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9th Circuit Upholds Dismissal of Coverage Claims

by | Sep 24, 2025 | Decisions, Events, Featured, Insurance Law, Misc., News & Updates, Professional Liability & Significant Injury Claims

On July 21, 2025, after almost 15 years of litigation, the 9th Circuit Court of Appeals affirmed the Western District Of Washington’s summary judgment decision in favor of Northland Insurance Company dismissing all contractual and extra-contractual claims. The 9th Circuit found that injunctive relief and discretionary costs arising therefrom do not constitute covered monetary damages. Furthermore, the 9th Circuit held that money damages resulting from an insured’s deliberate actions cannot constitute a covered “occurrence.” Lether Law Group represented Northland in both the Western District Washington and 9th Circuit Court of Appeals.

In 2012, an injunction was entered against Kitsap Rifle and Revolver Club (KRRC) whereby the club was prohibited from using its property as a shooting range until in complied with Kitsap County’s permitting requirements. Per KRRC, such permitting costs were approximately $400,000. It was undisputed that these costs were “the result of KRRC’s deliberate actions.”

KRRC then sought commercial general liability insurance coverage for the costs to comply with the injunction and obtain permits. KRRC also argued that the costs to comply with permitting was a covered defense cost. KRRC further asserted that Northland’s refusal to pay such fees and costs constituted bad faith, violation of Washington’s Consumer Protection Act, and violation of the Insurance Fair Conduct Act.

The District Court dismissed the KRRC’s claims, finding that the KRRC caused damage to its own property in developing the land in violation of Kitsap County ordinances. The District Court reasoned that, as the Northland policies strictly provided coverage for damage to third-party property, damage to KRRC’s own property did not qualify for coverage. Further, the District Court agreed with Northland that the KKRC’s claims did not constitute monetary damages as required by the policies because no such monetary damages had been incurred. Finally, the District Court found that the Club’s claims did not constitute an “occurrence” because permitting costs were not only foreseeable but also known and ignored by the Club.

The 9th Circuit affirmed in whole. “[T]he monetary damages for which KRRC seeks coverage—are the result of KRRC’s deliberate actions…Consequently, whatever money damages KRRC faces are not attributable to an “occurrence” and are therefore not covered by Northland’s CGL policies.” The 9th Circuit further held that the permitting costs were “a discretionary cost KRRC must pay only because it elected to develop its property” and therefore were not a defense cost or otherwise within the scope of the Northland policies.

Lether Law Group has extensive experience in the Washington State Courts, the Washington State Court of Appeals, Washington Federal Courts, and the 9th Circuit Court of Appeals litigating insurance coverage disputes in a wide variety of claims. If you have questions about commercial general liability coverage, Washington extra-contractual claims, or 9th Circuit’s decision, we invite you to contact us directly.

Washington Ruling Targets ACV Practices in APD Claims

by | Aug 6, 2025 | Decisions, Events, Featured, Insurance Law, Misc., News & Updates, Professional Liability & Significant Injury Claims

On July 29, 2025, the United States District Court for the Western District of Washington issued a summary judgment ruling in a matter entitled Ngethpharat v. State Farm Mut. Auto. Ins. Co., regarding State Farm’s methods for determining actual cash value (ACV) for total losses in Auto Physical Damage (APD) claims. Ngethpharat is an ongoing class action against State Farm accusing the carrier of violating Washington law by applying a “typical negotiation” deduction in calculating ACV.

A “typical negotiation” deduction is a reduction in the ACV calculation based upon a presumption that an advertised price for a comparable auto could be negotiated at the point of sale. The Washington Office of the Insurance Commissioner has promulgated WAC 284-30-391, which sets forth the methods and standards of practice for settlement of total loss vehicle claims. In its July 29, 2025 ruling, the Court held that “typical negotiation” deductions are not permitted under this regulation and that State Farm’s violation of the WAC constituted a per se violation of the Washington Consumer Protection Act (CPA), RCW 19.86 et seq.

As a demonstration of the potential implications of this type of ruling, the Court held that the Class Plaintiffs had produced uncontroverted evidence of CPA damages in the amount of $54,650,595.28.

