Jones v. Allstate Ins. Co.

• Decision Date: 09 May 2002
• Docket Number: No. 70607-7.,70607-7.
• Citation: 45 P.3d 1068,146 Wn.2d 291,146 Wash.2d 291
• Parties: Janet JONES and Terry Jones and their marital community, Respondents, v. ALLSTATE INSURANCE COMPANY and Jeremy France, Petitioners, Roy France and Amy France and the marital community comprised thereof; and Daimlerchrysler A.G., Defendants.
• Court: Washington Supreme Court

45 P.3d 1068

146 Wn.2d 291

146 Wash.2d 291

Janet JONES and Terry Jones and their marital community, Respondents, v.ALLSTATE INSURANCE COMPANY and Jeremy France, Petitioners,Roy France and Amy France and the marital community comprised thereof; and Daimlerchrysler A.G., Defendants.

No. 70607-7.

Supreme Court of Washington, En Banc.

Argued March 29, 2001.

Decided May 9, 2002.

Thomas Collins, John D. Lowry, James Brigman, Michael Rogers, Marilee Erickson, Seattle, for Petitioners.

John Budlong, Seattle, for Respondents.

Carney, Badley, Smith & Spellman, Timothy Parker, James Lobsenz, Seattle, amicus curiae on behalf of National Ass'n of Independent Insurers.

Magladry, Weigel, P.S., Jean Magladry, Bellevue, amicus curiae on behalf of Unites Policyholders.

Bryan Harnetiaux, Debra Stephens, Spokane, amicus curiae on behalf on Wash. State Trial Lawyers Assoc.

Jan Peterson, Linville, Clausen & Linton, Mark Clausen, Seattle, amicus curiae on behalf of Wash. State bar Ass'n.

BRIDGE, J.

We are asked to determine whether an insurance company's claims adjuster who developed a nonadversarial relationship with an unrepresented claimant was practicing law when she completed claims forms, advised the claimants regarding the settlement process, and recommended that the claimants sign a complete settlement and release without advising them that there were potential legal consequences or referring them to independent counsel.We hold that the actions of the claims adjuster in this instance constituted the practice of law.The insurance company and its adjusters will be allowed to continue this practice, however, provided they abide by the standard of care of a practicing attorney.

More specifically, we find that Allstate Insurance Company's (Allstate) employee's conduct fell below the standard of care of a practicing attorney when she did not disclose her conflict of interest, advised the claimants, Janet and Terry Jones, to sign the release of all claims arising from the accident, and did not either properly advise the Joneses that there were potential legal consequences of signing Allstate's settlement check and release or refer them to independent counsel.Because no injunctive relief is requested, we do not reach the issue of whether the conduct of Allstate's employee constitutes the unauthorized practice of law and hence is subject to being enjoined.

Thus, we affirm the trial court and remand for consideration of the Joneses' bad faith and civil fraud claims (Consumer Protection Act, chapter 19.86 RCW) against Allstate, for consideration of the Joneses' remaining claims against Allstate and the other parties, and for the awarding of damages.On remand, because Jeremy France has not shown that the accord between Allstate and the Joneses was reached in good faith and with full revelation, he may not assert an affirmative defense based on the existence of an accord and satisfaction.

FACTS

On November 21, 1997Jeremy France ran a stop sign and broadsided the vehicle driven by Janet Jones, hitting it on the driver's side.Jones was driving a 1992 Plymouth Voyager van.She sustained severe facial injuries, including damage to her right eye.Her scalp was peeled back and she was rendered unconscious from the impact.Jones was airlifted to the Harborview Trauma Center, where she was listed in serious but stable condition.An officer spoke with Terry, Janet's husband, and told him it did not appear that his wife had been wearing a seat belt because the emergency personnel did not have to remove her seat belt to extricate her from the ear.Terry Jones said that it would be unlike his wife not to wear a seat belt and that they had had trouble in the past with the seat belt not latching properly.An examination of the seat belt found that it would not lock into the floor mounted receiver.The release button was pulled up above the locking receiver and would not reset; it appeared that it was pulled out under force.Janet Jones' medical expenses for her hospital stay totaled nearly $75,000.She has undergone surgery on subsequent occasions both to insert plates into her face and head and to remove a plate.

