Court Opinion

ID: 2644368
Source: CourtListenerOpinion
Date Created: 2013-11-27 16:42:36.604076+00
Date Added: 2024-06-11T12:14:05.194144
License: Public Domain

Fl LE
       ltl CLI!RKS OFFICE
IUPREM~ COURT, STATE OF WAS1 rNm11

     DATE        NOV 2 7 2013

-~-ii~·9

         IN THE SUPREME COURT OF THE STATE OF WASHINGTON

     INTERNATIONAL MARINE
     UNDERWRITERS, a division of One
     Beacon America Insurance Company,                No. 87231-7
     a Massachusetts Insurance Company,
                                                           En Bane
                                     Respondent,
                 v.                                Filed     NOV 2 7 2013

     ABCD MARINE, LLC, a
     Washington LLC; ABCD MARINE,
     a Washington partnership,

                                     Defendants,
                 and

     ALBERT BOOGAARD, an
     individual domiciled in Washington,

                                     Petitioner,

                 v.

     ALLIANCE INSURANCE CORP.,
     a/k/a ALLIANCE INSURANCE,
     INC.,
                       Defendant.
No. 87231-7

      J.M. JOHNSON, J.-Albert Boogaard argues that the comprehensive

marine liability insurance policy he purchased from International Marine

Underwriters (IMU) for his general partnership, ABCD Marine, covers the

bodily injuries he suffered while working as an independent contractor for

Northland Services Inc. (NSI). Specifically, Boogaard claims that even as a

general partner he qualifies and is covered as a third party under the "insured

contract" provision of the policy. IMU contends that as a general partner

and an insured, Boogaard is not a third party under the insured contract

provision, so there is no coverage.

      We affirm summary judgment in favor of IMU. As a general partner,

Boogaard does not qualify as a third party under the "insured contract"

provision in accordance with Washington partnership law.

                      FACTS AND PROCEDURAL HISTORY

       At the time pertinent to this case, Boogaard was one of two partners in

ABCD, a Washington general partnership. Boogaard formed ABCD by oral

agreement with Wes Dahl in 2000 for the purpose of providing marine

welding services.    Boogaard and Dahl were both welders and did the

majority of their work as independent contractors for the Northland family

of companies at Terminalll5 on the Duwamish River in Seattle. Boogaard

                                       2
No. 87231-7

was the senior partner and took the responsibility on himself to secure

insurance and handle all of the partnership's other administrative paperwork.

      In August 2001, the supervisor for barge maintenance and repair at

Terminal 115 sent the contractors working at the terminal a letter in which

he informed them that they would need to provide proof of general liability

coverage in the amount of $1,000,000 in order to continue to work at the

terminal. Clerk's Papers (CP) at 328. The required proof was a certificate

of insurance that in addition to stating the coverage details, had to name and

expressly add Naknek Barge Lines LLC (Naknek) and Northland Holdings

Inc. (Northland) as additional insureds. ld. In order to comply with this

requirement, Boogaard turned to ABCD's insurance broker, Alliance

Insurance Corporation.        Boogaard took the supervisor's letter directly to

Alliance and requested insurance that complied with its requirements.

Alliance purchased a policy on ABCD' s behalf and issued a certificate

reflecting aggregate coverage of $1,000,000 and Naknek and Northland as

additional insureds. CP at 330. Alliance issued a similar certificate for the

2002-2003 policy period. 1 CP at 332. No endorsements securing Naknek

and Northland's status as additional insureds were ever issued. The policy

1
 From the record it does not appear that any certificates were issued for the 2003-2004 or
2004-2005 policy periods.

                                            3
No. 87231-7

included an exclusion for contractually assumed liability but had an

exception to that exclusion for "insured contracts": contracts in which the

insured "assume[s] the tort liability of another party to pay for 'bodily

injury' or 'property damage' to a third person or organization." CP at 136.

      In September 2004, after Naknek was acquired by a Northland entity,

the terminal supervisor informed the contractors that they would need to sign

a new agreement (Access Agreement) with NSI in order to continue work at

Termi~al   115. The Access Agreement required ABCD to indemnify NSI for

"all bodily and personal injuries to all persons arising out of or resulting

from its operations and/or use of the [NSI] '[p]roperty, including bodily and

personal injuries to its own employees, except if caused by the sole

intentional negligence of NSI." CP at 275. The Access Agreement also

required ABCD to maintain a general liability policy for $1,000,000 that

included an additional insured endorsement naming NSI as an additional

insured. !d.

       On September 29, 2004, Boogaard was presented with the Access

Agreement. CP at 179-80, 274. Boogaard gave it a five-minute review and

then personally filled it out and signed it in his capacity as "Senior Partner."

!d. Boogaard did not know what an "additional insured" was and thought

                                       4
No. 87231-7

the insurance he had in place at the time was sufficient.                   CP at 183.

Boogaard did not contact his broker, Alliance, to see if he had to modify his

insurance in any way to comply with the requirements detailed in the Access

Agreement. Id. Boogaard did not take the Access Agreement to a lawyer or

anyone else to see if it required additional insurance. 2 CP at 184.

         In October 2004, Boogaard was seriously injured while on the job at

Terminal 115 by an NSI employee operating a forklift. 3'           4
                                                                       As a result of his

injuries, Boogaard incurred approximately $92,000 in medical bills, suffered

permanent injuries, and was out of work for approximately one year.

         In November 2004, Boogaard and Dahl converted ABCD into a

limited liability company (LLC).            As a result of the accident, Boogaard

realized that as a general partnership he and Dahl were exposed to what he

deemed to be an unacceptable amount of personal liability. CP at 170.

         In December 2004, acting on behalf of ABCD LLC, Alliance

contacted IMU and asked that IMU change ABCD's policy to reflect its new

2
  Boogaard did not inform IMU that he had signed the Access Agreement until after his
accident. CP at 75.
3
 There is some confusion in the record as to the exact date of Boogaard's accident. The
exact date is ultimately immaterial as it is not in dispute that the injury took place in
October 2004 and consequently, within the 2004-2005 policy period.
4
    At the time of the accident, ABCD was doing contract work for NSI, a Northland entity.

