Hays v. State Farm Insurance Co.
| Decision Date | 23 December 2015 |
| Docket Number | 46679-1-II |
| Court | Washington Court of Appeals |
| Parties | CHARLES HAYS and KRISTA HAYS, each individually and the marital community comprised thereof, Appellants, v. STATE FARM INSURANCE COMPANY, a foreign insurance company, Respondent. |
UNPUBLISHED OPINION
Charles and Krista Hays appeal the superior court's summary dismissal of their claims of bad faith claims practices and Washington Consumer Protection Act (CPA) violations against State Farm Insurance Company (State Farm). The Hayses' 38-year-old manufactured home was a total loss following a February 19, 2010 fire. After the fire, the Hayses filed a claim under their State Farm homeowner's insurance policy. Over the next two years, the Hayses and State Farm disagreed over their home's valuation and engaged in a series of back and forth communication. In February 2013, the Hayses filed a lawsuit against State Farm alleging bad faith claims practices and CPA violations. The superior court granted State Farm's motion for summary judgment dismissing the Hayses' claims. The Hayses argue the court erred by dismissing their claims because genuine issues of material facts exist regarding (1) whether State Farm acted in good faith in handling the Hayses' claim and (2) whether State Farm violated Washington's CPA.
We affirm the superior court's summary dismissal of the Hayses' claims insofar as they are based on State Farm's investigation of the Hayses' claim and alleged violation of WACs 284-30-370, 284-30-330(4), and 284-30-330(7). However, we reverse and remand for trial on the Hayses' bad faith and CPA claims based on State Farm's delay of the Hayses' claim and State Farm's alleged violation of WACs 284-30-330(2) 284-30-330(6), and 284-30-330(13).
Charles and Krista Hays own real property in Monroe, Washington. A manufactured home was situated on the property. In 2000, the Hayses spent approximately $30, 000 to remodel and update their home. The Hayses purchased a homeowner's insurance policy from State Farm for actual value coverage.
In February, 2010, fire totally destroyed the Hayses' home. The Hayses submitted a claim for benefits under their policy. State Farm obtained an appraisal on the home placing the home's value at $16, 458. Lindsay Person, the State Farm claim representative originally assigned to the Hayses' claim, noted that this amount seemed low. When Person informed the Hayses of the valuation, they were dissatisfied with the low appraisal, and the Hayses sent State Farm a copy of a Town & Country appraisal done before the Hayses remodeled and updated. State Farm contacted Town & Country to issue an updated appraisal report for the property that would reflect the updates on the home. Town & Country valued the Hayses' home at $30 000.[1]
State Farm claims that on May 3, 2010, it sent a letter to the Hayses enclosing a copy of the appraisal and a final check for coverage of their property damage in the amount of $32, 580. The Hayses claim that they never received this letter. Rather, the Hayses contend they received only the check for $32, 580, and they argue that between June 2010 and October 2010 they made repeated attempts to contact State Farm regarding the status of their claim and the manner in which State Farm conducted their valuation, but received no response.
On October 17, 2010, the Hayses sent a letter to a supervisor at State Farm articulating their frustration with their claims process, requesting their claim be assigned to a different claims representative, and seeking clarification of the valuation method. On October 26, 2010, State Farm responded to the Hayses' October 17 letter showing the payments made to the Hayses up to that date and explaining that the actual cash value at the time of the loss was established by the Town & Country appraisal. State Farm sent a proof of loss form and another copy of the appraisal with the letter and also alerted the Hayses that State Farm had requested a certified copy of their manufactured home policy and it would be forwarded on receipt. The letter further notified the Hayses that they had reassigned the claim to Robert Nakashima. This correspondence was returned to State Farm because it was sent to the Hayses' old address. On December 10, 2010, Nakashima re-sent the Hayses the original letter, and on December 14, sent the Hayses the certified copy of their policy to the correct address.
In January 2011, the Hayses retained the services of a public adjuster to assist them with their claim. In March 2011, through their public adjuster, the Hayses submitted a formal proof of loss to State Farm, claiming an amount of $123, 634.00. The parties agreed to submit the disputed valuation to an arbitrator through an alternative dispute resolution (ADR) tool provided by the policy. In December 2011, the arbitrator issued an award with an actual cash value award of $70, 603.21. State Farm paid the remaining ADR award balance in January 2012.
