Hoff v. Safeco Ins. Co. of Ill.

• Decision Date: 29 May 2019
• Docket Number: No. 50850-8-II,50850-8-II
• Court: Washington Court of Appeals
• Parties: Payton O. HOFF, Respondent, v. SAFECO INSURANCE COMPANY OF ILLINOIS, Appellant.

449 P.3d 667

Payton O. HOFF, Respondent,

v.SAFECO INSURANCE COMPANY OF ILLINOIS, Appellant.

No. 50850-8-II

Court of Appeals of Washington, Division 2.

Filed May 29, 2019

Publication Ordered September 24, 2019

John Michael Silk, Morgan Emmerton Smith, Wilson Smith Cochran Dickerson, 901 5th Ave. Ste. 1700, Seattle, WA, 98164-2050, for Appellant.

Duane Charles Crandall, Crandall O'Neill Imboden & Styve PS, 1447 3rd Ave. Ste. A, Longview, WA, 98632-3226, for Respondent.

Glasgow, J.

¶1 Payton Hoff was a passenger in a vehicle that was hit by a drunk driver. She received a settlement from the at-fault driver’s insurer and personal injury protection payments from Safeco Insurance. She then made an underinsured motorist claim with Safeco. Hoff objected to Safeco’s low offers of settlement and eventually filed a complaint in superior court alleging unfair claims settlement practices and bad faith.

¶2 After some discovery, Safeco removed the suit to federal district court on the basis of diversity jurisdiction. The federal court remanded to the superior court, finding that the required minimum amount in controversy had not been established.

¶3 On remand, Hoff argued that Safeco’s removal attempt itself supported the bad faith claim, and she moved to compel Safeco to produce all information the company or its attorneys possessed concerning the decision to remove her superior court lawsuit to federal court. The superior court granted the motion to compel and ordered Safeco to produce for in camera review all information—including attorney-client privileged materials and work product—concerning Safeco’s decision to remove the case to federal court. We granted Safeco’s motion for discretionary review.

¶4 Under the facts of this case, information about Safeco’s decision to remove the case to federal court is not discoverable under Richardson v. GEICO , a case decided after the superior court made its ruling here. 200 Wash. App. 705, 403 P.3d 115 (2017), review denied , 190 Wash.2d 1008, 414 P.3d 575 (2018). In addition, under Cedell v. Farmers Insurance Co. , in order to pierce the attorney-client privilege and attorney work product protections, a party seeking protected information must make a factual showing adequate to support a reasonable good faith belief that the party’s conduct was fraudulent. 176 Wash.2d 686, 295 P.3d 239 (2013). This is a high bar and Hoff fails to meet it here.

¶5 We reverse the superior court’s order compelling discovery and remand for further proceedings.

FACTS

A. Accident and Underinsured Motorist Claim

¶6 In May 2011, a drunk driver drifted across the center line and collided head on with a vehicle in which Hoff was a passenger. Hoff sustained multiple soft tissue injuries. The drunk driver died. Safeco insured the vehicle and provided personal injury protection and underinsured motorist (UIM) coverage to Hoff.

¶7 The drunk driver’s insurer settled Hoff’s bodily injury claim for the policy limit of $25,000. Safeco also paid over $15,000 in personal injury protection benefits.¹

¶8 Hoff subsequently filed a UIM bodily injury claim with Safeco.² The UIM bodily injury coverage had a policy limit of $50,000.

¶9 Throughout Safeco’s claim investigation, Hoff reported ongoing neck, back, shoulder, and hip pain. She also reported that she was experiencing emotional trauma. Hoff continued to seek and receive chiropractic and other medical care and anticipated she would need ongoing care into the future.

¶10 Safeco completed a bodily injury evaluation and offered Hoff $2,500 to settle her UIM claim. Hoff rejected the offer and demanded $100,000, which was double the UIM policy limit. Safeco replied that they would be at an impasse until Hoff countered with a more reasonable demand.

¶11 Hoff filed a complaint in superior court. She alleged that Safeco had violated WAC 284-30-330(a)(7), which prohibits an insurance company from forcing a claimant to litigate by offering substantially less than the amounts ultimately recovered in the proceeding. She also relied on RCW 48.30.010(7) and the Insurance Fair Conduct Act, chapter 48.30 RCW.³ Hoff alleged that her damages "far exceed[ed] Safeco’s available UIM limits." Clerk’s Papers (CP) at 4. Hoff’s prayer for relief requested "judgments for general and special damages, all in such amounts as will be proven at time of trial herein" and "other relief as to the Court seems fair, just, and equitable." CP at 5.

B. Amount in Controversy

¶12 Safeco propounded its first set of discovery requests. In answering Safeco’s requests for admission, Hoff denied that the total amount of her damages payable by Safeco exceeded $75,000. She also denied that Safeco "[had] any exposure to pay [her] in excess of $75,000." CP at 69.