The Ngethpharat matter is ongoing and is certain to include additional motions practice and likely appeals to the Ninth Circuit Court of Appeals. The question of whether these types of discounts rise to the level of an actual CPA violation has not been decided by any Washington appellate court, and the District Judge’s decision in Ngethpharat is ultimately not binding on any other court. This issue may ultimately need to be brought before the Washington State Supreme Court before there is any ultimate resolution.

Lether Law Group has, for over 35 years, represented insurers, businesses, and individuals in significant claims. Lether Law Group is currently involved in some of the most high-value claims in the State of Washington. We pride ourselves on our track record of fair and equitable resolutions in tough cases.

If you have questions about total loss valuation practices, class exposure, or compliance risks arising from this decision, we invite you to contact us directly.

Washington Insurance Commissioner Discusses Proposed Restitution Bill

by | Feb 19, 2025 | Decisions, Events, Featured, Insurance Law, Misc., News & Updates, Professional Liability & Significant Injury Claims

In November, several new faces were elected to various positions within the Washington State government. This includes Patty Kuderer, who defeated Phil Fortunato to become Washington’s new Insurance Commissioner.

Recently, an AM Best report revealed some of the areas in which the newly elected Kuderer wants to implement reforms within Washington’s complex insurance code. House Bill 1199, which Kuderer is backing, would affect how the State regulates insurance code violations. The current system mandates that fines imposed by the Commissioner are directed to a general fund operated by the State. However, Kuderer argues that the current system does not provide restitution to affected consumers. Instead, the new bill would allow the Commissioner to directly order the payment of restitution to affected consumers.

While industry groups have expressed concerns about these measures, arguing that regulators can already negotiate penalties exceeding the current $10,000 limit, Kuderer believes per-violation fines are necessary to ensure accountability on the part of insurers. In supporting the bill, Kuderer looked to 40 other states that have passed similar regulations.

Another change would be to the system in which complaints are addressed by the Commissioner. Kuderer has requested a $470,000 budget increase to establish a claims review team consisting of three full-time employees focused on dispute resolution between claimants and their insurers.

In addition to resolving issues of restitution, Kuderer also wishes to address underwriting practices that may disproportionately affect policyholders based on race, gender, income, or national origin.

HB 1199 had its first public hearing in the House Committee on Consumer Protection & Business on January 24.

Lether Law Group actively tracks proposed changes to State laws across multiple jurisdictions to keep our clients fully apprised of any new developments. If you have questions about the implications of Washington’s upcoming legislative session or general questions in regard to compliance with Washington insurance law, please feel free to contact our office.

Washington Court Reaffirms Insurers’ Right to Participate in Reasonableness Hearings

by | Nov 8, 2024 | Appellate Practice, Events, Featured, Insurance Law, Misc., News & Updates, Professional Liability & Significant Injury Claims

On October 28, 2024, the Washington State Court of Appeals considered the validity of a reasonableness determination obtained without proper notice to the liability insurer, and held that without proper notice, the liability insurer is not bound to the reasonableness determination. This ruling further solidified the procedures set forth allowing liability insurers the opportunity to participate in reasonableness hearings in Washington State.

In Hawkins v. Miguel et al., Shelley Hawkins and Edwin Miguel entered into a covenant judgment settlement, establishing Miguel’s liability and assigning Miguel’s bad faith claims against his employer’s insurer, ACE American Insurance Company (ACE) to Hawkins. Thereafter, Hawkins obtained a ruling from the Court that the amount of the covenant judgment settlement was reasonable. However, in obtaining this reasonableness determination, Hawkins did not provide notice of the reasonableness hearing to ACE, and therefore did not provide ACE with the opportunity to be heard at the hearing.

Hawkins proceeded to obtain judgment against ACE on the assigned claims. In determining the validity of the reasonableness determination, in light of the fact that ACE was not provided notice and opportunity to be heard regarding the settlement amount, the Court of Appeals ruled that ACE was not bound by the reasonableness determination.

