Soha & Lang, P.S. Shareholder Paul Rosner will be speaking about insurance bad faith as part of a panel on reputational management at the Puget Sound Adjuster Association’s Spring Symposium on April 6th in Seattle. For more information, go to the PSAA website or click on the link below.
https://drive.google.com/file/d/1PbDj39us_TK3X41mJxW6aklXt1VQtqNL/view
In Keodalah v. Allstate Insurance Company, No. 75731-8-1 (Mar. 26, 2018), the Washington Court of Appeals held that an insurance adjuster that handles claims may be held individually liable for bad faith and violation of the CPA. The case involved allegations of bad faith and CPA against an Allstate insurance adjuster in an automobile claim.
The insured was involved in a fatal auto accident with a motorcycle, and made a UIM policy limits demand of $25,000. Allstate assessed the claim and found the insured was 70% at fault, and offered $1,600 to settle the claim. The adjuster was designated as Allstate’s 30(b)(6) witness and claimed that the insured had run the stop sign and been on his cell phone. The adjuster later admitted that was not the case. Allstate then tried to settle the claim for $15,000. The insured declined. At trial, the jury found zero liability on behalf of the insured and awarded him $108,868 for injuries, lost wages and medical expenses. The insured then brought IFCA, bad faith and CPA claims against both Allstate and the adjuster.
The trial court dismissed the individual claims. The Court of Appeals, however, found that the Washington bad faith regulations and CPA both apply to individual adjusters, even if they are working within the scope of their employment. The court concluded: “We hold that an individual employee insurance adjuster can be liable for bad faith and a violation of the CPA”.
If you have any questions regarding this case, please do not hesitate to contact Soha & Lang, P.S.
Disclaimer: Any 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 Ohio Security Ins. Co. v. Axis Ins. Co., No. 94677-9, the Washington Supreme Court, on a certified question from the United States District Court for the Western District of Washington, confirms that Washington law establishes that service through the Washington State Insurance Commissioner is the exclusive means of service for authorized foreign insures in Washington. The Court reaches this conclusion based on the plain language, and legislative intent, of RCW 4.28.080(7)(a) and RCW 48.05.200(1).
If you have any questions regarding this case, please do not hesitate to contact Soha & Lang, P.S.
Disclaimer: Any 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
In Cincinnati Ins. Co. v. Zaycon Foods LLC, 2018 WL 847247 (E.D. Wash. February 13, 2018) (ECF 54), the U.S. District Court ruled that a liability insurer had no duty to defend or indemnify where neither the underlying complaint nor extrinsic facts described a claim for damages that could be covered under the policy.
In the underlying suit, Zaycon was sued by its former CEO for alleged violations of state and federal securities laws, fraud, negligent misrepresentation, breach of fiduciary duty, and breach of contract relating to the former CEO’s ouster as CEO. Cincinnati agreed to defend Zaycon under a reservation of rights.
Represented by Gary Sparling and Sarah Davenport of Soha & Lang, P.S., Cincinnati filed an action for declaratory relief, seeking a declaration that the claims in the underlying suit did not fall within the coverages provided in Cincinnati’s policies issued to Zaycon. In response to Cincinnati’s summary judgment motion, Zaycon argued that certain allegations in the underlying complaint could be interpreted to describe defamation. The Cincinnati policies provided coverage for, among other things, “personal and advertising injury” arising out of “[o]ral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services.” Zaycon argued that although the underlying suit did not formally state a cause of action for defamation, the allegations in the complaint and extrinsic facts nevertheless demonstrated that the underlying suit included claims for false statements that allegedly damaged the former CEO’s reputation.
The court disagreed, and held that the underlying complaint did not allege or imply that the alleged false statements by Zaycon’s members had damaged the former CEO’s reputation, nor did the complaint seek damages for such harm. The court further held that the extrinsic facts failed to demonstrate that Zaycon faced potential liability for defamation in the underlying suit, when the complaint did not allege any claim for such damages. Accordingly, the court granted summary judgment and ruled that Cincinnati had no duty to defend or indemnify, and that Cincinnati could immediately withdraw from any further defense in the underlying suit.