In February 2013, the Hayses filed a lawsuit against State Farm alleging several theories of liability under common law, RCW 48.01.030, and Washington's CPA. They alleged that State Farm engaged in bad faith under the common law and RCW 48.01.030 by failing to reasonably investigate and by delaying the Hayses' claim. They also alleged that State Farm violated Washington's CPA by engaging in bad faith and by violating WACs 284-30-370, 284-30-330(2), 284-30-330(4), 284-30-330(6), 284-30-330(7) and 284-30-330(13). In August 2014, the superior court granted State Farm's motion for summary judgment dismissal of Hayses' claims. The Hayses appeal.
We review a summary judgment order de novo. Owen v. Burlington N. Santa Fe R.R. Co., 153 Wn.2d 780, 787, 108 P.3d 1220 (2005). Summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. CR 56(c). As the moving party, State Farm has the initial burden of showing the absence of an issue of material fact. Safeco Ins. Co. of Am. v. Butler, 118 Wn.2d 383, 395, 823 P.2d 499 (1992). The burden then shifts to the Hayses to set forth specific facts establishing that there is a genuine issue of material fact for trial. Young v. Key Pharms. Inc., 112 Wn.2d 216, 225, 770 P.2d 182 (1989). A motion for summary judgment accepts all facts and reasonable inferences in the light most favorable to the nonmoving party. Owen, 153 Wn.2d at 787. Considering the facts in the light most favorable to the nonmoving party, the motion for summary judgment should be granted only if, from all the evidence, reasonable persons could reach but one conclusion. Failla v. FixtureOne Corp, 181 Wn.2d 642, 649, 336 P.3d 1112 (2014).
The Hayses argue the superior court erred by granting summary dismissal of their bad faith claims because issues of material fact exist regarding State Farm's failure to reasonably investigate and its unreasonable delay of the Hayses' claim by failing to provide information about the Hayses' claim. We disagree that issues of material fact exist regarding State Farm's investigation, but agree that issues of material fact exist regarding delay of the Hayses' claim.
Insurers in Washington have a duty to act in good faith and deal fairly with their insured. Smith v. Safeco Ins. Co. 150 Wn.2d 478, 484, 78 P.3d 1274 (2003). This duty of good faith for the insurance industry is required by statute:
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. Upon the insurer, the insured, their providers, and their representatives rests the duty of preserving inviolate the integrity of insurance.
RCW 48.01.030.
A violation of this duty gives rise to a common law tort cause of action for bad faith. Smith, 150 Wn.2d at 484.[2] An insurer may breach its broad duty to act in good faith by conduct short of intentional bad faith or fraud, although not by a good faith mistake. Anderson v. State Farm Mut. Ins. Co., 101 Wn.App. 323, 329, 2 P.3d 1029 (2000); see also Sharbono v. Universal Underwriters Ins. Co., 139 Wn.App. 383, 161 P.3d 406 (2007). An insurer does not act in bad faith where it "'acts honestly, bases its decision on adequate information, and does not overemphasize its own interest.'" Lloyd v. Allstate Ins. Co., 167 Wn.App. 490, 496, 275 P.3d 323 (2012) (quoting Werlinger v. Clarendon Nat'l Ins. Co., 129 Wn.App. 804, 808, 120 P.3d 593 (2005).
Under Washington law every insurer has a duty to act promptly, in both communication and investigation in response to a claim or tender of defense. St. Paul Fire and Marine Ins. Co. v. Onvia, Inc., 165 Wn.2d 122, 132, 196 P.3d 664 (2008). Insurers have not only a general duty of good faith, but also a specific duty to act with reasonable promptness in investigation and communication with their insureds following a notice of a claim. 165 Wn.2d at 132. An insurer must give equal consideration to its policyholder's interests as well as its own. Am. States Ins. Co. v. Symes of Silverdale, Inc., 150 Wn.2d 462, 470, 78 P.3d 1266 (2003).
The question in bad faith claims is always whether the insurer acted reasonably under the facts and circumstances of the case. Indus. Indem. Co. of the NW, Inc. v. Kallevig, 114 Wn.2d 907, 920, 792 P.2d 520 (1990); Lloyd, 167 Wn.App. at 496. To establish bad faith, an insured is required to show the insurer's action was unreasonable, frivolous, or unfounded. Mut. of Enumclaw Ins. Co. v. Dan Paulson Const., Inc., 161 Wn.2d 903, 916, 169 P.3d 1 (2007).
Whether an insurer acted in bad faith is a question of fact. Smith...
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