On June 23, 2021, Miguel entered into a settlement agreement for 41.5 million, with judgment interest at 12%. Thereafter, Hawkins filed a motion for determination of reasonableness with respect to the June 23, 2021 settlement agreement and for judgment thereon. On July 20, 2021, the superior court granted Hawkins’s motion to find the settlement reasonable. On August 12, 2021, Hawkins and Miguel mailed a 20 day pre-suit IFCA notice to ACE, and thereafter filed a corrected amended complaint, asserting claims against ACE for negligence, violation of IFCA, and breach of the duty of good faith on October 1, 2021. Pursuing litigation, the superior court found that as a matter of law, ACE breached the insurance policy, breached the duty of good faith, and violated IFCA. The court further struck ACE’s affirmative defense that Miguel failed to comply with the policy’s conditions to the prejudice of ACE. The Court awarded enhanced damages under IFCA, as well as attorney fees and costs under Olympic Steamship v. Centennial.  The superior court entered judgment for Hawkins against ACE in the amount of $5,443,200.00, and an additional judgment of $232,195.60 for attorney fees. ACE thereafter appealed.

On appeal, ACE argued that the superior court’s imputation of the reasonableness determination to ACE violated ACE’s right to due process as it was not given notice of the hearing. The Court considered what is meant by the insurer’s having been given the “opportunity to be involved in a settlement” pursuant to Mutual of Enumclaw Insurance Company v. T & G Construction, Inc. 165 Wn.2d 255, 267, 199 P.3d 376 (2008). The Court noted that it is undisputed that Hawkins and Miguel did not give ACE notice of the settlement or of their intent to obtain a reasonableness determination until after they had already presented their motion and obtained the order.

The Court relied on the long-settled rule that an insurer is “bound by the findings, conclusions, and judgment entered in the action against the tortfeasor when it has an opportunity to intervene in the underlying action.” This reflects the notion that where an insurer is given notice but fails to defend where there is an obligation to do so is bound by a litigated judgment on the liability indemnified.

Turning directly to reasonable settlements, the Court notes that Washington applies a corollary rule of equal antiquity that states an insurer is bound by a reasonable settlement, reasonable meaning made without fraud or collusion. The Court notes that reasonableness is especially relevant to a covenant settlement, which involves three features: (1) a stipulated or consent judgment between the plaintiff and insured, (2) a plaintiff’s covenant not to execute on that judgment against the insured, and (3) an assignment to the plaintiff of the insured’s coverage and bad faith claims against the insurer. Once the reasonableness of a stipulated judgment is established, the amount of said judgment becomes the presumptive measure of that component of damages in a later bad faith actions. Simply put, the reasonableness of a stipulated or covenant judgment plays a large role in a later bad faith suit.

In order to protect the integrity of reasonable settlements, and therefore avoid unreasonable settlements, Washington courts have adopted a nine factor test to determine the reasonableness of a settlement amount. Most notable here is the Supreme Court’s emphasis of these factors, especially where “the insurer has notice of the reasonableness hearing and has an opportunity to argue against the settlement’s reasonableness.” Besel v. Viking Ins. Co. of Wisconsin, 146 Wn.2d 730, 739, 49 P.3d 887 (2002). The court notes the importance of allowing an insurer to be heard on reasonableness where the court will bind the insurer to said settlement.  In conclusion, the Court clearly concluded the importance that an insurer is given notice of the reasonable hearing itself in order to be bound by its outcome, not merely notice that the underlying suit had been commenced.

In finding that ACE was not bound by the reasonableness determination, the Court of Appeals stated:

Because Hawkins and Miguel did not give ACE notice of the settlement and the reasonableness hearing, the reasonableness determination cannot bind ACE consistent with due process. As a result, as to ACE, there has been no binding determination that the settlement was reasonable, and there is no current basis on which to bind ACE to the settlement amount, or find it liable for that amount, interest, or treble damages. Therefore, the May 3, 2023 summary judgment order, judgment against ACE finding it liable for the consent judgment, and judgment against ACE finding it liable for treble damages under IFCA must be reversed to that extent.

