by Kerri Lether | Mar 13, 2020 | Insurance Law, Misc., News & Updates
The coronavirus (COVID-19) pandemic has caused a significant health crisis throughout the world. The health concerns and public response to this catastrophe have been overwhelming. The potential economic impact of this crisis has yet to be fully addressed.
At Lether Law Group we are actively reviewing a number of potential legal and insurance related issues which will develop as a result of this ongoing situation. This includes analyzing the impact the virus will have on worldwide financial markets, the local impact on businesses and jobs, and the implication that this situation will have on our insurers and private clients.
Obviously, this is a rapidly changing and developing environment and we are working to stay on the forefront in identifying potential issues and developing a response to emerging issues for our clients. A number of issues have already been identified. For example, what are the potential coverage issues involving claims for business interruption or arising out of acts of decisions of government agencies to shut down transportation, service or public events? Additional issues arise in regard to the potential coverage for business interruption losses arising out of breach of contract claims and other transactual litigation which clearly will develop as a result of businesses and individuals retracting from ongoing financial obligations and business arrangements. Concerns have also arisen regarding potential liability and coverage issues for healthcare professionals and first responders that are on the frontlines of the fight against COVID-19.
We are also assessing the potential liability and coverage issues that might arise from accidental exposure to COVID-19 in the workplace and public at large. Finally, we are also working to address the significant issue involving available health benefits under public and private health insurance plans associated with medical care for COVID-19 infection.
One thing is definitely clear, this health crisis will not be going away any time soon and will continue to impact the economy and the insurance markets for the foreseeable future. In fact, the impacts are already affecting large portions of our society, with the cancellation of nearly every major sporting event, festival, concert, and other public gathering. The crisis is also dramatically impacting our courts. The following is a brief summary of what we know so far:
Pursuant to General Order 01-20, signed by Chief Judge Ricardo Martinez on March 6, 2020, all trials in the United States District Court for the Western District of Washington are continued indefinitely. The Court remains open, but there will be no hearings or trials. The Order will be vacated or amended on or before March 31, 2020. We anticipate that the Order will be extended at that time.
On March 4, 2020, Chief Justice Debra Stephens of the Washington State Supreme Court issued an Emergency Order allowing the Superior Courts and intermediate appellate courts to “adopt, modify, and suspend” the court rules or orders as warranted to address the crisis.
The King County Superior Court has suspended all personal appearances for oral argument on contested motions. We are also advised that although there is no formal Order at this point, there will be no civil trial in King County for a minimum of 2-3 months.
The Pierce County Superior Court will continue to hold trials and hearings, but it appears that decisions on whether to go forward are being placed in the discretion of each judicial department. Practitioners are being encouraged to contact the judicial assistant in their assigned department to inquire as to the status of pending matters.
The Snohomish County Superior Court has adopted an Emergency Order substantially the same as that adopted by Pierce County.
At this time, there are no changes to court operations for the United States District Court for the District of Oregon.
The largest state court in the State of Oregon, the Multnomah County Circuit Court, has ordered that all civil trials are continued for at least 30 days.
The United States District Court for the District of Idaho is maintaining normal operations. However, the Court has barred anyone who has travelled to the following areas in the past 14 days from entering the Court: China, Iran, Japan, South Korea, and “the Seattle/Tacoma area.”
Multiple other courts in the Pacific Northwest, and frankly throughout the United States, have adopted measures urging caution and offering recommendations for dealing with COVID-19. We urge anyone with any pending matter to visit the relevant court website for further information.
Despite any interruptions in the business environment or any court closures, Lether Law Group remains open and available to discuss these or any other issues at any time. If you are interested in discussing the impact of COVID-19 in relationship to economic concerns, insurance, or any other issues, please contact Lether Law Group.
by Kerri Lether | Mar 10, 2020 | Insurance Law, News & Updates
Personal Injury Protection (PIP) coverage is a product of statute in Washington. RCW 48.22.085. The statute requires insurers to offer PIP coverage for any new policy issued in Washington. However, the insured is not required to accept PIP coverage. Regarding rejection, the PIP statute provides as follows:
(2) A named insured may reject, in writing, personal injury protection coverage and the requirements of subsection (1) of this section shall not apply. If a named insured rejects personal injury protection coverage:
(a) the rejection is valid and binding as to all levels of coverage and on all persons who might have otherwise been insured under such coverage; and
(b) the insurer is not required to include PIP protection coverage in any supplemental, renewal, or replacement policy unless a named insured subsequently requests such coverage in writing.
