On April 12, 2018, the Washington Supreme Court held in Bearden v. McGill, No. 94320-6, that statutory costs are included when determining whether a party has improved its position at a trial de novo after a mandatory arbitration award.
In the underlying matter, the parties went to mandatory arbitration, and the arbitrator awarded damages plus statutory costs to the plaintiff. The defendant requested a trial de novo, and at trial, the jury awarded the plaintiff less in damages but more in statutory costs, for a total award that was greater than the amount the plaintiff was awarded in mandatory arbitration. The trial court also granted the plaintiff attorney fees and costs, on the basis that the defendant’s position did not improve from the arbitration award to the trial de novo.
The defendant appealed, and the appellate court reversed and vacated the award of attorney fees and costs, holding that the only comparison between the arbitration award and the trial award should be the common elements of the awards in each proceeding and only include “those costs and fees litigated before the arbitrator and the trial court.” On remand, the appellate court again reversed, holding that the comparison should only include the damages portions of each award and not the statutory costs awarded in either proceeding.
The Washington Supreme Court reversed the appellate court, holding that based on the language and legislative history of the Mandatory Arbitration Rules and applicable statutes, as well as what an ordinary person would understand in comparing an arbitration award and a trail award, statutory costs are included in the calculations of a party considering a trial de novo. However, if a substantial change of parties or claims brought occurs after the arbitration award and at the trial de novo, then this comparison may be unfair and need to be considered further by the trial court.
Justice Yu concurred, arguing that the holding could be more succinct, and Justice Wiggins dissented, arguing that the amount of costs awarded does not have anything to do with the merits of the dispute and should therefore not be considered when determining whether a party has improved its position.
Disclaimer: The opinions expressed in this blog are those of the author and do not necessarily reflect those of Soha and Lang, P.S. or its clients.
In Swank, et al. v. Valley Christian School et al., ___ Wn.2d ___, ___ P.3d ___ (July 6, 2017), the Washington Supreme Court held that the Lystedt law (RCW 28A.600.190) creates an implied cause of action. The 2009 Lystedt law requires that 1) schools develop a concussion and head injury information sheet; 2) youth athletes be removed from play on suspicion of sustaining a concussion or head injury; and 3) youth athletes removed from play may not return without written clearance from a health care provider.
Andrew Swank (Drew) was a student at Valley Christian School, a non-profit religious school in Spokane, WA. In 2007, a parent, Jim Puryear, approached Valley Christian and offered to start a football team. Valley Christian accepted and Puryear began coaching as an unpaid volunteer. Valley Christian developed a concussion information sheet (CIS) and Coach Puryear distributed the CIS to parents at the beginning of the 2009 season. Coach Puryear discussed the CIS with parents and Drew and his mother both signed the CIS.
On September 18, 2009, Drew was hit hard on the head during a football game. The Swanks live in Idaho and took Drew to his primary care physician in Idaho – Dr. Burns. Dr. Burns examined Drew in Idaho. Two days later, Dr. Burns wrote a note for Drew at his mother’s request.
Drew played football the next day. Though he initially played well, his performance declined sharply during the game. Drew appeared sluggish and confused and was slow to respond. Drew was hit by an opposing player during the game, staggered to the sidelines, and collapsed. He died two days later.
The Swanks sued Valley Christian, Coach Puryear, and Dr. Burns. The trial court granted summary judgment against the Swanks. The Court of Appeals affirmed the trial court on all but the Swanks’ negligence claim against Valley Christian. The Washington Supreme Court reversed the trial court decision, except as regards Dr. Burns.
The Court applied the Bennett test to determine whether the Lystedt law provides an implied cause of action. The Court found that all three elements of the Bennett test were met: 1) Drew is a member of the class protected by the statute; 2) the legislative history showed support for a remedy; and 3) an implied cause of action is consistent with the purpose of the statute. Having found that the Lystedt law includes an implied cause of action, the Court further held that the requirements in RCW 28A.600.190(2), (3), and (4) include duties which can support a claim.
The Court found that the Swanks’ claims against Valley Christian and Coach Puryear may proceed, but that the Washington Courts lacked personal jurisdiction against the Idaho physician, Dr. Burns.
The Washington Supreme Court remanded the matter with instructions to reinstate the Swanks’ claims against Valley Christian and Coach Puryear.
In Smelser v. Paul, et al, ___ Wn.2d ___, ___ P.3d ___ (July 6, 2017), the Washington Supreme Court found that, under the parental immunity doctrine, parents owe no duty of care to their children, and on that basis, fault for negligence cannot be apportioned to a parent of the plaintiff under RCW 4.22.070.
Derrick Smelser, then two years old, was run over by a car driven by defendant, Jeanne Paul while playing in his yard. At the trial court level, Ms. Paul was allowed to assert an affirmative defense that the child’s father was partially at fault on a theory of negligent supervision. The trial court instructed the jury under RCW 4.22.070, and the jury determined that the father was 50% at fault. The trial court did not enter judgment against the father because of the parental immunity doctrine.
