                                                                                                Filed
                                                                                          Washington State
                                                                                          Court of Appeals
                                                                                           Division Two

                                                                                         February 19, 2020
    IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

                                          DIVISION II
 JOHN WILLIAM WEBB and KRISTA L.                                     No. 52210-1-II
 WEBB,

                                Appellants,
                                                                PUBLISHED OPINION
        v.

 USAA CASUALTY INSURANCE
 COMPANY,

                                Respondent.



       MAXA, C.J. – John and Krista Webb appeal the trial court’s dismissal on summary

judgment of a lawsuit they filed against their homeowners insurance company, USAA Casualty

Insurance Company (USAA). The Webbs requested a defense from USAA regarding a

complaint filed against them by their neighbors. The complaint alleged that John Webb and

others (collectively the defendants) shot guns at a target on the Webbs’ property, which

carelessly and recklessly caused bullets, bullet fragments, or ricocheted projectiles to enter the

neighbors’ property.

       The trial court ruled that USAA had no duty to defend the Webbs against the trespass and

nuisance claims asserted in the complaint. The trial court also dismissed the Webbs’ claims for

bad faith and violation of the Insurance Fair Conduct Act (IFCA), RCW 48.30.015, and the

Consumer Protection Act (CPA), chapter 19.86 RCW.

       We hold that the trial court erred in granting USAA’s summary judgment motion and

denying the Webbs’ motion for partial summary judgment on the duty to defend because (1) the
No. 52210-1-II


trespass and nuisance claims conceivably constituted “personal injury” as defined by the policy’s

personal injury endorsement, (2) the complaint conceivably requested damages for all claims,

including nuisance, (3) the complaint alleged conduct that conceivably constituted an

“occurrence” as defined in the policy, (4) the policy exclusion for personal injury “intended or

expected by the insured” conceivably did not preclude the duty to defend, and (5) the policy’s

criminal conduct provision conceivably did not preclude the duty to defend because the

complaint did not clearly allege conduct that was criminal in nature.

       We also hold that the trial court erred in granting USAA’s summary judgment motion

and denying the Webbs’ motion for partial summary judgment on the Webbs’ extracontractual

claims because USAA’s failure to evaluate the complaint, the policy, and applicable law for

whether the policy conceivably could cover the allegations made was unreasonable and

frivolous. Therefore, as a matter of law USAA’s denial of its duty to defend constituted bad

faith, violated IFCA, and violated the CPA.

       Accordingly, we reverse the trial court’s order granting summary judgment in favor of

USAA and denying the Webb’s motion for partial summary judgment. We remand for entry of

partial summary judgment in favor of the Webbs on their duty to defend, bad faith, IFCA, and

CPA claims and for further proceedings.

                                              FACTS

Lawsuit Against the Webbs

       In May 2017, Steven Hogg and Candace Ladley (Hogg/Ladley) filed a complaint in

superior court against the Webbs, a person named John Anderson, and 100 unknown defendants.

The complaint included the following allegations:

       1.6 All of the properties owned by the parties herein are contiguous.
       ....



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No. 52210-1-II



       3.2 On January 21, 2017, Defendants and each of them . . . carelessly, recklessly,
       and without regard for human or animal life, caused multiple rounds of
       ammunition, fragments thereof and or richoteted [sic]1 projectiles to be shot and
       strafed across Plaintiffs’ property from the property of Defendants WEBB.
       Multiple rounds of ammunition, fragments, shrapnel and/or ricocheted projectiles
       cut through Plaintiffs’ trees. A round, fragment, or ricocheted object also landed
       in the bed of Plaintiffs’ pick-up truck. . . . [A visitor] stated that the gun fire sounded
       like it was on full automatic as it was being shot rapid fire as opposed to single
       shots. . . .

       3.3 . . . The defendants appeared to be shooting at a small target positioned South
       of WEBB’S residence so that the shots fired were directed southerly, without the
       benefit of a back stop and/or berm or any safety precautions. Said bullets were
       either directed at Plaintiff’s property or were the result of ricochet.

       3.4 Even though the Defendants were advised by Plaintiff HOGG that their careless
       and reckless conduct endangered others on the Plaintiff’s property, the Defendants
       continued to shoot their guns that day.

       3.5 Plaintiffs have requested that Defendants cease their ultra hazardous activity
       of shooting their guns on Defendants’ properties as Plaintiffs fear another incident
       will occur where Defendants will negligently, carelessly or recklessly fire again
       onto Plaintiffs’ property. . . . But to no avail, Defendants continue to target practice
       on their properties on a regular basis and refuse to cease to do so.

       3.6 . . . [S]heriff’s deputies have stated that they have advised the defendants to
       install a back stop and/or other safety measures to prevent other incidents of rounds,
       fragments and/or projectiles from entering onto Plaintiffs’ property. . . . Defendants
       have refused, failed and continue to refuse and fail to take any precautions to
       prevent any further gun fire from entering onto Plaintiffs’ property.

Clerk’s Papers (CP) at 119-20.

       The Hogg/Ladley complaint asserted seven causes of action: (1) trespass, (2) assault, (3)

violation of Kitsap County Code (KCC) 10.25.020, (4) intentional infliction of emotional

distress, (5) negligent infliction of emotional distress, (6) nuisance, and (7) injunction. Relevant

here, the complaint alleged:




1
  Hogg/Ladley presumably meant “ricocheted,” and simply misspelled the word. This opinion
replaces “richotet” with “ricochet.”


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No. 52210-1-II


       4.2 Defendants, and each of them trespassed on Plaintiffs’ land, without the consent or
       authority of the Plaintiffs.
       ....

       6.2 Plaintiffs’ real property is within five hundred yards of Defendant WEBB’S
       property.

       6.3 On said date, Defendants discharged their guns in violation of Kitsap County Code
       10.25.020 towards Plaintiffs’ barn which was occupied by people and domestic animals
       and which was and is also used for the storage of flammable or combustible hay and
       other materials.
       ....

       9.2 Defendants, and each of their use of firearms and other deadly weapons on their
       properties, imminently threaten the physical safety of Plaintiffs on their property so as to
       essentially interfere with the comfortable enjoyment of Plaintiffs’ property, and
       constitutes a nuisance and should be abated.

