by Geoff Bedell | Mar 16, 2020 | Blog News, Publications
Two recent decisions addressed the application of a Washington statute, RCW 48.18.200, which prohibits arbitration agreements and foreign choice-of-law provisions in insurance issued to Washington insureds. First, the Ninth Circuit held that the Washington statute did not prohibit an arbitration clause in an insurance policy issued to a Washington insured by a risk retention group chartered in Arizona. Allied Professionals Ins. Co. v. Anglesey, 2020 WL 1179772 (9th Cir. Mar. 12, 2020). The Ninth Circuit explained that the arbitration provision was enforceable because the Washington statute was preempted by the Liability Risk Retention Act of 1986, 15 U.S.C. § 3901 et seq. Second, a Washington federal district court held that the Washington statute voided arbitration and New York choice-of-law provisions in a reinsurance contract issued to a Washington risk pool. Washington Cities Ins. Auth. v. Ironshore Indem. Co., 2020 WL 1083715 (W.D. Wash. Mar. 6, 2020). In reaching this result, the court rejected the contention that reinsurance was not insurance subject to the statute.
Please note that 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.
by Jennifer Dinning | Feb 19, 2020 | Blog News, Publications
On February 11, 2020, in the matter of CLMS Mgmt. Servs. Ltd. P’ship v. Amwins Brokerage of Georgia, LLC, 3:19-CV-05785-RBL (W.D. Wash. Feb. 11, 2020), the US District Court in the Western District of Washington granted certification pursuant to 28 U.S.C. § 1292(b) of the court’s earlier order of December 26, 2019, in which the court held that the Convention on the Recognition of Foreign Arbitral Award, Art. II, Sec. 3 is “self-executing,” and not subject to preemption under the McCarran-Ferguson Act – and thus not preempted by Washington statute.
The Court’s Order, granting defendant’s motion to enforce an arbitration clause in the policy of insurance at issue, analyzes the interplay between the Federal Arbitration Act (FAA), the McCarran-Ferguson Act, and Art. II, Sec. 3 of the Convention. Although the FAA normally governs the enforceability of arbitration clauses, in the insurance context the McCarran-Ferguson Act, which creates a system of “reverse-preemption” for insurance law, must also be considered. The Court examined decisions by Washington state courts holding that, under the McCarran-Ferguson Act, Wash. Rev. Code 48.18.200 – which prohibits the enforcement of arbitration provisions in insurance contracts – preempts Chapter 1 of the FAA.
However, the Western District of Washington held that the same is not true of Chapter II of the FAA and ruled that Chapter II section 3 is self-executing, and thus not subject to preemption under the McCarran-Ferguson Act. The court found the reasoning of the US District Court for the Central District of California’s reasoning in the matter of Martin v. Certain Underwriters of Lloyd’s, London, to be persuasive. There, the court stated that Section 3’s use of “the verb ‘shall’ . . . expressly directs courts to enforce arbitration agreements” and thus gives Section 3 “automatic effect.”
In granting certification for immediate review, the Western District recognized that federal circuits are split and there is “considerable disagreement between courts around the country about whether and why the Convention preempts state laws like RCW 48.18.200,” and that the Ninth Circuit has not ruled on this issue. Accordingly, this will be a matter of first impression for the Ninth Circuit.
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.
by Jennifer Dinning | Oct 10, 2019 | Blog News, Publications
The Washington Supreme Court issued a decision on October 10, 2019 in the matter of T-Mobile USA, Inc. v. Selective Ins. Co. of Am., No. 96500-5 (2019), finding that an insurance company is bound by its agent’s representations made on a certificate of insurance, despite the disclaimer language contained in the certificate of insurance, even when those representations add new insureds to the policy or otherwise alter its terms.
The matter came to the Washington Supreme Court on certification from the Ninth Circuit, which presented the following question: “Under Washington law, is an insurer bound by representations made by its authorized agent in a certificate of insurance with respect to a party’s status as an additional insured under a policy issued by the insurer, when the certificate includes language disclaiming its authority and ability to expand coverage?” The Washington Supreme Court answered the question in the affirmative, holding that “an insurance company is bound by the representation of its agent in those circumstances.”
