Barber v. State Farm Mut. Auto. Ins. Co.

Decision Date27 January 1997
Docket NumberNo. 22283,22283
Citation931 P.2d 1195,129 Idaho 677
PartiesDe'Arley BARBER and George Barber, wife and husband, Plaintiffs-Respondents, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, an Illinois Corporation, Defendant-Appellant. North Idaho, October 1996 Term
CourtIdaho Supreme Court

Clements, Brown & McNichols, Lewiston, for defendant-appellant. Dean Wullenwaber argued.

Aherin, Rice & Anegon, Lewiston, for plaintiffs-respondents. Darrel W. Aherin argued.

SCHROEDER, Justice.

This is an appeal by State Farm Insurance Company from the district court's determination that its insureds, the Barbers, are entitled to attorney fees pursuant to section 41-1839 of the Idaho Code. The Barbers were awarded attorney fees by the district court following arbitration of a claim for personal injury resulting from a collision with an uninsured motorist. State Farm argues that the district court erred in applying Idaho law to the attorney fee issue instead of Washington law. The Barbers request an award of attorney fees on appeal.

I. BACKGROUND AND PROCEDURAL HISTORY

George and De'Arley Barber were residents of Clarkston, Washington, on May 22, 1988, when they purchased an automobile insurance policy ("the policy") for their motorhome from State Farm Insurance Company ("State Farm") from a State Farm agent in Washington. The policy includes coverage for bodily injury resulting from accidents involving uninsured or under-insured ("UIM") motorists and provides coverage for medical expenses. The policy contains an arbitration clause giving either the Barbers or State Farm the right to arbitrate disputes involving claim payments and specifies that arbitration will be conducted in the county in which the insured resides. 1 The policy also contains a covenant providing that State Farm can recalculate premiums based on rates applicable in a new location upon change of residence by an insured. 2

The Barbers were involved in an accident with an uninsured motorist on May 15, 1991, while operating their motorhome in Oregon. The uninsured motorist caused the accident, and fault is not an issue on appeal. De'Arley Barber sustained physical injury as a result of that accident. The Barbers resided in Washington at that time, but subsequent to the accident, they moved to Lewiston, Idaho.

On October 17, 1993, the Barbers' attorney provided State Farm with a settlement brochure for the injury claim in the amount of $164,897.11. State Farm responded with a $9,000 offer on November 3, 1993, which was to remain open until November 30, 1993. State Farm also indicated at that time it would take the necessary steps to begin the arbitration process after expiration of the offer.

Negotiations to settle the claim failed, and the Barbers filed a breach of contract suit against State Farm in district court in Idaho. State Farm notified the Barbers that it had contacted its attorney to begin the arbitration proceedings. The district court stayed proceedings pending arbitration.

The Barbers were awarded $38,422.13 in the arbitration, and the award was submitted to the district court for confirmation. The Barbers requested $863.30 in prejudgment interest, $200.00 in discretionary costs and $14,044.40 in attorney fees. State Farm objected to a portion of the award on the basis that the Barbers had already received some payments. State Farm also moved to disallow costs and attorney fees, arguing that under Washington law attorney fees are unavailable if the underlying dispute is resolved by arbitration.

The district court confirmed the arbitration award and entered judgment for the Barbers on their claim for attorney fees in the amount of $14,044.40. State Farm appeals the award of attorney fees. The Barbers request attorney fees associated with defending against the appeal.

II. STANDARD OF REVIEW

The Barbers urge this Court to affirm the district court's decision unless State Farm shows that the district court's decision was clearly erroneous or that it manifestly abused its discretion in making the award. This is the correct standard of review when a dispute concerns the amount of attorney fees awarded, Brinkman v. Aid Ins. Co., 115 Idaho 346, 350-51, 766 P.2d 1227, 1231-32 (1988), but that is not the issue in this case. This case involves determination and application of the appropriate conflicts of law analysis which is a question of law. Seubert Excavators, Inc. v. Anderson Logging Co., 126 Idaho 648, 652, 889 P.2d 82, 86 (1995). In reviewing questions of law the Court exercises free review and is not bound by findings of the district court but may draw its own conclusions from the evidence presented. Mutual of Enumclaw v. Box, 127 Idaho 851, 852, 908 P.2d 153, 154 (1995).

III.

AN AWARD OF ATTORNEY FEES PURSUANT TO SECTION 41-1839 OF THE IDAHO CODE CONFLICTS WITH WASHINGTON LAW.

