Caliber One Indemnity Company v. Wade Cook Financial Corporation and Diana K. Carey

This case arises from a commercial property insurance policy
Plaintiff-Appellee Caliber One Indemnity Company
("Caliber One") issued to the Defendant Wade Cook Financial
Corporation ("Cook"). Cook - through its trustee Diana
K. Carey - appeals the district court's summary judgment
under Washington law that the insurance contract between
Cook and Caliber One limited earthquake coverage to
$500,000, subject to a deductible calculated as a percentage
of the total insured value of the property affected by an earthquake
rather than of the claimed earthquake loss. Cook also
appeals the district court's refusal to consider affidavits submitted
in connection with its motion for reconsideration. We
affirm in part and reverse in part.

Background

In 1998, Cook purchased a comprehensive commercial
property insurance policy from Caliber One that, among its
various terms and conditions, provided $5 million in earthquake
coverage for various buildings Cook owned. In 1999,
Cook - through its insurance broker, Crump Insurance Services,
Inc. ("Crump") - told Caliber One that Cook wanted
to renew the policy "under exactly the same terms" as the initial
1998 policy. Contrary to Cook's asserted intent and apparently
unbeknownst to it, the 1999-2000 policy Caliber One
issued and Cook accepted contained only a $500,000 sublimit
for earthquake coverage. Caliber One acknowledges that the
reduction in earthquake coverage from $5 million to $500,000 was simply the result of a "clerical error in the preparation of
that policy."

In 2000, Cook sought to renew the policy once again, "on
the same terms and conditions" as the 1999-2000 policy. Consequently,
the mistaken $500,000 earthquake sublimit carried
through to the renewal policy. Caliber One gave Cook
(through Crump) a quotation confirmation including the
$500,000 earthquake sublimit, and Cook "accept[ed] the
quote" and expressed its "wish[ ] to have the agreement
bound." The final insurance policy in effect from December
2000 to December 2001 therefore had a stated earthquake
coverage limit of $500,000. Also relevant to this appeal, the
insurance policy provided that in the event of a claim, Cook
would be responsible for a "5.00% deductible Earthquake per
occurrence, minimum $50,000."

On February 28, 2001, Cook's corporate headquarters in
Tukwila, Washington, suffered significant damage as a result
of a large earthquake in the Puget Sound area. Losses, according
to Cook, were in excess of $8 million. After Cook submitted
a claim, Caliber One discovered the $500,000 sublimit
and traced it to the much earlier clerical error. It notified Cook
of the limit and stated its intent to seek declaratory judgment
that its liability would be only that lesser amount. Moreover,
Caliber One notified Cook that its claim would be subject to
a deductible of $695,100, calculated as 5% of the total insured
value ("TIV") of the damaged corporate headquarters building
($13,902,000). Cook contended that the deductible was
only about $400,000, calculated as 5% of the loss suffered
rather than 5% of the TIV.

Both parties sought summary judgment in the federal district
court as to the amount of coverage and the meaning of
"deductible." The district court determined that the $500,000
sublimit was unambiguous and declined to consider extrinsic
evidence to contradict that amount. The court also rejected
Cook's claim of mutual mistake, and refused to reform the contract on the ground that Crump, Cook's insurance broker,
knew about the $500,000 sublimit and its knowledge was
imputed to Cook. As to the definition of "deductible," the district
court held that the term was ambiguous, rejecting Cook's
argument that the term plainly referred to the amount of loss.
Relying on evidence submitted by Caliber One to elucidate
the meaning of deductible, including documents Crump
drafted referring to the deductible as 5% of TIV, the district
court granted summary judgment in favor of Caliber One.

Cook moved for reconsideration and offered two declarations
from Crump employees. Cook argued that these declarations
supported its mutual mistake claim and directly
contradicted the district court's finding that Crump knew of
the mistake in the earthquake sublimit. The district court
refused to reconsider its earlier summary judgment or the new
declarations, concluding that Cook could not satisfy the strict
test for admission of new evidence.

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