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Honorable Benjamin H. Settle

5 6

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT TACOMA GALP SIERRA VISTA, L.P., a Washington BAYTOWN, L.P., a Delaware limited ROLLINGBROOK, L.P., a Delaware Case No. 3:10-cv-05647 BHS SECOND AMENDED COMPLAINT FOR BREACH OF CONTRACT AND DECLARATORY RELIEF

7 limited partnership; WENTWOOD 8 partnership; WENTWORTH

9 limited partnership; EQUITY FUNDING ,

10 11 12
RSUI INDEMNITY COMPANY; A New Hampshire corporation, ILLINOIS UNION INSURANCE COMPANY, an Illinois 14 Corporation; a Washington Limited Liability Company, Plaintiffs,

13

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Defendants. COME NOW Plaintiffs, (hereinafter referred to as "Equity Funding, LLC"), by and

17 through its counsel, Cole, Wathen, Leid & Hall, P.C., and allege as follows: 18
1.1 I. PARTIES

Plaintiff GALP Sierra Vista Limited Partnership is a limited partnership organized

19
under the laws of the State of Washington with its principal place of business in Tacoma,

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Washington.
SECOND AMENDED COMPLAINT FOR BREACH OF CONTRACT AND DECLARATORY RELIEF - 1 3:10-cv-05647BHS P:\FILES\Equity Funding, LLC 11117\Second Amended Complaint.doc
COLE W A T H E N LEID & HALL, P.C.
1000 SECOND AVENUE, SUITE 1300 SEATTLE, WASHINGTON 98104

(206) 622-0494/FAX (206) 587-2476

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1.2

Plaintiff Wentwood Baytown Limited Partnership is a limited partnership

organized under the laws of the State of the State of Delaware, with its principal place of 3 A 5 6 7 8 9 10 11 RSUI sold a policy of insurance to Graoch Associates, insuring properties owned by Plaintiffs, 12 13 14 jc 16 17 18 19 20 and naming Plaintiffs as Insureds. 1.6 Centrum Financial Services, Inc. is a Washington Corporation. Centrum business in Tacoma, Washington 1.3 Plaintiff Wentwood RoUingbrook Limited Partnership is a limited partnership

organized under the laws of the State of Delaware, with its principal place of business in Tacoma, Washington 1.4 Plaintiffs GALP Sierra Vista Limited Partnership, Wentwood Baytown Limited

Partnership, and Wentwood RoUingbrook Limited Partnership are associated with Named Insured Graoch Associates, an unincorporated entity headquartered in Tacoma, Washington 1.5 Defendant RSUI Indemnity Company ("RSUT') is a corporation organized under

the laws of the State of New Hampshire with its principal place of business in Atlanta, Georgia. RSUI is licensed to do and does business in the State of Washington as an admitted insurer

Financial Services has assigned the Deed of Trust and all rights pursuant to said Deed of Trust to Equity Funding, LLC. Hereinafter the lender will be referred to as Equity Funding, LLC. 1.7 Equity Funding, LLC, Inc. is a Washington Corporation with its principal place of

business in King County Washington. Equity Funding, LLC is licensed to do and does business in the state of Washington. Equity Funding, LLC was the underlying lender to Wentwood RoUingbrook, L.P. 1.8 The Defendant Illinois Union Insurance Company is believed to be a an Illinois

Corporation with offices in the state of Illinois;

SECOND AMENDED COMPLAINT FOR BREACH OF CONTRACT AND DECLARATORY RELIEF - 2 i ifLrv nsfi47 nwq P : ^ E s 4 q ^ F L i n g , LLC 11117\Second Amended Complaint.doc COLE WATHEN LEID & HALL, P.C. 1000 SECOND AVENUE, SUITE 1300 SEATTLE, WASHINGTON 98104 (206)622-0494/FAX(206)587-2476

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II.

