by Sarah Davenport | Dec 2, 2016 | Blog News, Publications
On November 30, 2016, the Oregon Court of Appeals upheld the application of an anti-assignment clause in an insurance policy where the assignment arose from the insurer’s refusal to defend or indemnify rather than from a judgment against the insured. In doing so, the Court of Appeals addressed the effect of ORS 31.825 on the anti-assignment clause.[1]
In Clinton Condo. Owners Assn. v. Truck Ins. Exchange, 282 Or App 484 (2016), Clinton Condominium Owners Association (“Association”) sued a window washing company, We Do Windows, Inc., for negligence and breach of contract. We Do Windows was insured by Truck Insurance Exchange, which declined to defend or indemnify We Do Windows. We Do Windows assigned its claims against Truck Insurance Exchange to the Association as part of a settlement. The Association then filed this action. Truck Insurance Exchange brought a summary judgment motion, which the trial court granted on the basis that the anti-assignment clause provided that an insured could not assign any rights or claims under the policy without consent from the insurer, and that an anti-assignment clause was not rendered unenforceable by ORS 31.825. The Association appealed.
The Oregon Court of Appeals cited Brownstone Homes Condo. Assn. v. Brownstone Forest Hts., 358 Or 223, 363 P3d 467 (2015), to hold that ORS 31.825 is limited to “allowing an insured to assign excess judgment claims.” It reasoned that, because the assigned claims brought by the Association arose from Truck Insurance Exchange’s refusal to defend or indemnify We Do Windows, and not from a judgment against We Do Windows, the anti-assignment clause applied and the trial court rightly granted summary judgment dismissing the action for lack of standing.
[1] ORS 31.825 provides that “[a] defendant in a tort action against whom a judgment has been rendered may assign any cause of action that defendant has against the defendant’s insurer as a result of the judgment to the plaintiff in whose favor the judgment has been entered. That assignment and any release or covenant given for the assignment shall not extinguish the cause of action against the insurer unless the assignment specifically so provides.” (Emphasis added).
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 Soha Lang | Oct 7, 2016 | Blog News, Publications
On October 6, 2016, the Washington Supreme Court issued an important 5-4 decision holding that a wrongful death action is extinguished if the statute of limitations has run on the decedent’s own cause of action by the time of his death. Deggs v. Asbestos Corp., et al., Wash. Sup. Ct. No. 91969-1 (October 6, 2016). The majority rejected plaintiff’s claim that—regardless whether the statute had run on decedent’s own claims prior to death—the heirs’ cause of action for wrongful death cannot arise until after the decedent’s death.
The decedent in Deggs had filed a lawsuit in 1999 against nearly 40 defendants claiming asbestos-related injury. He settled with some defendants, and won a judgment at trial of $1,511,900 against the last remaining defendant. He died nine years later, and within three years of death, the personal representative of his estate filed a wrongful death action based on the alleged asbestos-related injury, naming one defendant who was named in decedent’s prior action, and a host of new defendants who were not. The trial court granted a motion to dismiss on the grounds that decedent’s cause of action for asbestos-related injuries had lapsed by the time of his death, precluding the heirs from bringing a wrongful death action. The Washington Court of Appeals upheld the dismissal.
Justice Stephens wrote a vigorous dissent to the majority opinion by the Washington Supreme Court, joined by three other justices. The dissent maintained that the wrongful death action is a “free-standing cause of action for family members that cannot arise before the death of their loved one.” It further complained that despite acknowledging its decision was based on incorrect precedent, the majority “sees no harm in perpetuating its topsy-turvy illogic.”
This decision should prevent the practice by some plaintiffs’ firms of recycling old claims by filing new wrongful death actions against the same or different defendants years after the decedent filed his own lawsuit or allowed his cause of action to lapse.
(October 6, 2016)
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 Soha Lang | Sep 14, 2016 | Blog News, Publications
On September 13, 2016, Soha & Lang, P.S. attorney Jennifer Dinning took and passed her first CPCU exam, CPCU 500 Foundations of Risk Management and Insurance. Jennifer is one of three Soha & Lang, P.S. attorneys on the path to obtaining the CPCU designation. In addition, one of our shareholders, Paul Rosner, J.D., CPCU, is active in the Pacific Northwest Chapter and nationally. Soha & Lang, P.S. attorneys are also frequent speakers at chapter meetings and All-Industry Days of the Pacific Northwest (Western Washington), Spokane and Oregon chapters of the CPCU Society.
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.
by Sarah Davenport | Dec 12, 2015 | Blog News, Publications
On December 10, 2015, the Washington Supreme Court affirmatively answered the following certified questions from the United States District Court for the Western District of Washington:
- Does the Washington Consumer Protection Act (“CPA”) create a cause of action for a plaintiff residing outside Washington to sue a Washington corporate defendant for allegedly deceptive acts?
