Escalante v. Sentry Ins.

• Court: Court of Appeals of Washington
• Citation: 743 P.2d 832,49 Wn.App. 375
• Decision Date: 28 September 1987
• Docket Number: No. 17310-3-I,17310-3-I
• Parties: Ray R. ESCALANTE and Esther Escalante, individually and the marital community composed thereof; and Ray R. Escalante as administrator of the Estate of Linda Christine Escalante, deceased, Appellants, v. SENTRY INSURANCE a Mutual Company, a foreign corporation; Farmers Insurance Company, a foreign corporation, Respondents.

Page 375

49 Wn.App. 375 743 P.2d 832 Ray R. ESCALANTE and Esther Escalante, individually and the
marital community composed thereof; and Ray R.
Escalante as administrator of the Estate
of Linda Christine Escalante,
deceased, Appellants,
v.
SENTRY INSURANCE a Mutual Company, a foreign corporation;
Farmers Insurance Company, a foreign corporation,
Respondents. No. 17310-3-I. Court of Appeals of Washington,
Division 1. Sept. 28, 1987.

Page 377

[743 P.2d 834] Michael E. Ritchie, Ellis & Li, Ralph J. Brindley, Hekell, Fetterman, Martin, Todd and Hokanson, Seattle, for Ray and Esther Escalante.

Matt Murray, Murray, Dunham & Murray, Seattle, for Sentry Ins. A Mut. Co.

GEORGE H. REVELLE, Judge Pro Tem. ^*

Appellants Ray and Esther Escalante, and the estate of Linda Christine Escalante appeal from an order denying their motion to compel discovery and an order of summary judgment dismissing their action. We reverse and remand.

FACTS

On December 12, 1982, Linda Christine Escalante was killed in an automobile accident while riding as a passenger

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in a car being driven by Mrs. Nova Jean Brooks. The accident was caused by the concurrent fault of two third parties. Mrs. Brooks was injured in the accident.

Respondent Sentry Insurance Company (Sentry) provided underinsured motorist (UIM) insurance covering the Brooks automobile. Linda Christine Escalante was covered under the following language of the UIM endorsement:

Anyone occupying with your permission, a car we insure has the same rights and obligations that you have under this insurance.

(Emphasis Sentry's). The policy also contained a single limit of $100,000, out of which the claims of Ray and Esther Escalante, appellants herein, and the named insured, Nova Jean Brooks, needed to be satisfied. ¹

Shortly after the accident, appellants informed Sentry of their claim for benefits under the UIM coverage. At Sentry's request, appellants then brought suit against the tortfeasors on May 5, 1983, and obtained an order of default against one (who was uninsured) on June 21, 1983. The case against the other tortfeasor was settled after the payment of his liability insurance policy limits ($50,000) in October, 1983.

On October 31, 1983, appellants informed Sentry that they believed their claim was worth in excess of $100,000, and asked that Sentry pay them $50,000 in settlement of their UIM claim. However, according to appellants, Sentry did not immediately respond to their offer of settlement. Instead, on December 12, 1983, Sentry informed appellants counsel that "we are waiting for additional information on Nova Jean Brooks and for evaluation discussions with our guiding office [and therefore] we are unable to make a reply to your $50,000.00 demand at this time".

On February 6, 1984, Sentry received a settlement offer from Nova Jean Brooks' attorney for $50,000, contingent on

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settlement of appellants' claim for $50,000.

On March 5, 1984, appellants' attorney received a letter from Sentry which stated:

This is to follow up our conversation regarding the Miller Casualty Insurance case and your $90,000 demand.

Pursuant to this case coming to our attention, our Company is taking the position that Underinsured Motorist coverage is to be treated like first party coverage. We further take the position that [743 P.2d 835] Underinsured Motorist coverage cannot be stacked externally.

As you are aware, the Escalantes have their own Underinsured Motorist coverage through Farmers Insurance Company, and we feel that their Company is where Christine Escalante's Underinsured Motorist claim belongs.

After you have had the opportunity to examine the Miller case, we ask that you formally drop any UIM claim that the Escalante Estate may have against Nova Jean Brooks.

That same day, appellants' attorney sent a letter to Sentry stating why Sentry's legal position was incorrect, and requesting arbitration if the matter was not immediately resolved.

