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Washington State Court of Appeals New Decision On Covenant Judgments

On January 30, 2023, Division One of the Washington State Court of Appeals issued a published opinion further addressing covenant judgments in Washington. In Garza v. Perry, No. 83377-4-I, 2023 Wash. App. LEXIS 144, at *8 (Ct. App. Jan. 30, 2023), the Court of Appeals issued a decision primarily holding that an insurer cannot nullify a stipulated settlement based on mutual release language in the agreement because the insurer is not a party to the agreement.

The Garza case arose out of a motor vehicle accident. After failed negotiation attempts with the defendant’s insurer, the plaintiffs and defendant entered into a stipulated settlement with a covenant judgment in the amount of $2.5M and an assignment of rights against the defendant’s insurer. The settlement agreement contained a paragraph that stated the parties would mutually release each other including from the assignment of rights if the insurer provided written proof that it would fully indemnify defendant from any final judgment.  As required, the parties sent a copy of the settlement agreement to the insurer with an email offering to settle for $2.5M if paid within 10 business days.

The insurer did not agree to pay the $2.5M, but instead waived its limits and advised that it would indemnify the defendant for any judgment. Based on that letter, the insurer asserted that Plaintiffs’ and Defendant had therefore mutually released each other. The parties to the agreement disagreed and made a written addendum to their agreement to accurately reflect the actual meeting of the minds. Nevertheless, the insurer intervened and asserted that it had a valid settlement agreement with the parties.

The trial court rejected the argument and the Court of Appeals affirmed on appeal. The Court of Appeals noted that purpose of a covenant judgment is to protect the insured from the bad faith of an insurer. It does not form a contract with the insurer or for the insurer’s benefit. The Court also rejected the insurer’s argument because the agreement as a whole, including the written reformation, evidenced that the agreement was only between Plaintiffs and Defendants and also required that the intent was to only release the covenant judgment if the insurer agreed to pay the $2.5M.

The insurer also attempted to attack the trial court’s reasonableness determination on appeal based upon three arguments: 1) that the trial court had made oral statements regarding a lack of basis for the $2.5M amount at the reasonableness hearing; 2) that the Plaintiffs’ experts were not credible. and 3) that there was no substantial evidence supporting the conclusion that the agreement was not the product of collusion and fraud. All three arguments were rejected on appeal.

With respect to the oral statements of the trial judge, the Court of Appeals reiterated Washington law that a trial court’s oral statements have no binding effect unless explicitly incorporated into the court’s written order. The statements at issue were not incorporated into the order and, as such, were treated as having no import on the case.

The second and third arguments were effectively rejected for the same reason. Specifically, they were rejected because the substantial evidence review standard for review of reasonableness hearings requires the appellate court to view the evidence in the light most favorable to the prevailing party.  

The bad faith evidence argument was rejected because there was evidence that the settlement agreement was subject to review, revisions, and input by independent coverage counsel. The credibility argument was also rejected because a factfinder’s credibility determination are not subject to review under the substantial evidence standard.

The Garza case provides a two main takeaways for any insurer facing a covenant judgment. First, collateral attacks on the language of the covenant judgment settlement agreement are unlikely to prevail because an insurer is not a party to the agreement. Second, the standard of appellate review for reasonableness hearings is a difficult standard to overcome on appeal.

Because of this, an insurer that fails to fully develop the record at a reasonableness hearing runs the significant risk of being unable to successfully challenge a reasonableness finding on appeal. As a result, insurers need to be fully prepared to fully present their case at any reasonableness hearing. Moreover, insurers and insurer counsel should specifically request that the judge explicitly incorporate any helpful oral statements into its final order.

Lether Law Group has been successfully defending insurers against covenant judgments before the trial court and on appeal for more than 30 years. If you would like to discuss covenant judgment defense or any other matter, please do not hesitate to contact us.

April Showers Bring May Flowers — AND BABY GEESE!

For the 6th year in a row, once spring rolls around, a familiar Mother Goose returns to the back deck of Lether Law Group, where she lays her eggs. This year, Mother Goose laid six eggs in one of our gardening boxes on the back porch.

For weeks, the Lether Law Group team witnessed how tenderly Mother Goose cared for her 6 eggs. Sometimes, the Lether Law Group team would also witness Father Goose swimming from a short distance, making sure that no hunter or gatherer posed a threat to his growing family.

On May 15, 2022, Mother Goose and Father Goose officially became the happy parents of 6 little goslings. The little hatchlings, pictured below, are brightly colored yellow with a hint of green.

The next time you paddleboard, kayak, or take your boat around South Lake Union, keep a look out for these little ones. Happy Spring!

Happy Valentine’s Day!


