United States District Court, D. Montana, Missoula Division
W. MOLLOY, DISTRICT JUDGE.
case arises from a dispute over a homeowner's insurance
policy. Plaintiffs Tafford and LaRayne Oltz (the
"Oltzes") argue that Defendant Safeco Insurance
Company of America ("Safeco") wrongfully refused to
provide coverage for losses to their home. Safeco rebuts that
the Oltzes' losses are not covered because they were
caused by excluded perils. Safeco has filed a motion for
summary judgment, (Doc. 15), and the matter is ripe for
ruling. Safeco's motion is granted because the undisputed
material facts, viewed in the light most favorable to the
Oltzes, show that Safeco properly denied coverage for the
losses to the Oltzes' home.
following facts are undisputed, (see Fact
Statements, Docs. 17, 24), or viewed in the light most
favorable to the Oltzes, Tolan v. Cotton, 134 S.Ct.
1861, 1863 (2014) (per curiam).
Oltzes own a home at 11 Golf Drive, in Whitefish, Montana,
and since January 13, 2013, have purchased their
homeowner's coverage from Safeco. (Compl., Doc. 4 at 17;
Ans., Doc. 2 at Â¶ 7.) In the summer of 2015, the Oltzes
noticed instability in the deck posts of their home and that
the deck was beginning to pull away from the house.
(Plaintiffs Statement of Disputed Facts, Doc. 24 at ¶
1.) They were at that time insured under Safeco Homeowners
Policy No. OM02493299 (the "Policy"). (Id.
Oltzes contracted with Teksu Rivera of Native, Way, Inc. to
investigate and repair their deck. (Id. at 12.)
Rivera inspected the deck in July and advised the Oltzes to
stop using it. (Id.) After discovering that the area
where the deck attached to the home was rotted, Rivera and
his employees began removing portions of the deck for safety
reasons. (Id.) During the removal, a portion of the
deck collapsed completely. (Id.) Subsequent removal
of the home's siding revealed water damage extending in a
triangular pattern from the roof to the deck. (Id.
at Â¶ 3.) The damage at the level of the deck was roughly 15
feet wide, and the deck had pulled away from the house where
the attachment points were rotted out. (Id.)
Oltzes submitted a claim to Safeco on October 27, 2015.
(Id. at ¶ 4.) Rivera spoke with claims adjuster
Michael Hoover, who agreed to Rivera's request to hire a
civil engineer to investigate the damage. (Doc. 4 at ¶
19; Doc. 2 at ¶ 19.) The Oltzes then hired Paul Wells of
WMW Engineering, Inc., a consulting civil and structural
engineer, to inspect the damage. (Doc. 24 at ¶ 10.)
Wells is a consulting civil and structural engineer.
(Id.) He performed an inspection on October 28,
2015. (Doc. 4 at ¶ 20.) His report, which he provided to
Rivera two days later, concluded that the sheathing and
framing of the northeast wall had suffered "extensive
water damage, " mostly like due to water being routed
"into the area of the roof/wall connection via a heat
cord." (Doc. 24-4 at 1.) Wells' report stated that
an ice dam may have "greatly increased" the amount
of water so routed. (Id.)
October 29, 2015, Safeco sent the Oltzes a Reservation of
Rights letter, informing them that coverage was under
investigation. (Doc. 24 at ¶ 5.) Safeco then hired
Wade Sticht of CASE Forensic Engineering, who conducted an
inspection of the Oltzes' home on November 5, 2015. (Doc.
24 at ¶ 6.) Sticht concluded that the deck most likely
detached because the wood where it was fastened had
"deteriorated, " and suspected, though did not
observe, that "it had been minimally fastened to the
home." (Doc. 17-3 at ¶ 5.) Sticht wrote it was
"more probable than not that the primary cause of the
deterioration of the exterior wall framing and sheathing was
long-term chronic exposure to moisture." (Id.
at Â¶ 6.) Sticht concluded that the "seepage/penetration
of water" occurred "as a result of: the as-built
roof and wall configuration, inadequate weatherproofing,
inadequate flashing at the roof-to-wall interface, and the
absence of adequate flashing at the windows."
(Id. at ¶ 9.)
Oltzes assert that, following Sticht's inspection, Safeco
claims handler Trevor Evans instructed Rivera to submit all
bills for payment to him, requested an estimate of the total
cost to repair, and instructed Rivera and the Oltzes to
continue with demolition and repair. (Doc. 4 at ¶ 24.)
Safeco states that Evans specifically reminded Rivera and the
Oltzes that coverage had not been determined. (Doc. 2 at Â¶ 24.)