- Does the Washington Consumer Protection Act create a cause of action for an out-of-state defendant for the allegedly deceptive acts of its in-state agent?
The Plaintiff, Sandra C. Thornell, in this putative class action lawsuit is a Texas resident. Ms. Thornell’s son was involved in a car accident in Texas, and the other motorist was insured by State Farm Mutual Automobile Insurance Company (“State Farm”), a corporation with its principal place of business in Illinois. State Farm paid for the damages to its insured’s vehicle, and then pursued Ms. Thornell for an unliquidated claim based on subrogated interest from its insured. Ms. Thornell alleged that she received three deceptive debt collection letters from Seattle Service Bureau Inc. (SSB), a corporation with its principal place of business in Washington, pursuant to the referral of unliquidated subrogation claims to SSB by State Farm.
The Washington Supreme Court answered both questions in the affirmative. Addressing Question 1, the Supreme Court noted that the CPA provides “‘[a]ny person’ can sue for a violation”, “‘[c]ommerce’ includes ‘any commerce directly or indirectly affecting the people of the state of Washington’”, and “the CPA ‘shall be liberally construed that its beneficial purposes may be served’” (emphasis in original). The court stated that a broad reading of this language is appropriate and supported by prior case law, and that it does not matter whether “commerce” is out-of-state if it affects the “people of the state of Washington,” even indirectly. Therefore, the court held “[t]he CPA does allow claims for an out-of-state plaintiff against all persons who engage in unfair or deceptive acts that directly or indirectly affect the people of Washington”.
Addressing Question 2, the Supreme Court gave a brief summary of the general rule of an agency relationship, and concluded that “[t]he ‘fact’ that the principal in this case is an out-of-state entity does not change this. A principal cannot send agents into a state to commit CPA violations in order to avoid liability by virtue of its out-of-state residence.” The Supreme Court clarified that the United States District Court would have to determine whether an agency relationship existed.
Soha and Lang attorneys are available to assist insurer clients in understanding and addressing the impact of this decision.
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 Soha Lang | Nov 25, 2015 | Blog News, Publications
On November 4, 2015, Soha & Lang Shareholder Paul Rosner, J.D., CPCU was awarded the 2014-2015 Ralph Boden Award for Excellence by the Pacific Northwest Chapter of the CPCU Society. The award was created to honor Ralph Boden’s long term commitment to the CPCU society and its mission of promoting excellence through ethical behavior and continuing education. The award, which was presented during the chapter’s All Industry Day, recognizes Paul’s continuing commitment to insurance education both locally and nationally.
by Geoff Bedell | Nov 24, 2015 | Blog News, Publications
On November 19, 2015, the Oregon Supreme Court overruled forty-year-old precedent holding that a plaintiff’s covenant not to execute a judgment obtained in a settlement with an insured-defendant extinguishes the insured-defendant’s liability to the plaintiff and, by extension, the liability of the defendant’s insurer, as well.
In Brownstone Homes Condo. Assn. v. Brownstone Forest Hts. et al, No. SC S061273255 (Or Nov 19, 2015), a homeowners association (“Association”) sued a siding subcontractor, A&T, for negligence and breach of contract. A&T had two insurers: Zurich and Capitol. Capitol initially undertook a defense of the action, but later declined to defend or indemnify A&T. The Association, A&T and Zurich settled the claim without Capitol’s participation. Under the settlement, A&T agreed to a stipulated judgment of $2 million, of which Zurich paid $900,000. The Association agreed not to execute on A&T’s assets, and A&T assigned its claims against Capitol to the Association. The settlement agreement was entered on March 14, 2008 and judgment was entered on November 13, 2008. Subsequent to entry of judgment, the Association filed a garnishment proceeding against Capitol seeking the $1.1 million balance. The trial court dismissed the garnishment action based on Stubblefield v. St. Paul Fire & Marine, 267 Or 397, 517 P2d 262 (1973), which held that a stipulated settlement, coupled with a covenant not to execute, extinguished liability. The Oregon Court of Appeals affirmed the trial court. On further review, the Oregon Supreme Court reversed. In doing so, the court expressly overruled Stubblefield:
In short, we conclude that Stubblefield erred when it concluded that a covenant not to execute obtained in exchange for an assignment of rights, by itself, effects a complete release that extinguishes an insured’s liability and, by extension, the insurer’s liability as well. It necessarily follows that the trial court in this case likewise erred in concluding that the existence of such a covenant not to execute as a component of the parties’ settlement agreement had the effect of extinguishing A&T’s liability to [the Association] and, as a result, had the effect of extinguishing Capitol’s liability as well.
