Anderson v. State Farm Mut. Ins. Co.

• Decision Date: 26 June 2000
• Docket Number: No. 44597-9-I.,44597-9-I.
• Citation: 2 P.3d 1029,101 Wash.App. 323
• Parties: Sharon ANDERSON, Appellant, v. STATE FARM MUTUAL INSURANCE COMPANY, Respondent.
• Court: Washington Court of Appeals

2 P.3d 1029

101 Wash.App. 323

Sharon ANDERSON, Appellant, v. STATE FARM MUTUAL INSURANCE COMPANY, Respondent.

No. 44597-9-I.

Court of Appeals of Washington, Division 1.

June 26, 2000.

Reconsideration Denied August 3, 2000.

Kevin M. Winters, Roger Edwin Hawkes, Shoreline, for Appellant.

Gailann Y. Stargardter, Marilee C. Erickson, Reed McClure, Seattle, for Respondent.

BECKER, J.

This decision reverses in part an order dismissing, on summary judgment, Sharon Anderson's suit against State Farm for bad faith and Consumer Protection Act violations. The suit arose from State Farm's failure to advise Anderson of underinsured motorist (UIM) coverage, and its handling of her UIM claim once she made it. We hold, as a matter of law, that an insurer commits bad faith and engages in an unfair claims settlement practice when it fails to disclose the existence of UIM coverage to an injured insured whose damages are substantial and whose account of the accident plausibly indicates another driver is at fault.

Anderson's allegation that State Farm made an unreasonably low settlement offer raises issues for the trier of fact. Her claims of unreasonable investigation and delay in payment after arbitration were properly dismissed as unsupported in the record.

FACTS

Sharon Anderson was driving her Honda south on Interstate 5 on a Monday afternoon in March, 1995. With her was her husband, Charles Buckner. Anderson lost control of the car and crashed into a cement barrier paralleling the right side of the freeway. The accident occurred in Mountlake Terrace, two miles south of the 236th Street exit. Anderson went to the hospital with a fractured leg and other injuries.

How the accident occurred, and what caused it, are matters of dispute. According to Buckner's statements at the time, Anderson was driving in the express lane. As she began to move over to the right to the exit lane, a green car also moved over and cut them off. When they moved into the far right exit lane the same car again moved in front of them causing Anderson to swerve to the right and hit the barrier.

Ten days after the accident, Anderson gave a statement to State Farm, the insurer of her Honda. Anderson said she and Buckner were in the carpool lane with another car in front of them. Neither car was speeding. She attempted to move to the far right lane. Each time she changed lanes the other car moved in front of her, cutting her off. She finally moved into the far right exit lane, and the other car remained in the lane next to her, on her left. Then a "big old white car" changed lanes in front of the other car and into her lane. This event caused her to veer sharply to the right and lose control of her car.

State Farm obtained the police report of the accident. The police report describes a version of the accident similar to Anderson's, but there is no information in the record as to the source of the description. The police report also contains the handwritten statement of a witness, Philip Benedict, taken at the scene of the accident. In it, Benedict states that the Honda and a Camaro were "zig-zagging" in the two right lanes at high speed, passing each other on the right and left sides and cutting back and forth in front of each other. He said they were going much faster than the main body of traffic. He said that a "car ahead of the speeders moved into the right-hand traffic lane," then the Camaro slowed quickly and the Honda had "no place to go." Benedict gave a similar account to State Farm.

Having obtained the various statements, a State Farm claims representative sent a letter to Anderson explaining that her benefits under the policy included coverage for medical expenses and lost wages, each limited to $10,000. State Farm's letter did not mention that Anderson's policy also included UIM coverage, potentially available if the accident was caused by another driver.

In November 1995, eight months after the accident, Anderson learned about the possibility of UIM coverage from an attorney she happened to meet. She hired counsel and submitted a UIM claim. State Farm opened a claim file in January 1996. A different claims representative, after reviewing the file, located the driver of the Camaro, 18-year-old Jason Gipe. In a statement given to State Farm at this time, Gipe said that Anderson's car was tailgating 10 to 15 feet behind his car. Both cars, he said, were traveling at the speed limit. Gipe said he moved one lane at a time to the right as he was preparing to exit. Anderson's car also moved to the right. According to Gipe, once he was in the far right lane, Anderson moved over onto the shoulder of the highway. He said Anderson passed him on the shoulder. Then she tried to reenter the right hand lane, but almost hit another car, slammed on her brakes and veered into the cement barrier.