On April 25th, Sentry sent a letter to appellants' attorney reiterating the position that appellants' must obtain UIM benefits from their own carrier. By letter dated May 8, appellants' attorney again pointed out to Sentry why its legal position was incorrect. The letter also stated that Sentry's "denial of coverage ... violate[d] its duty of good faith," and also demanded settlement within ten days. Several days later, Sentry sent appellants' attorney another letter which repeated Sentry's position regarding the proper source of appellants' UIM coverage, but then offered to settle appellants' claim. The letter also stated that Sentry would work out any UIM coverage problems with appellants' insurer, Farmers Insurance Company, at a later date, and that Sentry could not reply to appellants' settlement demand until it had completed an evaluation of Nova Jean Brooks' claim.

On June 14, 1984, appellants' attorney sent another letter

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to Sentry which stated in part:

As you will recall, by letter dated May 8, 1984, this office advised you of our position with respect to Sentry's failure to honor its obligations to our client under the Underinsured Motorist endorsement of your insured's policy. Your reply letter of May 11 was encouraging insofar as it reflected a belated acknowledgment [sic] of Sentry's obligation to our client and a willingness to pay now and work out any coverage problems with Farmers later.

However, the final paragraph of your letter, as well as the total lack of any follow-through on this obligation, only corroborates our potential claim for bad faith on the part of Sentry. Specifically, you refer to a need for "additional information" on your insured, although this claim has been pending for over 18 months and more than adequate information is already in your possession. In addition, you curiously refer to "another offer" as being forthcoming, even though Sentry has thus far made no offer whatsoever to our client. Most importantly, notwithstanding your assurances that we would be hearing from you immediately in this regard, this office has received no further contact of any kind during the month that has elapsed since your letter.

Therefore, unless this firm receives certified funds in the amount of $100,000 (payable to Esther and Ray R. Escalante, individually and as administrators of the Estate of Linda Christine Escalante) no later than 5:00 p.m. Thursday, June 21, we will on the following business day file a declaratory judgment action in King County Superior Court and seek compensatory and punitive damages as well as attorneys' fees and costs ...

On June 20, 1984, appellants received an offer of settlement from Sentry for the amount of $20,000 contingent on settlement of Nova Jean Brooks' claim. On June 22, 1984, Sentry offered to settle Nova Jean Brooks' claim for $30,000, contingent on appellants' acceptance of their $20,000 settlement offer.

Appellants rejected the $20,000 offer, and filed this action for bad faith, breach of contract, violation of the Consumer Protection Act (CPA), violation of Washington Administrative Code (WAC) regulations, negligence, tortious interference with protected property interest, tort of

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outrage, and negligent infliction of emotional distress on June 25, 1984. Approximately one month later, Sentry demanded arbitration[743 P.2d 836] of the matter. Though appellants resisted arbitration, on September 28, 1984, the superior court granted a motion to stay the proceedings and ordered arbitration on the issue of the amount of damages payable under the policy. The arbitration hearing was conducted on January 28 and 29, 1985, for the sole purpose of determining the amount of benefits payable to appellants under the underinsured motorist endorsement. Prior to the arbitration hearing, Sentry paid $10,000 of the available $100,000 to Mrs. Brooks in full settlement of her claim.

On January 30, 1985, the arbitration panel awarded appellants $165,000, representing the full available policy limits of Sentry's policy ($90,000) plus the policy limits of the appellants' coverage with Farmers ($25,000) and the $50,000 already paid to them by the tortfeasor's liability insurer.

On June 21, 1985, several months after the arbitration award, the superior court denied appellants' motion to compel answers to discovery from Sentry and awarded terms of $500 against appellants' counsel. On July 5, 1985, the court denied appellants' motion for reconsideration and again awarded terms against their counsel in the sum of $250.

On September 27, 1985, the trial court granted respondent Sentry's motion for summary judgment, and this appeal followed. ² The issues raised are (1) was this action barred by the arbitration clause in Sentrys policy, (2) do appellant's lack standing to bring claims against respondent for bad faith, breach of contract, or violations of the CPA, (3) can a negligence per se claim be based upon WAC regulations, (4) did the trial court err in denying appellant's motion to compel discovery or in assessing terms against appellant's counsel, and (5) is there a genuine issue of fact

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as to appellants' claims?

In reviewing a summary judgment order, this court engages in the same inquiry as the trial court. Hostetler v. Ward, 41 Wash.App. 343, 704 P.2d 1193 (1985). Summary judgment is proper only when the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. CR 56(c). Thus, we consider the various affidavits of proof, arguments and other pertinent documents furnished us in the record.

ARBITRATION

Appellants first contend the trial court erred in granting summary judgment because the arbitration provision ³ in the policy at issue was inapplicable to this action, and was not a mandatory or exclusive remedy. On the other hand, Sentry argues that the trial court properly entered summary...