Accordingly, under Oregon law, a covenant not to execute on a judgment obtained in exchange for an assignment of rights against the judgment debtor’s insurance carrier, does not, by itself, extinguish an insured’s liability and, thus, does not extinguish the insurance carrier’s obligation for the consent judgment. The court specifically limited its ruling to this narrow issue, declining to address, for example, whether collusion or fraud in the settlement may supply grounds for rejecting a stipulated or consent settlement.
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 Paul Rosner | Jun 18, 2015 | Blog News, Publications
On June 18, 2015, the Washington Supreme Court answered the following certified question from the Ninth Circuit Court of Appeals regarding the meaning of the undefined term “collapse” under the first party property coverage of a policy State Farm issued to a homeowners association:
What does “collapse” mean under Washington law in an insurance policy that insures “accidental direct physical loss involving collapse,” subject to the policy’s terms, conditions, exclusions, and other provisions, but does not define “collapse,” except to state that “collapse does not include settling, cracking, shrinking, bulging or expansion?”
The Washington Supreme Court first held that the undefined term “collapse” is ambiguous. The court then turned to the language of the State Farm policy and held:
“Collapse” in the Policy means the substantial impairment of structural integrity of a building or part of a building that renders such building or part of a building unfit for its function or unsafe in a manner that is more than mere settling, cracking, shrinkage, bulging, or expansion.
Queen Anne Park Homeowners Ass’n v. State Farm Fire & Cas. Co. No. 90651-3, *8 (June 18, 2015).
The Supreme Court explained that under the terms of the State Farm policy, “collapse” must mean something more than mere “settling, cracking, shrinking, bulging or expansion.” Id. at *7. The court also noted that “structural integrity” of a building means a building’s ability to remain upright and “substantial impairment” means a severe impairment. Id. Taken together, the court said “’substantial impairment’ of ‘structural integrity’ means an impairment so severe as to materially impair a building’s ability to remain upright.” Id.
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 Paul Rosner | Jul 10, 2014 | Blog News, Publications
In a unanimous decision[1] on an issue it identified as a matter of first impression in Washington, the Washington Supreme Court held discovery that is potentially prejudicial to an insured in underlying litigation must be stayed until the underlying litigation is fully adjudicated.[2] The Court also held that the trial court erred when it delayed ruling on a motion for summary judgment filed by the insured, Expedia, regarding its insurer’s duty to defend against numerous underlying lawsuits.[3]
The underlying litigation involved multiple lawsuits brought against Expedia by state and local taxing authorities. Expedia tendered most of the suits to Zurich; however, some were tendered late. Zurich declined Expedia’s tender on several grounds, including late tender and that the underlying suits may be excluded from coverage.
In November 2010, Expedia filed suit against Zurich for declaratory judgment, insurance bad faith, and violation of Washington’s Consumer Protection Act. Zurich responded with a counterclaim for declaratory judgment regarding its coverage obligations. Zurich also asserted various defenses, including late tender, known loss, material misrepresentation, and mistake. The trial court declined to make a determination of Zurich’s duty to defend Expedia and ordered Expedia to produce discovery that Expedia claimed may be prejudicial to it in the underlying actions.
When the matter reached the Washington Supreme Court, the Court rejected Zurich’s argument that under Nat’l Sur. Corp. v. Immunex Corp.,[4] it was entitled to discovery related to its late tender defense, which requires an insurer to prove that it was “actually and substantially prejudiced” by a late tender.[5] In so holding, the Court stated the following regarding its holding in Immunex:
At most, Immunex indicates that the actual prejudice question is relevant only to the late tender defense and that actual prejudice caused by late tender may relieve the insurer of the duty to pay the cost of defense incurred after the insurer obtains a judicial declaration that it owes no duty to defend.
The Court held the trial court should have adjudicated the duty to defend issue first. Then, Zurich could attempt to prove its defenses, including prejudice from late tender. “In the meantime, however, Zurich should have been required to defend Expedia if the court found that the duty to defend had been triggered.” The Court also held:
Unless actual prejudice can be established by the insurer as a matter of law, an insurer’s allegations of prejudice cannot preclude a determination that the underlying claim is conceivably covered.
The Court then addressed Zurich’s argument based upon Overton v. Consolidated Insurance Co.,[6] that it should be permitted to discover and present extrinsic evidence to negate its duty to defend. The Court held that to the extent Overton supported Zurich’s argument “the opinion predates and conflicts with the extrinsic evidence rule as clarified in Truck Insurance Exchange and its progeny.”[7]
Citing a California Court of Appeal decision, Haskel, Inc. v. Superior Court,[8] the Washington Supreme Court held “an adjudication of the duty to defend cannot be delayed by discovery.” Therefore, the trial court erred by delaying adjudication of Expedia’s summary judgment motion concerning the duty to defend until Expedia complied with potentially prejudicial discovery.