                                             5
No. 87231-7

LLC status, issue a certificate of insurance naming NSI as an additional

insured,   and   issue   additional   insured   and waiver of subrogation

endorsements. For an additional $250 premium, IMU changed the policy

and issued the endorsements as requested effective prospectively starting

December 1, 2004.        Alliance issued the accompanying certificate on

December 10, 2004.

      In November 2006, Boogaard filed a lawsuit in King County Superior

Court against NSI and the forklift operator.            NSI answered and

counterclaimed alleging, among other things, breach of the Access

Agreement.       In March 2007, Boogaard tendered defense of the

counterclaims to IMU.      IMU accepted the tender under a reservation of

rights and appointed additional counsel to work with Boogaard's primary

counsel to defend against NSI's counterclaims. In March 2008, the trial

court granted NSI summary judgment, ordering Boogaard to indemnify NSI

pursuant to the Access Agreement for any amounts he may recover against

NSI in the action, including attorney fees and costs. The trial court also

found that Boogaard breached the Access Agreement by failing to procure

insurance covering NSI.

                                        6
No. 87231-7

       After the trial court issued the summary judgment order, Boogaard's

primary counsel asked IMU if it would be willing to continue to prosecute

the appeal of the summary judgment order and if IMU would be covering

any of the damages the court awarded NSI. IMU responded by letter on

March 20, 2008, that it would continue to provide counsel for an appeal but

that it would not agree to cover the damages the court awarded NSI, as IMU

had determined that the policy did not cover NSI.

       On April 10, 2008, during mediation, NSI and Boogaard reached a

settlement agreement in which Boogaard was awarded $600,000 and NSI

was awarded $712,022.01 (indemnification for the amount of damages

awarded to Boogaard and NSI's attorney fees and costs). CP at 595-96, 740-

743.   NSI also agreed to pay Boogaard an additional $50,000 in partial

satisfaction of the $600,000 judgment against NSI.       CP at 596, 743.

Boogaard agreed not to execute or enforce his judgment against NSI and to

only seek recovery from IMU. CP at 742. The parties further agreed that

resolution of the insurance claims, regardless of the outcome of that

litigation, would be deemed as satisfaction of the judgments each party had

against the other. !d.

                                      7
No. 87231-7

      On April 28, 2008, IMU filed a complaint for declaratory relief,

seeking a judicial determination that there is no coverage under the IMU

policy for the NSI counterclaims. In his answer and counterclaim, Boogaard

argued that IMU' s denial was in bad faith, that there was coverage under the

policy for the counterclaims, or in the alternative, that IMU should be

estopped from denying coverage and that Boogaard should be awarded

treble damages and attorney fees. 5

      In August 2008, the trial court determined that the settlement between

Boogaard and NSI was reasonable. In its reasonableness order, the court

specifically found the settlement reasonable as to IMU because not only was

IMU involved in the defense of the counterclaims, it was also a party to the

mediation where the settlement was negotiated and was given both a notice

of the reasonableness hearing and an opportunity to participate. 6

5
  Boogaard was also allowed to assert a third party claim for professional negligence
against his insurance broker, Alliance. The trial court granted Alliance's motion for
summary judgment and dismissed Boogaard's claims against it with prejudice. At the
Court of Appeals, Boogaard settled with Alliance and dropped his appeal of the trial
court's order granting Alliance summary judgment. Consequently, Boogaard's claims
against Alliance are not before us.
6
  Importantly, NSI moved the trial court in the declaratory action between IMU and
Boogaard for an order dismissing IMU's claims against it as NSI had assigned any right
of recovery it may have had against IMU to Boogaard. IMU and NSI later stipulated that
the claims between them had been fully resolved and the trial court ordered the claims
against NSI dismissed with prejudice and without attorney fees and costs.

                                          8
No. 87231-7

         In November 2009, IMU moved for partial summary judgment in the

declaratory action, asking the court to determine that as a matter of law the

IMU comprehensive marine liability policy does not cover the damages

resulting from the NSI counterclaims.               IMU argued that the policy was

intended to cover ABCD and Boogaard's liability to others for the partners'

negligence. IMU argues that this intent is manifested by the policy's listing

ABCD Marine as the "named insured" and Boogaard as an "insured." CP at

110, 125.         IMU acknowledged that there was an "insured contract"

exception that would cover the torts of others which cause damage to "third

persons or organizations." Id. IMU argued, however, that Boogaard does

not qualify as a "third person," under the terms of the policy. 7

         In January 2010, the trial court granted IMU's motion for partial

summary judgment, ruling that as a matter of law, the damages arising out of

the forklift incident are not covered by the IMU policy.                   The trial court

subsequently denied Boogaard's motion for reconsideration. 8

7
    The insurance policy in its entirety can be found at pages 110-145 of the Clerk's Papers.
8
  In April 2010, the trial court denied IMU's motion for partial summary judgment,
declining to dismiss ABCD and Boogaard's bad faith counterclaims. In September 2010,
the trial court dismissed all remaining claims, including those for bad faith, without
prejudice and without costs pursuant to a stipulation by the parties.

                                               9
No. 87231-7

      Boogaard and ABCD appealed the trial court's summary judgment

order and the Court of Appeals affirmed the trial court in a 3-0 decision,

holding that Boogaard is not a "third person." Int'l Marine Underwriters v.

ABCD Marine, LLC, 165 Wash. App. 223, 232, 267 P.3d 479 (2011).

Boogaard and ABCD petitioned for discretionary review, which was

granted.

                           STANDARD OF REVIEW

      We review summary judgment decisions de novo, engaging in the

same inquiry as the trial court. Michak v. Transnation Title Ins. Co., 148
Wash. 2d 788, 794-95, 64 P.3d 22 (2003). Summary judgment is proper only

where there is no genuine issue of material fact and the moving party is

entitled to judgment as a matter of law. Hubbard v. Spokane County, 146
Wash. 2d 699, 707, 50 P.3d 602 (2002); CR 56( c).