VENUE AND JURISDICTION

Jurisdiction is proper pursuant to 28 U.S.C. 1332. The matter in controversy

exceeds $75,000, exclusive of interest and costs, and the controversy is between citizens of different states. 2.2 Venue is proper in the United States District Court for the Western District of

Washington at Tacoma pursuant to 28 U.S.C. 1391. A substantial part of the events giving rise to the claim occurred in Pierce County in the Western District of Washington. 7 8 9 10 11 Insurance Company Policy No. D36063385 002 (the "Primary Policy"). An uncertified copy of 12 13 14 15 16 17 18 19 20 Policy. 3.4 The Policy is a property policy in effect from November 27, 2007 to November the Primary Policy was attached as Exhibit A, Docket No. 1-1 to the original Complaint, and incorporated herein by this reference. 3.3 Plaintiffs are specifically incorporated as Named Insureds under the Primary A. The Policy 3.1 RSUI sold Policy No. NHD355332 (the "Policy") to Graoch Associates, which III. STATEMENT OF FACTS

provides all risk property coverage to certain properties owned by Plaintiffs in the State of Texas. 3.2 The Policy is an excess insurance policy that follows the form of Illinois Union

27, 2008. An uncertified copy of the Policy was attached as Exhibit B, Docket No. 1-1 to the original complaint, and incorporated herein by this reference. 3.5 The Policy was issued in the State of Washington, the premiums paid from the

State of Washington, and all claims managed and handled by the insureds in the State of Washington.
SECOND AMENDED COMPLAINT FOR BREACH OF CONTRACT AND DECLARATORY RELIEF - 3 COLE WATHEN LEID & HALL, P.C. 1000 SECOND AVENUE, Sune 1300
(206) 622-0494/FAX (206) 587-2476

3:10-cv-05647 BHS
P:\FILES\Equity Funding, LLC 11117\Second Amended Complaint.doc

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3.6

The Primary Policy provides coverage for physical loss or damage to covered

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property occurring as a result of a Covered Cause of Loss. 3.7 B. A Named Storm is a Covered Cause of Loss.

Circumstances Surrounding the Loss 3.8 GALP Sierra Vista Limited Partnership owns a residential apartment complex

known as Sierra Vista and located in Houston, Texas. 3.9 Wentwood Baytown Limited Partnership owns a residential apartment complex

known as Briarwood and located in Baytown, Texas. 3.10 Wentwood Rollingbrook Limted Partnership owned a residential apartment

complex known as Creekside and located in Baytown, Texas. 3.11 Named Storm Hurricane Dee made landfall in Galveston, Texas on September 13,

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2008. Hurricane Dee's effects extended to surrounding areas, including Baytown, Texas, and Houston, Texas, where Plaintiffs' properties are located. 12 13 14 15 16 17 18 19 20
SECOND AMENDED COMPLAINT FOR BREACH OF CONTRACT AND DECLARATORY RELIEF - 4 3:10-cv-05647BHS P:\FILES\Equity Funding, LLC 11117\Second Amended Complaint.doc COLE WATHEN LEID & HALL, P.C. 1 SECOND AVENUE, SUITE,1300
SEATTLE, WASHINGTON 98104 (206) 6 2 2 - 0 4 9 4 / F A X (206) 587-2476

3.12

As a result of Hurricane Dee, Sierra Vista, Briarwood, and Creekside experienced

property damage. 3.13 As a result of the covered property damage to Sierra Vista caused by Hurricane

Dee, GALP Sierra Vista Limited Partnership has suffered loss including repair and replacement costs, rental costs, and costs to bring structures into compliance with laws and ordinances. 3.14 As a result of the covered property damage to Briarwood caused by Hurricane Dee,

GALP Wentwood Baytown Limited Partnership has suffered loss including repair and replacement costs, rental costs, and costs to bring structures into compliance with laws and ordinances.

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3.15 2 3
4

Wentwood Rollingbrook defaulted on a loan owed to Equity Funding, LLC. As a

result of the default, Equity Funding, LLC has exercised its right to foreclose upon the property commonly known as Creekside located in Baytown, Texas 3.16 Claims which have been submitted by the plaintiff have been for the purpose of

providing coverage for physical loss and damage to the Creekside Apartments. Said claims are 5 for the benefit of Equity Funding, LLC 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 3.17 As a result of the covered property damage to Creekside caused by Hurricane Ike,

Equity Funding has suffered loss including repair and replacement costs, rental costs, and costs to bring structures into compliance with laws and ordinances. C. RSUI's Failure to Pay Covered Loss 3.18 Plaintiffs submitted claims for loss as a result of damage caused to their respective

properties by Hurricane Ike to their four property insurers, including RSUI 3.19 3.20 policies. 3.21 RSUI Policy. 3.22 RSUI has made no payments under the Policy for damage to Sierra Vista, Payment of policy limits by each of Plaintiffs' three other insurers triggered the Plaintiffs' primary insurer paid its limits of $5 million under the Primary Policy. Each of two other excess insurers paid their limits of $5 million under their excess

Briarwood, or Creekside. 3.23 RSUI has offered to pay sums for damage to Sierra Vista, Briarwood, and