The Court remanded the case to the trial court to determine Zurich’s duty to defend Expedia in each of the underlying cases subject to Expedia’s motion. The Court also ordered the trial court “to stay discovery in the coverage action until it can make a factual determination as to which parts of discovery in the coverage action are potentially prejudicial to Expedia in the underlying litigation.” Finally, the Court instructed that “[a]ll discovery logically related to the underlying claims should be stayed until such claims are fully adjudicated.”
Soha & Lang attorneys are available to assist insurer clients in understanding and addressing the impact of this decision.
Disclaimer: The opinions expressed in in this blog are those of the author and do not necessarily reflect those of Soha & Lang, P.S. or its clients.
[1] Expedia, Inc. v. Steadfast Ins. Co., No. 88673-3 (July 3, 2014).
[2] The Court’s ruling is understandable, and it is curious why the Court even deemed this a matter of first impression in view of its prior ruling in Mut. Of Enumclaw v. Paulsen Construc., 161 Wn.2d 903, 918 (2007) that “[w]hile defending under a reservation of rights, an insurer acts in bad faith if it pursues a declaratory judgment that it has no duty to defend and that ‘action might prejudice the insured’s tort defense.’” The only distinction between Paulsen and the current case is that the insurer in Paulsen was defending while Zurich had denied a defense.
[3] The opinion refers to the petitioner insureds collectively as Expedia and refers to respondent insurers collectively as Zurich.
[4] 176 Wn.2d 872, 297 P.3d 688 (2013).
[5] Immunex Corp., 176 Wn.2d at 890.
[6] 145 Wn.2d 417, 38 P.3d 322 (2002).
[7] Truck Ins. Exch. v. Vanport Homes, Inc., 147 Wn.2d 751, 58 P.3d 276 (2002) (the duty to defend must be determined from the “eight corners” of the insurance contract and the underlying complaint; the two exceptions to this rule may be used only to trigger the duty to defend, not to foreclose it).
[8] 33 Cal. App. 4th 963, 39 Cal. Rptr. 2d 520 (1995).
by Soha Lang | Jun 4, 2014 | Blog News, Publications
On June 2, 2013, the Washington Court of Appeals held that there is no duty to defend an insured’s remediation of contaminated property when the insured does not face the “functional equivalent” of a lawsuit. In Gull Industries, Inc. v. State Farm Fire and Casualty Company, et al, No. 69569-0-1 (Wash. App. 2014), the insured, Gull Industries (“Gull”), notified Washington State Department of Ecology (“DOE”) that there had been a release of petroleum product at its gas station. DOE sent Gull a letter acknowledging Gull’s notice of the suspected contamination. Gull tendered defense and indemnity of the cleanup to its insurers, including State Farm and Transamerica Insurance Group (“TIG”), both of whom denied the tender. Gull sued various insurers, including State Farm and TIG. The policies in question provided a duty to defend for “any suit.” Gull contended that the insurers had a duty defend because it faced strict liability under the Model Toxics Control Act (“MTCA”, chapter 70.105D RCW, thus satisfying the “any suit” requirement of the policies. The Court of Appeals rejected Gull’s argument. Instead, the court held that the duty to defend may incept where the insured faces the functional equivalent of a suit, following Ryan v. Royal Ins. Co. of Am., 916 F.2d 731, 741 (1st Cir. 1990). The court concluded that Gull failed to make this showing:
We conclude that the undefined term “suit” is ambiguous in the environmental liability context and may include administrative enforcement acts that are the functional equivalent of a suit….
We do not agree with Gull’s contention that liability under the MTCA alone, without any direct enforcement action by DOE, is the functional equivalent of a suit for the purposes of the duty to defend. Instead, we adopt the analysis outlined in Ryan and hold that an agency action must be adversarial or coercive in nature in order to qualify as the functional equivalent of a “suit.”
Here, the only communication Gull received was a letter from DOE acknowledging receipt of Gull’s notice that the property was contaminated and that it intended to pursue an independent voluntary cleanup. DOE gave notice to Gull that Gull’s report reveals the soil and groundwater are above the MTCA “Method A Cleanup levels” and that DOE placed the property on the leaking underground storage tank list with an “Awaiting Cleanup” status. The letter also advised Gull to “be aware that there are requirements in state law which must be adhered to” but did not advise of any consequences that might attach to the failure to adhere to those requirements. The letter expressly indicated DOE has not determined that Gull is a PLP and does not imply that DOE “has formally reviewed and approved of the remedial action” planned by Gull…. The letter did not present an express or implied threat of immediate and severe consequences by reason of the contamination. Therefore, consistent with Ryan, Gull has not met its burden on summary judgment to establish there is the functional equivalent of a “suit” here, triggering the duty to defend.
Slip op. at 13-14 (footnotes omitted).
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.