                                 ANALYSIS

A.     Interpretation and Construction

       Interpretation and construction are separate endeavors.       When

interpreting a contract a court is '" giv[ing] meaning to the symbols of

expression used by another person."' Berg v. Hudesman, 115 Wash. 2d 657,

663, 801 P.2d 222 (1990) (quoting 3 ARTHUR LINTON CORBIN, CORBIN ON

                                     10
No. 87231-7

CONTRACTS § 532, at 2 (1960)). In contrast, when construing a contract a

court is engaging in the "'process by which legal consequences are made to

follow from the terms of the contract and its more or less immediate context,

and from a legal policy or policies that are applicable to the situation."' !d.

(quoting Edwin W. Patterson, The Interpretation and Construction of

Contracts, 64 COLUM. L. REv. 833, 835 (1964)).

       1.     Interpretation

      During interpretation, a court's pnmary goal is to ascertain the

parties' intent at the time they executed the contract. Berg, 115 Wash. 2d at

663. "[E]xtrinsic evidence is admissible as ... an aid in ascertaining the

parties' intent."   !d. at 667.   The court, however, must distinguish the

parties' intent at the time of formation from the interpretations the parties are

advocating at the time of the litigation. I d. at 669 (explaining that extrinsic

evidence should not be used to import into a contract an intent that is not

expressed in the contract itself). Contract interpretation is a matter of law.

Wash. Pub. Uti!. Dists. ' Utils. Sys. v. Pub. Util. Dist. No. 1 of Clallam

County, 112 Wash. 2d 1, 10,771 P.2d 701 (1989).

                                       11
No. 87231-7

      When interpreting insurance contracts,             courts use the        same

interpretive   techniques    employed      on    other   commercial      contracts. 9

McDonald Indus., Inc. v. Rollins Leasing Corp., 95 Wash. 2d 909, 912 n.2, 631
P.2d 947 (1981). For example, a court may look to the structure of the

policy as "an important objective source of meaning and intent." Findlay v.

United Pac. Ins. Co., 129 Wash. 2d 368, 377, 917 P.2d 116 (1996). A court

will also consider whether there was another type of insurance that would

have covered the loss. See Lynott v. Nat'l Union Fire Ins. Co. of Pittsburgh,

123 Wash. 2d 678, 688, 871 P.2d 146 (1994) (explaining that courts consider

the availability of an alternative and/or more specific endorsement to be

"highly significant"). It is possible, however, that there may be no extrinsic

evidence to review when an insurer issues a standard policy. Queen City

Farms, Inc. v. Cent. Nat'lins. Co. of Omaha, 126 Wash. 2d 50, 82, 882 P.2d
703, 891 P.2d 718 (1994) (recognizing that sometimes language in standard

policies does not involve mutual negotiations between the insurers and the

insureds).

9
  Washington courts have never attempted to formulate a definitive list of aids to
interpretation, but there are 10 maxims that are commonly used. See Berg, 115 Wash. 2d at
665; THOMAS V. HARRIS, WASHINGTON INSURANCE LAW §§ 6.10-6.12 (3d ed. 2010)
(containing a complete list adapted to insurance contracts).

                                         12
No. 87231-7

      If during interpretation a court has determined that an essential

provision     is   ambiguous   (susceptible   to   two   different   reasonable

interpretations), the court must attempt to resolve that ambiguity. Boeing

Airplane Co. v. Firemen's Fund Ins. Indem. Co., 44 Wash. 2d 488, 496, 268
P.2d 654 (1954), overruled on other grounds by Berg v. Hudesman, 115
Wash. 2d 657, 801 P.2d 222 (1990); see Farmers Ins. Co. of Wash. v. Grelis,

43 Wash. App. 475, 477, 718 P.2d 812 (1986) (recognizing that determining

whether a policy is ambiguous is a matter of law). "Apparent" ambiguities

can sometimes be resolved by reading the policy as a whole. Queen City

Farms, 126 Wash. 2d at 74; see also Boeing, 44 Wash. 2d at 496 ("[I]t is the duty

of the court to search out the intent of the parties by viewing the contract as

a whole and considering all of the circumstances surrounding the

transaction."); Kent Farms, Inc. v. Zurich Ins. Co., 140 Wash. 2d 396, 400, 998

P .2d 292 (2000) (explaining that courts will interpret policy exclusions in

the context of the whole policy). A court, however, may not interpret a

policy in such a way that it creates nonexistent ambiguities that result in the

policy being construed in favor of the insured. See, e.g., West Am. Ins. Co.

v. State Farm Mut. Auto. Ins. Co., 80 Wash. 2d 38, 44, 491 P.2d 641 (1971);

McDonald v. State Farm Fire & Cas. Co., 119 Wash. 2d 724, 734, 837 P.2d
13
No. 87231-7

1000 (1992) (recognizing that just because the policy language 1s

complicated or confusing does not mean the prov1s10n m question 1s

ambiguous).

      In addition, if there are any undefined terms they will be given their

"plain, ordinary, and popular meaning .... " Queen City Farms, 126 Wash. 2d

at 66; see also Lynott, 123 Wash. 2d at 691 (holding that undefined

exclusionary terms are given their plain, ordinary, and popular meaning).

To determine the plain meaning of an undefined term, courts often refer to

standard English dictionaries.     Queen City Farms, 126 Wash. 2d at 77

(referring specifically to Webster's Third New International Dictionary

(1981)); see Spratt v. Crusader Ins. Co., 109 Wash. App. 944, 949-50, 37 P.3d
1269 (2002) (holding that an expert's affidavit could not be a stand-in for a

dictionary definition because it is the role of the court to determine how the

average person would understand the policy). If a standard dictionary is not

clear, we can lo.olc to the common law or specialty insurance and legal

dictionaries. See Lynott, 123 Wash. 2d at 691-92. Consequently, the fact that a

term is undefined does not automatically render a provision ambiguous.

