by Jennifer Dinning | Jul 10, 2017 | Blog News, Publications
In King County v. Vinci Constr. Grands Projects, et al., __Wn.2d __, __ P.3d __ (July 6, 2017), the Washington Supreme Court was asked to review an award of nearly $15 million in attorney fees against five surety companies following a jury trial for breach of contract in a public works project. In a six to three decision, the Washington Supreme Court ruled attorney fees under Olympic S.S. Co. v. Centennial Ins. Co., 117 Wn.2d 37, 811 P.2d 673 (1991) (“Olympic Steamship Fees”), which arguably had been restricted to disputes where an insured is a prevailing party in a lawsuit that is forced by an insurer’s refusal to defend or pay the claim, may be applied in the context of a dispute with sureties on a performance.
In 2006, King County contracted with three construction firms to expand its wastewater treatment system. One of the contractors, VPFK, did not perform its portion of the work by the performance deadline contained in the contract. VPFK had a performance bond that obligated the sureties to step in and “promptly remedy the default in a manner acceptable to [King County],” if VPFK did not perform under the contract.
After King County declared VPFK to be in default, the County requested that the sureties either cure VPFK’s default themselves or agree to fund a new contractor to complete VPFK’s work. The sureties, however, responded that performance was not required under the bond because no breach had occurred.
King County filed suit against VPKF and one of its sureties. VPKF’s other sureties intervened. Together, the five sureties denied coverage and adopted all of VPFK’s defenses against breach of contract. The matter proceeded to trial, and the jury found in favor of King County. As part of the relief awarded after the trial, the court awarded $15 million in Olympic Steamship Fees. Moreover, the trial court held, as a basis for awarding the County all of its legal fees, that it didn’t matter if the fees were incurred in pursuing claims against VPKF or the sureties. Because King County’s claim against the sureties was intertwined and indistinguishable from its claim against VPFK, the county could recover all of its fees under Olympic Steamship.
by Jennifer Dinning | Feb 2, 2017 | Blog News, Publications
The Washington Supreme Court held today that violation of Washington Administrative Code (“WAC”) regulations alone does not support a cause of action under the Insurance Fair Conduct Act (“IFCA”) in Perez-Crisantos v. State Farm Fire and Casualty Co., No. 92267-5, with eight justices joining the lead opinion. The Court’s findings included the following:
- IFCA does not state a cause of action for first party insureds “whose claims were processed in violation of the insurance regulations,” but it explicitly lays out a cause of action for first party insureds who are unreasonably denied a claim.
- When the Washington State Voters were presented with the IFCA initiative, the ballot title clearly indicated an intent to create a cause of action for unreasonable denial of coverage, not for regulatory violations. On the whole, the Court concluded that the legislative history suggests that IFCA does not create an independent cause of action for regulatory violations.
- The reading sought by Mr. Perez-Crisantos would render portions of IFCA superfluous.
In reaching this conclusion, the Court agreed with the rationale of prior federal decisions that an independent cause of action based on a WAC violation was not created. Among the decisions cited by the Court was Country Preferred Ins. Co. v. Hurless, 2012 WL 2367073 (W.D. Wash. 2012), in which Soha & Lang, P.S. successfully represented the insurer on this issue.
The litigation between State Farm and Mr. Perez-Crisantos arose from his insurance claim regarding a motor vehicle accident caused by another driver. Mr. Perez-Crisantos made an underinsured motorist (“UIM”) claim with State Farm. State Farm determined that Mr. Perez-Crisantos had been fully compensated, and declined to make further payments under the UIM coverage. Mr. Perez-Crisantos sued State Farm on multiple grounds, including a claim for violation of IFCA. Mr. Perez-Crisantos premised his IFCA claim on, among other things, State Farm’s alleged violation of certain WAC regulations.
This is a fair and reasonable reading of the Insurance Fair Conduct Act and good news for insurers and, in the long run, their customers.
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.
by Jennifer Dinning | Dec 9, 2016 | Blog News, Publications
On December 8, 2016, the Oregon Supreme Court upheld the determination of the Court of Appeals holding that plaintiff/respondent West Hills Development Company (“West Hills”) was an insured under a policy of insurance issued by Oregon Automobile Insurance Company (“OAIC”) and was entitled to a defense, but did so on alternative grounds. The Oregon Supreme Court found that there was no question regarding whether West Hills was an additional insured under the policy in question, and questions regarding the duty to defend were properly resolved under the “four corners” or “eight corners” rule..