Stich sent his report to Evans on November 23, 2015. (Doc. 4
at ¶ 25; Doc. 2 at ¶ 25.)
sent a second Reservation of Rights letter on November 24,
2015, which included excerpts from the Policy exclusions.
(Doc. 24 at Â¶ 5.) Tafford Oltz emailed Evans on November 27,
2015, asking for an "immediate commitment that either
Safeco is going to cover the repairs or not." (Doc. 4 at
Â¶ 27; Doc. 2 at 127.) Evans emailed Rivera on November 29,
2015. (Doc. 4 at Â¶ 33; Doc. 2 at Â¶31). The Oltzes state the
email informed Rivera that it would still be several weeks
before a coverage decision would be made, (Doc. 4 at Â¶ 33),
while Safeco states the email informed the Oltzes they could
move forward with demolition and related repairs, but that
coverage was under investigation and Safeco could not commit
to coverage or payments at that time, (Doc. 2 at ¶ 31.)
The email does not appear in the record. On January 15, 2016,
Safeco sent a third Reservation of Rights letter, which again
included excerpts from the Policy exclusions. (Doc. 24 at
denied the Oltzes' claim on January 19, 2016.
(Id. at Â¶ 8.) The letter included exclusion language
from the Policy, and the following explanation of denial:
As you can see in the above-referenced policy provisions
losses resulting from continuous or repeated seepage or
leakage of water, inherent defect, weather, faulty,
inadequate or defective design, workmanship and construction,
and wet or dry rot, are not covered. The exterior sheathing
and windows are non-covered losses due to improper flashing
and roof construction with non-covered ensuing loss of
repeated seepage and leakage of water. The Additional
Property Coverage for Collapse excludes coverage for decks
unless the loss is a direct result of the collapse of the
dwelling or part of the dwelling to which it is attached.
Therefore, according to the terms and conditions of your
policy, we are unable to provide any coverage for this loss.
(Doc. 1-1 at 72.) Safeco did not initially consider
Wells' report, but did so after the Oltzes' counsel
provided it in February 2016. (Doc. 24 at ¶ 15; Doc.
17-2 at ¶ 13.) Safeco concluded the report did not
affect its coverage decision. (Id.) Work on the
Oltzes' home was completed in April 2016. (Doc. 24 at
¶ 16.) The Oltzes assert they were unable to completely
repair their home in the most appropriate manner because
Safeco refused to pay for their losses. (Id.)
Oltzes sued Safeco on August 16, 2016, in the Eleventh
Judicial District Court, Flathead County, Montana. (Doc. 1.)
The Oltzes request declaratory relief (Count I) and allege
breach of contract (Count II), breach of the covenant of good
faith and fair dealing (Count III), common law bad faith
(Count IV), and violation of Montana's Unfair Trade
Practices Act (Count V). Safeco simultaneously removed the
action to this Court and filed its Answer on September 21,
2016. (Doc. 2.) Safeco subsequently moved for summary
judgment. (Doc. 15.)
is entitled to summary judgment if it can demonstrate that
"there is no genuine dispute as to any material fact and
[it] is entitled to judgment as a matter of law."
Fed.R.Civ.P. 56(a). Summary judgment is warranted where the
documentary evidence produced by the parties permits only one
conclusion. Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 251 (1986). On summary judgment, "[t]he
evidence of the non-movant is to be believed, and all
justifiable inferences are drawn in his favor." Id.
at 255 (citation omitted). Only disputes over facts that
might affect the outcome of the lawsuit will preclude entry
of summary judgement-factual disputes that are irrelevant or
unnecessary to the outcome are not considered. Id.
Coverage and Exclusions
argues that Policy exclusions bar coverage for the
Oltzes' losses. (Doc. 16 at 14.) The Oltzes insist both
that their losses are not excluded, and that factual
questions regarding the cause of their losses preclude
summary judgment. (Doc. 25 at 9.)
interpretation of an insurance contract is a question of
law." Steadele v. Colony Ins. Co., 260 P.3d
145, 149 (Mont. 2011). Insurance policies are
"construe[d] ... strictly against the insurer and in
favor of the insured." Id. That means that
"[w]hen a court reviews an insurance policy, it is bound
to interpret its terms according to their usual, common sense
meaning as viewed from the perspective of a reasonable
consumer of insurance products, " and that
"[exclusions from coverage are to be narrowly and
strictly construed because they are contrary to the
fundamental protective purpose of an insurance policy."
Id. (citations omitted). The Oltzes bear the initial
burden of establishing their claim falls within the
Policy's scope of coverage, after which the burden shifts
to Safeco to establish the claim is excluded. Travelers
Cas. and Sur. Ins. Co. v. Ribi Immunochem Research,
Inc., 108 P.3d 469, 476 (Mont. 2005). If Safeco meets
its burden, the Oltzes may still show an exception to the
applicable exclusion applies. Id.