RCW 48.22.085(2).
On February 23, 2017, Progressive issued a personal auto policy to named insured Jesus Mendoza. At the time that he purchased the policy, Mr. Mendoza rejected PIP coverage. When the policy renewed in February of 2018, Mr. Mendoza added his mother, Ms. Esther Madrigal de Mendoza as an insured under the policy and also added her vehicle.
On July 28, 2018 Ms. Madrigal de Mendoza was involved in an automobile accident. She made a claim for PIP benefits under the Progressive policy. Progressive rejected coverage on the basis that PIP had been waived.
Ms. Madrigal de Mendoza issued a Notice of Violation under the Insurance Fair Conduct Act claiming that Progressive had an obligation to re-offer PIP coverage when she and her vehicle were added to the policy upon renewal. Following receipt of the IFCA notice, Progressive filed a Complaint for Declaratory Judgment seeking a judicial determination of its rights and obligations under the subject policy.
The parties later filed Cross-Motions for Summary Judgment on the single coverage issue. Progressive’s position was that the PIP statute was unambiguous and should be enforced as drafted.
Ms. Madrigal de Mendoza argued that the “material change” doctrine adopted by the Washington Courts in the context of the obligation to re-offer underinsured motorist (UIM) coverage, should be adopted by the Court. In those cases, the Washington Courts have held that even if there is not a strict “new policy” purchased, there may be an obligation on the part of the insurer to re-offer UIM coverage if the insured makes a “material change” to the policy. See e.g., Torgerson v. State Farm Mut. Auto. Ins. Co., 91 Wn. App. 952, 958-959, 957 P.2d 1283 (1998).
The District Court analyzed the issue by assuming, but not deciding, that the “material change” doctrine would apply to PIP coverage under Washington law. The Court concluded that if there was not a “material change” as that rule had been applied by the Washington Courts, then Progressive must prevail.
The District Court noted that the statement from the Torgerson Court that “a majority of jurisdictions which have dealt with the question do not find a new policy created when a party replaces a vehicle covered under an existing policy with a new vehicle.” The Court concluded as well that under Washington’s approach to the “material change” rule, adding a new vehicle or a new insured do not constitute “material change” that would require Progressive to re-offer PIP coverage.
The Court concluded that only changes to coverages or levels of coverage would support a conclusion that there had been a material change to the policy. Thus, even if a “material change” rule were to be applied in the PIP context – something that the Court again did not expressly hold – there was no basis for requiring Progressive to re-offer PIP coverage to the Mendozas. Summary Judgment was granted in favor of Progressive.
There are a couple of things that we find particularly instructive about the Mendoza case. First, claims and underwriting personnel should be aware of the “material change” rule, particularly as it concerns UIM coverage. Where there is a waiver of either PIP or UIM coverage, we would encourage claims personnel to ensure that no “material change” had occurred in the coverages before taking a coverage position.
Also, the Mendoza case highlights the importance and effectiveness of bringing a Declaratory Judgment Action once it becomes clear that there is an actual and justiciable controversy on a coverage issue. By bringing the Declaratory Judgment Action, Progressive was able to focus the case on the sole coverage issue without becoming tied up in cumbersome extra-contractual issues.
Tom Lether and Eric Neal were proud to have represented Progressive in the Mendoza matter. Should you wish to discuss this case or any other issue in further detail, please do not hesitate to contact Tom and Eric at any time.
by Kerri Lether | Feb 7, 2020 | Insurance Law, Misc.
It is not uncommon for people to complain about their insurance company. No one likes paying premiums and rarely does anyone enjoy having to make a claim. However, property insurance policies are products that most, if not all, homeowners and renters have. The following are some commonly asked questions and some simple recommendations.
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As a Property Owner or Renter What Types of Insurance Should I Have?
All homeowners and renters should carry property and liability insurance. These policies typically provide similar coverages. Homeowners policies provide coverage for the actual structure or residence, the personal property in the residence, and for additional living expenses which may be incurred if a loss takes place. Such expenses can include the rental for an alternative residence, emergency meals, etc. Renters policies provide the same types of coverage except coverage for the actual building. Finally, owners of condominiums should also procure property insurance. Condominium policies obtained by unit owners typically provide coverage for their personal property, additional living expenses, and improvements and betterments contained within their own individual units.
Homeowners, condominium owners, and renters policies also typically provide liability coverage which protects an insured if a claim or suit is filed against the insured. This coverage provides both for an attorney to defend the insured and for payment of any judgment or settlement up the amounts of the policy limit.
