In Alex Jones et al. v. St. Paul Fire & Marine Ins. Co., et al., Nos 15-35856 & 16-35160, 2017 WL 6333768 (9th Cir. Dec. 12, 2017) (unpublished), the Ninth Circuit Court of Appeals held that claims against a Washington municipal risk pool, WRCIP, for breach of contractual and extra-contractual duties had no merit. Among other things, the Ninth Circuit held that the municipal risk pool was not an “insurer” under Washington law and, in fact, was a co-insured with the risk pool members under an insurance policy issued by St. Paul & Marine Insurance Company (“St. Paul”). Accordingly, any dispute that the plaintiffs had over insurance coverage was with St. Paul and not with the risk pool:
WRCIP is not an insurer but an insured, and it satisfied its duties under its contract with St. Paul when it paid the self-insured retention. Any dispute that [plaintiffs] Jones and Vargas have over insurance coverage is therefore with St. Paul and not with WRCIP.
The Ninth Circuit also rejected the plaintiffs’ arguments that the risk pool had extra-contractual duties under Washington insurance law (internal citations omitted):
Jones and Vargas also failed to state other causes of action against WRCIP because they have not plausibly alleged that WRCIP owed them any extra-contractual duties. They acknowledge that the district court was correct in ruling that WRCIP is exempted by Washington statute from the definition of “insurer,” so it does not owe an insurer’s statutory duties.
Jones’s and Vargas’s alternative bases for extra-contractual duties are unpersuasive. WRCIP owes them no common-law fiduciary duties because neither of them (nor their public defense attorneys) “occupie[d] such a relation to” WRCIP “as to justify [them] in expecting that [their] interests will be cared for.” Jones and Vargas also rely on a general preambulatory provision of Washington’s insurance code to suggest that WRCIP owes them duties of good faith related to the general business of insurance. But under Washington law, self-insurance and the payment of self-insured retentions are not insurance, so there is no reason to imply duties on WRCIP from Washington’s insurance law. Even if there were, Jones and Vargas have failed to plead any failure by WRCIP to act in good faith because it paid its self-insured retention, at which point any coverage duties fell to St. Paul.
Accordingly, the Ninth Circuit affirmed the district court’s dismissal of all claims against the risk pool.
One of the plaintiffs also filed suit against Canfield & Associates (“Canfield”), the third-party administrator responsible for the risk pool’s day-to-day administration. In a footnote, the Ninth Circuit explained that its analysis of the claims against the risk pool also governs the claims against Canfield. Thus, the Ninth Circuit agreed with the district court’s dismissal of the claims against Canfield as well.
Authors: Sarah Davenport and Paul Rosner
Disclaimer: The opinions expressed in this blog are those of the authors and do not necessarily reflect those of Soha and Lang, P.S. or its clients.