Creekside that are insufficient to reimburse Plaintiffs for their covered losses. 3.24 RSUI has made its offers of payment contingent on Plaintiffs' releases of all

remaining claims under the Policy. RSUI's contingent offers violate, inter alia, Washington

SECOND AMENDED COMPLAINT FOR BREACH OF

CONTRACT AND DECLARATORY RELIEF - 5

C O L E W A T H E N LEID & H A L L , P . C .
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, . l n ... n e o n R H c I', 1 ~ 5 _ -. r r , , , i* ^ A P:\FILES\Equity F u n d i n g , L L C 1 1 1 1 7 \ S e c o n d A m e n d e d Complaint.doc

SEATTLE, WASHINGTON 98104 (206) 622-0494/FAX (206) 5 8 7 - 2 4 7 6

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State's Unfair Claims Settlement Practices Act, WAC 284-30-330 et seq. Plaintiffs have declined

2 to accept RSUI's offers on that basis. 3 D. 4 5 6

3.26 Centrum Financial was unaware the check had been issued. Illinois Union did not Illinois Union 3.25 Upon information and belief, Illinois Union issued a check in the amount of

$750,000 ostensibly for emergency services and temporary repairs, clean up, etc. The check named Centrum Financial.

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advise Centrum Financial that such check would be issued. 3.27 Upon information and belief, the check was delivered directly to representatives

9 of Wentwood Rollingbrook.
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3.29 Centrum Financial has not received any of the proceeds of the Illinois Union 3.28 The check was never endorsed by Centrum Financial. The check was negotiated

and honored by Illinois Union's bank without proper endorsement.

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$750,000 payment. IV. Breach of Contract 4.1 Plaintiffs re-allege the allegations contained in paragraphs 1.1 through CLAIMS AGAINST RSUI

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3.22 as though fully set forth in this section. 4.2 The Policy contains no exclusions or limitations that would preclude

coverage of Plaintiffs' claims.

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4.3

RSUI's failure to pay Plaintiffs' losses in accordance with the Policy terms

19 constitutes breach of the Policy for which no justification exists. 20

SECOND AMENDED COMPLAINT FOR BREACH OF CONTRACT AND DECLARATORY RELIEF - 6 3:10-cv-05647BHS P:\FILES\Equity Funding, LLC 11117\Second Amended Complaint.doc
COLE W A T H E N LEID & HALL, P.C.
1000 SECOND AVENUE, SUITE 1300 SEATTLE, WASHINGTON 98104

(206) 622-0494/FAX (206) 587-2476

GSEE8B93B1twQ!3SS&flBlrS [Etemrre3nrtt3B

Filed 0422BM12I Ft%g#977&TJf1t3D

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4.4

As a direct and proximate result of RSUI's breach of its contract of

insurance with Plaintiffs, Plaintiffs have sustained considerable damage including, but not limited to, direct and consequential damages and attorneys' fees. 4.5 RSUI is obligated to make payment directly to Equity Funding, LLC for losses

occurring at Creekside by virtue of the Lender Loss provision contained in the policy of insurance. 4.6 RSUI has made no offer to Equity Funding, LLC for losses occurring at

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Creekside. 4.7 RSUI's failure to inadequately protect Equity Funding, LLC constitutes a breach

of the insurance contract. 4.8 trial. Equity Funding, LLC has been damaged in an amount to be proven at the time of

10 11 B. 12 13 14 15 16 17 18 19 20

Declaratory Relief 4.9 Plaintiffs re-allege paragraphs 1.1 through 4.4 as though fully set forth in this

section. 4.10 The allegations in this complaint present a justiciable controversy subject to

declaratory relief. The matter in controversy exceeds $75,000, exclusive of interest and costs, and the controversy is between parties who are citizens of different states. Plaintiffs are entitled to a declaration that the Policy of insurance issued by RSUI requires RSUI to pay Plaintiffs' losses sustained as a result of Hurricane Ike. C. Entitlement to Attorney's Fees 4.11 section.
SECOND AMENDED COMPLAINT FOR BREACH OF CONTRACT AND DECLARATORY RELIEF - 7 3:10-cv-05647BHS P:\FILES\Equity Funding, LLC 11117\Second Amended Complaint.doc
COLE W A T H E N LEID & HALL, P.C.
1000 SECOND AVENUE, SUITE 1300 SEATTLE, WASHINGTON 98104

Plaintiffs re-allege paragraphs 1.1 through 4.6 as though fully set forth in this

