                                                                                                 Filed
                                                                                           Washington State
                                                                                           Court of Appeals
                                                                                            Division Two

                                                                                          September 20, 2016


      IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

                                          DIVISION II


    LORETTA LESURE, a single woman,                                   No. 48045-0-II

                                Appellant,

          v.

    FARMERS INSURANCE COMPANY OF                                UNPUBLISHED OPINION
    WASHINGTON, a domestic corporation and a
    Washington State Stock Insurer,

                                Respondent.


         LEE, J. — Loretta Lesure appeals the trial court’s order granting Farmers Insurance

Company of Washington’s (Farmers) motion for summary judgment, finding Farmers did not owe

additional benefits to Lesure for fire damage to her home. The trial court concluded that as a matter

of law, Lesure’s policy did not cover the total cost of fire-loss house repairs that included, in part,

costs for changed building code requirements. We agree and affirm.

                                               FACTS

         The facts are primarily undisputed. Lesure’s Port Angeles home was partially damaged by

fire. The home was insured by Farmers. Coverage A of the insurance policy covered the cost to

repair or replace the insured’s dwelling up to a policy limit of $112,000.00.1 The policy, however,


1
    The policy states that under Coverage A:
No. 48045-0-II


excludes “direct or indirect loss” resulting from the “[e]nforcement of any ordinance or law

regulating construction, repair or demolition of a building or other structure, unless endorsed by

this policy.”2 Clerk’s Papers (CP) at 129. Lesure purchased an optional endorsement for coverage

of building code and ordinance upgrades with a liability limit of “10% of the total limit of insurance

applying to the covered property.”3 CP at 144. The policy limit for the optional coverage was

$11,200.00.




         We cover:
         1. The dwelling, including attached structures, on the residence premises and used
         principally as a private residence.
         2. Material and supplies on or adjacent to the residence premises for use in
         construction, alteration or repair of the dwelling or other structures on the residence
         premises.
         Wall-to-wall carpeting attached to the dwelling is part of the dwelling.

CP at 125.
2
    The policy states:

         We do not cover direct or indirect loss from:
         1. Enforcement of any ordinance or law regulating construction, repair or
         demolition of a building or other structure, unless endorsed to this policy.

CP at 129.
3
    The endorsement states:

         Under Section I — Property, Losses Not Insured or Losses Not Covered, the
         following exclusion is deleted:

         Enforcement of any ordinance or law regulating construction, repair or demolition
         of a building or other structure, unless endorsed on this policy.
         Under Section I — Property, Additional Coverages, the following coverage is
         added:



                                                   2
No. 48045-0-II


         Replacement costs for the partially fire-damaged home totaled $22,248.25 (less Lesure’s

$500 deductible). Because the home failed to comply with current building code requirements,

the city of Port Angeles required that the home be rebuilt to construction code. Specifically, the

home needed a foundation. Lesure estimates the cost to rebuild her home with the code required

updates to be $125,397.12. Farmers tendered $21,748.25 for repairs related to the fire damage,

plus $11,200.00 for repairs related to code compliance, which was the coverage limit.

         Lesure rejected Farmers’ offer and requested the full policy limit of $112,000.00 plus an

additional 10 percent under the optional building ordinance or law endorsement, totaling

$123,200.00 to demolish and rebuild her home to current code. Farmers denied her request.

         Lesure filed a complaint for declaratory relief and damages. Lesure requested declaratory

judgment arguing the efficient proximate cause (EPC) rule required Farmers to pay the full policy

limit.

         Farmers filed a motion for partial summary judgment, arguing it fulfilled its obligations

under the policy by offering payment for the property damage plus an extra 10 percent of her

maximum policy limit under her optional endorsement. The trial court granted Farmers’ request

for partial summary judgment, finding Farmers owed no additional benefits under the coverage




         1. Our limit of liability for this coverage will not be more than 10% of the total
         limit of insurance applying to the covered property under Coverage A—Dwelling
         or Coverage B—Separate Structures, shown in the declarations or premium notice,
         whichever is most recent at the time of loss. This endorsement applies to all
         coverages whether in the policy contract or subsequently added by endorsement.

CP at 144.


                                                 3
No. 48045-0-II


terms of the policy; denied Lesure’s request for declaratory judgment; and dismissed with

prejudice Lesure’s action. Lesure appeals.4

                                           ANALYSIS
A.     STANDARD OF REVIEW

       We review a superior court’s order on summary judgment in a declaratory judgment action

de novo. Internet Cmty. & Entm’t Corp. v. Wash. State Gambling Comm’n, 169 Wn.2d 687, 691,

238 P.3d 1163 (2010). Summary judgment is appropriate if no genuine issues of material fact

exist and the moving party is entitled to judgment as a matter of law. CR 56(c).