On November 24, three days after the accident, Christy Klein, claims adjuster for Allstate, sent Janet Jones a letter, the first paragraph of which states:

Although we spoke on 112497,[¹] I want to reaffirm Allstate's policy that we will provide quality service to anyone who has been involved in an accident with one of our policyholders.As your claim representative, my role is to ensure that you receive this quality service, outlined in the enclosed "Quality Service Pledge."[²]

The Quality Service Pledge, a single sheet of information, promises the following: "Because you have been involved in an accident with an Allstate policyholder, we will provide you with quality service....Your claim representative is dedicated to carrying out this Quality Service Pledge."³At the time of Janet's accident, Allstate separated its claim functions into represented and unrepresented claimants.Allstate adjusters, such as Klein, were instructed to act as the individual's claim representative for unrepresented claimants.

Over the next two months Klein called Terry Jones frequently-assisting Jones in identifying Janet's medical coverage, finding insurance to pay the medical bills, and obtaining subrogation waivers.Terry Jones recalls that he had extensive contact with Klein and that she helped him: "Almost daily I would talk to her and ask her, you know, she was helping me.She was helping me get the bills paid and helping me with my insurance company.She got my insurance company to pay benefits to me."⁴Terry Jones estimated that payment was $30,000 in underinsured motorist coverage from Farmers, the Joneses' insurer.Jones stated that Klein was more helpful to him than his own insurance company.

In early December 1997Terry Jones met with two attorneys to discuss a possible seat belt product liability claim.This claim would have been independent of any claim involving Allstate or the Frances.Jones did not consult with either attorney to obtain advice about settling the claim against France nor did he discuss Allstate's offer to settle the claim.⁵Jones later informed Klein that he had met with the lawyers to discuss the possible seat belt claim, but had not retained them.Klein told Jones that she could not represent him if he hired an attorney.

In January 1998 Klein sent Janet Jones a letter, a check, and a release form.The letter explained that Klein had been speaking to Terry about the settlement, briefly described the terms of the settlement, and urged Janet to sign the release form:

Thank you for your time today to discuss the settlement of Janet's medical claim against Allstate Insurance.Allstate has issued payment of $25,000.00 payable to you which represents the bodily injury limits on our insureds [sic] policy.Also enclosed are forms for the Release of this Claim.Please sign the original form and return to me in the enclosed envelope.[⁶]

The letter also contained the heading, "Settlement of your medical claim for Janet Jones."⁷The check listed Roy and Amy France as the insured and was made to the order of Janet Jones for $25,000.In the space for "in payment of" the check had this phrase typed in: "FINAL SETTLEMENT OF ANY AND ALL CLAIMS ARISING FROM BODILY INJURY CAUSED BY ACCIDENT ON 11/21/97."⁸The release form was more consistent with the check than with the letter.The release, a mixture of preprinted and handwritten words, contained this heading, "RELEASE OF ALL CLAIMS," and stated: "[I]n consideration of the sum of Twenty Five thousand and xx/100 Dollars ($25,000.00) ... I do hereby release and forever discharge Roy & Amy France, Jeremy France, & Allstate Insurance Co. and any other person, firm or corporation charged or chargeable with responsibility ... from any and all claims ... and causes of action."⁹The post-it note on the release said, "Please sign and return to my attn.Thanks Christy."¹⁰Janet Jones signed and deposited the check.

After reading the release, Terry Jones felt that both he and Janet should not sign it because it appeared that they would thereby be giving up all of their claims.In September 1998 the Joneses attempted to return the money by writing Allstate a check for $25,000, but Allstate returned the check and said that it considered the Joneses' claim settled and closed.According to the Joneses, if the release and settlement were enforceable, they would discharge vicarious and joint and several liability and preclude full compensation.To the Joneses, if the settlement were effective, their car manufacturer would only be severally liable for damages.

The Joneses filed their initial complaint on January 22, 1999 against Allstate, Jeremy France, and Roy and Amy France, Jeremy's parents and owners of the car Jeremy drove in the accident.In their first amended complaint, filed on September 29, 1999, the Joneses added DaimlerChrysler A.G. as a defendant.

On December 8, 1999, the Joneses filed a motion for partial summary judgment, asking the court to find that Allstate engaged in the unlicensed, negligent practice of law by selecting and drafting release and settlement instruments, misrepresenting the terms of these instruments to the Joneses, and advising them to sign the instruments.Allstate opposed the motion and filed a cross-motion for summary judgment.The Frances also moved for summary judgment on the basis that the Joneses' claims against them were barred by the existence of accord and satisfaction.

On January 14, 2000the trial court issued an order granting the Joneses' motion and denying Allstate's.The court granted the motion "on grounds that under Washington law, defendantAllstate Insurance Company engaged in the unauthorized, negligent practice of law and breached its fiduciary duties to the Joneses in representing the Joneses on their claims against...