The underlying lawsuit arose from West Hills’ work as the general contractor for a townhome development in Sherwood, Oregon (“Arbor Terrace”). West Hills hired multiple subcontractors, including L&T Enterprises, Inc. (“L&T”). West Hills was added as an additional insured (“AI”) on L&T’s insurance policy with OAIC. The language of the AI endorsement provides that West Hills is an insured “only with respect to liability arising out of [L&T’s] ongoing operations performed for [West Hills].” The Arbor Terrace homeowners association sued West Hills, alleging that negligence of West Hills’ subcontractors had caused defects which lead to water damage and that West Hills was liable for that negligence due to negligent hiring and supervision. The complaint alleged that damages occurred before the owners purchased their units, but did not provide any further detail regarding timing of damage.
The Court found, contrary to the argument of the parties and the determinations of the lower courts, that the language of the AI endorsement made clear that West Hills was an additional insured under the policy. Accordingly, the Court proceeded under the four corners” or “eight corners” rule, applying the principle that ambiguities in the complaint be resolved in favor of the insured, in order to determine if the duty to defend was triggered. The Court found that, although the complaint did not specifically name L&T or specifically allege that West Hills was liable for the negligence of L&T, the allegations of the complaint presented facts that “reasonably could be interpreted to result in West Hills being held liable for conduct covered by the policy: L&T’s operations for West Hills.” The Court rejected OAIC’s argument that the allegations of the complaint were barred by the “ongoing operations” language in the AI endorsement. The Court noted that the language covers claims “arising from” ongoing operations, and that the complaint’s vague statement did not rule out damage occurring during ongoing operations. Accordingly, the Court found that OAIC had a duty to defend West Hills based on the allegations of the complaint and the language of the insurance policy.
Soha and Lang attorneys are available to assist insurer clients in understanding and addressing the impact of this decision both during the claims handling process and after an allegation of bad faith claims handling has been made.
Disclaimer: The opinions expressed in in this blog are those of the author and do not necessarily reflect those of Soha and Lang, P.S. or its clients.
by Jennifer Dinning | Jun 14, 2016 | Blog News, Publications
On June 9, 2016, in the matter of Lui v Essex Ins. Co. (WA Sup. Ct. No. 91779-9), the Washington Supreme Court ruled that a Change of Conditions Endorsement in a commercial property insurance policy precluded coverage for water damage to a vacant building.
There was no dispute regarding the relevant facts. After a tenant moved out of the insured building, a frozen sprinkler pipe burst causing substantial water damage to the building. The building owner submitted a claim to its insurer. The insurer issued payment for property damage. However, it later discovered that the building had been vacant at the time of the damage and refused to issue further payment based upon the following Change of Conditions Endorsement:
Coverage under this policy is suspended while a described building, whether intended for occupancy by owner or tenant, is vacant or unoccupied beyond a period of sixty consecutive days, unless permission for such vacancy or unoccupancy is granted hereon in writing and an additional premium is paid for such vacancy or unoccupancy.
Effective at the inception of any vacancy or unoccupancy, the Causes of Loss provided by this policy are limited to Fire, Lightning, Explosion, Windstorm or Hail, Smoke, Aircraft or Vehicles, Riot or Civil Commotion, unless prior approval has been obtained from the Company.
The insurer took the position that coverage did not exist because the endorsement immediately suspended coverage at the inception of any vacancy for all but specifically named causes of loss and water damage was not one of the named causes of loss.
The insured argued that the endorsement did not apply to limit coverage until the covered property had been vacant for more than 60 consecutive days. The Washington Supreme Court sided with the insurer. The court held that under the endorsement when a building becomes vacant, coverage is limited to loss resulting from the specified causes of loss and, after a 60 consecutive day vacancy, the policy provides no coverage. Accordingly, the court held the policy barred coverage for the water damage in this case.
Soha and Lang attorneys are available to assist insurer clients in understanding and addressing the impact of this decision both during the claims handling process and after an allegation of bad faith claims handling has been made.
Disclaimer: The opinions expressed in in this blog are those of the author and do not necessarily reflect those of Soha and Lang, P.S. or its clients.