       Interpretation of an insurance policy is a question of law we review de novo. Woo v.

Fireman’s Fund Ins. Co., 161 Wn.2d 43, 52, 164 P.3d 454 (2007). Because insurance policies are

construed as contracts, the policy terms are interpreted according to contract principles.

Weyerhaeuser Co. v. Commercial Union Ins. Co., 142 Wn.2d 654, 665, 15 P.3d 115 (2000). The

policy is considered as a whole, and is given a “‘fair, reasonable, and sensible construction as

would be given to the contract by the average person purchasing insurance.’” Id. at 666 (quoting

Am. Nat’l Fire Ins. Co. v. B & L Trucking & Constr. Co., 134 Wn.2d 413, 427, 951 P.2d 250

(1998)). If the language is clear, the court must enforce the policy as written and may not create

ambiguity where none exists. Quadrant Corp. v. Am. States Ins. Co., 154 Wn.2d 165, 171, 110

P.3d 733 (2005). “[T]he expectations of the insured cannot override the plain language of the

contract.” Id. at 172.




4
  The parties stipulated to the dismissal of all other potential coverage claims and agreed the
court’s memorandum order was a final decision on the merits.

                                                 4
No. 48045-0-II


B.     EFFICIENT PROXIMATE CAUSE RULE

       Lesure first contends the trial court erred in failing to recognize and apply the EPC rule.

The EPC rule is applied in Washington to determine first-party insurance policy coverage when a

single loss occurs as the result of two or more perils acting together. Vision One, LLC v.

Philadelphia Indem. Ins. Co., 174 Wn.2d 501, 519, 276 P.3d 300 (2012). “The efficient proximate

cause rule applies only when two or more perils combine in sequence to cause a loss and a covered

peril is the predominant or efficient cause of the loss.” Id. (citing McDonald v. State Farm Fire &

Cas. Co., 119 Wn.2d 724, 732, 837 P.2d 1000 (1992)) (emphasis added). “In such a situation, the

efficient proximate cause rule mandates coverage, even if an excluded event appears in the chain

of causation that ultimately produces the loss.” Vision One, 174 Wn.2d at 519 (citing Safeco Ins.

Co. of Am. v. Hirschmann, 112 Wn.2d 621, 628, 773 P.2d 413 (1989)).

       Here, the facts in Allemand v. State Farm Insurance Companies, 160 Wn. App. 365, 248

P.3d 111 (2011), are very similar to our facts. In Allemand, fire damaged the Allemands’ home.

The Allemands’ policy with State Farm covered damage due to fire plus an optional endorsement

for coverage of “increased costs resulting from enforcement of any ordinance or law.” 160 Wn.

App. at 367. The optional coverage provided an additional sum equal to 10 percent of the policy

maximum. Id. After a fire damaged their home, the Allemands learned their home would have to

meet building codes. Specifically, their home needed a foundation, crawl space, and updated

electrical wiring. Id. They requested the full policy limit plus an extra 10 percent for these repairs.

State Farm rejected their demand, and the Allemands filed a complaint for declaratory judgment.

The court held that “Coverage A is to provide ‘similar construction’ in rebuilding the home . . .

[and] does not include paying for required code upgrades.” Id. at 373. The court further held that


                                                  5
No. 48045-0-II


the sole source of coverage for bringing the remodeled home up to code was the optional coverage

and that coverage had a policy limit of 10 percent of the Coverage A policy limit. Id. In a footnote,

the court noted, “[T]he Allemands’ argument that the policy conflicts with [the EPC] rule is

without merit.” Id. at 372 n.2.

       Similarly here, Lesure’s EPC rule argument is without merit. The rule “applies only when

two or more perils combine in sequence to cause a loss and a covered peril is the predominant or

efficient cause of the loss.” Vision One, 174 Wn.2d at 519. “When . . . the evidence shows the

loss was in fact occasioned by only a single cause, . . . the efficient proximate cause analysis has

no application.” Kish v. Ins. Co. of N. Am., 25 Wn.2d 164, 170, 883 P.2d 308 (1994) (quoting

Chadwick v. Fire Ins. Exch., 17 Cal. App. 4th 1112, 1117, 21 Cal. Rptr. 2d 871 (1993)). The Kish

court elaborated, “An insured may not avoid a contractual exclusion merely by affixing an

additional label or separate characterization to the act or event causing the loss.” (quoting

Chadwick, 17 Cal. App. 4th at 1117).