      Boogaard claims that the parties always intended for the policy to

cover his injuries. Boogaard argues this is because it was the partnership

                                      14
No. 87231-7

that signed the Access Agreement, not the partners in their individual

capacity, so he is a third party as to NSI and clearly within the scope of the

"insured contract" exception. In response, IMU claims that it was clear from

the start that the intent of this comprehensive marine liability insurance

policy was to protect ABCD, Boogaard, and Dahl from any liability that

might result if the partners/partnership injured another party. IMU argues

that nowhere in the policy, or the parties' interaction leading up to

execution, did either party express an expectation or desire that the policy

cover damages stemming from personal injury to the partners themselves.

      As explained above, we must look past these present claims of intent

in our attempt to ascertain the parties' intent at the time of execution. This

was a standard industry policy, so there was not any negotiation before

execution. Boogaard, however, did express his purpose for obtaining the

insurance when he presented Alliance with the 2001 terminal supervisor's

letter that spelled out Northland and Naknek's new insurance requirements

for its contractors.   According to his deposition testimony, Boogaard

presented the terminal supervisor's letter to his broker at Alliance and told

                                      15
No. 87231-7

her to "[t]ake care of it" so he could get back to work. 1        ° CP at 184.      The

letter required all contractors to obtain $1,000,000 in general liability

coverage and provide a certificate of insurance to the terminal supervisor

that, among other things, named and waived Naknek and Northland. CP at

328.

       Thus, Boogaard intended to obtain the coverage spelled out in the

terminal supervisor's letter. The letter shows it was possible that his "intent"

was to cover his own personal injuries to the extent that he was injured by an

employee of Naknek or Northland, as these entities should have been

additional insureds on his policy. 11 Boogaard, however, did not present the

Access Agreement to Alliance either before or after he signed it.

Consequently, his intent when renewing the policy for the relevant 2004-

2005 term matches his intent at the time he initially acquired the insurance.

Thus, he likely did not intend to be covered for his own personal injuries if

he was injured by an employee of NSI. Otherwise, Boogaard made no other

expression to show it was his intent that he be covered as if the policy were

10
  It is unclear whether Boogaard knew exactly what type of insurance he was purchasing
or why Northland and Naknek were requiring that he purchase it.
11
  It is undisputed that ifNSI had been an additional insured under the IMU policy for the
2004-2005 policy period, like it was contractually supposed to be, Boogaard's damages
would have been covered.

                                           16
No. 87231-7

for health and/or disability insurance.     Our inquiry into intent, however,

should not end there. Next, we should look at the policy as a whole.

      The numerous exclusions relating to liability for injuries to employees

or the insureds themselves make it clear that the predominant purpose of this

policy was to cover the insured's liability to other entities/persons. The

policy covers the insured for (1) bodily injury/property damage liability the

insured becomes legally obligated to pay, (2) personal and advertising injury

liability the insured becomes legally obligated to pay, and (3) certain

medical payments the insured might have to pay. CP at 112-13. Among

other exclusions, the policy does not cover the insured for (1) liability as an

employer or in any other capacity to its employees; (2) liability to the

spouse, child, dependent, etc., of any of its employees arising out of

bodily/personal injury to that employee; (3) liability to any other party

arising out of bodily/personal injury to any employees, including for

indemnity or contribution in tort or contract and any liability of other parties

assumed under contract; (4) liability of any employee with respect to

bodily/personal injury to another employee; (5) any liability directors,

officer, partners, principals, employees or stockholders may have to any

employee; (6) any medical expenses for any insured, person hired to do

                                       17
No. 87231-7

work for any insured, or any tenant of any insured if the benefits for the

bodily injury are payable or must be provided under workers' compensation

or disability benefits law or other similar law; or (7) for liability an

employee incurs for inflicting bodily/personal injury on the insured or its

partners or members. CP at 114-25. Given the exclusions, if an average

person were to review this policy, it is unlikely they would conclude that it

was intended to cover an insured or an insured's employee for their own

personal injuries or disabilities. 12

       Significantly, Boogaard and Dahl were aware of other types of

insurance that clearly would have covered their work-related personal

mJunes. CP at 157-58. The fact that Boogaard and Dahl did not purchase

labor & industries, longshoreman, or harbor workers' insurance would

strengthen the argument that Boogaard thought his personal injuries were

covered by the IMU policy if it were not for the fact that Boogaard said the

principal reason they did not acquire those policies was that they were told

they did not need them in order to work at the terminal. Id. Boogaard's

decision to not buy workers' compensation insurance had more to do with

12
   It is significant that IMU required ABCD to pay an additional premium to place NSI on
the policy as an additional insured. By making NSI an additional insured, injuries like
Boogaard's would now be covered, exposing the insurer to additional risk.

                                          18
No. 87231-7

the fact that he thought it was not a prerequisite to working at the terminal
                                                               13 14
and not because he thought the IMU policy covered him.           '

        Finally, we must consider the fact that "third party" is not defined in

the insured contract exception or anywhere else in the policy. The ultimate

issue we are to decide is whether or not Boogaard qualifies as a third party

under the "insured contract" exception. We give undefined terms their plain,

ordinary, and popular meaning. Queen City Farms, 126 Wash. 2d at 66. A

standard English dictionary defines "third party" as "[A] person other than

the principals." WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY 2378

(2002). There is no indication IMU or ABCD/Boogaard intended any other

definition for "third party." Thus, a person/entity is a third party as the term

is used in the "insured contract" exception if he/she/it is not a principal/party

to the indemnity agreement (Access Agreement).              There is no ambiguity

here.

13
   The Access Agreement required ABCD to obtain such insurance. CP at 275. ABCD
failed to do so. CP at 157. In fact, after the accident, Dahl went out and obtained L&I
insurance in order to comply with the requirement. CP at 158.
14
   In his deposition testimony, Boogaard claims he thought he was covered because he
looked at the policy, saw the $1,000,000 figure, and assumed that that would cover him.
CP at 158. He further stated that he thought he had workers' compensation insurance
through the policy. Id. The policy has no provision providing for workers' compensation
coverage or anything even resembling it. An insured has an affirmative duty to read his
or her policy and to know its terms and conditions. Dombrosky v. Farmers Ins. Co. of
Wash., 84 Wash. App. 245, 257, 928 P.2d 1127 (1996).