Anderson demanded the UIM policy limits of $100,000 from State Farm in March 1996. The claims representative assessed Anderson's damages as between $150,000 to $200,000, but concluded that the claim had little value because Anderson was, in his estimation, 80-100 percent at fault. In July 1996, State Farm offered Anderson $7,500 in settlement. Two months later, State Farm obtained a declaration from witness Philip Benedict. Benedict now said that the accident occurred when the Honda tried to pass the Camaro on the right shoulder of the highway. He said a green car moved into the right lane while the Honda was on the shoulder, but "did not cut off the Honda." Based on this declaration, State Farm informed Anderson that she had no UIM claim because she was the sole cause of the accident.

Anderson wrote to State Farm demanding UIM arbitration. The parties agreed to arbitrate liability only. In a decision issued in August 1997, the arbitrator concluded that "Anderson was 25% negligent and State Farm is 75% liable" for the accident. Five months later, State Farm paid Anderson the policy limits of $100,000.

Anderson then filed suit against State Farm alleging bad faith and violations of the Consumer Protection Act. Anderson alleged that State Farm violated several regulations contained in WAC 284-30, governing trade practices in the insurance industry. The court heard cross motions for summary judgment and granted summary judgment to State Farm. Anderson appeals.

In reviewing summary judgment, this court evaluates the matter de novo, engaging in the same inquiry as the trial court. Kruse v. Hemp, 121 Wash.2d 715, 722, 853 P.2d 1373 (1993). The appellate court considers the facts and all reasonable inferences from those facts in the light most favorable to the nonmoving party. Wilson v. Steinbach, 98 Wash.2d 434, 437, 656 P.2d 1030 (1982). Summary judgment is proper if no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. CR 56(c). Although there is no appeal as of right from the denial of a motion for summary judgment, we may exercise our discretion and rule on a denied motion for summary judgment to serve the interest of judicial economy where there are no genuine issues of material fact. See Waller v. State, 64 Wash.App. 318, 338, 824 P.2d 1225,

review denied, 119 Wash.2d 1014, 833 P.2d 1390 (1992).

The tort of bad faith has been defined as a breach of the obligation to deal fairly with an insured, giving equal consideration to the insured's interests. Tank v. State Farm Fire & Casualty Co., 105 Wash.2d 381, 385-86, 715 P.2d 1133 (1986). The duty of good faith owed by an insurer to its insured is statutory. "The business of insurance is one affected by the public interest, requiring that all persons be actuated by good faith, abstain from deception, and practice honesty and equity in all insurance matters." RCW 48.01.030. The insurer's fiduciary duty to act in good faith is fairly broad and may be breached by conduct short of intentional bad faith or fraud, Industrial Indem. Co. of the Northwest, Inc. v. Kallevig, 114 Wash.2d 907, 916-917, 792 P.2d 520 (1990), although not by a good faith mistake, Coventry Associates v. American States Ins. Co., 136 Wash.2d 269, 280, 961 P.2d 933 (1998). An insurer acts in bad faith when it overemphasizes its own interests. Coventry, 136 Wash.2d at 280, 961 P.2d 933. The determinative question is reasonableness of the insurer's actions in light of all the facts and circumstances of the case. Kallevig, 114 Wash.2d at 920, 792 P.2d 520.

A Consumer Protection Act claim in the insurance context requires (1) an unfair or deceptive practice, (2) in trade or commerce, (3) that impacts the public interest, (4) which causes injury to the party in his business or property, and (5) which injury is causally linked to the unfair or deceptive act. Kallevig, 114 Wash.2d at 920-921, 792 P.2d 520.

The public interest element may be established by showing a violation of a statute containing a legislative declaration of public interest impact. Hangman Ridge Training Stables, Inc., v. Safeco Title Ins. Co., 105 Wash.2d 778, 791, 719 P.2d 531 (1986). Consumer Protection Act claims alleging unfair insurance claims practices meet the public interest element because RCW 48.01.030 declares that the "business of insurance is one affected by the public interest".

As to the element of damage, only injuries to business or property are recoverable in a Consumer Protection Act claim. Kallevig, 114 Wash.2d at 920, 792 P.2d 520.

FAILURE TO DISCLOSE UIM COVERAGE

Anderson's first claim is for damages caused by State Farm's failure to disclose her UIM coverage when she first contacted them to claim benefits under her policy. Her claim is based on an insurance regulation that requires disclosure of pertinent coverages when a claim is presented:

Misrepresentation of policy provisions. (1) No insurer shall fail to fully disclose to first party claimants all pertinent benefits, coverages or other provisions of an insurance policy or insurance contract under which a claim is presented.

WAC...