Policy provides that "[Safeco] cover[s] accidental
direct physical loss to property described in
Building Property We Cover except as limited
or excluded." (Doc. 1-1 at 23.) Covered property in turn
includes "the dwelling . .. including structures
attached to the dwelling other than fences, driveays, or
walkways." (Id.) Accordingly, the accidental
direct physical loss to the Oltzes' dwelling and attached
deck is covered under the Policy unless specifically
excluded. Safeco points to several exclusions it asserts
preclude coverage, each of which are discussed in turn below.
first argues the Oltzes' losses are not covered because
the Policy excludes coverage for losses caused by long term
exposure to water and moisture, regardless of the source of
that moisture. (Doc. 16 at 14.) Safeco argues three specific
exclusions apply: (1) continuous or repeated seepage or
leakage of water; (2) weather that contributes to an
uncovered cause; and (3) wet or dry rot. (Id. at 2.)
The Oltzes insist both that an ice dam is the proximate cause
of their losses and that questions of material fact preclude
summary judgment. Safeco has the better argument.
Seepage or leakage exclusion
Property Coverages section of the Policy provides a number of
exclusions under the heading "BUILDING PROPERTY
LOSSES WE DO NOT COVER." (Doc. 1-1 at 23.) The
fifth exclusion states that Safeco will not cover losses
caused "directly or indirectly by ... continuous or
repeated seepage or leakage of water or steam, or the
presence or condensation of humidity, moisture or vapor which
occurs over a period of weeks, months or years."
(Id. at 23-24.)
initial matter, the experts here agree that moisture caused
the damage to the Oltzes' home. Safeco's Engineer, Wade
Sticht, concluded in his report that the "primary
cause" of the "material deterioration of the
exterior wall framing and sheathing" was
"long-term, chronic exposure to moisture, " as
"evidenced by the nature and locations of the observed
stain patterns and the severity and extent of the
deterioration." (Doc. 17-3 at 15; Doc. 24 at ¶ 7.)
Sticht also concluded the deck detachment "was most
likely caused by the deterioration of the wood into which the
deck attachment thru-bolts were fastened." (Doc. 17-3 at
16; Doc. 24 at ¶ 6.) The Oltzes' engineer, Paul
Wells, assumed in his report that the damage was "water
damage, " concluding that "the extensive water
damage that has occurred to the sheathing and framing ... is,
most likely, the result of excessive water being routed into
the area of the roof/wall connection via a heat cord."
(Doc. 24-4 at 1.) And Hafferman Engineering, Inc., a firm the
Oltzes' hired to review expert reports, photos,
deposition, and video, so it could "render an opinion on
the most probable cause of the moisture damage"
concluded that "the major damage was caused by melting
water from ice melting, either natural warming and cooling
patterns, or from the heat from around the heat tape
cord." (Doc. 24-5 at 2, 8.) Hafferman further concluded
that, "[although water may be entering the residence by
following the heat tape cord and some minor damage may be
occurring from rainfall runoff, the ice damming will have
first created a pathway for moisture to enter into the house,
" and noted particularly that "all parties make
continual reference to the ice dam and the moisture from the
melting ice that's causing the damage."
(Id. at 8.)
there is also expert consensus that the damage occurred over
an extended period of time, although the exact length of time
is unclear. Sticht states in his affidavit that "[i]t is
more probable than not that the amount of deterioration [he]
witnessed would have taken multiple years to occur."
(Doc. 17-3 at 3.) In his deposition, Wells agreed that the
plywood sheeting composing the side of the Oltzes' home
had wet rot caused by repeated exposure to moisture. (Doc.
17-6 at 6; Doc. 24 at ¶ 11.) Finally, Hafferman
Engineering noted in its report that "the ice damming
and subsequent moisture damage may have occurred over a long
period of time but because it only was occurring and creating
damage during short periods of time during any given year,
years of damage, once revealed, could appear to have occurred
during several months of continuous moisture rather than
several years of intermittent moisture." (Doc. 24-5 at
there is expert consensus that the damages were caused by
repeated exposure to moisture over an extended length of
time. In turn, the Policy excludes from coverage "losses
resulting from "continuous or repeated seepage or
leakage of water . . . which occurs over a period of weeks,
months or years." (Doc. 24 at ¶ 5.) As such,
Safeco's conclusion that the losses to the Oltzes'
home were caused by an excluded peril is correct.
Nevertheless, the Oltzes argue that is not the end of the
inquiry, because the water ...