Under Idaho law an insured with an uninsured motorist claim who complies with the notice requirements of section 41-1839 of the Idaho Code and recovers more in arbitration than the insurer offered is entitled to recover attorney fees from the insurer. Wolfe v. Farm Bureau Ins. Co., 128 Idaho 398, 403, 913 P.2d 1168, 1173 (1996); Emery v. United Pac. Ins. Co., 120 Idaho 244, 246, 815 P.2d 442, 444 (1991). "The purpose of Idaho Code Section 41-1839 is to prevent the sum that is due the insured under the policy from being diminished by expenditures for services of an attorney." Walton v. Hartford Ins. Co., 120 Idaho 616, 620, 818 P.2d 320, 324 (1991); Halliday v. Farmers Ins. Exch., 89 Idaho 293, 301, 404 P.2d 634, 639 (1965).

Generally, in Washington the court does not have collateral authority to go behind the face of an arbitrator's award and determine whether additional amounts are appropriate. Dayton v. Farmers Ins. Group, 124 Wash.2d 277, 279, 876 P.2d 896, 897 (1994). The Washington Supreme Court has explained that Washington's policy is to put the insured in the same position as if the tortfeasor had carried liability insurance and reasoned that to provide attorney fees after an uninsured motorist arbitration would give the insured more than he or she had contracted for. Id. at 279, 876 P.2d at 898.

Washington's policy is not absolute. A Washington court may award attorney fees when an insured is compelled to assume the burden of legal action to obtain the full benefit of the insurance contract. McGreevy v. Oregon Mut. Ins. Co., 128 Wash.2d 26, 904 P.2d 731, 734 (1995); Olympic S.S. Co. v. Centennial Ins. Co., 117 Wash.2d 37, 811 P.2d 673, 681 (1991). However, that rule does not apply when the controversy is merely over the amount of a claim, 904 P.2d at 734 n. 4; See also Dayton v. Farmers Ins. Group, 124 Wash.2d 277, 876 P.2d 896 (1994). Idaho law and Washington law are different.

The Barbers make the further argument that no conflict of law exists between Idaho and Washington law even though Washington does not have a provision similar to I.C. § 41-1839, arguing that attorney fees are still obtainable because State Farm is subject to RCW 48.01.030 which requires it to act in good faith. The Barbers assert that by failing to pay their claim State Farm breached this duty and this breach is a violation under the Washington Consumer Protection Act ("WCPA"). However, the elements of proof necessary for an award under the WCPA are different from the requirements of I.C. § 41-1839. Therefore, a conflict of law between Washington and Idaho does exist.

IV.

THE CONTRACT DOES NOT CONTROL THE CHOICE OF LAW.

The Barbers maintain that the insurance contract contemplates application of the law of the state in which the insureds reside, Idaho. The arbitration clause provides the following:

The arbitration shall take place in the county in which the insured resides unless the parties agree to another place. State court rules governing procedure and admission of evidence shall be used.

Ambiguous contracts are construed against the drafting party. Haener v. Ada County Highway Dist., 108 Idaho 170, 173, 697 P.2d 1184, 1187 (1985); Toevs v. Western Farm Bureau Life Ins. Co., 94 Idaho 151, 153, 483 P.2d 682, 684 (1971). The main objective in contract construction is to give effect to the intent of the parties which should, if possible, be ascertained from the language of the documents. Twin Lakes Village Property v. Crowley, 124 Idaho 132, 135, 857 P.2d 611, 614 (1993). However, this does not aid the Barbers. The language of the arbitration clause is not ambiguous and cannot be construed reasonably as a choice of law clause. The arbitration clause does not state that the substantive law of the state in which the insureds reside will apply. The arbitration clause provides for application of the rules governing procedure and admission of evidence of the state in which the insureds reside. Procedural law and rules do not generally implicate a substantive choice of law. Rungee v. Allied Van Lines, Inc., 92 Idaho 718, 722, 449 P.2d 378, 382 (1968). This language indicates that the clause is meant as a choice of forum clause, not a choice of law clause.

V.

WASHINGTON HAS THE MOST SIGNIFICANT RELATIONSHIPS TO THE TRANSACTION AND THE PARTIES AND WASHINGTON'S LAW APPLIES.

This Court applies the most significant relationship test in conflict of law resolution and has opted in favor of applying the test as set forth in the American Law Institute Restatement (Second) of Conflict of Laws, although it has not adopted the Restatement formulation in full. Seubert Excavators Inc. v. Anderson Logging Co., 126 Idaho 648, 651, 889 P.2d 82, 85 (1995), see also Unigard Ins. Group v. Royal Globe Ins. Co., 100 Idaho 123, 126, 594 P.2d 633, 636 (1979); Rungee, 92 Idaho at 722-23, 449 P.2d at 382-83. "The goal of this test is to identify the state most significantly related to a particular issue and to apply its law to resolve that issue." Seubert, 126 Idaho at 651, 889 P.2d at 85.

In this case the law of the state which is the principal location of the insured risk will be applied ...

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