The Court cited to the rule of textual interpretation that the specific prevails over the general, and thus found that the general disclaimers in the certificates of insurance are ineffective and are superseded by the specific information written on the certificate. The Court also found that public policy supports enforcing the representations of an insurance company’s agents.
The Court distinguished this decision from its ruling in Postlewait Constr., Inc. v. Great Am. Ins. Co., 106 Wn.2d 96, 100-01 & n.7, 720 P.2d 805 (1986), in which the Court stated that “[T]he purpose of issuing a certificate of insurance is to inform the recipient thereof that insurance has been obtained; the certificate itself, however, is not the equivalent of an insurance policy” on the grounds that the broker in Postlewait was not the agent of the insurance company, and that the certificate of insurance at issue did not represent that the purported additional insured was in fact an additional insured.
Two justices dissented. While accepting the possibility that equitable estoppel could apply in some circumstances, that was not the case here where the entity seeking coverage, T-Mobile USA, was a sophisticated business entity and there was never any agreement that the insurance would cover it.
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.
by Paul Rosner | Oct 4, 2019 | Blog News, Publications
We won! On October 3, 2019, in a 5 to 4 decision, the Washington Supreme Court held in Keodalah v. Allstate Insurance Company, No. 95867-0 that “employee adjusters are not subject to personal liability for insurance bad faith or per se claims under the CPA [Consumer Protection Act].” The decision, which has been closely monitored across the nation, protects claims professionals, insurance agents, experts, and lawyers who represent insurers from being drawn into disputes between insureds and insurers as parties.
The insured, Moun Keodalah, was injured in an accident where a motorcyclist struck his truck while crossing an intersection. The facts uncovered by the Seattle Police Department (“SPD”) investigation, Allstate’s witness interviews, and the accident reconstruction firm hired by Allstate to analyze the collision all suggested that the motorcyclist was at fault and that his “excessive speed” caused the collision. Keodalah made a claim under his underinsured motorist (“UIM”) coverage and requested that Allstate pay him the $25,000 limit. Allstate refused, finding Keodalah to be 70 percent at fault, and made a series of offers to settle the claim.
Keodalah filed suit asserting a UIM claim. During discovery, an adjuster employee of Allstate was designated as Allstate’s corporate representative for a Civil Rule 30(b)(6) deposition. The adjuster contradicted the conclusions reached by the SPD and Allstate’s accident reconstruction analysis by testifying, for example, that Keodalah had run the stop sign and had been on his cell phone at the time of the accident. At trial, Allstate continued to contend that Keodalah was 70 percent at fault. The jury determined that the motorcyclist was 100 percent at fault and awarded Keodalah $108,868.20 for his injuries, lost wages and medical expenses.
Keodalah then filed a second lawsuit against Allstate that included claims against the adjuster for bad faith and CPA violations. Allstate moved to dismiss the claims on the pleadings under CR 12(b)(6). The trial court dismissed the claims against the adjuster and certified the issue for interlocutory appeal. The Court of Appeals disagreed with the trial court and concluded that the bad faith and CPA claims against the adjuster could proceed. The Court of Appeals found that a Washington statute, RCW 48.18.030, imposes a duty of good faith on an individual adjuster, not just the insurance company, and applies equally both to individuals and to corporations acting as insurance adjusters. The Court of Appeals similarly found that the adjuster could be liable for a CPA violation even absent a contractual relationship between them.
The Washington Supreme Court reversed the Court of Appeals and reinstated the trial court’s dismissal of claims against the adjuster. In its analysis, the Court applied Washington’s three-pronged test for an implied statutory right of action under Bennett v. Hardy, 113 Wn.2d 912, 784 P.2d 1258 (1990) to determine whether RCW 48.01.030 includes an implied cause of action against an adjuster for bad faith. The Court held:
[A]pplication of the Bennett factors does not support the imposition of an implied cause of action here. In light of RCW 48.01.030’s plain language, indicating that the statute is intended to benefit the general public, and the broader statutory and historical context in which the statute appears, we hold that RCW 48.01.030 does not create an implied cause of action for insurance bad faith.