It’s the season of love – yep, Valentine’s Day! Here at Lether Law Group, we are starting a new tradition of decorating waffles and having breakfast together. As we begin our own tradition, here are some ways others celebrate.

In Wales, they celebrate by giving each other wooden spoons known as “love spoons”. Though the Welsh celebrate a little earlier than us instead celebrating on January 25th or Saint Dwynwen’s Day. Saint Dwynwen’s Day celebrates the legend of the patron saint of love, Saint Dwynwen.

Argentina doesn’t just celebrate Valentine’s Day – they celebrate an entire week called “the week of sweetness” in July. The tradition originally started as a commercially driven celebration and is now widely celebrated. Throughout the week lovers exchange chocolates and other types of candy. How sweet!

Valentine’s Day is also the “day of winemakers” or San Trifon Zartan in Bulgaria. The tradition originates from when priests would cut unnecessary branches off and bless the grape vines at the beginning of February. Today, San Trifon Zartan is celebrated with lots of wine and a feast.

In El Salvador, Valentine’s Day isn’t just a day of love, but also a day of friendship. A centerpiece is used to put in the names of friends, family members, coworkers, etc. and everyone draws a name to buy a gift for. Think Secret Santa, but there’s a twist! You also say a good quality about your friend and the group tries to guess the gift’s recipient before giving the gift to your secret friend.

White Day follows exactly a month after Valentine’s Day in Japan. On Valentine’s Day, women buy their male companions chocolates and gifts, but men can’t reciprocate until White Day on March 14th. Traditionally, men would give out white chocolate, marshmallows, and cookies on White Day.

However you celebrate, we at Lether Law Group wish you a Happy Valentine’s Day!







Fresh Faces

Lether Law Group is happy to announce the addition of two new associate attorneys to the firm.  Welcome to the team Maria Hull and John Isaacson.


Maria attended the University of Texas, where she earned a degree in Social Work. After working as a social worker in the private and public sectors, she went back to school to pursue her Juris Doctor from South Texas College of Law . During law school, Maria earned her transactional law certificate, which propelled her into an in-house corporate role for an energy company in Houston.  After relocating to Seattle, Maria joined the Lether Law Group and is a member of the Board of Directors at a local nonprofit.  Maria spends her free time playing golf with her husband.


Born and raised in Phoenix, Arizona, John spent his undergrad years in the State of Texas before moving to Spokane, Washington to attend law school at Gonzaga. Although he initially planned to return to the heat and sunshine, he enjoyed his time in Washington far more than he expected to and feels lucky to be able to call it home for the foreseeable future. After law school, John worked with Pierce County’s Department of Assigned Counsel as a Public Defender before deciding to transition to the life of private practice. He enjoys fishing, painting, cooking, and admittedly more than a few Netflix shows.



Congrats to Our Newest Senior Associates

Congrats to Our Newest Senior Associates
We would like to congratulate Kasie Kashimoto and Chance Laboda on their promotions to Senior Associates this week. Kasie and Chance were classmates at Seattle University School of Law, and have both been with Lether Law Group since becoming licensed attorneys.
Chance is a Seattle native and earned his Juris Doctor from Seattle University School of Law where he served as the Vice President of the Business and Entrepreneurial Law Association. While attending law school, Chance externed at the Washington State Department of Financial Institutions, Division of Banks and was a Rule 9 intern for Hughes Robbins P.S. Chance’s experience includes coverage and litigation of disputes arising from commercial general liability, commercial auto, personal auto and business owners insurance policies. Chance’s litigation practice includes cases before the Washington State Court of Appeals, the 9th Circuit Court of Appeals, United States Judicial Panel on Multijurisdictional Litigation, and class action litigation.


Kasie is from Honolulu, Hawaii, and earned her Juris Doctor from Seattle University School of Law where she also graduated cum laude. While attending law school, Kasie externed at the District Court of the First Circuit in Honolulu, Hawaii for Judge Dean E. Ochiai. Kasie’s experience includes coverage and litigation of disputes arising from commercial general liability, business owners, public entity, automobile, and watercraft insurance policies. Kasie’s litigation practice includes cases before the Washington State Court of Appeals, United States Judicial Panel on Multijurisdictional Litigation, and class action litigation. Kasie actively practices in both Washington and Hawaii.


Kasie and Chance!

Duck Duck Goose – Wildlife at Lether Law Group

Located directly on the water, the Lether Law Group office is often visited by wildlife. As she does every year, a mother goose came to lay her eggs in the planter on the deck earlier this spring. This month, a mother duck did the same. When it came time for the duck babies to join their mom in the water this week, the height of our deck presented a challenge for the small and fragile ducklings. We are pleased to announce that after a successful rescue mission, all ducklings were safely reunited with their mother in the water. We wish them luck on their new adventure, and hope they come back to visit.