by sohalang | Jan 20, 2012 | Blog News, Uncategorized
Despite the challenges facing carriers in Washington when disputing the reasonableness of a covenant judgment, Soha & Lang, P.S. attorneys have once again obtained a judicial determination that a stipulated covenant judgment settlement was unreasonable.
On January 9, 2012, Federal District Court Judge John Coughenour ruled that a $5.75 million covenant judgment settlement of a condominium construction defect lawsuit was unreasonable, that the reasonable settlement value of all of the plaintiff homeowners association’s claims was $1,921,525.70, and that the value of the association’s breach of fiduciary duty claim, the only potentially covered claim, was $300,000.i
Applying the first of the factors identified in Chaussee v. Maryland Cas. Co.,ii the releasing party’s damages, Judge Coughenour first considered the association’s cost of repair claim. Judge Coughenour found that the defense repair estimate prepared by McBride Construction, which was about $1.8 million less than the association’s estimate, was more reasonable than plaintiff’s repair cost estimate prepared by Charter Construction. The court also reduced the association’s loss of use claim from $963,012 to $96,000— a reduction of over 90%—and reduced the association’s attorney fee claim by about 65%. As a result of the court’s adjustments, the amount of the association’s damages was reduced from $8,463,679 to $4,270,057 before the court applied the remaining Chaussee factors.
Judge Coughenour then discussed several of the remaining Chaussee factors, including the merits of the association’s liability theories, the merits of the defense theories, and the defendants’ ability to pay. Based upon the weaknesses in the association’s legal theories, evidentiary problems with the association’s case, and the defendants’ lack of material assets to satisfy a judgment, the court applied a 55% reduction to the association’s adjusted damage claim of $4,270,057 to arrive at $1,921,525.70 as the reasonable settlement value of the all of the association’s claims.
Recognizing that the association’s breach of fiduciary duty claim was the only potentially covered claim, Judge Coughenour separately addressed this claim’s value. The association argued that the measure of damages for this claim was the cost of repair. However, Judge Coughenour expressed doubt that any alleged breach of fiduciary duty by the developer-appointed pre-turnover board caused water damage to the complex. Moreover, citing Water’s Edge Homeowners Ass’n v. Water’s Edge Assocs.,iii the court held that the cost of repair is not the proper measure of damages for a breach of fiduciary duty claim. Based upon evidence presented by the intervening insurers represented by Soha & Lang, P.S., the court held that the reasonable value of the only potentially covered claim was $300,000.
Judge Coughenour’s analysis reflects further recognition by Washington courts that stipulated settlements involving judgment-proof defendants raise concerns about the reasonableness of such settlements. The court explained that because of the defendants’ lack of material assets, the defendants did not have incentive to obtain the best possible settlement amount. Accordingly, the court held that the “final settlement amount must be discounted to reflect this reality.”
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i. Aspen Grove Owners Ass’n v. Park Promenade Apartments, LLC et al., No. CV09–1110 (W.D.Wash. Jan. 9, 2012). Soha & Lang, P.S. attorneys Tyna Ek, Mary DeYoung, and Paul Rosner represented the intervening insurers.
ii. 60 Wn. App. 504, 803 P.2d 1339 (1991).
iii. 152 Wn. App. 572, 216 P.3d 1110 (2009).
by sohalang | Dec 23, 2011 | Blog News, Uncategorized
Yesterday, a 5-4 majority of the Washington Supreme Court held that certain auto insurance policies issued by Farmers Insurance Company of Washington required the company to pay for post-accident diminished value of repaired vehicles. The case arose out of a November 1998 automobile accident in which David Moeller’s Honda Civic CRX was damaged. Farmers paid the cost to repair the vehicle. Moeller acknowledged that the repairs were complete and acceptable. However, in May 1999, Moeller brought a class action breach of contract lawsuit against Farmers for failing to pay for the vehicle’s diminished value.
Our Supreme Court acknowledged that a majority of other jurisdictions have previously denied coverage for diminished value because an automobile policy’s reference to “repair or replace” unambiguously encompasses only a concept of tangible, physical value. Nevertheless, the Supreme Court disagreed with this view, noting that “the majority view’s framework ignores important presumptions in favor of the insurance consumer that are inherent in the rules of construction regarding insurance contracts.”
The court explained that the policy must be construed as the average person would read it. Through this lens, the majority held, a reasonable consumer looking at the relevant policy language would expect to be placed in the same position he/she was in prior to the accident.
The court also held the class was properly certified despite the difficulty of determining damages.
by sohalang | Jul 7, 2011 | Blog News, Uncategorized
On July 5, 2011, Division 1 of the Court of Appeals of Washington held there was sufficient evidence for a jury to find that an insurer’s pre-suit claims handling constituted bad faith despite the fact that the insurer subsequently tendered policy limits after the plaintiff filed suit. Moratti v. Farmers Ins. Co. of Washington, 2011 WL 2611763 (2011).
by sohalang | Apr 25, 2011 | Blog News, Uncategorized
The Insurance Research Counsel (“IRC”), a division of the American Institute for CPCU, which is an independent, nonprofit organization dedicated to providing educational programs, reports that the Washington Insurance Fair Conduct Act (“IFCA”) may have caused an increase in homeowners insurance claims cost in the state by as much as $190 million. The IRC report is available at http://www.ircweb.org/News/IRCWABadFaith_033011.pdf
by sohalang | Apr 22, 2011 | Blog News, Uncategorized
On April 6, 2011, the Oregon Court of Appeals ruled that American Family Mutual Insurance Company (“American Family”) had no duty to defend its insured where the underlying complaint alleged only damage to the insured’s work and did not allege resulting property damage, such as water damage to other building components, that would have been covered by the policy. State Farm Fire and Cas. Co. v. Am. Family Mut. Ins. Co., 2011 WL 1262760, 4 (Or App, 2011). The opinion acknowledged that water damage to other components or contents could have been a natural result of the insured’s alleged negligent performance of the work identified in the complaint. However, the court considered only the policy and the allegations in the complaint in evaluating American Family’s duty to defend:
[T]he allegations in the [underlying] complaint are unambiguous. None of the allegations … allege damage to property other than the EIFS system identified in the particular specification, and none of the identified allegations allege water damage to other components or contents of the residence. Although water damage to other components or contents could have been a natural result from [the insured’s] alleged negligent performance of the work identified in the [underlying] complaint, such damage was not a necessary result of [the insured’s] … alleged negligence. Because that water damage was not a necessary result of [the insured’s] alleged negligence and was collateral in nature, the [underlying plaintiffs] were required to specially plead allegations of such water damage before evidence of it could be properly admitted. It follows that defendant had no duty to defend against the [underlying] negligence claim because the allegations of their complaint did not allege injury to property covered by defendant’s policy. Thus, the trial court erred in granting summary judgment for plaintiff and denying defendant’s motion for summary judgment.