       There is no uncovered peril here. Fire is the only cause of loss. Non-compliance with a

city’s building code is not a peril. There is no chain of events. Thus, the EPC rule does not trigger

coverage for additional repair costs due to building code violations other than what is allowed

under the building ordinance or law endorsement.5



5
  The United States District Court for the Western District of Washington recently held likewise
in an unpublished opinion. Certain Underwriters at Lloyds, London v. Allen, 2015 WL 4094350,
at *4 (W.D. Wash. July 7, 2015). Farmers cites this case in its response brief. Washington’s
former General Rule 14.1(b) permits parties to cite unpublished decisions from non-Washington
jurisdictions if that jurisdiction permits citation to the decision. Federal courts permit citation to
unpublished decisions issued on or after January 1, 2007. FRAP 32.1. But, former GR 14.1(b)
required the party citing an unpublished decision to “file and serve a copy of the opinion with the


                                                  6
No. 48045-0-II


       Next, Lesure contends the insurance policy effectively circumvents the EPC rule because

the entire fire loss would be covered if Lesure did not purchase optional coverage, making the

optional building ordinance or law endorsement coverage illusory. We disagree because the EPC

rule simply does not apply in this case. There is no chain of covered and uncovered peril to warrant

further discussion or speculation of the EPC rule on an optional endorsement.

C.     DECLARATORY JUDGMENT

       Lesure next contends the trial court erred by dismissing her action because the policy

language for the building ordinance or law endorsement is ambiguous. She contends the term

“Additional Coverages” can be interpreted as meaning additional to the maximum policy limit

(including code upgrade costs) or additional solely to the repair costs (excluding code upgrade

costs). CP at 109. Lesure urges this court to interpret the policy as permitting recovery of the

building ordinance or law endorsement limit of $11,200.00 in addition to the $112,000.00 policy

limit, for a total of $123,200.00. We disagree.

       A similar policy was discussed at length in Allemand, where the court addressed “nine

decades” of Washington law involving comparable policies. 160 Wn. App. at 366. The Allemand

court held that replacement costs for like construction and use of a structure do not include costs

of upgrading a structure to meet building codes that it did not previously meet. 160 Wn. App. at

372; see also Dombrosky v. Farmers Ins. Co. of Wash., 84 Wn. App. 245, 259, 928 P.2d 1127

(1996) (holding that coverage for “equivalent construction” did not include building code



brief or other paper in which the opinion is cited.” Farmers failed to include the required copy;
therefore, this opinion does not address Allen. As a side note, amendments to GR 14.1 took effect
September 1, 2016, but the changes have no impact on this opinion.


                                                  7
No. 48045-0-II


upgrades), review denied, 131 Wn.2d 1018 (1997); Roberts v. Allied Grp. Ins. Co., 79 Wn. App.

323, 325, 901 P.2d 317 (1995) (holding that coverage for “like construction” did not include

building code upgrades). For Lesure to reach the Coverage A maximum, the code upgrade costs

would have to be covered under Coverage A. They are not.

       Moreover, in Vision One, our Supreme Court held that an extraexpense endorsement

(additional coverage for soft costs including loan interest, property taxes, and accounting and legal

fees) was limited to the endorsement amount and was not “designed to provide an additional $1

million for the specified . . . losses in the event the $12.5 million [policy] limit was exhausted.”

174 Wn.2d at 522.

       Based on the above authority, the policy language is clear and unambiguous. Farmers’

original obligation under Coverage A is to provide similar construction in rebuilding the partially

damaged home. This does not include paying for required code upgrades. Instead, the policy

provides for necessary code upgrades by the optional endorsement. The endorsement is the sole

source of the obligation to pay for bringing the remodeled home up to code. The coverage,

however, is limited to 10 percent of Coverage A that Lesure purchased. The necessary upgrades

required more than that figure and Farmers, accordingly, properly tendered its limits under that

coverage. Farmers was not required to pay the full policy limits plus an extra 10 percent as alleged

by Lesure.




                                                 8
No. 48045-0-II


        We affirm.

        A majority of the panel having determined that this opinion will not be printed in the

Washington Appellate Reports, but will be filed for public record in accordance with RCW 2.06.040,

it is so ordered.




                                                                       Lee, J.
 We concur:



                     Johanson, J.




                    Bjorgen, C.J.




                                                9