CP at 121-23.

       The Hogg/Ladley complaint requested a decree requiring the defendants to “compensate

Plaintiffs for their actual damages.” CP at 123-24. The complaint also requested punitive

damages and temporary and permanent injunctions.

USAA Homeowners Insurance Policy

       USAA issued a homeowners insurance policy to the Webbs that was in effect between

August 2016 and August 2017. In the Webbs’ policy, the standard liability insurance section

was replaced by a “Personal Injury Endorsement.” CP at 93-94. The Webbs paid an additional

premium for this endorsement.

       The personal injury endorsement provided:

       If a claim is made or a suit is brought against any “insured” for damages because
       of “bodily injury”, “property damage” or “personal injury” caused by an
       “occurrence” to which this coverage applies, we will:
       ...
       2. Provide a defense at our expense by counsel of our choice, even if the suit is
       groundless, false or fraudulent.

CP at 93.



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No. 52210-1-II


       The endorsement defined “personal injury” to mean several listed offenses, including

“wrongful entry” and “[i]nvasion of rights of privacy.” And the definition stated, “ ‘Personal

injury’ only applies when the conduct is not malicious or criminal in nature.” CP at 93.

       The endorsement defined “occurrence” as follows:

       a. An accident, including continuous or repeated exposure to substantially the same
       generally harmful conditions, which results, during the policy period, in “bodily
       injury” or “property damage”.

       b. An event or series of events, including injurious exposure to conditions,
       proximately caused by an act or omission of any “insured”, which results, during
       the policy period, in “personal injury”, neither expected nor intended from the
       standpoint of the “insured”.

CP at 93.

       The endorsement contained an exclusion for personal injury “which is expected or

intended by the ‘insured’.” CP at 93.

USAA’s Denial of Duty to Defend

       The Webbs notified USAA about the Hogg/Ladley lawsuit. A claims examiner, claims

manager, and in house counsel all reviewed the complaint and concluded that USAA did not

have a duty to defend under the terms of its policy.

       In a June 20, 2017 letter, USAA denied coverage and a duty to defend the Hogg/Ladley

complaint. The letter stated:

       USAA’s review of your policy and the lawsuit has found there is no coverage and no
       duty to defend under the Homeowners and Umbrella Policies because some of the
       allegations in the complaint do not meet the definition of an occurrence. Intentional acts
       and Punitive damages are excluded from the policy.

CP at 143 (emphasis added). The letter then referred to the applicable policy forms and quoted

several provisions of the policy. The letter provided no further explanation for the denial of the

duty to defend.




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No. 52210-1-II


       In September, the Webbs responded and asserted that USAA had wrongfully denied

coverage. They pointed out that USAA stated that only some of the claims in the Hogg/Ladley

complaint were excluded and that USAA had failed to provide a coherent explanation for its

denial of coverage. The Webbs claimed that “USAA has a duty to defend because, as it

admitted, at least some of the allegations [in] the complaint were not excluded from coverage.”

CP at 149. The Webbs also stated that they would be filing a lawsuit against USAA and gave

notice of an IFCA claim.

       In an October 4, 2017 letter, USAA instructed the Webbs to disregard the prior denial

letter and provided an amended denial letter. The letter stated:

       USAA’s review of your policy and the allegation in the lawsuit has found there is
       no coverage and no duty to defend under the Homeowners and Umbrella Policies.
       The allegations of intentional infliction of emotional distress, negligent infliction
       of emotional distress and nuisance are intentional acts and excluded from the
       policy. Punitive damages are excluded from the policy. In addition the following
       allegations are not covered because they do not meet the definition of an occurrence
       as outlined in the policy; Trespass, Assault, Violation of Kitsap County Code
       10.25.020, Temporary Restraining Order and Permanent Injunction.

CP at 153. The letter again referred to the applicable policy forms and quoted several provisions

of the policy. The letter provided no further explanation for the denial of a duty to defend.

Webbs’ Lawsuit Against USAA

       The Webbs filed a lawsuit against USAA, alleging that USAA had breached the

insurance policy by refusing to defend the Webbs against the Hogg/Ladley lawsuit. The Webbs

also asserted that USAA’s denial of its duty to defend them against the Hogg/Ladley lawsuit was

a violation of the common law duty of good faith, IFCA, and the CPA. The Webbs requested a

declaratory judgment that USAA had a duty to defend them against the Hogg/Ladley lawsuit and

had an obligation to pay their future defense costs.




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No. 52210-1-II


       USAA moved for summary judgment, arguing it had no duty to defend the Webbs for a

variety of reasons. USAA also argued that the Webbs’ bad faith, IFCA, and CPA claims should

be dismissed.

       The Webbs also moved for partial summary judgment, arguing that the trespass and

nuisance claims in the Hogg/Ladley complaint triggered USAA’s duty to defend as a matter of

law, and that USAA’s refusal to defend was in bad faith and violated both IFCA and the CPA as

matter of law. Krista Webb submitted a declaration stating that the Webbs had incurred legal

fees because of USAA’s failure to defend.

       The trial court granted USAA’s summary judgment motion regarding all the Webbs’

claims and denied the Webbs’ motion for partial summary judgment. The court stated, “USAA

. . . has no duty to defend because the claims against [the Webbs] in the underlying Complaint

arise from an intentional act and could not conceivably be covered according to particular

provisions within the policy at issue.” CP at 565. The Webbs appeal the trial court’s summary

judgment order.

                                            ANALYSIS

A.     INSURER’S DUTY TO DEFEND

       1.   Scope of Duty

       Generally, a standard liability insurance policy imposes two distinct duties on the insurer:

the duty to defend the insured against lawsuits and the duty to indemnify the insured against

settlements or judgments. United Servs. Auto. Ass’n v. Speed, 179 Wn. App. 184, 194, 317 P.3d

532 (2014). An insurer’s duty to defend is separate from and is broader than its duty to

indemnify. Xia v. ProBuilders Specialty Ins. Co., 188 Wn.2d 171, 182, 400 P.3d 1234 (2017).

