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ACE PROPERTY AND CASUALTY INSURANCE COMPANY v. YAKIMA AIR TERMINAL - MCALLISTER FIELD et al

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Case Number: 
1:15-cv-03002 Search Pacer
Court Type: 
Federal
US District Court: 
Eastern District of Washington
Date Filed: 
Jan 5 2015

Plaintiff, ACE PROPERTY AND CASUALTY COMPANY, by its attorneys, LEWIS
BRISBOIS BISGAARD & SMITH, LLP, files this Complaint for Declaratory Judgment against
the above-captioned Defendants, and would respectfully show the Court the following:

I. NATURE OF ACTION
1. This is an insurance coverage action seeking declaratory relief pursuant to 28
U.S.C. §§ 2201 and 2202. ACE Property and Casualty Company seeks a determination of the
parties’ rights and obligations under a general liability policy it issued Yakima Air Terminal -
McAllister Field, as more particularly described below, with respect to claims asserted by M.A.
West Rockies Corporation/Langdon Family Revocable Trust and the Byron and Alice Lockwood
Foundation in the actions captioned and numbered, Yakima Air Terminal - McAllister Field v.
M.A. West Rockies Corporation, 10-2-00989-1; Byron and Alice Lockwood Foundation v. M.A.
West Rockies Corporation, et al, 14-2-00976-3, both of which are pending in the Superior Court
for the State of Washington, County of Yakima.

II. PARTIES
2. ACE Property and Casualty Company (“ACE”), a member company of ACE
Group of Insurance Companies, is a Pennsylvania corporation with its executive offices at Two
Liberty Place, Philadelphia, Pennsylvania, and is authorized to write liability insurance policies in
Washington.
3. Yakima Air Terminal - McCallister Field (“Yakima”), an agency of the City of
Yakima and County of Yakima, Washington, is a Washington public corporation.
4. On information and belief, M.A. West Rockies Corporation (“M.A. West”) is a
Nevada corporation with its principal place of business in Yakima, Washington.
5. On information and belief, the Langdon Family Revocable Trust (“Langdon”) is
the assignee of M.A. West.
6. On information and belief, the Byron and Alice Lockwood Foundation
(“Lockwood”) is a Washington nonprofit corporation.

III. JURISDICTION AND VENUE
7. This declaratory judgment action is brought pursuant to 28 U.S.C. §§ 2201 and
2202 and Rule 57 of the Federal Rules of Civil Procedure.
8. An actual justiciable controversy exists between ACE and the named defendants
within the meaning of 28 U.S.C. § 2201 regarding insurance coverage provided under a policy that
ACE issued to Yakima.
9. This Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332(a)(1) because the
amount in controversy exceeds the sum of $75,000, exclusive of interest and costs, and the suit is
between citizens of different states. In particular, there is complete diversity of citizenship
between ACE and the named defendants.
10. Venue is proper in this Court pursuant to 28 U.S.C. § 1391(a)(1) because the
Yakima airport and related public entities are located in the Eastern District of Washington, where
the acts complained of are alleged to have occurred.