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 Bates v. Bankers Life and Cas. Co., 362 Or 337 (2018), the Oregon Supreme Court addressed the certified question involving ORS 124.110(1)(b), which addresses financial abuse of vulnerable persons. The certified question was: “Does a plaintiff state a claim under Oregon Revised Statutes 124.110(1)(b) for wrongful withholding of money or property where it is alleged that an insurance company has in bad faith delayed the processing of claims and refused to pay benefits owed under an insurance contract?” The plaintiffs were elderly persons who had purchased long-term care insurance policies from the defendant insurance company. The plaintiffs claimed that the insurer developed onerous procedures to delay and deny insurance claims. The court held that plaintiffs had failed to state a claim under the statute: “[W]e answer in the negative: Allegations that an insurance company, in bad faith, delayed the processing of claims and refused to pay benefits owed to vulnerable persons under an insurance contract do not state a claim under ORS 124.110(1)(b) for wrongful withholding of ‘money or property.’” The court reasoned that Section (1)(b) of the statute applies where a vulnerable person entrusts his or her money or property to another, who in bad faith refuses to return that money or property. This requirement was not satisfied because the plaintiffs were not seeking the return of the money that they had transferred to the insurer but were seeking contractual benefits under the insurance policies.
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
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.
In Security National Ins. Co. v. Sunset Presbyterian Church, 289 Or App 193 (2017), the named insured was a subcontractor that performed masonry work on the project in question. The general contractor was an additional insured on the subcontractor’s insurance policy based on a provision in the subcontract with this requirement. The Oregon Court of Appeals rejected the insurance company’s contention that the additional insured provision in the subcontract was void under ORS 30.140, which prohibits provisions in construction contracts requiring one party to procure insurance to indemnify another party for the second party’s own negligence. Instead, the provision was enforceable to the extent it did not contravene the statute. The appellate court also addressed the extent of the additional insured obligation owed. The issue was whether the insurer had an obligation to defend all claims asserted against the general contractor or whether its duty to defend was limited to the claims relating to liability arising out of the fault of the subcontractor. The court reasoned that, under ORS 30.140, the duty to defend was limited to claims arising out of the fault of the subcontractor, and the insurance company did not have to defend all claims that were unrelated to the subcontractor. Other holdings were as follows. The court rejected the insurer’s argument that there was no duty to defend because the underlying complaint did not mention the subcontractor. The court reasoned that the complaint alleged that the general contractor relied on the work of subcontractors and specified defects in the building envelope including problems with stone masonry. These allegations were sufficient for the purpose of triggering the duty to defend. In addition, the insurer contended there was no duty to defend because the additional insured obligation was limited to the named insured’s “ongoing operations.” The court rejected this contention, finding that the underlying complaint did not allege when the damage occurred and was thus sufficient for the purposes of the duty to defend.
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.
In the matter of The Dolsen Companies, et al. v. Bedivere Insurance Company, et al., Case No. 1:16-CV-3141-TOR, 2017 WL 3996440 (E.D.Wash. September 11, 2017) (ECF 70), the United States District Court for the Eastern District of Washington addressed the application of an absolute pollution exclusion to claims for defense and indemnity of a lawsuit alleging environmental contamination and liability under the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq. (“RCRA”), the Emergency Planning and Community Right-to-Know Act, 42 U.S.C. § 11001 et seq. (“EPCRA”), and the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. § 9601 et seq. (“CERCLA”).
The underlying lawsuit alleged that the plaintiffs, three dairy farm operations (“the Dairy Farms”), caused contamination to ground water and drinking water through their use and storage of liquid manure. The Dairy Farms submitted the claim to several insurers who had issued policies covering after the year 2000 (“Insurers”). The Insurers denied both defense and indemnity based, in part, on the absolute pollution exclusion contained in the policies. The Dairy Farms sued the Insurers and the parties cross moved on summary judgment to determine whether the absolute pollution exclusion applied to preclude coverage for the environmental contamination claims under the policies.
The Court first construed the language of the absolute pollution exclusion and found that it was unambiguous in the context of the environmental contamination claims. The Court considered and rejected the Dairy Farms’ argument that cow manure did not qualify as a “pollutant” under the policy because it has a beneficial non-polluting use. The Court also analyzed and rejected the Dairy Farms’ argument that coverage should be afforded under the policies because a reasonable purchaser of a farm policy would not expect to have part of their operations excluded from coverage. The Court noted that Washington Courts have expressly declined to adopt the “reasonable expectation” line of reasoning.