Although the duty to indemnify exists only if an insurance policy actually covers a claim, “the




                                                7
No. 52210-1-II


duty to defend arises when the policy could conceivably cover allegations in a complaint.” Id.

An insurer’s duty to defend is “one of the principal benefits of the liability insurance policy.”

Woo v. Fireman’s Fund Ins. Co., 161 Wn.2d 43, 54, 164 P.3d 454 (2007).

       Whether an insurer has a duty to defend a complaint “must be determined from the four

corners of the complaint and the four corners of the insurance policy.” Expedia, Inc. v. Steadfast

Ins. Co., 180 Wn.2d 793, 806, 329 P.3d 59 (2014). An insurer can consider facts outside of the

complaint only to find a duty to defend, not to deny a duty to defend. Id. at 803-04.

       A duty to defend exists if the facts alleged in the complaint against the insured, if proved,

would trigger coverage under the policy. Am. Best Food, Inc. v. Alea London, Ltd., 168 Wn.2d

398, 404, 229 P.3d 693 (2010). The insurer must analyze the potential for coverage. Woo, 161

Wn.2d at 52-53. The insurer must defend if “on the face of the complaint and the insurance

policy, there is an issue of fact or law that could conceivably result in coverage under the

policy.” Xia, 188 Wn.2d at 182. “[I]f there is any reasonable interpretation of the facts or the

law that could result in coverage, the insurer must defend.” Am. Best Food, 168 Wn.2d at 405.

       When reviewing a complaint, we must give the insured the benefit of the doubt in

determining the duty to defend, and a duty to defend will be found unless it is clear from the face

of the complaint that the policy does not provide coverage. Woo, 161 Wn.2d at 64. If the

complaint is ambiguous, it must be construed liberally in favor of triggering a duty to defend.

Expedia, 180 Wn.2d at 803. In addition, any “legal ambiguity” must be resolved in favor of the

insured. Am. Best Food, 168 Wn.2d at 411. The Supreme Court has expressly rejected the

notion that an insurer can deny a duty to defend based on a questionable or equivocal

interpretation of the law. Id. at 411-13; Woo, 161 Wn.2d at 60. An insurer cannot “[rely] on an




                                                  8
No. 52210-1-II


equivocal interpretation of case law to give itself the benefit of the doubt rather than its insured.”

Woo, 161 Wn.2d at 60.

       An insurer’s duty to defend applies to any allegation in a complaint that may result in a

covered liability, even if other claims in the complaint are clearly outside the scope of coverage.

See Grange Ins. Ass’n v. Roberts, 179 Wn. App. 739, 752, 320 P.3d 77 (2013) (“The obligation

[to defend] encompasses any claim that might be covered under any permissible construction of

the policy”). In other words, an insurer has a duty to defend the claims that are conceivably

covered even though other claims are not covered.

       “[A]n insurer takes a great risk when it refuses to defend on the basis that there is no

reasonable interpretation of the facts or the law that could result in coverage.” Xia, 188 Wn.2d at

182. When the allegations in the complaint or the law affecting coverage are unclear, the

insurer’s proper course of action is to defend under a reservation of rights. Am. Best Food, 168

Wn.2d at 405.

       2.    Policy Interpretation

       We must give the language in insurance policies a fair and reasonable interpretation,

considering how an average insurance purchaser would understand that language. Xia, 188

Wn.2d at 181. We give undefined terms in insurance policies their plain, ordinary, and popular

meaning. Id. at 181-82.

       However, ambiguous policy language generally will be construed against the insurer and

in favor of coverage. Kut Suen Lui v. Essex Ins. Co., 185 Wn.2d 703, 712, 375 P.3d 596 (2016).

Policy language is ambiguous “if it is susceptible to two different but reasonable interpretations.”

Id. In addition, exclusionary clauses must be strictly construed against the insurer. Am. Best

Food, 168 Wn.2d at 406.




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No. 52210-1-II


       3.    Standard of Review

       We review summary judgment orders de novo. Speed, 179 Wn. App. at 193. “Summary

judgment is appropriate when there are no genuine issues of material fact and the moving party is

entitled to judgment as a matter of law.” Xia, 188 Wn.2d at 177.

       Similarly, whether a lawsuit triggers a duty to defend is a question of law that we review

de novo. Speed, 179 Wn. App. at 194. Generally, there are no questions of fact regarding the

duty to defend. Id. at 195. Therefore, we “must decide as a matter of law either that the insurer

has a duty to defend or that no duty to defend exists.” Id. at 194.

       We interpret insurance policy language as a matter of law, and we review policy

construction de novo. Expedia, 180 Wn.2d at 802.

B.     DUTY TO DEFEND UNDER PERSONAL INJURY ENDORSEMENT

       USAA’s personal injury endorsement provides that USAA will defend an insured “[i]f a

claim is made or a suit is brought . . . for damages because of . . . ‘personal injury’ caused by an

‘occurrence’ to which this coverage applies.” CP at 93. The policy excludes coverage for

personal injury expected or intended by the insured and states that personal injury exists only

when the conduct is not criminal in nature.

       The Webbs argue that USAA had a duty to defend the Hogg/Ladley lawsuit because (1)

the trespass and nuisance claims alleged “personal injury” as defined in the policy (2) the lawsuit

was brought “for damages,” (3) the lawsuit alleged an “occurrence” – personal injury neither

expected or intended from the standpoint of the insured, (4) the exclusion for personal injury

expected or intended by the insured did not apply to the lawsuit allegations, and (5) the criminal

conduct provision did not apply to the lawsuit allegations. We agree.




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No. 52210-1-II


       1.   Trespass and Nuisance as “Personal Injury”

       USAA’s personal injury endorsement defines “personal injury” to include the undefined

term “wrongful entry.” CP at 93. The Webbs argue that the Hogg/Ladley claims for trespass

and nuisance constitute claims for “wrongful entry.” We agree.2

       In Kitsap County v. Allstate Insurance Company, the court addressed whether an insurer

had an obligation to provide liability coverage for trespass and nuisance claims. 136 Wn.2d 567,

571-72, 964 P.2d 1173 (1998). Several of the policies at issue extended coverage to “personal

injury,” which was defined to include injury arising out of “wrongful entry.” Id. at 573-74.