IV. FACTS COMMON TO ALL COUNTS
The Policy
11. ACE issued an Airport Owners and Operators General Liability Policy to Yakima
under number AAP N02204332 incepting on May 1, 2009 and renewed through May 1, 2014 (the
“Policy”). (A true and correct copy of the Policy is attached hereto as Exhibit A).
Yakima's Unlawful Detainer Action
12. In March 2010, Yakima filed an unlawful detainer action against M.A. West in the
Superior Court of Washington for Yakima County under number 10-2-00989 (the “Unlawful
Detainer Action”), alleging that in April 1997, Yakima entered into a lease, which M.A. West
assumed, for airport ramp space.
13. The Unlawful Detainer Action alleged that M.A. West was to pay a $3,000.00
security deposit and $2,718.29 per month in rent with 12% interest charged per annum to the
extent that the rent was not received by the 10th day of each month.
14. The Unlawful Detainer Action alleged Yakima was forced to apply the security
deposit to M.A.’s unpaid rent, the continued delinquency of which Yakima to serve a default
notice on March 15, 2010, advising of the termination of M.A. West’s tenancy.
15. The Unlawful Detainer Action alleged that while M.A. West made additional
payments, it continued to be delinquent, thereby requiring surrender of the premises to Yakima
and a judgment for outstanding rents, fees and costs.
16. M.A. West responded to the Unlawful Detainer Action by asserting that Yakima
breached the lease, wrongfully attempted to terminate the lease and interfered with its right to
quiet enjoyment of the property.
17. On June 10, 2010, the trial court ruled in favor of Yakima, and, thereafter, M.A.
West vacated the premises and appealed the decision.
Appellate Ruling on Unlawful Detainer Action
18. On December 10, 2013, the Washington Court of Appeals reversed the trial court’s
ruling in Yakima’s favor in the Unlawful Detainer Action. (A true and correct copy of the Court
of Appeals' decision is attached hereto as Exhibit B).
19. The appellate court reversed and remanded holding that M.A. West’s attempts to
cure the defaults were timely and should not have been rejected, that Yakima did not properly
apply the repaid security deposit to the unpaid rent and that M.A. West was wrongfully evicted.
20. Yakima first notified ACE of this Unlawful Detainer Action in December 2013,
after the appellate court’s adverse ruling in favor of M.A. West, seeking indemnity for the
anticipated judgment against it.
The Langdon Counterclaim
21. Based upon the appellate court ruling, Langdon, as M.A.West’s assignee, filed an
amended counterclaim in the Unlawful Detainer Action (the “Langdon Counterclaim”). (A true
and correct copy of the pending Langdon Counterclaim is attached hereto as Exhibit C).
22. The Langdon counterclaim alleges that Yakima wrongfully evicted M.A. West,
thereby directly and proximately causing it damages, including loss of value of the leasehold
interest, as well as lost revenues, rental income and destruction of its business and credit.
23. The Langdon Counterclaim also alleges that the wrongful eviction was breach of
the lease, constituted tortious interference with its business expectancy and economic
relationships, resulted in intentional and negligent trespass and constituted inverse condemnation.
The Lockwood Action
24. On March 14, 2014, Lockwood filed a complaint against Yakima and other
defendants in the Superior Court of Washington for Yakima County under number 14-2-00967-3
(the “Lockwood Action”). (A true and correct copy of the complaint filed in the Lockwood
Action is attached hereto as Exhibit D).
25. The Lockwood Action alleges that in 2008 and 2009, M.A. West borrowed some
$2 million from the Lockwood in exchange for a mortgage lien on its property.
26. The Lockwood Action alleges that Yakima’s eviction of M.A. West from the
leasehold premises was wrongful, improper, illegal and unlawful and by evicting M.A. West, the
tenant was unable to run its business.
27. In seeking the funds that M.A. West borrowed from Lockwood, the Lockwood
Action asserts several causes of action against Yakima, including negligence and damages to
collateral; negligent misrepresentation and omission; breach of contract; trespass; statutory
trespass; condemnation; tortious interference with contract; and tortious interference with business
expectancy.
28. Yakima has tendered the Langdon Counterclaim and Lockwood Action to ACE,
which ACE is defending under a reservation of rights pursuant to the Policy. (True and correct
copies of the reservation of rights letters issues for these matters are attached hereto has Group
Exhibit E).

V. CAUSES OF ACTION

COUNT ONE
Coverage A Not Triggered
29. Paragraphs 1-28 set forth supra are hereby incorporated by reference.
30. The Policy’s Insuring Agreement under Coverage A for Bodily Injury and Property
Damage Liability provides, in part, as follows:
1. Insuring Agreement
a. We will pay those sums that the insured becomes legally
obligated to pay as damages because of “bodily injury” or
“property damage” to which this insurance applies.. . .
* * *
b. This insurance applies to “bodily injury” and “property
damage” only if:
(1) The “bodily injury” or “property damage” is caused
by an “occurrence” . . .
31. The Policy provides the following relevant definitions:
6. “Bodily injury” means:
a. Bodily injury, sickness or disease sustained by a person,
including death resulting from any of these at any time; or
b. Freight or mental anguish sustained by a person.
* * *
14. “Occurrence” means an accident, including continuous or repeated
exposure to substantially the same general harmful conditions.
* * *
17. “Property damage” means:
a. Physical injury to tangible property, including all resulting
loss of use of that property. All such loss of use shall be
deemed to occur at the time of the physical injury that caused
it; or
b. Loss of use of tangible property that is not physically
injured. All such loss shall be deemed to occur at the time of
the “occurrence’" that caused it.
32. The Langdon Counterclaim and Lockwood Action do not seek damages for “bodily
injury” or “property damage” as those terms are defined by the Policy but only seek non-covered
economic damages.
33. The Langdon Counterclaim and Lockwood Action allege only non-accidental
conduct, which does not constitute an “occurrence” as that term is defined by the Policy.
34. Absent “bodily injury”, “property damage” or an “occurrence” alleged in the
Langdon Counterclaim and Lockwood Action, there can be no coverage extended under Coverage
A of the Policy, and ACE has no duty to defend or indemnify Yakima.

