[No. 59024-3-I. Division One. January 22, 2008.]
[1] Judgment — Summary Judgment — Review — Role of Appellate Court. When reviewing a summary judgment, an appellate court undertakes the same inquiry as the trial court under CR 56(c), viewing the facts submitted and the inferences therefrom in the light most favorable to the nonmoving party. [2] Judgment — Summary Judgment — Burden on Moving Party — Absence of Factual Issue. A party moving for summary judgment has the initial burden of showing that the case does not present any genuine issues of material fact. [3] Insurance — Construction of Policy — Question of Law or Fact — In General. The interpretation of an insurance policy is a question of law. [4] Insurance — Construction of Policy — Average Purchaser — Policy as a Whole. An insurance policy is construed as a whole and is given a fair, reasonable, and sensible construction as would be given by the average person purchasing insurance. [5] Insurance — Construction of Policy — Meaning of Words — Defined Terms. A term in an insurance policy that the policy specifically defines is interpreted consistently with the policy definition. [6] Insurance — Construction of Policy — Unambiguous Language — In General. Clear and unambiguous insurance policy language is enforced as written. [7] Insurance — Construction of Policy — Ambiguity — What Constitutes — In General. Insurance policy language is ambiguous if, on its face, it is fairly susceptible to two different reasonable interpretations. [8] Courts — Stare Decisis — Dicta — What Constitutes. Statements in an appellate opinion that do not relate to an issue before the court and that are unnecessary to decide the case constitute obiter dictum and need not be followed. [9] Insurance — Claim for Loss — Amount of Loss — Actual Cash Value — What Constitutes. An actual cash value coverage provision in an insurance policy that provides for "fair market value of the property at the time of the loss" provides only indemnification for a loss. Replacement cost considerations do not apply because they apply only if actual replacement is undertaken. Actual cash value coverage does not entitle the insured to any more than indemnity for the actual loss sustained so as to place him or her in the same financial condition as he or she would have been in if there had been no property damage. [10] Insurance — Claim for Loss — Amount of Loss — Actual Cash Value — Scope — Sales Tax. Under an actual cash value coverage provision in an insurance policy that provides for "fair market value of the property at the time of the loss," sales tax is reimbursable only when incurred by the insured. The use of replacement value in calculating the fair market value under an actual cash value coverage provision does not include sales tax if the item is not replaced, but does include sales tax if the tax is incurred. This differential treatment is not ambiguous; it is a consistent application of the principles of indemnification. [11] Insurance — Property Damage — Amount of Loss — Actual Cash Value and Replacement Cost Valuation — Indemnity. When an insured elects not to replace an insured item of damaged property and does not make a claim under the replacement coverage provision of the policy but, instead, claims under the actual cash value provision, the actual cash value provision acts as an indemnity clause and provides indemnity only, not the replacement value or sales tax not incurred. Nature of Action: An insured who suffered property damage and was compensated for the loss by her insurer upon her claim under the actual cash value provision of her policy sought a determination that the coverage should include sales tax. Superior Court: The Superior Court for King County, No. 05-2-08816-8, John P. Erlick, J., on September 8, 2006, entered a summary judgment in favor of the plaintiff. Court of Appeals: Holding that the plaintiff is not entitled to recover sales tax for the loss under the actual cash value coverage provision of her policy, the court reverses the judgment and remands the case for entry of summary judgment in favor of the insurer. Danielle S. Fitzpatrick- and R. Omar Riojas- (of DLA Piper US, LLP) (Jeffrey A. Rosenfeld of DLA Piper US, LLP, of counsel), for petitioners. Bradley J. Moore- and Garth L. Jones- (of Stritmatter Kessler Whelan Coluccio), for respondent. ¶1 APPELWICK, C.J. — This case presents a single question of law—does "actual cash value," defined as fair market value, include sales tax on all amounts claimed under a homeowner's insurance policy? The trial court determined that actual cash value includes sales tax and granted summary judgment in favor of Holden. Because an actual cash value clause acts only to indemnify the insured, we reverse and remand for entry of summary judgment for Farmers Insurance