       The court stated that in analyzing personal injury coverage, the focus is on the type of

offense alleged – there, trespass and nuisance. Id. at 580. If trespass and nuisance claims are

“analogous” to claims for wrongful entry, there is coverage for trespass and nuisance under the

personal injury provisions. Id. In other words, if the trespass and nuisance claims are

“equivalent” to claims for wrongful entry, they are claims for personal injury. Id. at 586.

       The court reviewed dictionary definitions and noted that the term “wrongful entry”

essentially was synonymous with the word “trespass.” Id. at 587. The court concluded that “an

average purchaser of insurance would think that a trespass was a wrongful entry.” Id. at 589.

The court also concluded that a nuisance claim was equivalent to a claim for wrongful entry,

based on the similarity between trespass and nuisance claims. Id. at 592.

       Here, the Hogg/Ladley complaint asserted claims for trespass and nuisance. Under

Kitsap County, those claims are the equivalent of “wrongful entry.” Id. at 589, 592. Therefore,

the complaint alleges personal injury as defined in the USAA policy.



2
  The Webbs also argue that trespass and nuisance constitute the “invasion of rights of privacy,”
one of the offenses listed in the definition of “personal injury.” CP at 93. Because we hold that
trespass and nuisance constitute “wrongful entry,” we need not address this issue.


                                                11
No. 52210-1-II


       USAA argues that Kitsap County is distinguishable because the policies at issue in that

case defined “personal injury” to include injury “arising out of” a list of offenses that included

wrongful entry. Id. at 573. The USAA policy stated that personal injury “means” a list of

enumerated offenses that included wrongful entry. USAA contends that use of the word

“means” limits the definition of “personal injury” to the specifically enumerated offenses, and

does not include offenses that are merely equivalent to one of those enumerated offenses.

       We reject this argument. Nothing in Kitsap County suggests that use of the term “arising

out of” had any significance in the court’s analysis. In any event, a reasonable interpretation of

Kitsap County is that trespass and nuisance constitute “wrongful entry” for purposes of the

definition of personal injury. “[I]f there is any reasonable interpretation of the facts or the law

that could result in coverage, the insurer must defend.” Am. Best Food, 168 Wn.2d at 405. The

Supreme Court has rejected the notion that an insurer can refuse to defend based on an

“ ‘equivocal interpretation of case law’ ” that supports its position. Id. at 412 (quoting Woo, 161

Wn.2d at 60).

       Accordingly, we hold that the trespass and nuisance allegations conceivably allege a

“personal injury” as defined in USAA’s personal injury endorsement.

       2.    Suit “For Damages”

       USAA’s personal injury endorsement provided a duty to defend if a lawsuit was brought

against the insured “for damages” because of personal injury. CP at 93. The Webbs argue that

the Hogg/Ladley complaint requested damages caused by trespass and nuisance. We agree.

       The Hogg/Ladley complaint requested a decree requiring the Webbs to “compensate

Plaintiffs for their actual damages.” CP at 123-24. Therefore, the lawsuit was brought against

the Webbs “for damages.”




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No. 52210-1-II


          USAA acknowledges that the trespass claim was brought for damages. However, USAA

contends that the nuisance claim was not brought for damages. USAA points out that in

asserting the nuisance claim, the Hogg/Ladley complaint stated that the Webbs’ conduct

constituted a nuisance that “should be abated.” CP at 123. USAA states that abatement involves

the use of equity, not the award of damages.

          However, the Hogg/Ladley complaint did not state that abatement was the only remedy

requested for the nuisance claim. The complaint requested both actual damages and injunctive

relief without specifying which claims related to the different types of relief. Therefore, the

complaint is at least ambiguous as to whether the nuisance claim was brought for damages, and

this ambiguity must be resolved in favor of triggering a duty to defend. See Expedia, 180 Wn.2d

at 803.

          Accordingly, we hold that both the trespass and nuisance claims conceivably were

brought “for damages” as required under USAA’s personal injury endorsement.

          3.   “Occurrence” Requirement

          USAA’s personal injury endorsement provides that USAA will defend a lawsuit brought

because of personal injury caused by an “occurrence.” CP at 93. The Webbs argue that the

Hogg/Ladley complaint alleged that the trespass and nuisance were caused by an “occurrence” as

defined in the endorsement. We agree.

               a.   Inapplicability of “Accident” Requirement

          USAA argues that the Hogg/Ladley complaint did not allege an “occurrence” because all

claims arose from the Webbs’ deliberate, nonaccidental shooting of guns. USAA contends that

its policy defines “occurrence” as “an accident.” CP at 93. USAA then relies on well-settled

law that an accident is never present when a deliberate act is performed unless some additional




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No. 52210-1-II


unexpected happening occurs that causes the injury, regardless of whether the insured expected

or intended any injury. E.g., Speed, 179 Wn. App. at 198-99.

       USAA is correct that one definition of “occurrence” in the personal injury endorsement

requires an “accident.” However, the endorsement also includes a second definition: “An event

or series of events, including injurious exposure to conditions, proximately caused by an act or

omission of any ‘insured’, which results, during the policy period, in ‘personal injury’, neither

expected nor intended from the standpoint of the ‘insured’.” CP at 93. This definition does not

require an “accident.” The Webbs rely on this second definition, not on the first definition.

       In Queen City Farms, Inc. v. Central National Insurance Company of Omaha, the

Supreme Court expressly rejected the insurers’ reliance on cases addressing an “accident”

requirement when the issue was whether the insured expected or intended damage. 126 Wn.2d

50, 68, 882 P.2d 703 (1994). “The determination of what constitutes an accident, i.e., whether

injury or damage has resulted from an ‘accident’, is not dispositive on the standard for

expectation of the damages.” Id.

       As a result, USAA’s argument that the Hogg/Ladley complaint did not allege an

“accident’ is not conclusive to its duty to defend because of the second definition of

“occurrence” in the personal injury endorsement.

            b.    Expected/Intended Personal Injury

       Under the second definition of “occurrence,” the question here is whether the

Hogg/Ladley complaint alleged that the trespass and nuisance was “expected or intended” from

the Webbs’ standpoint. Two principles guide this determination.