COUNT TWO
Coverage A Excluded for Expected or Intended Injury
35. Paragraphs 1 -34 set forth supra are hereby incorporated by reference.
36. Coverage A of the Policy provides the following exclusion:
2. Exclusions
This insurance does not apply to:
a. Expected or Intended Injury
“Bodily injury” or “property damage” expected or intended
from the standpoint of the insured.. . .
37. The Langdon Counterclaim and Lockwood Action allege conduct, injury or
damage expected or intended from the standpoint of Yakima, including, inter alia, allegations that
it failed to comply with the lease’s notice provisions, failed to properly apply rent and wrongfully
and unlawfully evicted M.A. West.
38. Any “bodily injury” or “property damage”, as those terms are defined by the
Policy, alleged in the Langdon Counterclaim and Lockwood Action is excluded from coverage, as
such injury or damage was intended from the standpoint of the insured and ACE has no duty to
defend or indemnify Yakima.

COUNT THREE
Coverage A Excluded for Contractual Liability
39. Paragraphs 1 -38 set forth supra are hereby incorporated by reference.
40. Coverage A of the Policy provides the following exclusion:
2. Exclusions
This insurance does not apply to:
b. Contractual Liability
“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. This exclusion does not
apply to liability for damages:
(1) Assumed in a contract or agreement that is an ‘insured contract’
provided the ‘bodily injury’ or ‘property damage’ occurs subsequent
to the execution of the contract or agreement; or
(2) That the insured would have in the absence of a contract or
agreement.
41. The Policy defines, in pertinent part, “insured contract” as:
“Insured Contact” means:
a. A lease of the premises;
b. A sidetrack agreement;
c. Any easement or license agreement, except in connection with
construction or demolition operations on or within 50 feet of a
railroad;
d. An obligation, as required by ordinance, to indemnify a
municipality, except in connection with work for a municipality;
e. An elevator maintenance agreement;
f. That part of any other contract or agreement pertaining to your
business (including an indemnification of a municipality in
connection with work perfonned for a municipality) under which
you assume the tort liability of another party to pay for ‘bodily
injury’ or ‘property damage’ to a third person or organization. Tort
liability means a liability that would be imposed by law in the
absence of any contract or agreement.
42. The Langdon Counterclaim and Lockwood Action seek relief Yakima’s breach of
its obligations under the parties lease agreement.
43. Any “bodily injury” or “property damage”, as those terms are defined by the
Policy, alleged in the Langdon Counterclaim and Lockwood Action is excluded from coverage, as
any damages for which Yakima may be obligated to pay arises from the assumption of liability in
a contract or agreement that is not an “insured contract”, as that term is defined by the Policy, or
that would exist against Yakima in absence of the contract or agreement.
COUNT FOUR
Coverage A Excluded for Damage to Property Owned
44. Paragraphs 1 -43 set forth supra are hereby incorporated by reference.
45. Coverage A of the Policy provides the following exclusion:
2. Exclusions
This insurance does not apply to:
* * *
k. Damage to Property
“Property damage” to:
(1) Property you own, rent or occupy;. . .
* * *
46. Yakima owns the property that M.A. West leased from it.
47. Any “property damage”, as that term is defined by the Policy, alleged in the
Langdon Counterclaim and Lockwood Action is excluded from coverage, as any the insurance
does not apply to any “property damage” to property owned by Yakima.
COUNT FIVE
Coverage B Not Triggered
48. Paragraphs 1 -47 set forth supra are hereby incorporated by reference.
49. The Policy’s Insuring Agreement under Coverage B for “Personal and Advertising
Injury Liability provides, in part, as follows:
1. Insuring Agreement
a. We will pay those sums that you become legally obligated to
pay as damages because of “personal injury” or . . . to which
this insurance applies.. . .
* * *
but only if:
(a) The offense was committed or alleged to have been
committed unintentionally by you or any of your employees
while engaged in their employment by you;
* * *
50. The Policy provides the following relevant definitions:
15. “Personal injury” means injury, other than “bodily injury”, arising
out of one or more of the following offenses:
a. Mistaken arrest, detention or imprisonment;
b. Malicious prosecution;
c. The wrongful eviction from, wrongful entry into, or invasion
of the right of private occupancy of a room, dwelling or
premises that a person occupies by or on behalf of its owner,
landlord or lessor;
d. Oral or written publication of material that slanders or libels
a person or organization or disparages a person’s or
organization’s goods, products or services;
e. Oral or written publication of material that violates a
person’s right of privacy;
f. Unintentional discrimination; [deleted by endorsement]
g. Misdirection of a passenger by an insured to the wrong
aircraft, automobile or other connecting transportation; or
* * *
51. The Langdon Counterclaim and Lockwood Action seek only economic damages do
not seek damages because of “personal injury” or “advertising injury” as those terms are defined
under the Policy.
52. The Langdon Counterclaim and Lockwood Action allege conduct committed
intentionally, which is not encompassed by one of Policy’s enumerated offenses for “personal
injury” as that term are defined by the Policy.
53. Absent “personal injury” alleged in the Langdon Counterclaim and Lockwood
Action, there can be no coverage extended under Coverage B of the Policy and ACE has no duty
to defend or indemnify Yakima.