Company of Washington. FACTS ¶2 Laura Holden had a homeowner's insurance policy through Farmers Insurance Company of Washington under a broad form renter's package policy. The policy stated that "covered loss to property will be settled at actual cash value." The policy defined actual cash value (ACV) as "fair market value of the property at the time of the loss." The policy does not include a definition of fair market value (FMV). Farmers uses a variety of means to determine FMV, including surveying online markets; hiring an appraiser; agreeing with the insured on the value; and depreciating the cost of a new item to reflect age, obsolescence, and wear and tear. Holden's policy also included coverage for the replacement cost of property lost. The policy defines replacement cost as "the cost, at the time of loss, of a new article identical to the one damaged, destroyed or stolen." ¶3 Holden filed a claim with Farmers on this policy for property loss relating to a fire under the ACV provision. Holden never made a claim under the replacement coverage. Farmers reimbursed her for the ACV of the property, which had not been replaced. The reimbursement did not include an allowance for sales tax. Holden requested that her ACV payment include Washington sales tax. Farmers sent her two letters advising her that she could claim replacement cost, including sales tax, if she submitted receipts reflecting the cost of replacement. Holden sent at least three letters to Ethel Smith of the Washington State Insurance Commissioner's Office, complaining that Farmers was not paying the sales tax applicable to her loss. The insurance commissioner took no action except to forward the letter to Farmers, requesting a response. Farmers responded, stating that Holden could not receive allowance for sales tax unless and until she incurred the tax. ¶4 After receiving these responses from Farmers and the insurance commissioner, Holden filed a putative class action claim against Farmers. Holden and Farmers both filed motions for summary judgment. After a hearing, the trial court determined that Farmers' definition of ACV was ambiguous as a matter of law because FMV is capable of multiple interpretations. The trial court construed the provision against Farmers, as drafters of the policy, and interpreted the provision to include sales tax. The trial court granted summary judgment in favor of Holden. Farmers filed for discretionary review. DISCUSSION ¶7 Holden argues that Farmers' various methods of valuing FMV demonstrate ambiguity in the meaning of FMV, particularly as to whether sales tax is covered, and that any ambiguity should be construed against Farmers. Resolution of this ambiguity in favor of Holden would result in payment of sales tax for ACV under all calculations of FMV. Holden claims that Farmers admits that it pays sales tax when using replacement cost less depreciation to calculate FMV. Farmers acknowledges that it pays sales tax as part of the replacement cost minus depreciation method of calculating FMV, but only when the insured has a policy containing ACV coverage (no replacement provision) and actually replaces the lost property subsequent to the loss. Farmer's notes this is distinct from Holden's claim because she both has a replacement clause in her policy and failed to replace her property. ¶8 Nonetheless, Farmers contends that the Washington Supreme Court's decision in National Fire Insurance Co. of Hartford v. Solomon, 96 Wn.2d 763, 770, 638 P.2d 1259 (1982), provides a definition for ACV and FMV that precludes the use of replacement cost less depreciation. In Solomon, the issue on appeal concerned whether the policy required actual replacement in order to recover under the replacement cost policy. Id. at 765. The Supreme Court held that the replacement cost clause did not require rebuilding as a condition precedent to reimbursement. Id. at 770 (citing Reese v. N. Ins. Co. of N.Y., 215 A.2d 266, 269 (1965)). As an additional holding, the court defined ACV. " '[A]ctual cash value' within statutory language of [a] fire policy is synonymous with 'fair market value' and does not mean replacement cost less depreciation." Id. at 770 (citing Jefferson Ins. Co. of N.Y. v. Superior Court, 3 Cal. 3d 398, 402-03, 475 P.2d 880, 90 Cal. Rptr. 608 (1970)). Holden claims that Hess v. North Pacific Insurance Co., 122 Wn.2d 180, 859 P.2d 586 (1993), overruled Solomon. Hess stated that "[t]he facts in [Solomon], 96 Wn.2d 763 . . . mandate limiting whatever its holdings may be to those facts and the policy involved." Hess, 122 Wn.2d at 191. The trial court agreed with Holden, concluding that Hess significantly limited or sub silentio overruled the holding in Solomon. ¶13 We reverse and remand for entry of summary judgment for Farmers. ELLINGTON and DWYER, JJ., concur.