Citing to Kent Farms v. Zurich Ins. Co., 140 Wn.2d 396 (2000) and Quadrant Corp. v. Am. States Ins. Co., 154 Wn.2d 165 (2005), the Court held that absolute pollution exclusions apply to traditional environmental harm arising from a pollutant acting as a pollutant. The Court found that the underlying environmental claims clearly alleged that manure was acting as a pollutant when it caused the loss at issue.
The Court then turned to the efficient proximate cause analysis as set out in Xia v. ProBuilders Specialty Insurance Company RRG, 2017 WL 3711907, at *4 (April 27, 2017), originally published at 188 Wn.2d 171 (2017), as modified (August 16, 2017). The Court stressed:
The distinguishing feature between these two lines of cases is the relation between the initial act and the pollutant causing harm—viz., whether the initial peril was the polluting act (i.e., whether the incident involved pollutants in the first place) or whether the initial peril was some other act that incidentally led to a polluting harm. Although subtle, this framework is workable and leads to a clear result in this case: the initial act was intimately tied to the pollutant and thus the initial peril was the polluting act.
Applying this framework to the environmental claims at issue, the Court found that the initial act giving rise to the environmental harm (the storage and application of liquid manure) was an excluded harm and there was no other covered occurrence that otherwise led to the harm. The Court rejected the argument that the negligent construction of the storage facilities for the manure presented a separate cause of the loss, instead finding that the absolute pollution exclusion specifically excluded coverage for the seepage of pollutants stored or processed as waste.
The Court also rejected the Dairy Farms’ argument that under American Best Food, Inc. v. Alea London, Ltd., 168 Wn.2d 398, 229 P.3d 693 (2010), the Insurers had a duty to defend because a Washington case had not yet determined that cow manure was a “pollutant” as defined by the policies, and at least one case from a different jurisdiction had found that pig manure was not a pollutant. The Court rejected this argument and found “a different approach in another state does not create lack of clarity where the underlying rules are much different and are clearly inconsistent with the approach in Washington.”
Accordingly, the Court found that the absolute pollution exclusion applied and that the Insurers had no duty to defend or indemnify the Dairy Farms for the environmental contamination claims.
On September 14, 2017, the Washington Supreme Court held in Arden v. Forsberg & Umlauf, P.S., No. 93207-7, that lawyers who represent insurance companies in coverage disputes may also defend their insureds provided they adhere to the Rules of Professional Conduct.
In the underlying matter, Hartford retained Forsberg & Umlauf P.S. (“Forsberg”) to defend Hartford’s insureds in a civil matter. Forsberg had represented Hartford in other matters but did not disclose this relationship to the insureds or otherwise obtain their informed consent. The underlying case settled, with Hartford paying the entire settlement amount. However, the insureds sued Forsberg for breaches of fiduciary duty and legal malpractice.
The trial court granted summary judgment in favor of Forsberg. The Washington Court of Appeals affirmed. The Washington Supreme Court also affirmed, but on a different basis. After discussing the lawyers’ obligation to disclose actual and potential conflicts of interest under the Rules of Professional Conduct, the Supreme Court found there was no evidence that the insureds suffered any damages.
In its decision, the Washington Supreme Court rejected the argument that a lawyer who represents an insurer is automatically disqualified from representing the company’s insureds. Thus, lawyers are not precluded from representing both an insurance company and its insured; however, lawyers must follow the Rules of Professional Conduct including obtaining informed written consent from both clients when required.
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.
Soha & Lang, P.S. Shareholder Paul Rosner is one of more than 50 speakers who will be participating in the 2017 CPCU Annual Meeting in Orlando this month.
On Sunday September 17th, Paul, Ulises Castellon of Fire Cause Analysis, and Denise Brown of InterWest Insource Services will be presenting “Bad Faith Nightmares: Recent Trends and Themes.” This interactive course discusses real-life case scenarios and explores errors and issues that have led to some of the industry’s most troubling bad faith losses, as well as several of the themes and increasingly common attacks being utilized by plaintiffs.
On Monday September 18th, Paul will join a panel of experts including Professor Harold Weston of Georgia State University, Phillip Bryant of Snodgrass, P.C. and Michael Gay of Volvo Financial Services to present: “Vacation Calamity 2: Adventures on the Trip to Orlando” a tale of a fictional group traveling to Orlando for the CPCU Society Annual Meeting. The group encounters misfortunes and accidents along the way, including at an amusement park, on an aerial gondola ride, and from an Airbnb stay gone bad. The panel will discuss the legal issues and apply policy provisions.