Washington Court of Appeals Holds Noneconomic Damages Available under Insurance Fair Conduct Act (IFCA)

Whether the term “actual damages” as used in RCW 48.30.015 includes noneconomic damages is an issue of first impression under Washington law. On April 19, 2022, the Court of Appeals, in Beasley v. GEICO General Insurance Company, et al., 2022 WL 1151426 (Wash. Ct. App. 2022), held that the legislative history demonstrates that noneconomic damages are “actual damages” under RCW 48.30.015 and reversed the trial court.

In this underinsured motorist (UIM) case, when instructing the jury on the elements of the IFCA claim, the trial court included the following language: “The Court has determined that [GEICO] unreasonably denied the payment of benefits by failing to pay the undisputed $10,000 offer of UIM benefits made on October 23, 2015.” However, the trial court refused to provide the jury with Beasley’s proposed instruction on damages under IFCA that included noneconomic damages based on the trial court’s ruling that the IFCA claim did not include noneconomic damages because the claim sounded in negligence rather than intentional tort. The jury found that Beasley had proven his IFCA claim and that Beasley’s IFCA-related damages were $84,000. The jury further found that Beasley had proved his insurance bad faith claim and that he had incurred $400,000 in noneconomic damages related to that claim. Beasley appealed the trial court’s ruling that IFCA does not include noneconomic damages.

The Court of Appeals determined that the legislature intended “actual damages” to include noneconomic damages under IFCA because this legislation was intended to protect insureds from an insurer’s unreasonable actions and remanded the matter to the trial court for a new trial on noneconomic damages related to the IFCA claim.

The Court of Appeals held that merely tripling the bad faith noneconomic damages was not an appropriate remedy. Rather, the Court held that the “proper remedy is based on an understanding that although not all bad faith conduct constitutes an IFCA violation, we can presume under the facts of this case that GEICO’s IFCA violations also constituted bad faith” and that “[b]ecause a violation of IFCA also would constitute bad faith under the facts of this case, any IFCA noneconomic damages necessarily would have been included in the $400,000 the jury awarded in bad faith damages.” The Court remanded for a new trial on the issue of IFCA noneconomic damages only, noting that the “IFCA noneconomic damages may be less than the bad faith damages because the bad faith cause of action is much broader.” The Court of Appeals further noted that Beasley is not automatically entitled to treble damages. RCW 48.30.015(2). The Court also ruled that Beasley is not entitled to double recovery.

Washington Federal Judge says adjusters need a baseline understanding of Washington law

According to a new opinion out of the U.S. Court for the Eastern District of Washington, insurers have a duty to ensure that adjusters know enough about applicable case law in order to make reasonable coverage and defense decisions. In Security National Ins. Co. v. Construction Associates of Spokane, Inc., 2022 WL 884911 (E.D. Wash. 3/24/2022), the Court suggested that insurance companies could meet this duty by teaching adjusters to run case searches, purchasing subscriptions to legal newsletters, or consulting legal professionals.

The case involved a Certificate of Insurance issued in 2019 in connection with a construction site injury that occurred in 2016. The injured worker, who was employed by a subcontractor, sued the general contractor. The general contractor tendered its defense to the subcontractor’s insurer, Security National.

In preparing the tender, the general contractor searched its records for a Certificate of Insurance that confirmed its status as an additional insured under the subcontractor’s insurance policy. When it was unable to locate a Certificate for 2016, it contacted the subcontractor’s insurance broker and asked it to issue a Certificate confirming that the subcontractor was insured for the policy period during which the accident occurred and that the general contractor was an additional insured.

While Security National was investigating the tender, the Washington Supreme Court issued its opinion in T-Mobile USA, Inc. v. Selective Ins. Co. of Am., 194 Wn.2d 413, 450 P.3d 150 (2019), which held that the insurer was bound by the representation of its authorized agent in a Certificate of Insurance that an organization was an additional insured even though the Certificate said that it could not be used to expand coverage beyond that provided in the insurance policy. Previous cases had held that a Certificate of Insurance could not expand coverage provided by the insurance policy.

Although the adjuster reviewed the Insurance Commissioner’s regulation on Certificates of Insurance, he was not aware of the T-Mobile opinion. He sent a letter denying the tender almost two months after the opinion had been issued. After the general contractor’s attorney called Security National’s attention to the T-Mobile opinion, it reinvestigated the tender, eventually affirming its denial.