The Hawkins opinion emphasizes the importance of procedure in covenant judgments and reasonableness hearings. An insured is expressly required to provide notice of a reasonableness hearing to the insurance company, however it is of even more importance that the insurer appears and participates in the reasonableness hearing in good faith.

The attorneys at Lether Law Group have in excess of thirty-five years experience in insurance coverage litigation, including but not limited to covenant judgments, reasonableness hearings and litigation insurance disputes in the state of Washington. Please do not hesitate to contact our office if you have any questions regarding the Hawkins opinions or any other insurance matter.

Clearly Applicable Policy Exclusions and the Duty to Defend

by | Sep 17, 2024 | Construction Law, Decisions, Dispute Resolution, Events, Featured, Insurance Law, Misc., News & Updates, Professional Liability & Significant Injury Claims

On August 21, 2024, the Ninth Circuit Court of Appeals issued an unpublished opinion in Sec. Nat’l Ins. Co.  v. Urberg, Case No. 23-35228, 2024 U.S. App. LEXIS 21365, 2024 WL 3912582 (9th Cir. Aug. 21, 2024) affirming the dismissal of the appellants’ claims against Security National Insurance Company (SNIC) regarding SNIC’s duty to defend.

The underlying lawsuit in Urberg arose when the appellant-homeowners noticed damage to their properties several months after purchasing their homes. The homeowners filed suit against the builders and developers alleging breach of contract and breach of express and implied warranties. The general contractor filed a third-party complaint against the subcontractors, including LND Construction, who was insured by SNIC. LND Construction thereafter tendered the defense of the general contractor’s claims to SNIC and SNIC denied.

The United States District Court for the Western District of Washington (the “Western District”) granted summary judgment in favor of SNIC dismissing the appellants’ breach of contract and bad faith claims. The Western District found the appellants failed to establish that SNIC’s denial was unreasonable, frivolous, or unfounded. The Western District further dismissed LND Construction’s claims because aside from an unfounded timing argument, it failed to establish actual harm as a result of SNIC’s alleged bad faith denial.

Pursuant to Washington law, the duty to defend is triggered at the time a lawsuit is filed and “is based on the potential for liability.” Woo v. Fireman’s Fund Ins. Co., 161 Wn.2d 43, 164 P.3d 454, 459 (Wash. 2007) (quoting Truck Ins. Exch. v. VanPort Homes, Inc., 147 Wn.2d 751, 58 P.3d 276, 281 (Wash. 2002)). Additionally, despite insurers having a broad duty to defend in Washington, any alleged claims which are clearly not covered by the policy relieve an insurer of its duty. Kirk v. Mt. Airy Ins. Co., 134 Wn.2d 558, 951 P.2d 1124, 1126 (Wash. 1998).

The Ninth Circuit affirmed the Western District’s decision and likewise found that SNIC did not have a duty to defend. The Ninth Circuit also ruled that it was clear from the operative Complaint and the SNIC policy that the new construction exclusion clearly applied. In particular, the Ninth Circuit held that because it was certain that the claims alleged against LND Construction involved new construction, the exclusion directly applied and no further consideration of facts and/or Washington case law was necessary. Sec. Nat’l Ins. Co., 2024 U.S. App. LEXIS 21365 at *4.

On August 22, 2024, the Western District issued another unpublished opinion in Bitco Gen. Ins. Corp. v. Union Ridge Ranch, LLC & Inland Co., Case No. C22-05624 BHS, 2024 U.S. Dist. LEXIS 150604*; 2024 WL 3924715 (W.D. Wash., Aug. 22, 2024). Specifically, the Western District addressed the applicability of an impaired property exclusion and its exception involving the retaining wall/concrete work the insured, Inland Corporation (Inland Co.), was retained to perform.

Specifically, the Bitco General Insurance Corporation (Bitco) policy included an impaired property exclusion which excluded coverage for property that is rendered “less useful” due to the defective work by the insured. The exception would apply, however, if the insured could prove the “loss of use of other property arising out of sudden and accidental physical injury” to its work after it has been put to its intended use.