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What Makes for a Good Insurer?
Premium value is always a concern. However, it is better to spend the money to have the right insurer and coverage’s. Although you may want to shop your insurance premium, find out from your agent or broker what you are actually getting for your money. When it comes to customer service, local insurers are going to typically provide better service. It is better to have a claims agent in your neighborhood or community as opposed to a remote agent who does not understand the Northwest. It is always better to have an insurance claims department that actually has a physical presence in Seattle.
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How Much Insurance is Enough?
It is best to be fully covered than to save a few dollars on premiums. For example, it is important that you properly assess the value of your personal property. It is even more important to understand that the construction costs for repairing your home may be significantly more than you imagine. Given the construction boom in the Northwest, construction prices have gone up dramatically. Your own insurance company may not even recognize this.
Finally, we live in a litigious world. The value of claims against individuals have skyrocketed. Carrying a $100,000 liability policy limit may seem like a sufficient amount. However, if you are sued for traumatic injury you may find that such a limit is not enough.
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Is Excess Coverage a Good Idea?
Umbrella, or excess, coverage provides liability coverages over the amount stated in your primary policy. Given the exposures present in the current world, it is always a good idea to make sure you have excess or umbrella coverage providing additional protection.
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Are There Particular Types of Property Coverage that Insureds Should Have?
There are a number of types of property coverages that an insured should make sure they have. These include Guaranteed Replacement Cost Coverage. This coverage usually provides additional limits to an insured when they repair their residence following a loss. Another example involves building code or upgrade coverage. This provides additional coverage if a building department requires modifications to be made to your home or residence. Finally, if you have particular contents items that are high in value, you should consider scheduling the personal property and obtaining additional coverage. For example, most property policies have limitations on jewelry and antiques. For a small amount you can obtain additional insurance for these items.
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Is Earthquake Coverage a Good Idea?
Seattle has not suffered a major earthquake since February 28, 2001. However, there is always the potential that an earthquake could happen at any time. Earthquake coverage is more applicable to homeowners as opposed to renters or condominium owners. Depending on the age of your home and type of construction, earthquake insurance may be a valuable thing to have. However, make sure that you are getting the right type of coverage. For example, many earthquake policies have limits on how much will be paid out, have high deductibles, etc.
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What Do I Do If I Have a Claim?
One of the most important things to do if you suffer a loss is to report the loss promptly. Thereafter, cooperate with the agent and claims representative to make sure the claim is processed in a timely fashion.
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What Happens if My Insurance Company Does Not Properly Respond to My Claim?
Washington is one of the most consumer-friendly jurisdictions in the country for insureds. The insurance industry is heavily regulated. There are very specific requirements that an insurer must follow in regard to how to handle claims. This includes specific response deadlines for how long an insurer has to resolve claims. There are many options for insureds to pursue claims against insurance companies which improperly treat their insureds. If insurers fail to follow these rules or otherwise act in what is termed “bad faith,” they may be exposed to claims under the Consumer Protection Act, claims under the Insurance Fair Conduct Act, and other common law claims. A good place to obtain additional information or to report an insurer that is not acting properly is the Washington State Office of the Insurance Commissioner.
The above article is an opinion based on various resources such as industry knowledge and is not to be construed as legal advice or to be used as such. If you require legal advice or would like to inquire further about the information contained in this article, please feel free to contact our office directly.
by Kerri Lether | Nov 22, 2019 | Insurance Law
Many insurers are extremely hesitant to allow a jury to consider insurance coverage or extra-contractual claims in Washington. The pro-insured temperament of Washington law and the reactions of juries to these types of claims give insurers every reason to avoid trial. This is particularly true given the treble damage exposures available under Insurance Fair Conduct Act. As a result, many insurers believe a file has to be “perfect” in order to go to trial.
That belief ignores the reality of modern claims-handling. In almost any claim there will be some type of an issue wherein the claim was not handled perfectly. Mistakes, however, do not mean bad faith. Sometimes you have to not be afraid to present your case and let the jury decide.
That is exactly what happened in the matter entitled Gallagher v. Fire Insurance Exchange (Farmers). In the Gallagher case, the insured suffered an accidental residential fire. The fire was small and primarily involved only smoke damage. Following the fire, and during the course of the investigation of the first claim, a secondary water damage event occurred as the result of an alleged frozen pipe. Although the insured was residing in the home at the time of the initial smoke loss, the repairs had not yet been completed for the smoke loss. Farmers extended coverage and issued payments for the dwelling, contents, and additional living expenses. Between the two claims, there were several issues which arose. Although the insured raised several complaints in regard to the claim handling, Farmers paid what it believed it owed on all claims.