Judge Mendoza, Jr. granted the general contractor’s motion for summary judgment, holding that Security National was bound by its authorized agent’s representation in the 2019 Certificate that the general contractor was an additional insured on the date of the accident. He also held that the insurer acted in bad faith as a matter of law when it denied the tender of defense, rejecting Security National’s argument that claims adjusters cannot be expected to know the law and perform legal research, especially when a new case is decided during an investigation. After noting that the file included notes about sending the tender out for review by coverage counsel and making suggestions about training adjusters to know the law, he held that ignorance of the law does not excuse the conduct of adjusters who deny claims for defense or indemnification. “Adjustors must equip themselves or else seek out those with the requisite tools and knowledge.”

Oregon Court of Appeals Holds that Insured has a Valid Negligence Per Se Claim against the Insurer based on Alleged Violation of ORS 746.230

On January 26, 2022, the Court of Appeals, in Moody v. Oregon Community Credit Union, et al., 317 Or App 233 (2022), held that the trial court erred in dismissing plaintiff’s negligence per se claim and striking her allegation of emotional distress. This decision will likely be appealed to the Oregon Supreme Court. As it stands, policyholder counsel will likely cite the decision as representing a significant change in Oregon law and a basis for the expansion of extra-contractual damages in Oregon.

ORS 746.230, Unfair Claim Settlement Practices, provides, among other things, that an insurer may not refuse to pay claims without conducting a reasonable investigation or fail to attempt in good faith to promptly and equitably settle claims when liability is reasonably clear. Plaintiff alleged that defendant violated ORS 746.230 when it unreasonably denied her claim for accidental loss of life benefits arising out of the accidental death of her husband. Defendant asserted its policy excluded accidents caused by or resulting from the insured being under the influence. Plaintiff advanced a number of claims for relief, including a claim for breach of contract and for negligence per se, based on defendant’s alleged failure to conduct a reasonable investigation and its failure, in good faith, to settle her claim – all in breach of ORS 746.230(1). Plaintiff claimed economic damages as well as noneconomic damages for emotional distress.

Plaintiff relied on Abraham v. T. Henry Construction, Inc., 230 Or App 564, 572, 217 P3d 212 (2009), aff’d on other grounds, 350 Or 29, 249 P3d 534 (2011), to support her position that defendant’s breach of its policy of insurance violated an independent, statutory standard of care spelled out in ORS 746.230(1), thereby supporting her claim for negligence per se. Defendant maintained that the Oregon Supreme Court’s decision in Farris v. U.S. Fid. and Guar. Co., 284 Or 453, 587 P2d 1015 (1978) foreclosed a negligence per se claim based on a violation of ORS 746.230(1). The Court of Appeals determined that defendant read too much into the Farris decision in which the plaintiffs did not make a claim for statutory liability for defendant’s violation of ORS 746.230 and concluded that the Supreme Court’s discussion of ORS 746.230 was “plainly dictum.” Moody, 317 Or App at *6. The Court of Appeals found that the present matter posed a different question from the Court’s dictum in Farris. Here, the question is whether the statute establishes a standard of care for purposes of a claim for negligence per se, which was not addressed in Farris. The Court of Appeals held that “[w]hether the legislature intended … to create direct statutory liability does not preclude courts from determining … the enactment [establishes] a standard of care for purposes of stating a claim for negligence per se.” Id. at *6. The Court of Appeals further held that “[t]he fact that the legislature may not have intended to create a private right of action for recovery of emotional distress damages does not necessarily mean that the legislature did not enact ORS 746.230, at least in part, to prevent such emotional distress from occurring.” Id. at *7.

Disclaimer: The opinions expressed in this blog are those of the author and do not necessarily reflect those of Soha & Lang, P.S. or its clients.

Oregon Supreme Court Affirms Jury’s Finding that the Insured Was Injured in Two Separate “Accidents”

On June 17, 2021, the Oregon Supreme Court addressed an appeal on the number of “accidents” in Wright v. Turner, 368 Or 207, — P3d — (2021). The insured was a passenger in a truck that was involved in a motor vehicle accident. The truck was impacted successively by two vehicles. The insured made a claim under her underinsured motorist (“UIM”) coverage that provided a $500,000 limit for damages “resulting from any one automobile accident[.]” Id. at 224. The Oregon Supreme Court had previously held that the number of accidents was an issue from the jury. On remand, the jury found that two accidents had occurred and that insured’s injuries could not be apportioned between them. Id. at 213. On a second appeal, the insurance company contended that trial court erred in instructing the jury when it permitted the jury to decide that the cause of the insured’s injuries could not be separated. Id. at 223-24. The court on the second appeal rejected the contention, finding the instruction proper. It explained:

Thus, under settled principles of causation, the jury was permitted, but not required, to find that both accidents caused [the insured’s] injuries. In this case, the jury found that it could not “separate the cause” of [the insured’s] injuries and that her injuries resulted from the two accidents that the jury found had occurred.

