Credit General Ins. Co. v. Zewdu

• Decision Date: 15 July 1996
• Docket Number: No. 34917-1-I,34917-1-I
• Citation: 919 P.2d 93,82 Wn.App. 620
• Court: Washington Court of Appeals
• Parties: CREDIT GENERAL INSURANCE COMPANY, a foreign corporation, Appellant, v. Dessie T. ZEWDU, Defendant, Joseph Blondo; and Caroline Koff, a Personal Representative of the Estate of Harry Koff, deceased, Respondents.

Page 620

82 Wn.App. 620

919 P.2d 93

CREDIT GENERAL INSURANCE COMPANY, a foreign corporation, Appellant, v. Dessie T. ZEWDU, Defendant, Joseph Blondo; and Caroline Koff, a Personal Representative

of the Estate of Harry Koff, deceased, Respondents.

No. 34917-1-I.

Court of Appeals of Washington,

Division 1.

July 15, 1996.

Jeffrey M. Thomas, Seattle, for Appellant

David Seth Vogel, Seattle; Arthur Dean Swanson, Renton, Joanne Roth Werner, Bellevue, David Michael Jacobi and Wilson, Smith, Cochran & Dickerson, Seattle, for Respondents.

WEBSTER, Judge.

A taxicab driver ran over a pedestrian crossing a street, and the taxicab's insurer filed this declaratory judgment. The insurer, Credit General Insurance Co., seeks a judgment declaring the absence of coverage because the policy requires the pre-approval of all taxicab drivers, and it did not pre-approve the driver causing the accident.

Prior to the accident, the insurance commissioner denied Credit General permission to sell the policy because the pre-approved driver clause violated Washington law. Because Credit General sold the policy without appealing the commissioner's disapproval, it failed to exhaust its administrative remedies, and we will not consider its substantive arguments. We construe the policy without the disapproved clause, and affirm the trial court's declaration of coverage.

I. FACTS

On November 18, 1991, Credit General submitted its taxicab liability policy to the forms regulation division of the insurance commissioner's office. The policy, through Any driver authorized as a taxicab driver, limousine driver or driver of any other public livery vehicle while operating covered "auto" with your knowledge and consent under your operating authority. ^* No coverage will apply to any driver newly placed in service after the policy begins until you report that driver to us and we will advise you in writing that he/she is acceptable to us and that he/she is covered under the policy. Coverage on any such driver newly placed in service will become effective as of the date and time we advise you he/she is acceptable and that they are covered by the policy and not before, subject to the reporting methods outlined and agreed to in the Notification Procedure Outline signed by the insured and the agent prior to coverage being effected under the policy.

its definition of "insured," excluded coverage for drivers who were not "pre-approved" by Credit General. The definition of "insured" was part of a General Change Endorsement, which provided:

On November 20, 1991, a senior analyst, acting as the commissioner's representative, disapproved the policy:

6. First, your Named Driver Exclusion endorsement is not acceptable. If an excluded driver is operating an insured vehicle, the vehicle may be both uninsured and underinsured. You must provide underinsured motorist coverage when a vehicle is operated by an excluded driver. Please review First Nat'l Ins. Co. of America. v. Perala, 32 Wash.App. 527, 648 P.2d 472 and amend your form.

. . . . .

7. First, your General Change Endorsement excludes all coverages for drivers newly placed in service until approved by the company. This appears contrary to our Financial Responsibility law. Please explain how this form will work in the context of our Financial Responsibility Law, or withdraw this form.

The analyst also disapproved it because of the method used by Credit General to restrict the policy's scope of coverage: "this form is not a 'general change,' [it] is a significant restriction of coverage. The title should describe what the form does, or it is misleading--in violation of RCW 48.18.110(1)(d)." Credit General did not appeal the analyst's disapproval to the commissioner. ¹ And, despite the disapproval, Credit General immediately marketed the policy.

Dessie Zewdu applied for a Credit General taxicab liability policy in June 1992, submitting a list of drivers with his application. Credit General issued the policy. Zewdu did not include Blondo on the initial driver list, nor did he ever seek approval for Blondo.

In January 1993, Blondo, driving a taxicab owned by Zewdu, struck Harry Koff while he was crossing a street in downtown Seattle. Koff died the next day.

Credit General sued Zewdu, Blondo, and Koff's personal representative for declaratory judgment. Zewdu failed to answer and the court entered a default judgment. Blondo, Koff, and Credit General brought cross-motions for summary judgment. The trial court granted summary judgment to Blondo and Koff, entering a declaratory judgment that the pre-approved driver provision did not exclude coverage. It also awarded Blondo attorney fees.

Credit General appealed, and, after oral argument, we requested additional briefing regarding exhaustion of administrative remedies.