                                          19
No. 87231-7

       2.     Construction

      After interpreting an insurance policy, the court must construe it, i.e.,

determine its legal effect. See Berg, 115 Wash. 2d at 663. If a court is unable

to resolve an ambiguity through interpretation, it must construe the

ambiguity in favor of the insured. Queen City Farms, 126 Wash. 2d at 68; see

also George v. Farmer Ins. Co. of Wash., 106 Wash. App. 430, 439, 23 P.3d
552 (2001) ("Exclusionary clauses are narrowly construed for the purpose of

providing maximum coverage for the insured."). Consequently, if insurers

want exclusions upheld, they have the burden of drafting them in "clear" and

"unequivocal" terms. 15 Am. Star Ins. Co. v. Grice, 121 Wash. 2d 869, 875, 854
P.2d 622 (1993), supplemented by 123 Wash. 2d 131, 865 P.2d 507 (1994). A

court, however, is not at liberty to revise a contract under the theory of

construing it. Evans v. Metro. Life Ins. Co., 26 Wash. 2d 594, 604, 174 P.2d
961 (1946). Here, it is clear that the parties intended "third party" to mean

those persons or entities that are not principals/parties to the Access
15
   We will uphold exclusions that rationally limit the risks of the insurer. Kelly v. Aetna
Cas. & Sur. Co., 100 Wash. 2d 401, 408, 670 P.2d 267 (1983) ("'An insurer is free to limit
its risks by excluding coverage when the nature of its risk is altered by factors not
contemplated by it in computing premiums .... "' (quoting Mutual of Enumclaw Ins. Co.
v. Wiscomb, 97 Wash. 2d 203, 209, 643 P.2d 441 (1982))). "Many insureds must purchase
several different coverages to protect their financial interests ... [and] cannot sell or
purchase dovetailed coverages unless insurable risks that are included within one
coverage can be cleanly and predictably excluded from another coverage." THOMAS v.
HARRIS, WASHINGTON INSURANCE LAW§ 6.10, at 6-34 (3d ed. 2010).

                                            20
No. 87231-7

Agreement. Accordingly, we must interpret our partnership law to decide if

Boogaard, as a partner in a general partnership, was a principal/party to the

Access Agreement. 16

B.    Revised Uniform Partnership Act and General Partnerships

      A "partnership" is an "association of two or more persons to carry on

as co-owners a business for profit .... " RCW 25.05.005(6). The legislature

enacted the Revised Uniform Partnership Act (RUP A) in 1998 to replace the

Uniform Partnership Act (UPA), the law governing partnerships in this state

since 1945. LAWS OF 1998, ch. 103 (RUPA); LAWS OF 1945, ch. 137 (UPA).

The RUPA differs from the UPA in a number of respects.

       Most importantly for this case, the RUP A places an '"increased

emphasis on the entity theory [of partnerships] as the dominant model."'

ROBERT W. HILLMAN ET AL., THE REVISED UNIFORM PARTNERSHIP ACT

SECTION 201, at 1 (Westlaw Sept. 2012) (quoting UNIF. P'SHIP ACT § 201

cmt., 6 U.L.A. 91 (1997)). RCW 25.05.050 (section 201(a)) states that "[a]

16
  Boogaard could be a first party to the insurance contract as an "insured" and still be a
"third party" under the "insured contract" exception to the relationship between ABCD
and NSI if our partnership law allowed that result. See discussion infra Part B. The
policy defines "you" and "your" as the named insured on the declaration page. CP at
112. The named insured is ABCD. CP at 110. The policy also defines an "insured,"
which is what Boogaard is, as a partner. CP at 112. Thus, the "you" referred to in the
definition of"insured contract" is ABCD, not Boogaard.

                                           21
No. 87231-7

partnership is an entity distinct from its partners." The entity theory is one

of the two main theories governing the law's treatment of partnerships. The

other, aggregate theory, was traditionally applied in the common law and

posits that partnerships are "nothing more than a conduit for a collection of

individuals." HILLMAN ET AL., supra, author's cmt. 1. Under the aggregate

theory, the partnership is not a separate legal personality. Id. The partners

own an undivided share of partnership assets and conduct a pro rata share of

partnership business. Id. In contrast, under the entity theory, the partnership

is "a distinct entity interposed between partners and the partnership assets."

Id.   Each partner's interest is a "separate bundle of rights and liabilities

associated with the partner's participation in the organization, analogous to

the interest of a corporate shareholder in shares of stock." Id. "[T]he U.P.A.

adopted an entity theory for some purposes, [but] the aggregate theory

predominated." I d. The reverse is true for the RUP A. I d.

       The RUP A's emphasis on the entity theory was intended to resolve

some of the issues stemming from the aggregate theory. Id. For example,

under the UPA if someone was added to or withdrew from a partnership, any

title had to be conveyed by deed from the "'old"' partnership to the "'new"'

partnership. ld. (quoting UNIF. P'SHIP ACT§ 201 cmt., 6 U.L.A. 91). Under

                                      22
No. 87231-7

the RUP A, there is not necessarily a "'new"' partnership just because the

membership changes. 17'     18

      In sum, the RUP A adopted the entity theory as the dominant model

"for three basic reasons: (1) to add theoretical stability to partnerships that

have contracted for stability; (2) to reflect the extent to which partnerships

are treated as entities in the world of commerce; and (3) to add simplicity of

analysis." Id. author's cmt. 2. The RUP A, however, did not do away with

the aggregate theory. Id. To the contrary, the official comment makes it

clear that the change is one of emphasis only. I d. The RUP A continues to

use the aggregate approach for some purposes. Id.