       First, the question is whether the insured expected or intended personal injury, not

whether the insured expected or intended the conduct giving rise to the personal injury. See




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No. 52210-1-II


Woo, 161 Wn.2d at 65. This principle is dictated by the language of USAA’s endorsement,

which expressly provides that the personal injury – not the insured’s conduct – must be neither

expected nor intended from the insured’s standpoint.

       Second, whether an insured expected or intended personal injury is determined using a

subjective standard, not an objective standard. Queen City Farms, 126 Wn. 2d at 69. In other

words, the question is whether the insured subjectively expected or intended the personal injury.

Id. The language of the USAA endorsement adopts this principle, stating that whether personal

injury is expected or intended is based on “the standpoint of the ‘insured’.” CP at 93.

       In Queen City Farms, the insured sought insurance coverage for its liability for pollution

arising from an industrial waste dump site. 126 Wn.2d at 56-59. The insured allowed various

entities to deposit hazardous waste in pits located on its property. Id. at 57. The leaking of waste

from the pits resulted in groundwater contamination. Id. at 56. Certain policies required an

occurrence, defined as an event that “unexpectedly and unintentionally results in personal

injury.” Id. at 59-60. The issue presented was whether and when the insured “expected or

intended the leakage from the pits into the groundwater”; i.e., whether and when the insured

subjectively expected or intended the groundwater contamination. Id. at 70. The Supreme Court

did not even discuss the fact that the insured clearly expected and intended the initial deposit of

hazardous waste on its property.

       In Woo, the complaint alleged that the insured (an oral surgeon) had taunted the plaintiff

(the surgeon’s patient and employee) about her potbellied pigs and that he played an offensive

practical joke on her by putting boar teeth in her mouth and then taking pictures of her while she

was under anesthesia. Woo, 161 Wn.2d at 49-50, 65. The surgeon’s insurance policy covered

personal injury “neither expected nor intended from the standpoint of the insured.” Id. The




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No. 52210-1-II


Supreme Court reasoned that, based on the language of the surgeon’s policy, he had to have

“expected” or “intended” the specific “injury” alleged in the complaint to preclude coverage. Id.

Because the patient/employee’s complaint did not clearly allege that the surgeon expected or

intended that his taunts or the practical joke would cause personal injury to her, the surgeon’s

insurance carrier had a duty to defend him. Id.

       Here, like the complaint in Woo, the Hogg/Ladley complaint did not clearly allege that

the Webbs expected or intended that their target shooting would cause a trespass or a nuisance.

The complaint alleged that on January 21, 2017, John Webb and others “carelessly, recklessly,

and without regard for human or animal life, caused multiple rounds of ammunition, fragments

thereof and/or ricocheted projectiles to be shot and strafed across Plaintiffs’ property from the

property of Defendants WEBB.” CP at 119. As a result of the shooting, “[m]ultiple rounds of

ammunition, fragments, shrapnel and/or ricocheted projectiles cut through Plaintiffs’ trees. A

round, fragment, or ricocheted object also landed in the bed of Plaintiffs’ pick-up truck.” CP at

119. The complaint alleged that the defendants were shooting at a small target without using a

backstop, berm, or safety precautions. Finally, the complaint alleged that the “bullets were either

directed at Plaintiffs’ property or were the result of ricochet.” CP at 119.

       These allegations did not state that on January 21 the target shooters on the Webbs’

property subjectively expected or intended that their shooting would cause personal injury to

Hogg/Ladley in the form of trespass or nuisance. The complaint alleged that the target shooters

acted carelessly and recklessly, but not that they actually knew that bullets were entering the

Hogg/Ladley property. In fact, the complaint expressly states that the bullets may have

ricocheted onto the adjoining property. Although the shooting was deliberate, the Webbs must




                                                  16
No. 52210-1-II


have expected or intended the personal injury – here trespass and/or nuisance – to negate the

existence of an occurrence. See Woo, 161 Wn.2d at 65.

       Accordingly, we hold that the Hogg/Ladley complaint conceivably alleged an

“occurrence” with regard to the trespass and nuisance claims under the USAA personal injury

endorsement.3

       4.   Expected/Intended Exclusion

       USAA’s personal injury endorsement excludes coverage for personal injury “which is

expected or intended by the ‘insured.’” CP at 93. The Webbs argue that this exclusion does not

apply to the allegations in the Hogg/Ladley complaint. We agree.

       The language of this exclusion essentially is identical to the pertinent language of the

“occurrence” definition. Therefore, the analysis of “expected and intended” in the context of the

occurrence requirement applies equally here. As discussed above, with respect to the first

incident on January 21, the Hogg/Ladley complaint did not allege that the Webbs expected or

intended that trespass or nuisance would result when the defendants conducted target practice on

the Webbs’ property.

       As with its argument on the “occurrence” requirement, USAA claims that the

expected/intended exclusion applies if the Webbs’ conduct was intentional. USAA repeatedly

refers to the exclusion as an “intentional act” exclusion. USAA is wrong. The exclusion says

nothing about intentional acts. The policy language makes it clear that the exclusion is for

personal injury – here, the trespass and nuisance – that the insured expects or intends, not




3
 The Hogg/Ladley complaint alleges that after the initial incident on January 21, the Webbs
were informed that bullets were entering the adjoining property but they refused to stop shooting.
Arguably, at that point the Webbs expected or intended the trespass and nuisance. However, we
need not address this issue because the initial incident conceivably constituted an occurrence.


                                                17
No. 52210-1-II


conduct that the insured expects or intends. USAA’s argument that the exclusion focuses on the

intentionality of the conduct rather than on whether the resulting harm is expected or intended is

inconsistent with the plain policy language.

       Further, the two gun shooting cases that USAA cites did not even involve an

expected/intended exclusion, but focused on whether an event was an “accident” as required in

the definition of “occurrence.” See Safeco Ins. Co. of Am. v. Butler, 118 Wn.2d 383, 400-03, 823

P.2d 499 (1992); State Farm Fire & Cas. Co. v. Parrella, 134 Wn. App. 536, 540-41, 141 P.3d

643 (2006). The expected/intended exclusion in USAA’s personal injury endorsement does not

contain an accident requirement.