COUNT SIX
Any Offense Was Not Committed Unintentionally
54. Paragraphs 1-53 set forth supra are hereby incorporated by reference.
55. Coverage B is applicable only if the “offense was committed or alleged to have
been committed unintentionally”.
56. The Langdon Counterclaim and Lockwood Action allege only conduct, injury or
damage committed intentionally by Yakima, including, inter alia, that it failed to comply with the
lease’s notice provisions, failed to properly apply rent and wrongfully and unlawfully evicted
M.A. West.
57. Any “personal injury”, as that term is defined by the Policy, alleged in the Langdon
Counterclaim and Lockwood Action does not trigger Coverage B, as such injury or damage was
not committed unintentionally and ACE has no duty to defend or indemnify the Yakima.
COUNT SEVEN
Coverage B Excluded for Contractual Liability
58. Paragraphs 1-57 set forth supra are hereby incorporated by reference.
59. Coverage B of the Policy provides the following exclusion:
2. Exclusions
This insurance does not apply to:
a. “Personal injury” or “advertising injury”:
* * *
(4) For which the insured has assumed liability in a contract or
agreement. This exclusion does not apply to liability for
damages that the insured would have in the absence of the
contract or agreement;
* * *
60. The Langdon Counterclaim and Lockwood Action seek relief Yakima’s breach of
its obligations under the parties lease agreement.
61. Any “personal injury”, as that term is defined by the Policy, alleged in the Langdon
Counterclaim and Lockwood Action is excluded from coverage.
COUNT EIGHT
Late Notice Violates Policy Conditions
62. Paragraphs 1 -61 set forth supra are hereby incorporated by reference.
63. The Policy imposes contractual duties upon Yakima as a condition precedent to
coverage, including:
2. Duties In The Event Of Occurrence, Offense, Claim Or Suit
a. You must notify us immediately of an “occurrence” or an
offense which may result in a claim. To the extent possible,
notice should include:
(1) How, when and where the “occurrence” or offense
took place;
(2) The names and addresses of any injured persons and
witnesses; and
(3) The nature and location of any injury or damage
arising out of the “occurrence” or offense.
b. If a claim is made or “suit” is brought against any insured,
you must:
(1) Immediately record the specifics of the claim or
“suit” and the date received; and
(2) Notify us as soon as practicable.
You must see to it that we receive written notice of the claim
or “suit” as soon as practicable.
c. You and any other involved insured must:
(1) Immediately send us copies of any demands, notices,
summonses or legal papers received in connection
with the claim or “suit”;
(2) Authorize us to obtain records and other information;
(3) Fully cooperate with us in the investigation,
settlement or defense of the claim or “suit”; and
(4) Assist us, upon our request, in the enforcement of any
right against any person or organization which may
be liable to the insured because of injury or damage
to which this insurance may also apply.
* * *
f. Unless we are prejudiced by the insured of your failure to
comply with the requirement, no provision of this policy
requiring you or any insured to give notice of “occurrence”,
claim or “suit”, or forward demands, notices, summonses or
legal papers in connection with a claim or “suit” will bar
coverage under this policy.
64. The Langdon Counterclaim and Lockwood Action allege conduct, injury or
damage that took place well before ACE was provided notice in December 2013.
65. Yakima’s notice to ACE was untimely and prejudiced ACE’s rights and obligations
under the Policy, as it was unable to participate in the defense of the action from its
commencement, including the appeal of the Unlawful Detainer Action.
66. Given Yakima’s failure to comply with the Policy’s condition precedent of notice,
and based upon the prejudice suffered by ACE because of the late notice, ACE has no duty to
defend or indemnify Yakima.

VI. PRAYER FOR RELIEF
WHEREFORE, for the reasons set forth above, ACE asks that the Court find and declare
the following:
A. ACE has no duty to defend or indemnify Yakima under the Policy in either
the Langdon Counterclaim or the Lockwood Action.

The provided text is an excerpt from a document filed in this case. For a full understanding of the case, one should read the complete court file, including the response.

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