Regardless, the insured sued and alleged the standard claims for breach of contract, bad faith, treble damages under IFCA and violations of the Washington Consumer Protection Act. A significant part of the insured’s claim involved allegations surrounding a claim that her home had been contaminated by toxic smoke as part of the losses.
Despite Farmers’ efforts to resolve the claims, the litigation dragged on for years with exhaustive and extensive discovery, motions practice, expert witnesses etc. This all resulted in significant costs to both sides. When a reasonable resolution could not be arrived at, Farmers elected to proceed to have the jury decide the issues.
The insured asked for an award in excess of 12 million dollars. This demand primarily involved extra-contractual claims. Following an almost three-week trial, the jury returned a complete defense verdict for Farmers on all issues. The jury deliberated for approximately an hour. The primary theme that the jury agreed on was that despite some claims handling issues, Farmers acted reasonably and that the plaintiff herself was overreaching. Farmers also argued that the insured was using the insurance funds to remodel her house.The insured’s claims of toxic smoke conditions were flatly rejected. The below photos illustrated the dispute.
The bottom line is that trying to resolve claims through a reasonable settlement or mediation is always preferable. However, there are some claims that need to go to trial. Some parties need to have a jury give them an honest assessment of the value of the claim. Even if there are claims-handling issues and exposures, you cannot be afraid to try a case.
Farmers Insurance was represented throughout the course of the claim and at trial by Tom Lether and Eric Neal of Lether & Associates. If you would like to discuss this case or other bad faith claims involving property losses, please contact our offices.
by Kerri Lether | Oct 17, 2019 | Insurance Law
The Washington Supreme Court issued its decision in T-Mobile USA INC. v. Selective Insurance Company of America on October 10, 2019. The majority opinion, joined by seven of the nine justices, held that an agent with apparent authority can bind an insurance company through written representations, even if contrary to the policy.
This case reached the Washington Supreme Court through a certification from the Ninth Circuit Court of Appeals. The Ninth Circuit sought an answer as to whether an insurance company is bound by its agent’s written representation on a Certificate of Insurance that a company is an additional insured in a given policy. The Ninth Circuit had already ruled that the agent acted with apparent authority and the Certificates of Insurance included disclaimers stating the Certificates could not “amend, extend, or alter the coverage afforded by” the policy.
This case arose from the construction of a cell phone tower on the roof of a New York Building. T-Mobile Northeast (“T-Mobile NE”) hired a contractor for the project. The contract between them required the contractor to name T-Mobile NE as an additional insured and to provide annual Certificates of Insurance showing coverage. The contractor obtained a policy through Selective Insurance Company of America (“Selective”). T-Mobile NE became an additional insured under the policy based on the contract with the contractor. For the next seven years, Selective’s agent issued a series of Certificates of Insurance naming “T-Mobile USA, its subsidiaries and affiliates” as additional insureds. T-Mobile USA is a parent company for T-Mobile NE, but was not involved in the project or identified in the construction contract. Selective never objected to the agent’s issuance of the Certificates of insurance.
The owner of the rooftop sued the contractor and T-Mobile USA for damage that occurred during the construction. Both T-Mobile USA and the contractor tendered to Selective. However, Selective denied T-Mobile USA’s claim because T-Mobile USA was not an additional insured per the policy and construction contract. T-Mobile USA then sued Selective for coverage and defense. After having its claims dismissed on Summary Judgment, T-Mobile USA appealed. On appeal, the Ninth Circuit certified to the Washington Supreme Court 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 held that the Certificates of Insurance naming T-Mobile USA as an additional insured superseded the policy. The Court reasoned that the representations in the Certificates of Insurance were binding because they were made by an agent with apparent authority to bind Selective. The specific naming of T-Mobile USA as an additional insured controlled over general disclaimers. The Court also found Selective’s public policy arguments unpersuasive.
The two dissenting justices did not agree with the Court’s ruling because T-Mobile USA was not an insured under the terms of the Selective policy. They asserted that sophisticated business entities cannot reasonably rely on a Certificate of Insurance with clear disclaiming language.