       Accordingly, we hold that the exclusion for expected and intended personal injury in

USAA’s personal injury endorsement conceivably does not apply.

       5.   Criminal Conduct Provision

       The USAA personal injury endorsement stated that personal injury coverage “only

applies when the conduct is not malicious or criminal in nature.” CP at 93.4 The Webbs argue

that this provision does not apply to the allegations in the Hogg/Ladley complaint. We agree.

       “[A] criminal act exclusion does not apply to all acts technically classified as crimes, but

only to serious criminal conduct ‘done with malicious intent, from evil nature, or with a

wrongful disposition to harm or injure other persons or property.’ ” Allstate Ins. Co. v. Raynor,

143 Wn.2d 469, 477, 21 P.3d 707 (2001) (quoting Van Riper v. Constitutional Gov’t League, 1

Wn.2d 635, 642, 96 P.2d 588 (1939)). “[T]he average [insurance] purchaser would not think




4
  USAA refers to this provision as an exclusion. However, it is not identified as an exclusion in
the personal injury endorsement. It appears to be part of the definition of personal injury.



                                                18
No. 52210-1-II


‘criminal acts’ means any and all criminal acts in the technical sense.” Allstate Ins. Co. v.

Peasley, 131 Wn.2d 420, 434, 932 P.2d 1244 (1997) (Madsen, J., concurring).

       USAA argues that the criminal conduct provision precludes a duty to defend because the

Webbs’ conduct as alleged in the Hogg/Ladley complaint violated KCC 10.25.020 and RCW

9.41.230.

       First, KCC 10.25.020(2)(c) prohibits the discharge of firearms in the unincorporated

areas of the county “[t]owards any building occupied by people or domestic animals . . . where

the point of discharge is within five hundred yards of such building.” Under KCC 1.12.010,

“[a]ny person violating any of the provisions or failing to comply with any of the mandatory

requirements of the resolutions or ordinances of Kitsap County is guilty of a misdemeanor.”

       The Hogg/Ladley complaint contains a cause of action alleging that the Webbs’ conduct

violated KCC 10.25.020. The criminal conduct provision arguably would preclude coverage for

that cause of action.

       However, regarding the trespass and nuisance claims, the complaint does not allege acts

sufficient to establish a violation of KCC 10.25.020. The complaint alleges that Hogg’s property

was within 500 yards of the Webbs’ property. But KCC 10.25.020 only prohibits shooting if the

point of discharge is within 500 yards of an occupied building. The complaint does not contain

any allegations about the distance between the point of discharge and an occupied building.

Therefore, it is not clear from the face of the complaint that the criminal conduct provision

precludes coverage based on a violation of KCC 10.25.020. The complaint is at least ambiguous

in this regard, and that ambiguity must be resolved in favor of a duty to defend. Expedia, 180

Wn.2d at 803.




                                                 19
No. 52210-1-II


       Second, RCW 9.41.230(1) provides that anyone who “[w]illfully discharges any firearm,

air gun, or other weapon, or throws any deadly missile in a public place, or in any place where

any person might be endangered thereby. . . . is guilty of a gross misdemeanor.” RCW

9.41.230(1)(b) specifies that “[a] public place shall not include any location at which firearms are

authorized to be lawfully discharged.”

       The Hogg/Ladley complaint does not allege a violation of RCW 9.41.230, nor does the

complaint allege facts sufficient to establish a violation. A violation of RCW 9.41.230 requires

“[w]illfully” discharging a firearm, but as stated above, the Hogg/Ladley complaint alleges that

the Webbs discharged their guns “carelessly, recklessly, and without regard for human or animal

life.” CP at 119. A violation of RCW 9.41.230 also requires discharge of a firearm in a public

place or a place where a person might be endangered. But the Hogg/Ladley complaint alleges

that the Webbs shot their guns on their own property, not in a public place. And whether target

shooting on the Webbs’ property might endanger other people is a subjective determination that

is not necessarily resolved by the complaint allegations.

       However, even if the Webbs’ conduct as alleged did violate one of these laws, the

complaint does not allege that their actions constituted “serious criminal conduct” done with a

“ ‘malicious intent’ ” or a “ ‘wrongful disposition’ ” to harm “ ‘persons or property.’ ” Raynor,

143 Wn.2d at 477 (quoting Van Riper, 1 Wn.2d at 642). On the contrary, the complaint alleges

that the Webbs “carelessly” and “recklessly” caused rounds of ammunition, fragments, and

ricocheted projectiles to enter Hogg’s property. CP at 119. And the complaint does not allege

that the Webbs were charged with a crime in relation to these incidents.

       USAA does not even acknowledge the Supreme Court’s decision in Raynor, which is

controlling authority regarding a criminal act exclusion. Instead, USAA cites to the Court of




                                                20
No. 52210-1-II


Appeals decision in Raynor and to the plurality opinion in Peasley, 131 Wn.2d at 420. But a

majority of the justices in Peasley adopted the same rule confirmed in Raynor – that criminal act

exclusions apply only to serious crimes involving some malicious or wrongful mental state.

Peasley, 131 Wn.2d at 433 (Madsen, J., concurring), 438 (Johnson, J., dissenting).

          Accordingly, we hold that the personal injury endorsement’s criminal conduct provision

conceivably does not preclude a duty to defend the Hogg/Ladley complaint.

          6.   Summary

          We conclude that USAA had a duty to defend the Webbs for the trespass and nuisance

claims in the Hogg/Ladley complaint because none of the arguments USAA makes to support its

refusal to defend the Webbs has merit. Accordingly, we hold that the trial court erred in granting

USAA’s summary judgment motion and denying the Webbs’ motion for partial summary

judgment on the Webbs’ duty to defend claim.

C.        BAD FAITH CLAIM

          The Webbs argue that the trial court erred in granting USAA’s summary judgment

motion and denying their summary judgment motion regarding their claim that USAA’s refusal

to defend them was in bad faith. We agree.