The Washington Supreme Court found that the common law doctrine of parental immunity in Washington State establishes that there is no tort liability or tort duty applicable to a parent for negligent supervision or negligence in other parenting activities. The Washington Supreme Court went on to state that, under RCW 4.22.051, in order to be an at-fault entity, the party must have engaged in negligent or reckless conduct that breaches a recognized duty. Because the Court found that parents do not have a recognized duty of supervision of their children, the parents’ conduct is not tortious, and they cannot be an at-fault entity.
Pursuant to this holding, the Washington Supreme Court remanded the matter to the trial court, with instructions to enter judgement for 100% of the damages against Ms. Paul.
In another example of bad facts make bad law, the Washington Supreme Court, in a six to three decision, ruled that the “efficient proximate cause rule” applies to the interpretation of general liability policies. See Xia v. ProBuilders Specialty Insurance Company RRG, __Wn.2d __, __ P.3d __ (April 27, 2017).
Turning insurance contract construction on its head, the court first analyzed whether an absolute pollution exclusion applied to a bodily injury claim caused by the inhalation of carbon monoxide fumes from an improperly installed water heater. The Court found that the pollution exclusion would preliminarily apply to a bodily injury claim caused by carbon monoxide poisoning, because the pollution exclusion applies when a “pollutant is acting as a pollutant.” The Court reasoned that, “the choice of analysis under Kent Farms versus Quadrant and the antecedent “fumes” cases, Cook and Harbor Insurance, necessarily turns on a determination of whether an occurrence, as defined under the policy, stems from either a traditional environmental harm or a pollutant acting as a pollutant. If the answer to this inquiry is yes, barring any ambiguities in the policy language, courts must apply the plain language of the pollution exclusion to determine whether the exclusion applies to the facts at hand.”
However, the Court then added an additional step to the analysis, and found that the insurer must next determine whether the excluded occurrence is the “efficient proximate cause of the claimed loss.” Thus, it appears that the Court has instituted an additional step in the contract interpretation requirement under general liability policies, at least with respect to “[w]hen a nonpolluting event that is a covered occurrence causes toxic pollution to be released, causing damages.” In this scenario, it appears that the Insurer must first determine whether the insuring clause is satisfied, then determine whether the exclusion applies to prohibit coverage, and then finally determine whether the “efficient proximate cause” of the loss was the direct cause of the excluded damage.
Prior to this decision, the efficient proximate cause rule had only been applied to first party coverage which is generally based on “covered perils.” Nevertheless, the Washington Supreme Court rejected its own precedent and explicitly held that an efficient proximate cause analysis must be undertaken under the terms of general liability policies as well, at least in the context of a pollution claim when the pollution is proximately caused by “a nonpolluting event.”
The Court stressed, “[h]owever, the efficient proximate cause rule applies only ‘when two or more perils combine in sequence to cause a loss and a covered peril is the predominate or efficient cause of the loss.” The Court went to great lengths to distinguish the facts at issue before it with traditional environmental harm cases. The Court reasoned:
ProBuilders contends that application of the efficient proximate cause rule would defeat the exclusion entirely, arguing that all acts of unintentional pollution begin with negligence. This is not so, and application of the rule may be harmonized with Washington’s prior pollution exclusion jurisprudence. In Cook, the initial peril that set in motion the causal chain was the polluting event: the application of a chemical sealant. 83 Wn. App. at 151. Up until the point of using the sealant and creating the toxic fumes, no negligent act had occurred. Rather, the negligence in permitting the fumes to migrate occurred after the fumes had been created intentionally. Id. (“The contractors did not seal off a six-[ ]by eight-foot fresh air intake, which drew air into the building’s HVAC system. [Sealant] fumes entered the building, requiring evacuation.”). Similarly, in Quadrant, the initial peril that set in motion the causal chain was also the application of a chemical sealant, which was toxic even when used as intended. 154 Wn.2d at 168. There were no covered perils prior to the release of a pollutant acting as a pollutant. As such, application of the efficient proximate cause rule in both cases would have led to the same outcome.
The Court found that because the “efficient proximate cause” of the carbon monoxide poisoning was the negligent installation of the hot water heater (which it characterized as a covered event), and not the escape of the carbon monoxide from the heater, that the absolute pollution exclusion would not apply to bar coverage.
Moreover, the Court found that the insurer committed bad faith in not defending its insured because “under the ‘eight corners rule’ of reviewing the complaint and the insurance policy, ProBuilders should have noted that a potential issue of efficient proximate cause existed,” because the complaint alleged negligent installation of the hot water heater. The Court further found that ProBuilders acted in bad faith by failing to conduct an investigation into Washington law (before it denied the claim) “that might have alerted them to the rule of efficient proximate cause and this court’s unwillingness to permit insurers to write around it.”