       Of special significance to this case, the aggregate theory continues to

govern the personal liability of partners. 19 Id.; see also Gildon v. Simon

17
   In other words, under RCW 25.05.200 (section 501), the partner's only transferable
interest is his or her share of the profits and losses and his or her right to receive
distributions.
18
   The partners would have had to have expressed their intent that the partnership
continue after a change in membership. HILLMAN ET AL., supra, author's cmt. 1. Other
examples of how RUPA' s emphasis on the entity theory has changed partnership law
include the fact that RUP A enables a partnership to sue and be sued in the name of the
partnership and the fact that partners who embezzle from the partnership are now subject
to the same criminal penalties as shareholders who embezzle from corporations. Id.
author's cmt. 5; see RCW 25.05.130 (section 307(a)).
19
   Fiduciary duties for partners also reflect the aggregate approach. RCW 25.05.165
(section 404(a)) states that a partner owes fiduciary duties "to the partnership and the
other partners." In another example, federal courts treat the citizenship of a partnership
as being composed of the citizenship of each individual partner when determining

                                           23
No. 87231-7

Prop. Grp., Inc., 158 Wash. 2d 483, 500, 145 P.3d 1196 (2006) (noting that the

RUP A did not fundamentally alter the nature of liability for partners and

partnerships).   RCW 25.05.125 (section 306) holds partners jointly and

severally liable for all of the partnership's obligations.          Under RCW

25.05.120 (section 305), a partnership is liable for injury or loss caused as

the result "of a partner acting in the ordinary course of the partnership

business . . . . "   This is because, under RCW 25.05.100 (section 301),

"[e]ach partner is an agent of the partnership for the purpose of its business"

so when a partner acts to "carry[] on in the ordinary course [of] the

partnership business . . . [he or she] binds the partnership . . . ." See also

RCW 25.05.150(6) (section 401(f)) ("Each partner has equal rights in the

management and conduct of the partnership business."). Consequently, a

single partner, acting in the ordinary business of the partnership, binds the

entire partnership and subjects each partner to personal liability, joint and

several, for the obligation incurred. While free to modify many of RUP A's

provisions by agreement, partnerships are not permitted to modify their joint

and several liability to third persons.         RCW 25.05.015(2)G) (section

103(b)(10)); see also Gildon, 158 Wash. 2d at 500.           This result is in stark

diversity for jurisdiction. E.g., Johnson v. Columbia Props. Anchorage, LP, 437 F.3d
895, 899 (9th Cir. 2006).

                                        24
No. 87231-7

contrast to the effect an executive's action has on the liability of the

shareholders in a corporation or a manager's action has on the liability of an

LLC's members.         With a corporation or an LLC there is typically no

personal liability beyond the individual shareholder or member's stake in the

entity.

          Clearly, our law does not treat ABCD as a distinct entity when it is

time for the obligations it incurred under the Access Agreement to be

honored. RUPA, through its adoption of the aggregate theory for liability,

holds Boogaard and Dahl personally liable. In essence, when ABCD said

that it agreed to indemnify NSI, then Boogaard simultaneously and

automatically agreed to do the same thing. 20 The liability of the partnership

is the liability of the partners and the liability of a partner incurred in the

course of partnership business is the liability of the partnership.                  Each

partner is an agent of the partnership, binding and bound by the partnership.

RCW 25.05.100(1), .125(1).            That is the role the partner accepts upon

joining a partnership. Consequently, both ABCD and Boogaard were parties

to the Access Agreement.

20
  It is true that RUPA usually requires a creditor to first exhaust the partnership's assets
before pursuing the partners' personal assets and that it imposes other specific
requirements relating to judgment execution, but that does not change the fact that a
partner is personally liable. See RCW 25.05.130(4) (section 307).

                                            25
No. 87231-7

      Boogaard brings various cases to our attention in his attempt to avoid

the conclusion that RUP A does not treat a general partnership as a distinct

entity when determining liability.         First, Boogaard points us to Cowan

Systems, Inc. v. Harleysville Mutual Insurance Co., 457 F.3d 368 (4th Cir.

2006). In Cowan, Linens N' Things contracted with Cowan, a corporation,

to provide transportation services. Id. at 371.           As part of the contract,

Cowan agreed to indemnify Linens N' Things for any liability arising out of

its operations.    Id.   Subsequently, one of Cowan's employees, Shaffer,

slipped and fell on ice in a Linen N' Things storage lot. I d. at 370-71.

Cowan's insurance policy, like Boogaard's, was for commercial general

liability and contained a similar exclusion for contractually assumed liability

with an "insured contract" exception identical to the one in the IMU policy.

Id. at 372. The court determined that Shaffer was a third party, as the term

was used in the "insured contract" exception, because he was not a party to

the Linens N' Things and Cowan contract. !d. at 373. Cowan is inapposite

here. Unlike a partner in a general partnership, an employee of a corporation

cannot bind a corporation and does not assume any liability on its behalf? 1

21
   Boogaard also directs us to XL Specialty Insurance Co. v. Kiewit Offshore Services
Ltd., 336 F. Supp. 2d 673 (S.D. Texas 2004), aff'd, 513 F.3d 146 (5th Cir. 2008); Marlin
v. Wetzel County Board of Education, 212 W.Va. 215, 569 S.E.2d 462 (2002); and Hunt

                                          26
No. 87231-7

Partnerships and corporations are fundamentally different entities in the eyes

of the law.

      Next, Boogaard argues that Truck Insurance Exchange v. ERE

Properties, Inc., 119 Wash. App. 582, 81 P.3d 929 (2003) is strong persuasive

authority in his favor.     In Truck, West Star Construction, a corporation,

contracted with BRE Properties, also a corporation, to work as a

subcontractor on an apartment project. Id. at 584. In the contract, West Star

agreed to indemnify BRE against certain risks and to obtain a

comprehensive general liability policy that would cover both itself and BRE.

!d. at 584-85. West Star obtained a policy that had an "insured contract"

provision identical to the provision in the IMU policy. !d. at 587. West Star

made sure BRE was listed as an "additional insured." !d. at 589. Later, a

West Star employee injured by the negligence of a BRE employee sued

BRE. !d. at 585. BRE requested coverage from West Star's insurer and

brought a contribution claim against West Star. !d.            The insurer filed a

declaratory judgment action arguing it did not owe coverage to either party.