          1.   Legal Principles

          “An insurer acts in bad faith if its breach of the duty to defend was unreasonable,

frivolous, or unfounded.” Am. Best Food, 168 Wn.2d at 412. A breach of the duty to defend

does not automatically constitute bad faith. See id. at 413 n.5. There is no bad faith where the

insurer denies coverage or fails to provide a defense based on a reasonable interpretation of the

insurance policy. Truck Ins. Exch. v. VanPort Homes, Inc., 147 Wn.2d 751, 777, 58 P.3d 276

(2002).




                                                  21
No. 52210-1-II


       An insurer is not automatically liable for bad faith if it wrongfully denies a duty to

defend. See Am. Best Food, 169 Wn.2d at 413 n.5. But in order to avoid bad faith liability for

wrongfully denying a duty to defend, an insurer must show that it had a reasonable, nonfrivolous

argument that there was no “reasonable interpretation of the facts or the law that could result in

coverage.” See id. at 413. The insurer also must show that it “did not put its own interest ahead

of its insured when it denied a defense.” Id.

       An insurer’s failure to defend based on a “questionable interpretation of law” or an

“arguable interpretation of its own policy” is unreasonable and constitutes bad faith as a matter

of law. Id. at 413-14.

       2. Bad Faith Analysis

       USAA raised several grounds for denying the duty to defend. As discussed above, we

hold that none of these grounds provide a legitimate basis for denying a duty to defend the

Webbs. The question regarding the Webbs’ bad faith claim is whether these grounds were

“unreasonable, frivolous, or unfounded.” Am. Best Food, 168 Wn.2d at 412.

       USAA’s second denial letter only referenced one ground for denying a defense of the

trespass claim and one ground for denying a defense of the nuisance claim. But the letter

provided no explanation, and did not address the more recently asserted grounds. Therefore, we

must look to USAA’s appellate briefing to determine the reasonableness of its positions.

            a.   Trespass and Nuisance as “Personal Injury”

       USAA argued that neither trespass nor nuisance falls within the policy definition of

“personal injury” because neither was specifically included in the list of offenses that constituted

personal injury under the policy definition. However, as discussed above, wrongful entry is

included in the policy definition of “personal injury.” CP at 93. And in Kitsap County, the




                                                 22
No. 52210-1-II


Supreme Court unequivocally held that both trespass and nuisance are equivalent to wrongful

entry. 136 Wn.2d at 589, 592.

       USAA argued that Kitsap County can be distinguished based on a difference in the policy

language. But even if the argument has some merit, denying a duty to defend despite a

controlling Supreme Court case to the contrary is a classic example of an insurer putting “its own

interest ahead of its insured” based on a questionable interpretation of case law. Am. Best Food,

168 Wn.2d at 413. That constitutes bad faith as a matter of law. Id.

       Finally, it is worth noting that USAA did not even reference the definition of “personal

injury” in either denial letter or in the trial court. Instead, USAA on appeal attempted to assert a

new – and meritless – ground for denying a duty to defend that had nothing to do with its initial

refusal to defend the Webbs.

       Therefore, we conclude that USAA’s position regarding the personal injury definition is

unreasonable and frivolous and constitutes bad faith as a matter of law.

            b.    Suit “for Damages” – Nuisance

       USAA argued that the nuisance claim was not asserted “for damages” as required under

the personal injury endorsement. This argument was based on an allegation in the complaint that

the nuisance should be abated, which is equitable relief. However, as stated above, the

complaint specifically requested an award of actual damages and did not limit that request to

only certain claims. And the complaint did not state that abatement was the only remedy

requested for the nuisance claim.

       The complaint was at least ambiguous regarding whether Hogg/Ladley sought damages

for the nuisance claim. USAA was required to liberally construe that ambiguity in favor of

triggering a duty to defend. Woo, 161 Wn.2d at 53. Instead, USAA construed the ambiguity in




                                                 23
No. 52210-1-II


favor of itself and placed its own interests ahead of its insured’s interests. That constitutes bad

faith as a matter of law. See Am. Best Food, 168 Wn.2d at 413.

       Finally, even if USAA’s position had been correct on the “for damages” requirement,

USAA acknowledged that its position only applied to the nuisance claim. USAA still had an

obligation to defend the trespass claim, which clearly was brought “for damages.”

       Therefore, we conclude that USAA’s position regarding the “for damages” requirement is

unreasonable and frivolous and constitutes bad faith as a matter of law.

             c.   Occurrence Definition

       USAA argued that the alleged trespass and nuisance did not did not fall within the policy

definition of an “occurrence” because the defendants deliberately fired the guns and therefore

there was no “accident.” USAA relied on the first definition of “occurrence” in the personal

injury endorsement, which requires that an “accident” result in bodily injury or property damage.

       However, as discussed above, USAA relied on the wrong definition of “occurrence.”

The second definition does not require an “accident,” and instead requires an “event or series of

events” that results in personal injury “neither expected nor intended” by the insured. CP at 93.

And regarding the second definition, the Supreme Court in Queen City Farms made it clear that

“whether injury or damage has resulted from an ‘accident’, is not dispositive on the standard for

expectation of the damages.” 126 Wn.2d at 68.

       Therefore, we conclude that USAA’s position regarding the occurrence definition is

unreasonable and frivolous and constitutes bad faith as a matter of law.

             d.   Expected/Intended Exclusion

       USAA argued that the trespass and nuisance claims are excluded from coverage under an

“intentional act” exclusion because the Hogg/Ladley complaint alleged the defendants




                                                 24
No. 52210-1-II


intentionally shot the guns. However, as discussed above, there is no “intentional act” exclusion;

the expected/intended exclusion says nothing about intentional acts. The policy language states

that the exclusion applies to personal injury that the insured expects or intends, not conduct that

the insured expects or intends. USAA’s argument that the exclusion focuses on the intentionality

of the conduct rather than on whether the resulting harm is expected or intended is inconsistent

with the plain policy language. Denying a duty to defend based on a questionable interpretation

of policy language that gives the insurer rather than the insured the benefit of the doubt

constitutes bad faith as a matter of law. Am. Best Food, 168 Wn.2d at 413-14.