Next, the Court held that an insured cannot sue an adjuster under the CPA. The Court explained that Keodalah’s CPA claim based on RCW 48.01.030 failed because CPA claims based upon a breach of the statutory duty of good faith are limited to the context of the insurer-insured relationship. Thus, although Keodalah may sue his insurer under the CPA, he cannot sue the adjuster:
Because Keodalah claims a breach of the duty of good faith by someone outside the quasi-fiduciary relationship, his CPA claim based on RCW 48.01.030 was properly dismissed.
The majority decision will prevent plaintiffs from bringing specious claims against insurance adjusters and other insurance professionals for purposes of intimidation and to destroy diversity jurisdiction.
Soha & Lang, P. S. attorneys Paul Rosner and Geoff Bedell co-authored an amicus brief on behalf of Washington Defense Trial Lawyers (WDTL). Based upon questions by the court during oral argument, the WDTL brief appears to have helped sway the Washington Supreme Court to make the right decision.
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.
by Jennifer Dinning | Sep 9, 2019 | Blog News, Publications
In the matter of Belmain Place Condominium Owners Association v. American Insurance Company, 2:19-cv-00156-MJP (W.D. Wash., September 4, 2019) the Washington federal district court denied an insured/plaintiff’s motion for summary judgment on coverage related to water damage to a condominium. Based on the “inverse proximate cause” language found in the “Washington Changes — Excluded Causes of Loss” form, the Court rejected the insured’s argument that if water intrusion damage is not specifically excluded, it is always covered under an ensuing loss provision.
The Court explained that the Washington Supreme Court expressly allowed for “inverse proximate cause” language in Vision One, LLC v. Phila. Indemn. Ins. Co., 174 Wn.2d 501 (2012) and distinguished this matter from another Western federal district court decision that addressed different policy language.
Notably, the decision also states that “Plaintiff’s position has the potential to swallow the exclusions in an all-risk policy whole.”
by Kyle Butler | Jul 9, 2019 | Blog News, Publications
In Lazuri Daniels v. State Farm Mutual, No. 96185-9 (July 3, 2019), an en banc Washington Supreme Court decided that an insurer which has sought and obtained subrogation proceeds from a third party is required to reimburse its fault-free insured for the full amount of their deductible before allocating any portion to its subrogated interest.
The insured was involved in an auto accident. The insurer, State Farm, paid its insured the portion of the repair costs that exceeded the insured’s deductible and then sought to recover its payment from the at-fault driver’s insurer, Geico. Geico contended that it’s insured was 70% at fault for the collision and offered State Farm 70% of its insured’s total damages. State Farm accepted the offer and then reimbursed its insured for 70% of her deductible. State Farm’s insured then filed suit against State Farm alleging that under its own insurance policy and Washington law, State Farm was entitled to settlement proceeds only after fully compensating its insured for her losses, including the full deductible. The trial court dismissed the claims against State Farm via summary judgment which was affirmed by the Court of Appeals.
The Washington Supreme Court reversed and remanded. The Supreme Court held that the application of the Made Whole Doctrine is not limited to situations where the insured recovers directly from a third-party, and instead applies whenever an insurer seeks “an offset, subrogation, or reimbursement” for benefits already paid. It followed its reasoning in Thiringer v. American Motors Insurance Co. and Sherry v. Financial Indemnity Co., stating that “the proceeds from any recovery from a third-party tortfeasor, whether in a subrogation action or otherwise, must be allocated in such a way as to first make the insured whole.” The Court also determined that this policy is supported by the insurance regulations and State Farm’s own insurance policy language.
If you have any questions regarding this case, please do not hesitate to contact us.
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.