Id. at 227.

Disclaimer: The opinions expressed in this blog are those of the author and do not necessarily reflect those of Soha & Lang, P.S. or its clients.

Oregon Court of Appeals Holds that the Insured’s Misrepresentation of a Portion of the Claim Precluded Coverage for the Entire Claim

On June 16, 2021, the Oregon Court of Appeals addressed the insured’s misrepresentation in Kelly v. State Farm Fire & Cas. Co., 312 Or App 361, — P3d — (2021). The insured made a claim for a fire loss. The insurance company advanced $10,000 for personal property and paid $37,000 in additional living expenses (“ALE”) on the claim. The ALE payment included $1,500 per month in rent that the insured had allegedly paid after the fire. Id. at 364. The insurance company subsequently learned that the insured had made misrepresentations regarding, among other things, the rental payment. When the insured sued, the insurance company raised the policy’s Misrepresentation, Concealment and Fraud provision. The trial court granted the insurance company’s summary judgment motion, and the Oregon Court of Appeals affirmed. The insured contended that the misrepresentations were not material. The Court of Appeals rejected the contention, concluding that the misrepresentations as to the ALE precluded coverage for the entire claim:

In sum, the trial court did not err in concluding that [the insured’s] misrepresentation that he was living at the [alleged rental] property at a cost of $1,500 per month was material for purposes of the Concealment, Misrepresentation or Fraud provision in his insurance policy. Forfeiture of the entire policy is undoubtedly a harsh penalty. However, it is the penalty that the legislature appears to have intended …, and it is what the policy requires under existing case law.

Id. at 376.

Disclaimer: The opinions expressed in this blog are those of the author and do not necessarily reflect those of Soha & Lang, P.S. or its clients.

Washington Federal Court Dismisses Insureds’ Claims Seeking Coverage for COVID-19

On May 28, 2021, the United States District Court for the Western District of Washington dismissed claims for alleged losses associated with COVID-19. Nguyen, et al. v. Travelers Cas. Co, et al, 2:20-CV-00597-BJR (W.D. Wash. May 28, 2021). The lawsuit is a consolidated action addressing claims under first-party “all risk” property policies. Judge Barbara Rothstein granted the defendant insurers’ motions to dismiss. In line with the majority of courts, the Court determined that there was no coverage for the claims. Among other things, the Court held:

  • COVID-19 did not cause direct physical loss of or damage to property.
  • The Civil Authority provisions did not provide coverage.
  • The virus exclusion barred coverage.

In reaching this result, the Court declined to follow two Washington state trial court decisions, finding their reasoning to be unpersuasive.

Disclaimer: The opinions expressed in this blog are those of the author and do not necessarily reflect those of Soha & Lang, P.S. or its clients.

Washington Supreme Court Holds Liability of School District Cannot be Precluded as a Matter of Law Based on Legal Cause

On March 4, 2021, the Washington Supreme Court held in Myers v. Ferndale School District, No. 98280-5, that the alleged acts of negligence of the school in not complying with internal policies and safety precautions for taking students on an off campus walk were not too remote or insubstantial to be the legal cause of the student’s death.

In this case, a wrongful death claim was brought on behalf of a student against the school district after a student was killed by a vehicle while on an off campus walk with his class. The trial court dismissed the negligence claim on summary judgment based on lack of duty. The Court of Appeals reversed, determining that there were sufficient factual issues on duty and proximate causation.

The Washington Supreme Court affirmed. The Supreme Court noted that while the Court of Appeals erred in analyzing legal causation, it properly concluded that material issues of fact existed concerning proximate causation. The Court found that legal causation should not be assumed to exist every time a duty of care has been established. Legal cause is determined by utilizing “mixed considerations of logic, common sense, justice, policy, and precedent.”

The Court found that sufficient evidence was presented to survive summary judgment by establishing a factual question as to whether the school district’s act of taking the students off campus led to the accident. The Court’s legal cause analysis included the underlying policy considerations for imposing liability. The Court held:

[O]ur cases establish a policy based on the special relationship where school districts may be liable for harms suffered by students even where the harm occurs off campus and is caused by the act of a third party. This flows from the custodial relationship and responsibility between schools and students. Since students are involuntarily subject to the school’s control, schools must take affirmative steps to protect students even against reasonably foreseeable acts of third parties.

Here, the off campus walk did not comply with the internal policies and safety precautions. The Court held the alleged acts of negligence were not too remote or insubstantial to be the legal cause of the student’s death. Therefore, the Court could not preclude liability as a matter of law based on legal cause.