       Further, as discussed above USAA relies on two cases that address an “accident”

requirement, not an expected/intended exclusion. See Butler, 118 Wn.2d at 400-03; Parrella,

134 Wn. App. at 540-41. Denying a duty to defend based on a questionable interpretation of

case law constitutes bad faith as a matter of law. Am. Best Food, 168 Wn.2d at 413.

       Therefore, we conclude that USAA’s position regarding the expected/intended exclusion

is unreasonable and frivolous and constitutes bad faith as a matter of law.

            e.   Criminal Conduct Provision

       USAA argued that the criminal conduct provision precluded a duty to defend the trespass

and nuisance claims because the Webbs’ conduct as alleged in the Hogg/Ladley complaint

violated KCC 10.25.020 and RCW 9.41.230. However, as discussed above, the Hogg/Ladley

complaint did not clearly allege that the conduct giving rise to the trespass and nuisance claims

involved criminal conduct. And the case law is clear that only serious criminal conduct that

involves a malicious intent or wrongful disposition to commit harm to persons or property will

support the denial of coverage under a criminal conduct provision. Raynor, 143 Wn.2d at 477.




                                                 25
No. 52210-1-II


The complaint makes no such allegation regarding the initial incident. And USAA did not even

acknowledge the Supreme Court’s decision in Raynor even though it is controlling authority.

       Denying a duty to defend based on a questionable interpretation of policy language or

case law that gives the insurer rather than the insured the benefit of the doubt constitutes bad

faith as a matter of law. Am. Best Food, 168 Wn.2d at 413-14. Therefore, we conclude that

USAA’s position regarding the criminal conduct provision is unreasonable and frivolous and

constitutes bad faith as a matter of law.

             f.   Summary

       When an insurer evaluates whether to defend a lawsuit against its insured, Washington

law is clear that the insurer must ask if there is any conceivable way that one or more of the

claims asserted in the lawsuit is covered under the applicable policy. Xia, 188 Wn.2d at 182.

USAA did just the opposite, seemingly asking whether there was any conceivable way that its

policy did not provide coverage for the Hogg/Ladley complaint.

       USAA’s disregard of its clear duty to defend the trespass and nuisance claims asserted

against its insureds constitutes bad faith as a matter of law. Accordingly, we hold that the trial

court erred in granting USAA’s summary judgment motion and denying the Webbs’ motion for

partial summary judgment on the Webbs’ bad faith claim.

D.     IFCA CLAIM

       The Webbs argue that the trial court erred in granting USAA’s summary judgment

motion and denying their motion for partial summary judgment regarding their claim that

USAA’s denial of its duty to defend the Webbs under the personal injury endorsement violated

IFCA. We agree.




                                                 26
No. 52210-1-II


       Under IFCA, a “first party claimant” can recover damages if an insurer “unreasonably

denie[s] a claim for coverage or payment of benefits.” RCW 48.30.015(1). A “first party

claimant” includes an individual “asserting a right to payment as a covered person under an

insurance policy.” RCW 48.30.015(4). If an insurer acted unreasonably in denying a claim for

coverage, the trial court may award up to three times the actual damages and shall award

attorney fees to the claimant. RCW 48.30.015(2), (3).

       As discussed above, we hold that each of USAA’s arguments to support its refusal to

defend the Webbs is unreasonable as matter of law. A refusal to defend constitutes a denial of a

claim for coverage. Therefore, USAA is liable to the Webbs under IFCA. We hold that the trial

court erred in granting USAA’s summary judgment motion and denying the Webbs’ motion for

partial summary judgment on the Webbs’ IFCA claim.

E.     CPA CLAIM

       The Webbs argue that the trial court erred in granting USAA’s summary judgment

motion and denying their motion for partial summary judgment regarding their claim that

USAA’s denial of its duty to defend them violated the CPA. We agree.

       The CPA provides that “[u]nfair methods of competition and unfair or deceptive acts or

practices in the conduct of any trade or commerce are . . . unlawful.” RCW 19.86.020. The

purposes of the CPA are “to protect the public and foster fair and honest competition.” RCW

19.86.920. The CPA must to be liberally construed. RCW 19.86.920.

       To prevail on a CPA claim, “ ‘a plaintiff must establish five distinct elements: (1) unfair

or deceptive act or practice; (2) occurring in trade or commerce; (3) public interest impact; (4)

injury to plaintiff in his or her business or property; (5) causation.’ ” Perez-Crisantos v. State




                                                 27
No. 52210-1-II


Farm Fire & Cas. Co., 187 Wn.2d 669, 685, 389 P.3d 476 (2017) (quoting Hangman Ridge

Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wn.2d 778, 780, 719 P.2d 531 (1986)).

         RCW 48.30.010(1) prohibits unfair practices and deceptive acts for those engaged in the

business of insurance. A violation of RCW 48.30.010 is per se an unfair trade practice and

satisfies the first element of the five-part test for bringing a CPA action. Indus. Indem. Co. of the

NW, Inc. v. Kallevig, 114 Wn.2d 907, 920-23, 792 P.2d 520 (1990). Because USAA’s

arguments supporting its refusal to defend the Webbs were unreasonable and frivolous, the

Webbs established the first element of a CPA claim as a matter of law.

         The Webbs also presented sufficient evidence of the remaining elements of the CPA

claim for summary judgment: (1) the Webbs’ interaction with USAA occurred in the insurance

trade, (2) the public has an interest in fair insurance practices, (3) the Webbs were injured when

they incurred legal fees in defending themselves against the Hogg/Ladley suit, and (4) USAA’s

denial of the duty to defend was the cause of their injury. USAA does not dispute the existence

of these elements. We hold that the trial court erred in granting USAA’s summary judgment

motion and denying the Webbs’ motion for partial summary judgment on the Webbs’ CPA

claim.

                                          CONCLUSION

         We reverse the trial court’s order granting summary judgment in favor of USAA and

denying the Webbs’ motion for partial summary judgment. We remand for entry of partial




                                                 28
No. 52210-1-II


summary judgment in favor of the Webbs on their duty to defend, bad faith, IFCA, and CPA

claims and for further proceedings.



                                                  MAXA, C.J.

 We concur:



MELNICK, J.




GLASGOW, J.




                                             29