!d. The court determined that as an "additional insured" BRE was entitled to

v. Ciminelli-Cowper Co., 93 A.D.3d 1152, 939 N.Y.S.2d 781 (2012), which are almost
factually identical to Cowan in that they involve an indemnification agreement and
insurance policy with an "insured contract" exception. These cases are inapposite,
however, for exactly the same reason as Cowan; they involve employees of corporations.

                                         27
No. 87231-7

coverage under the policy and that the indemnification agreement qualified

as an "insured contract," so Truck must provide coverage for any

indemnification West Star owed BRE. Id. at 592, 595-96.

        Truck, however, does not resolve the issue before us. In Truck, it was

again an employee of a corporation, not a partner in a general partnership,

filing suit. Moreover, unlike ABCD, West Star complied with its contract

by making sure BRE was an "additional insured." The parties agree that if

NSI had been listed as an "additional insured" on the policy, there would

have been coverage.       Furthermore, unlike the insurer in Truck, IMU

concedes that the Access Agreement is an "insured contract." Truck does

nothing to alter our partnership law and is factually distinct from the present

case.

        Finally, Boogaard argues that we must deem him a third party because

to do otherwise would fly in the face of our decision in McDowell v. Austin

Co., 105 Wash. 2d 48, 710 P.2d 192 (1985).          In McDowell, we upheld a

contract that required indemnification of the indemnitee against losses

caused by its own negligence when the indemnitor was also negligent. ld. at

54-55. We said our decision to uphold the contract was consistent with

RCW 4.24.115, which prohibits agreements requiring indemnification for

                                       28
No. 87231-7

the sole negligence of the indemnitee. Id.      It is unclear, however, why

McDowell is relevant here.      The argument that the Access Agreement

violated RCW 4.24.115 and McDowell and is therefore unenforceable would

have been relevant in the underlying action between ABCD, Boogaard, and

NSI, not in this declaratory action involving insurance coverage.

      Boogaard contends that ruling in IMU' s favor would leave contract

workers and small general contractors without a remedy for their jobsite

mJunes. Boogaard also alleges that such a ruling would allow insurers to get

out of providing indemnity coverage under "insured contracts" provisions in

the policies they issue. Boogaard overstates the impact of a ruling against

him by glossing over the fact that his is a unique situation of his own

making.

      First, if Boogaard had honored the contract he had signed with NSI

and made NSI an additional insured, there would be coverage for his

injuries. Most indemnification agreements of the type signed here require

the indemnitor to also acquire comprehensive general liability insurance and

place the indemnitee on the policy as an additional insured. Boogaard' s own

insurance expert acknowledged this fact. See CP at 413 (Decl. Sedillo   ~   7)

("[I]t is common to require that the indemnitee be included as an additional

                                      29
No. 87231-7

insured on the indemnitor's liability insurance.").        Second, Boogaard

consciously decided not to purchase workers' compensation or other similar

insurance, undoubtedly in an effort to keep his costs down. Third, as the

dearth of case law involving "insured contracts" and partnerships shows,

most of the time corporations are involved and employees of corporations

are generally not parties to indemnification agreements.

      In sum, our partnership law is not interacting with our law regarding

indemnification and insurance contracts to create a pit for contract workers

and small general contractors.         If partnerships like ABCD honor their

contracts and/or obtain first-party insurance for their partners, they will be

covered for these types of injuries.

      If we hold that Boogaard was not a party to the Access Agreement, in

essence treating ABCD as if it were a corporation or an LLC, we would

contradict the RUPA and further confuse our state's law governing business

organizations.   A general partnership is assumed as the default business

organization. We require individuals interested in forming limited liability

entities to register with the state as such and comply with additional

requirements in part to provide fair warning to others with whom they

interact. Corporations and partnerships have different corporate structures,

                                         30
No. 87231-7

rules and liabilities that warrant different treatment. Boogaard signed the

Access Agreement and in doing so bound both him and the partnership.

                               CONCLUSION

      The IMU policy was never intended to cover Boogaard' s personal

injuries. Moreover, Washington's partnership law, the RUPA, clearly treats

a general partnership as an aggregation of its partners for purposes of

determining liability.   Consequently, when Boogaard signed the Access

Agreement he was binding both himself and the partnership and cannot be

considered a "third party" to that agreement. We affirm summary judgment

in favor of IMU because, as a matter of law, Boogaard does not qualify as a

third party under the       "insured contract"   exception in the      IMU

comprehensive marine liability insurance policy. Accordingly, Boogaard's

request for attorney fees pursuant to Olympic Steamship Co. v. Centennial

Insurance Co., 117 Wash. 2d 37, 811 P.2d 673 (1991) and RCW 48.30.015 is

denied.

                                    31
No. 87231-7

      WE CONCUR:

                   32
International Marine Underwriters   v. ABCD Marine, LLC

                                        No. 87231-7

       WIGGINS, J. (concurring)-! agree with the result the lead opinion reaches

but would resolve this case much more simply. We must answer a straightforward

question: was Albert Boogaard a "third person" to the indemnification agreement he

signed as a general partner of ABCD Marine, as the term "third person" is used in

ABCD's insurance policy with International Marine Underwriters (IMU)?

       IMU issued an insurance policy covering ABCD and its partners for liability

arising out of bodily injury and property damage. The policy expressly excluded from

coverage bodily injury or property damage "for which the insured is obligated to pay

damages by reason of the assumption of liability in a contract or agreement." Clerk's

Papers at 114. However, the policy excepted from this exclusion any liability

assumed in an '"insured contract,"' id., which the policy defined as "[t]hat part of any

other contract or agreement pertaining to your business . . . under which you

assume the tort liability of another party to pay for 'bodily injury' or 'property damage'

to a third person or organization," id. at 136. The agreement Boogaard signed with
                                                                   "
Northland Services, Inc. (NSI) indemnified NSI for "all bodily and personal injuries to

all persons arising out of or resulting from [ABCD's] operations and/or use of the

[p]roperty .... " /d. at 275. Thus, the indemnification agreement between ABCD and

NSI was clearly a contract or agreement that pertained to ABCD's business. The
No. 87231-7 (Wiggins, J., concurring)

only unresolved issue is whether the ABCD-NSI agreement assumed tort liability to

pay for injury to a third person, that is, was Boogaard, the injured party seeking

redress in tort, a third person to the ABCD-NSI indemnification agreement?