This is an impactful decision regarding the use of Certificates of Insurance. Insurance companies in Washington must make sure Certificates of Insurance issued by agents accurately represent their insurance policies. Companies cannot rely on the general disclaimer language. The principle that an agent’s representations bind their employer may appear in other contexts too.
If you have any questions regarding the effect of this case or any other issues involving Washington insurance law, please contact our offices.
by Kerri Lether | Oct 3, 2019 | Insurance Law
A split Washington Supreme Court issued its decision in Keodalah v. Allstate on October 3, 2019. The majority opinion, joined by five of the nine justices, held that there is no cause of action against an employee insurance adjuster for three types of claims:
- Insurance Bad Faith based on alleged violation of RCW 48.01.030 by an adjuster;
- Consumer Protection Act per se claims based on alleged violations of WAC 284-30-330 (The Unfair Claims Settlement Practices Act); and
- Consumer Protection Act per se claims based on alleged violation of RCW 48.01.030.
To recap, in Keodalah, the insured asserted a UIM claim following a motor vehicle accident. Allstate took the position that the insured was 70% at fault for the accident, despite substantial evidence to the contrary. Following trial, a jury determined the insured had no fault for the accident and awarded damages well in excess of the coverage limits. The insured then filed a second lawsuit against Allstate and the adjuster, which included extra-contractual claims against the adjuster. The trial court then granted a motion to dismiss the extra-contractual claims against the adjuster. The Court of Appeals reversed the trial court’s dismissal of the bad faith and CPA claims against the adjuster, finding that an adjuster’s alleged bad faith conduct could support those claims.
On review, the Supreme Court held that a bad faith claim based on the good faith insurance statute (RCW 48.01.030) was not available because the statute did not imply a cause of action under the applicable test. In particular, the Court explained that the statute was enacted to benefit the general public, as opposed to a certain class of individuals. It further reasoned that the legislature did not intend for the statute to form the basis of a civil action because, in part, doing so would also create a bad faith cause of action against insureds.
The Court then quickly dispensed with CPA claims against adjusters based on violations of WAC 284-30-330 because the express language of that regulation applies the standards contained therein to “insurers” only.
Finally, the majority stated that CPA claims against adjusters based on violations of RCW 48.01.030 are not cognizable because that statute does not imply a private right of action and prior case law (primarily, Tank v. State Farm) shows that CPA claims based on bad faith arise from the quasi-fiduciary relationship between insurers and insureds. The Court reasoned that, because there is no quasi-fiduciary relationship between adjusters and insureds, there is no CPA claim based on the alleged bad faith of an adjuster.
The dissenting opinion, joined by four justices, agreed that there is no cause of action against employee insurance adjusters for bad faith claims based on violation of RCW 48.01.030 and CPA claims based on violations of WAC 284-30-330.
However, the dissenting justices believed that there should be a CPA cause of action against adjusters based on violation of RCW 48.01.030. Their primary arguments were that a CPA claim based on violation of a statutory duty can exist, even when that statute does not imply a right of action, and the existence of a quasi-fiduciary relationship is not a requirement for a CPA claim in any context.
Most interestingly, the dissenting opinion further stated that a bad faith cause of action based purely on the common law should be available against an adjuster.[1]Whether an adjuster has a common law duty of good faith has never been addressed before by a Washington court. In analyzing whether it should recognize such a duty, the dissenting court noted that the majority of jurisdictions that have addressed the issue have found there is no such duty in common law. Nevertheless, the dissenting court believed it should follow the minority of states that do impose a common law duty on adjusters based on the similarities regarding the other principles of common law bad faith between Washington and those states. The dissent further stated that public policy, common sense, logic and justice support imposing a common law duty of good faith on adjusters because they are most directly responsible for how a claim is handled. The dissenting court did note that this duty should be limited to knowing bad faith conduct within their control and that adjusters should not held responsible for improper policies imposed upon them by their employers.
This opinion provides both clarity and questions for insurance litigation moving forward. There is clearly no cause of action against adjusters based on violation of the good faith statute and any WACs expressly directed at insurers. However, whether an adjuster could face a cause of action for common law bad faith remains an open question of law in Washington. Unfortunately, the only source of Washington law addressing this issue is the dissenting opinion in this case.
If you have any questions regarding the effect of this case or any other issues involving Washington insurance law, do not hesitate to contact our offices.
[1] This type of claim was not addressed by the majority court apparently because it was not addressed by the Court of Appeals. The dissenting justices believe the majority court should have addressed this claim because it was part of the insured’s pleadings, briefing and arguments throughout this case.