II. DISCUSSION

A. Exhaustion Of Administrative Remedies

1. Agency's Initial Authority To Evaluate and Resolve The Claim.

Litigants must exhaust administrative remedies before seeking judicial intervention when an agency has initial authority to evaluate and resolve a claim, and the administrative remedy is adequate in relation to the relief sought. South Hollywood Hills Citizens Ass'n v. King County, 101 Wash.2d 68, 73, 677 P.2d 114 (1984). Credit General's "claim" is that its policy is consistent with Washington's insurance statutes, thereby entitling the policy to enforcement. The commissioner has initial authority to authorize the sale of insurance policies, including the obligation to determine whether policy provisions are consistent with Washington's insurance laws. RCW 48.18.100, 48.18.110(1)(a), WAC 284-02-020(3)(a). The commissioner exercises this initial authority through the forms regulation division, and an insurer can administratively appeal a disapproval. RCW 48.04.010(1)(b), WAC 284-02-070(1)-(2), RCW 34.05.413. Thus, the commissioner had initial authority to evaluate and resolve Credit General's claim.

2. Adequacy of Remedy In Relation To Relief Sought.

The more difficult question concerns the type and adequacy of administrative remedies. Credit General contends that the relief that it seeks--a declaratory judgment binding on the taxicab driver and the deceased pedestrian's estate--is not within the commissioner's authority. And further, that even if Credit General sought and received a favorable determination from the commissioner, the commissioner could not bind this court. From these two points, Credit General reasons that the administrative remedy was inadequate and that pursuit of administrative review was futile.

Washington law rejects the simplistic, mechanistic approach to adequacy that Credit General proposes. For even when an administrative remedy is not the precise relief sought, or will not give a litigant "complete relief," the remedy may be adequate for purposes of requiring exhaustion. Dioxin/Organochlorine Center v. Department of Ecology, 119 Wash.2d 761, 777, 837 P.2d 1007 (1992) (pursuit of administrative remedies not inadequate or futile despite absence of injunctive power in agency). The adequacy of an administrative remedy is measured in relation to the claim. Cf. W. Andersen, The 1988 Washington Administrative Procedure Act--An Introduction, 64 Wash. L.R. 781, 828 (1989) (discussing RCW 34.05.534).

For example, State v. Tacoma-Pierce County Multiple Listing Service, 95 Wash.2d 280, 284, 622 P.2d 1190 (1980), involved an antitrust action by the attorney general against multiple listing services. The listing services contended that the attorney general should have initially proceeded before the Department of Licensing or the Real Estate Commission. Because neither agency had any power to regulate, enjoin, or penalize multiple listing associations, however, the court held the administrative remedy to be inadequate. In other words, an administrative agency lacking authority to make or enforce a decision relevant to the claim cannot provide an adequate remedy.

By contrast, Retail Store Employees Union, Local 1001 v. Washington Surveying and Rating Bureau, 87 Wash.2d 887, 558 P.2d 215 (1976), involved an insurance rating bureau that the plaintiffs contended was operating in violation of insurance statutes. An insurance statute provided for complaint directly to the bureau, and subsequent hearing by the commissioner. 87 Wash.2d at 906, 558 P.2d 215. Because the commissioner could order the bureau to desist from illegal activities, an adequate administrative remedy existed. 87 Wash.2d at 909, 558 P.2d 215. In other words, an administrative agency empowered to entertain the type of claim and enforce its decision can supply an adequate remedy. Citizens for Clean Air v. Spokane, 114 Wash.2d 20, 28, 785 P.2d 447 (1990).

This case falls between Multiple Listing Service and Retail Store Employees Union. The commissioner has authority to decide whether Credit General's policy complies with Washington's statutes and rules, and whether it deceives or misleads purchasers. RCW 48.18.110(a), (c), (d). The commissioner can enforce decisions, and can issue declaratory orders in contested cases. RCW 48.02.080, 34.05.240. In addition, although a commissioner cannot bind the courts, the court appropriately defers to a commissioner's interpretation of insurance statutes and rules. Bailey v. Allstate Ins. Co., 73 Wash.App. 442, 447, 869 P.2d 1110 (1994); Retail Store Employees Union, 87 Wash.2d at 898, 558 P.2d 215 ("We may place greater reliance than usual upon an administrative statutory interpretation in this case because the commissioner has been entrusted with very broad discretion and responsibility in the administration of RCW 48.19.170(2)(b) and the other statutes regulating rating organizations"). Unquestionably, the adequacy of the remedy must be measured from the time the administrative remedy was available. In November 1991, Credit General was faced only with the commissioner's disapproval. The disapproval precluded the issuance, use, or delivery of the...