¶13 In her answers to Safeco’s first interrogatories and requests for production, Hoff claimed that her special medical damages totaled at least $12,455, not including $4,733 of other medical bills, and that she anticipated she would require future medical care. She claimed that "[g]eneral damages are unknown at this time[,] ... [but] the value is $75,000 exclusive of the third party recovery." CP at 63. When asked whether she sought a trebling or any multiplier of damages, she responded, "Yes. Both general and special damages. The amounts will be determined by a jury based upon the longevity of symptoms, their severity and the manner in which [Hoff’s] claim was treated by defendant Safeco through its employees and practices." CP at 64. Hoff also asserted that "[i]n the event of a determination that [the Insurance Fair Conduct Act] was violated," she planned to "seek punitive damages in an amount a finder of fact deems appropriate." CP at 64.

¶14 Although the amount in controversy had the potential to exceed $75,000, Hoff acknowledged that she was disinclined to litigate in federal court. Therefore, she offered to sign a CR 2A stipulation that the amount in controversy did not exceed $75,000. Nevertheless, she maintained that the jury could award her an "aggregate verdict" of far more than $75,000, but that Safeco could not be required to pay anything greater than $75,000. CP at 1301. Safeco proposed the following CR 2A stipulation language:

1. Now, therefore, Plaintiff and Safeco stipulate that the sum total of all monetary relief that Plaintiff will seek in this action, whether costs, attorney’s fees, expert expenses or otherwise, is $75,000.00 or less.

2. Plaintiff and Safeco further stipulate to the entry of an order in limine that limits Plaintiff from seeking any monetary relief in this action, damages, attorney’s fees, costs, or otherwise, in excess of $75,000.

CP at 567.

¶15 Hoff agreed to the proposed language in paragraph 1 of Safeco’s CR 2A stipulation, but not the language in paragraph 2. Hoff suggested the following language for paragraph 2:

2. However, admissible evidence that a trier of fact may consider is not subject to an order in limine. In the event a trier of fact values Plaintiff’s claim at more than $75,000, Plaintiff and Safeco agree no money judgment may exceed $75,000.

CP at 510.

¶16 The parties exchanged follow-up letters regarding the proposed CR 2A stipulation language, but could not reach an agreement. Because Hoff retained the right to claim damages greater than $75,000, Safeco warned that if Hoff would not agree to its proposed language it would remove the suit to federal court, stating, "A willingness to ‘waive’ the right to seek relief greater than $75,000 to avoid removal to federal court, while retaining the right to claim damages over that amount is inconsistent with a stipulation that the amount in controversy is $75,000 or less." CP at 572. Hoff explained that she would not limit her trial testimony by stipulating to an order in limine, as Safeco proposed, but reiterated that she would neither seek, nor accept, a judgment of more than $75,000, in the event it was awarded. Hoff also countered that if Safeco removed the suit to federal court, she would seek remand.

C. Removal to Federal Court and Remand

¶17 Because Hoff refused to stipulate that she would not ask the jury to award her monetary relief "in excess" of $75,000, Safeco removed the suit to federal court under 28 U.S.C. § 1441. Br. of Pet’r at 8; CP at 634. Safeco argued that the federal court had diversity jurisdiction under 28 U.S.C. § 1332. The parties were citizens of different states. And Safeco claimed the matter in controversy exceeded $75,000 because Hoff might seek more than $75,000 from the jury, even if she was willing to agree not to ultimately accept a judgment over $75,000.

¶18 Hoff moved for remand. The federal court granted Hoff’s motion and explained that Safeco could not insist on limiting the evidence before the jury. But the federal court also made it clear that Hoff could not seek recovery in excess of $75,000 from the jury. The court observed that "prior to removal, a plaintiff can effectively avoid removal on diversity grounds by agreeing not to seek or recover more than the jurisdictional minimum, regardless of what the fact finder thinks of her evidence." CP at 645. The court concluded that "Hoff’s unilateral act [of limiting her recovery] is sufficient to deny this court jurisdiction. It does limit her recovery to less than $75,000, and it does prohibit her from seeking—from asking the jury for—more." CP at 646.

D. Hoff’s Discovery Request Regarding Removal Decision

¶19 On remand, Hoff propounded the following interrogatory:

INTERROGATORY NO. 5 :

Please explain every reason Safeco had for removing Ms. Hoff’s suit against Safeco to federal court in Tacoma.

CP at 652. Safeco objected and declined to answer, arguing in part that Hoff was seeking information protected by the attorney-client privilege and the attorney work product doctrine because Hoff was seeking an explanation of litigation strategy. Following a discovery conference, Safeco declined to withdraw its objections and still refused to answer.

¶20 Hoff moved to compel Safeco’s answer. In her motion,...