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Hayden v. Mutual of Enumclaw Insurance Co.6/15/2000
Oral Argument Date: 02/17/2000
En Banc
Hayden Farms seeks review of the summary judgment dismissal of its suit against the Mutual of Enumclaw Insurance Company (MOE) for recovery of insurance benefits and breach of the duty to defend. We hold that the duty to defend was properly denied based on the policy's "loss of use" exclusion; thus, the Court of Appeals' decision is affirmed.
I. Facts
Hayden Farms planted rootstock in the spring of 1988 intending to graft scion wood (a tree branch with several buds from a particular species of fruit tree) onto the stock to create a variety of fruit trees. Clerk's Papers (CP) at 92. In November, Hayden Farms hired James Krause, a self- proclaimed grafting expert, to perform the grafting in the spring of 1989. Both Krause and Hayden Farms provided the scion wood to be used.
The grafting was postponed until September 1989, however, because the buds were damaged while in Krause's care. New scion wood was provided by both Krause and Hayden Farms. When Krause finally performed the grafting, less than 10 percent of the grafts were successful. Krause accepted the blame, attributing the failure to a new type of tape he used.
Krause agreed to try grafting again in the spring of 1990. Again, both Krause and Hayden Farms provided new scion wood. The grafting was again postponed, however, because Krause improperly stored the scion wood. Notably, the rootstock remained undamaged.
Fed up, Hayden Farms hired someone else to perform the grafting in the fall of 1990; this time nearly all of the new grafts were successful. Hayden Farms subsequently sued Krause for breach of contract and negligence.
The relevant portion of Hayden Farms' complaint states:
In the spring of 1988, {Hayden Farms} planted approximately 22 acres of Julian rootstocks for the purpose of budding and/or grafting over onto such trees or rootstocks certain highly desirable varieties of plums, peaches and nectarines. {Hayden Farms} contacted defendant James Krause for the purpose of having him perform the necessary budding or grafting; . . . . In the spring of 1989, the bud wood to be used apparently froze, and Mr. Krause stated he could bud in August. Mr. Krause did not do the work until the end of September, 1989, and, in doing so, either improperly performed the budding or used improper materials or both. The buds loosened without fault on the part of plaintiffs, and did not take. Mr. Krause then advised he would collect additional scion wood and perform grafting to the trees in the spring of 1990. Although {Hayden Farms} attempted to get Mr. Krause to do the grafting work, he failed to comply, asserting that the graft wood did not store, that it was his fault, and he would do the work in the fall of 1990. {Hayden Farms}, having sustained a substantial crop loss by reason of the delays occasioned by the default on the part of defendant Krause, and having reason to believe that Mr. Krause will not satisfactorily perform or respond in damages to {Hayden Farms}, have determined that other procedures will be followed. CP at 239-40 (emphasis added). The complaint further states that "By reason of the fault of defendant James Krause, . . . {Hayden Farms has} sustained substantial damages . . . . {Krause's} conduct constitutes breach of contract and negligence." CP at 240.
Krause tendered defense of the suit to MOE through which Krause had a comprehensive general liability (CGL) policy. Under the policy, MOE agreed to indemnify Krause for all damages that he becomes legally obligated to pay because of "PROPERTY DAMAGE to which this insurance applies, caused by an OCCURRENCE." CP at 122.
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