After the construction was finished, a prospective buyer retained a geotechnical expert who identified multiple defects with Inland Co.’s work. As a result, the prospective buyer did not purchase the property. Inland Co. later discovered that one of the retaining walls it constructed had failed. A second geotechnical expert further confirmed that the retaining walls were still defective after Inland Co. attempted to repair the defects. The property was eventually sold. However, a third geotechnical expert’s analysis revealed that the retaining walls were improperly constructed and were at risk of failure.

Inland Co. filed suit against Union Ridge Ranch (URR) in Clark County Superior Cout based upon URR’s alleged failure to pay. URR raised counterclaims against Inland Co. alleging breach of contract and negligence based upon Inland Co.’s faulty work which prevented it from selling the property for a profit. Inland Co. tendered the defense of URR’s counterclaims to BITCO and BITCO defended under a full reservation of rights. The parties reached a settlement for $2.66 million and URR agreed not to seek recovery against Inland Co. and Inland Co. assigned its insurance rights against BITCO to URR.

BITCO then filed a declaratory judgment coverage action against URR arguing that it did not owe coverage for the settlement under the commercial general liability and umbrella policies it issued to Inland Co. The Western District determined that the failure of one of the retaining walls was gradual and inevitable rather than sudden or accidental. When considering the impaired property exception, the Western District ruled that the exception did not apply because even if the failure of the retaining wall was “sudden and accidental”, Inland Co. could not show that URR’s damages arose from that failure.

Moreover, the Western District commented that the only thing surprising about the failed retaining wall is that it was the only retaining wall to visibly fail. The Western District heavily considered the three geothermal experts’ analysis revealing that the retaining walls, both before and after the single wall failed, were likely to fail. Ultimately, the Western District determined that it was clear the impaired property exclusion applied, without exception, to exclude coverage to Inland Co. because the property was “less useful” as a direct result of the improperly constructed retaining walls.

The Bitco and Urberg decisions evidence that Washington Courts broadly construe insurers’ duty to defend. Specifically, when there is any reasonable interpretation of the facts or law which could result in coverage, the insurer must defend. However, when it is uncontested that an alleged claim is not covered or clearly excluded by the policy, Washington Courts will oftentimes determine that the insurer is relieved of its duty to defend and/or indemnify.

Lether Law Group has represented and advised commercial general liability primary and excess insurers on all aspects of coverage, including the duty to defend, scope of coverage, and application of policy exclusions and their exceptions. If you would like to discuss the implications of the Bitco and/or Urberg decisions or coverage issues involving these types of claims, please feel free to contact our offices.

Labor Day: Office Hours & the Evolution of Workers’ Insurance

by | Aug 29, 2024 | Events, News & Updates

As Labor Day approaches, we at Lether Law Group want to take a moment to recognize and celebrate the hard work and dedication that you and countless others demonstrate every day. Labor Day, observed on the first Monday of September, is a time to honor the achievements and contributions of workers across the country.

In observance of this National Holiday, our offices will be closed on Monday, September 2, 2024, to allow our team to enjoy some well-deserved rest and relaxation. We will resume our normal business hours on Tuesday, September 3, 2024.

Fun Fact: Labor Day is not just a day off—it is also a significant marker in the history of workers’ rights and the development of modern-day insurance practices. As the industrial revolution transformed the American workforce, the risks associated with labor grew, leading to the establishment of workers’ compensation laws and the expansion of insurance coverage to protect both employers and employees. These laws were designed to provide financial protection for employees injured on the job, paving the way for modern-day insurance practices related to workplace safety and employee benefits.

Today, these protections have evolved into the complex and sophisticated insurance landscape we know, where coverage disputes, liability concerns, and regulatory challenges are common.

At Lether Law Group, we understand the vital role that labor plays in our society and the importance of ensuring that workers are protected. As we take this time to reflect on the importance of labor and the protections that have been established over the years, we remain dedicated to serving the needs of our clients in this ever-evolving field.

We hope you have a safe and enjoyable Labor Day weekend. Should you need any assistance before or after the holiday, please do not hesitate to reach out.

Thank you for your continued trust in Lether Law Group.