007 or that they agreed to an easement.
        10 RCW 48.30.015(1) states, in pertinent part:
        Any first party claimant to a policy of insurance who is unreasonably denied a claim for
        coverage or payment of benefits by an insurer may bring an action in the superior court of
        this state to recover the actual damages sustained, together with the costs of the action,
        including reasonable attorneys' fees and litigation costs.

                                                   16
No. 75097-6-1/17

      We affirm summary judgment dismissal of the lawsuit against Talon and First

American.

                                              iskku
WE CONCUR:

                                         17