The ruling in this case has the potential to have a significant impact on the duty to defend and indemnify analysis under general liability policies.
Please feel free to contact Soha & Lang, P.S. to learn more.
Soha & Lang, P.S. Shareholder Paul Rosner, J.D., CPCU has been selected to Chair the Coverage, Litigators, Educators & Witnesses Interest Group (the “CLEW IG”) of the Institutes CPCU Society for a three year term beginning on January 1, 2017.
The CLEW IG was founded in the 1990s as a home and resource for a diverse segment of CPCU Society members whose professional paths tended toward independence: attorneys representing or counseling insurers or insureds in claims and coverage matters and industry professionals putting their experience and expertise to work as consultants or as witnesses in contested insurance-related matters. When the group formed, the CLEW acronym stood for Consultants, Litigators & Expert Witnesses. Today, those initials stand for Coverage, Litigators, Educators & Witnesses, and CLEW’s members include CPCUs whose emphasis is on technical research and on the development and spread of insurance knowledge in universities and through continuing professional education. CLEW activities include presenting one or more educational programs at the CPCU Society Annual Meeting, which commonly include a “Mock Trial”; publication of articles in CPCU Society publications and other industry journals; and a growing number of webinars through the Society. Participation in these activities provides CLEW members the opportunity to interact with, and to share their technical expertise with, fellow industry professionals.
Paul’s practice focuses on representing insurance companies and risk pools in insurance coverage matters and bad faith litigation in Washington and Oregon. Paul is also a claims handling and bad faith expert with over 15 years of industry experience as a claims professional.
Please feel free to contact Paul if you have questions about the CPCU designation, the CPCU Society, the local PNW (Seattle) Chapter, the CLEW IG, or about insurance coverage issues.
Disclaimer: The opinions expressed in in this blog are those of the authors and do not necessarily reflect those of Soha and Lang, P.S. or its clients.
On January 28, 2014, the Washington Court of Appeals ruled that USAA did not act in bad faith when it declined to defend its insured, Dennis Geyer, under his homeowners and auto insurance policies for claims arising out of an assault at traffic light. United States Auto. Assoc. v. Speed, No 43728-7-II.
In March 2009, Geyer assaulted Robert Speed at a traffic signal. Apparently, Geyer was angry over something Speed had done while driving in front of him. In an August 2009 letter, Speed’s attorney demanded Geyer pay $650,000 to compensate Speed for his injuries. The letter alleged that Geyer followed Speed, pulled him out of his vehicle at a stop light, beat him, and then drove away leaving Speed bleeding and unconscious in the street. The demand letter stated that if this were a negligence case that was covered by insurance, Speed’s attorneys would have sought seven-figures.
Geyer tendered under his USAA homeowners and auto insurance policies. Unlike most standard policies, the USAA policies provided that USAA’s duty to defend arose not only when a “suit” was brought against the insured, but also when any “claim” was made for damages arising from acts covered under the policies. After investigating the claim, USAA reserved rights as to whether the incident involved an “occurrence” under Geyer’s homeowner’s policy, an accident under his auto policy, and whether the claims fell within the policies’ intentional acts exclusions. USAA continued to monitor the claim, but did not retain counsel to defend Geyer.
Geyer and Speed later stipulated to a $1.4 million covenant judgment, which included an assignment to Speed of Geyer’s potential contractual and bad faith claims against USAA. USAA then filed a complaint for declaratory relief against Speed. USAA moved for summary judgment asking the trial court to declare as a matter of law that (1) there was no coverage under either policy, (2) USAA had no duty to defend Geyer, (3) USAA’s failure to defend was not in bad faith, and (4) USAA was not estopped from denying coverage. The trial court granted USAA’s motion and a second (unopposed) motion to dismiss Speed’s statutory and regulatory bad faith claims. Speed appealed.
In affirming the trial court’s finding that USAA had no duty to defend as a matter of law, the Speed Court explained that unlike cases where standard policy language regarding the duty to defend is determined by allegations in the complaint, non-standard language of the USAA policies, discussed above, required that the duty to defend depend upon the allegations in the demand letter. Then, noting that Washington courts have repeatedly held that an insured’s deliberate conduct does not constitute an accident, the Speed Court held that “[e]ven interpreting the allegations liberally and resolving doubts in favor of a duty to defend,” the USAA policies did not conceivably cover the claims alleged in Speed’s demand letter.
In reaching its holding, the Court of Appeals rejected Speed’s argument that USAA was obligated to defend because USAA expressed uncertainty regarding coverage. (For example, USAA had advised Geyer that coverage was “questionable” and that “[ c]overage may be precluded.”) The Speed Court held: “What the insurer believes about the duty to defend or policy coverage is immaterial to the court’s duty to defend determination.” Further, “to allow an insurer’s conduct to give rise to the duty to defend would conflict with the rule that insurance coverage cannot be created by equitable estoppel.”