In a concurrence, Judge McCloud disagreed with the majority’s application of its legal cause analysis. She agreed that the school district’s failure to obtain required parental permission for the walk suffices to show legal cause. However, she disagreed that the teacher’s decision to take the walk on the sidewalk, at a normal pace, in broad daylight, suffices to show legal cause. She noted that “[i]f legal cause is satisfied here, then legal cause could be satisfied for accidents occurring during many basic recreational and educational activities that students enjoy, from jump rope to dance.”

Disclaimer: The opinions expressed in this blog are those of the author and do not necessarily reflect those of Soha & Lang, P.S. or its clients.

Washington Federal Court Rules Notice Prejudice Rule Does Not Apply to Consecutive Claims-Made and Reported Policies

On December 12, 2020, Philadelphia Indemnity Insurance Company, prevailed before the U.S. District Court for the Western District of Washington, in Faithlife Corp. v. Phila. Indem. Ins. Co., 2020 WL 7385722 (W.D. Wash. 2020), on cross-motions for summary judgment.

Philadelphia issued plaintiff two claims-made and reported policies, one effective in 2016 and one effective in 2017. During the 2016 policy, plaintiff was mailed notice of administrative charges from the EEOC, regarding alleged age and disability discrimination against former employees. The charges were not reported to Philadelphia, and were later voluntarily withdrawn by the former employees. Then, during the 2017 policy period, the former employees filed an employment discrimination lawsuit against plaintiff. Plaintiff reported the lawsuit to Philadelphia, who denied coverage under the terms of the policies. Plaintiff filed suit against Philadelphia for coverage.

The parties filed cross-motions for summary judgment regarding coverage. Philadelphia argued that there was no coverage under the claims-made and reported policies, since plaintiff failed to give timely notice of the claim during the 2016 policy. The Court agreed. The Court found that the administrative charges filed by the former employees were a “claim” under the policies. Based on the policy language, the administrative charges and the lawsuit alleged the same wrongful acts, and were not reported during the 2016 policy, and therefore excluded under the 2016 policy.

The Court rejected plaintiff’s argument that the “Prior and Pending” clause does not exclude the claim under the 2017 policy, or that the policies contain a “Loss Aggregation Clause” that is not properly read to exclude the claim. The Court also rejected plaintiff’s arguments that the notice/prejudice rule should apply.

Based on these findings, the Court granted Philadelphia’s motion for Partial Summary Judgment, finding no coverage under Philadelphia’s policies, and denied plaintiff’s motion for partial summary judgment on coverage.

Philadelphia was represented by Soha & Lang attorneys Paul Rosner and Jillian M. Henderson in this matter.

New COVID Legislation in Washington to Modify Insurance Policy Terms

On January 26, 2021, Senate Bill 5351 was introduced during the State of Washington’s 67th Legislature’s 2021 Regular Session. The bill seeks to change the suit limitations period from one year to two years (RCW 48.18.200), and add the provision that:

“Every property insurance policy containing a grant of coverage for direct physical loss of or damage to property shall be construed to include the deprivation of such property and the loss of the ability to use such property.”

(RCW 48.18.520). The bill would also add two new sections, applying these changes retroactively to February 29, 2020, when Governor Inslee issued Proclamation 20-05, and explaining that the act would take effect immediately.

If you have additional questions on this bill, or would like to receive continuing updates, please feel free to reach out to Soha & Lang.

Court Holds that Bicyclist is a “Pedestrian” for Purpose of Coverage

McLaughlin v. Travelers Comm. Ins. Co., Wash. Supreme Court (Dec. 10, 2020).

This case deals with whether the plaintiff, while riding his bicycle at the time of the accident, was a “pedestrian” under his California auto insurance policy’s MedPay coverage. “Pedestrian” was not defined by the policy. RCW 48.22.005(11) defines “pedestrian” for purpose of casualty insurance as “a natural person not occupying a motor vehicle as defined in RCW 46.04.320.” Since McLaughlin’s bicycle did not have a motor, he was deemed a “pedestrian.” The Court discussed the Court of Appeals approach to “harmonize” the definition of “pedestrian” in RCW 48.22.005(11) with RCW 46.04.400. The latter statute expressly excludes bicyclists from the definition of “pedestrian.” RCW 48.22.005(11), applies to casualty insurance, however, and RCW 46.04 has limiting language that definitions in that chapter apply to that chapter, “except where otherwise defined,” so RCW 48.22.005(11) was determined to be the appropriate definition to apply in this case.

The Court discussed that even if the definition of “pedestrian” in RCW 48.22.005(11) was not applied, the term “pedestrian” in the policy is ambiguous, and resolved in favor of the insured.