       Unlike the lead opinion, I believe that Cowan Systems, Inc. v. Harleysville

Mutua/Insurance Co., 457 F.3d 368 (4th Cir. 2006), is instructive in determining the

identity of a third party to an indemnification agreement. The importance of Cowan is

not that it involved an employee of a corporation rather than a partner of a general

partnership, see lead opinion at 26-27, but that for the purposes of interpreting an

insured contract clause, courts should look to whether the injured person is a third

person as to the indemnified party. Cowan, 457 F.3d at 373 ("Because Cowan was

assuming Linens N Things' tort liability to Shaffer and because Shaffer was a 'third

person' with respect to Linens N Things, the conditions of contractual coverage were

satisfied." (emphasis added)). Thus, following Cowan's lead, the question that

resolves this case is whether Boogaard, the injured party, was a third person as to

NSI, the indemnified party.

       This question is easily resolved in the negative. When ABCD entered into an

indemnity agreement with NSI, ABCD undertook an obligation to hold NSI harmless

for all injuries and property damage resulting from ABCD's operations on NSI's

property. Because "all partners are liable jointly and severally for all obligations of

the partnership," RCW 25.05.125(1 ), ABC D's indemnification obligation was also

Boogaard's. Boogaard was therefore not a third party as to NSI.

                                          2
No. 87231-7 (Wiggins, J., concurring)

       Because Boogaard did not qualify as a third person, the indemnification

agreement between ABCD and NSI was not an insured contract. Thus, the coverage

exclusion applies to Boogaard's injury and IMU owes ABCD no coverage.

       Because the lead opinion unnecessarily complicates the issues presented by

this case, I join its opinion only insofar as it is consistent with the foregoing analysis.

                                              3
No. 87231-7

      1 concur.

                  4
Int'l Marine Underwriters v. ABCD Marine, LLC
Dissent by C. Johnson, J.

                                     No. 87231-7

      C. JOHNSON, J. (dissenting)-Both the lead opinion and concurrence

misunderstand the nature of the partnership and the effect that a general partner's

joint and several liability has in relationship to agreements entered into on behalf

of the partnership. Because both opinions ignore clear statutory guidance on the

relationship of partners vis-a-vis the partnership and the roles partners take when

acting on behalf of the partnership, I dissent.

      That a partnership is an entity apart from the general partners cannot be

seriously contested. RCW 25.05.050 ("A partnership is an entity distinct from its

partners."). The distinction between partner and partnership is given practical

effect throughout the Revised Uniform Partnership Act (RUPA), chapter 25.05

RCW. A partnership can acquire property and that property "is property of the

partnership and not of the partners individually." RCW 25.05.060. In fact, the

partner is not even considered co-owner of any partnership property. RCW

25.05.200. Similarly, a creditor cannot go after the partners' assets individually

without first liquidating the partnership's assets and must obtain a separate

judgment against the partners. RCW 25.05.130. Nor can a creditor of an individual
Int'l Marine Underwriters v. ABCD Marine, LLC, No. 87231-7
C. Johnson, J., dissenting

partner recover against the partnership for debts incurred outside of the ordinary

course of the partnership's business. RCW 25.05.120. We interpret related statutes

consistently and the lead opinion's attempt to follow the aggregate theory in only

the liability context ignores RUPA's consistent and bright-line treatment of the

partnership as a separate entity.

       The agreement here was apparently between Northland Services Inc. (NSI)

and ABCD Marine with Albert Boogaard acting as an agent of ABCD. That

Boogaard was also a partner is of no import because RUPA states that "[e]ach

partner is an agent of the partnership for the purpose of its business." RCW

25.05.100(1). Thus, the statute directs that Boogaard signed the contract as an

agent but incurred liability as a partner. As discussed above, however, this liability

must first flow through the partnership. Holding that Boogaard's possible joint and

several liability on the agreement makes him a party to the contract ignores this

fact as well as the fact that NSI would have to obtain an entirely separate judgment

against Boogaard to enforce the contract against him personally. 1

       Understanding that any liability that might be incurred by Boogaard

necessarily flows through the partnership and to him as a partner and not as an

       1 As a side note, the lead opinion also appears to ignore the general rule of construction
that when the contract at issue is an insurance policy, ambiguities are resolved in favor of the
policyholder, and exclusionary clauses are construed strictly against the insurer. Eurick v. Pemco
Ins. Co., 108 Wn.2d 338,340,738 P.2d 251 (1987). This certainly would have weighed in
Boogaard's favor.

                                                2
Int'l Marine Underwriters v. ABCD Marine, LLC, No. 87231-7
C. Johnson, J., dissenting

agent of the partnership demonstrates why both the concurrence and lead opinion

are mistaken to distinguish Cowan Systems, Inc. v. Harleysville Mutual Insurance

Co., 457 F.3d 368 (4th Cir. 2006). The lead opinion distinguishes Cowan based on

the fact that there was a corporation there and a partnership here. But this

distinction is only meaningful if the aggregate theory of the partnership is adopted

and, as discussed above, RUP A treats partnerships as entities separate from the

partners. The concurrence rightfully acknowledges that the choice of entity does

not distinguish Cowan, but then goes on to reason that because Boogaard might be

liable as a partner, he was a party to the indemnity agreement and therefore not a

third party. This reasoning is flawed, however, because a partner's liability flows

through the entity and requires a separate judgment. Accordingly, both opinions

misapply Cowan, a case which is factually on point and should guide our

resolution of the current case.

       Because the lead opinion and concurrence's finding that Boogaard was a

party to the indemnity agreement is based on a misunderstanding of how joint and

severalliability might be applied and an erroneous interpretation of RUP A, I

respectfully dissent and would reverse the grant of summary judgment to the

msurer.

                                           3
Int'l Marine Underwriters v. ABCD Marine, LLC, No. 87231-7
C. Johnson, J., dissenting

                                             4