(206) 622-0494/FAX (206) 587-2476

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4.12

Under the doctrine of Olympic Steamship v. Centennial Ins. Co., Plaintiffs are

2 entitled to all of their attorneys' fees and costs incurred in securing the benefits of the RSUI 3 Policy. 4 5 6
5.1 section. 5.2 The Illinois Union policy of insurance requires that it protect the interests of the V. CLAIMS AGAINST ILLINOIS UNION

Plaintiffs re-allege paragraphs 1.1 through 4.12 as though fully set forth in this

7 lender Centrum Financial now known as Equity Funding. 8

5.3 Illinois Union has issued a check reportedly protecting the interests of Centrum

9 Financial, nka Equity Funding. As a result of the improper endorsement, the check was never
10 1 1
owed under the policy of insurance. paid to Equity Funding. 5.4 Illinois Union still owes the obligation to pay Equity Funding $750,000 as it is

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5.5

Equity Funding has been damaged in that it has not received the benefits of the

13 contract. 14
5.6 Equity Funding has been damaged in an amount of $750,000 plus pre-judgment

15 interest. 16 17
6.1 Money Damages. For money damages in an amount to be proved at trial, together VI. PRAYER FOR RELIEF

WHEREFORE, Equity Funding prays for the following relief:

18 with pre-judgment and post-judgment interest. 19

6.2 Declaratory Relief. A declaration that Illinois Union and RSUI are required to

20 pay the losses sustained by Equity Funding as a result of Hurricane Ike.

SECOND AMENDED COMPLAINT FOR BREACH OF CONTRACT AND DECLARATORY RELIEF - 8
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COLE WATHEN LEID & HALL, P.C. 100 SECOND AVENUE, SUITE 1300
SEATTLE, WASHINGTON 9 8 1 0 4 (206) 622-0494/FAX (206) 5 8 7 - 2 4 7 6

P:\FILES\Equity Funding, LLC 11117\Second Amended Complaint.doc

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6.3

Attorneys' Fees and Costs of Suit. For reasonable attorneys' fees and costs,

including, without limitation, actual attorneys' fees pursuant to Olympic Steamship Co. v. Centennial Ins. Co., 117 Wn.2d 37, 811 P.2d 673 (1991). 6.4 and proper. Other Relief. For such other relief, equitable or at law, as the Court deems just

Dated this

[fT2z day of December, 2011. COLE, WATHEN, LEID & HALL, P.C.

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SECOND AMENDED COMPLAINT FOR BREACH OF CONTRACT AND DECLARATORY RELIEF - 9 3:10-cv-05647BHS P:\FILES\Equity Funding, LLC 11117\Second Amended Complaint.doc
COLE W A T H E N LEID & HALL, P.C.
1000 SECOND AVENUE, SUITE 1300 SEATTLE, WASHINGTON 98104

Rick J Wathen, WSBA # 25539 Attorney for Plaintiff Equity Funding 1000 Second Avenue, Suite 1300 Seattle, WA 98104 Phone: 206-622-0494/Fax: 206-587-2476

(206) 622-0494/FAX (206) 587-2476

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CERTIFICATE OF SERVICE I hereby certify that on the date below, I electronically filed the foregoing with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following participants: 4 5 6 7 8 9 Insurance Commissioner's Office 5000 Capitol Boulevard Tumwater, Washington 98501
Matthew J. Sekits Bullivant|Houser|Bailey PC 1601 Fifth Avenue, Suite 2300 Seattle, WA 98101-1618 manhew.sekits@bullivant.com Phone: 206.521.6452 - Fax: : 206.386.5130

] ] [ ] [X]

Via US Mail Via Hand Delivery/Messenger Service Via Facsimile Via CM/ECF

Counsel for RSUI [ [x [ [ ] ] ] ] Via US Mail Via Process Service Via Facsimile Via CM/ECF

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I declare under penalty of perjury under the laws of the State of Washington that the

11 foregoing is true and correct. 12 13 14 15 16 17 18 19 20

SECOND AMENDED COMPLAINT FOR BREACH OF CONTRACT AND DECLARATORY RELIEF - 10 3:10-cv-05647BHS P:\FILES\Equity Funding, LLC 11117\Second Amended Complaint.doc
COLE W A T H E N LEID & HALL, P.C.
1000 SECOND AVENUE, SUITE 1300 SEATTLE, WASHINGTON 98104

DATED at Seattle, Washington, this

Natasha Johnston, Local Assistant

(206) 622-0494/FAX (206) 587-2476