Mailloux v. State Farm Mut. Auto. Ins. Co.

• Court: Washington Court of Appeals
• Writing for the Court: MORGAN
• Citation: Mailloux v. State Farm Mut. Auto. Ins. Co., 887 P.2d 449, 76 Wn.App. 507 (Wash. App. 1995)
• Decision Date: 09 January 1995
• Docket Number: No. 15577-0-II
• Parties: Joseph K. MAILLOUX and Georgette Mailloux, husband and wife, Respondents, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellant.

Page 507

76 Wn.App. 507

887 P.2d 449

Joseph K. MAILLOUX and Georgette Mailloux, husband and wife Respondents, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellant.

No. 15577-0-II.

Court of Appeals of Washington Division 2.

Jan. 9, 1995.

David Allan Larson, Federal Way, William Robert Hickman, Reed McClure, Seattle, for appellant.

Hollis Herman Barnett, Campbell Dille & Barnett, Puyallup, for respondents.

MORGAN, Chief Judge.

State Farm Mutual Automobile Insurance Company appeals a superior court judgment that confirmed an underinsured motorist (UIM) arbitration award in favor of Joseph M. Mailloux. We affirm.

On November 23, 1989, Woods was driving his pickup across the Narrows Bridge. The bed of the pickup was covered by a canopy. According to Mailloux, "a particularly ferocious windstorm" was in progress. The wind "ripped" the canopy off the truck, and Woods stopped to retrieve it. He parked in the roadway, because the bridge has no shoulder on which to pull off. Stray stopped behind Woods, and Mailloux stopped behind Stray. Johnson then rear-ended Mailloux, who was injured as a result.

Mailloux had UIM coverage with State Farm. Johnson had liability insurance with limits of $50,000, and Woods had liability insurance with limits of $100,000.

Mailloux settled with Johnson for $50,000. Before releasing Johnson, he offered State Farm the opportunity to purchase his rights against Johnson for the amount of the settlement. See Hamilton v. Farmers Ins. Co., 107 Wash.2d 721, 733 P.2d 213 (1987). State Farm did not accept.

Mailloux elected not to claim against Woods. ¹ However, he demanded UIM arbitration with State Farm, and an arbitration hearing ensued. Mailloux took the position that Johnson was at fault and Woods was not. State Farm took the position that both Johnson and Woods were at fault.

On April 11, 1991, the arbitrators found that Mailloux's total damages were $107,500. ² They allocated fault 90 percent to Johnson, 10 percent to Woods, and none to Mailloux. They awarded Mailloux $96,750 (90 percent of $107,500), "less any offsets or credits allowed by law." ³

After the arbitrators' award, State Farm claimed it was entitled to offset the sum of Johnson's and Woods' liability limits, or $150,000. Mailloux sued for a judgment confirming the award and declaring the amount owed by State Farm. The Superior Court confirmed that Mailloux was entitled to recover 90 percent of his total damages ($96,750). It also ruled that State Farm could offset Johnson's liability limits of $50,000, but not Woods' liability limits of $100,000. It concluded that Mailloux was entitled to recover $46,750 pursuant to his UIM coverage. ⁴

State Farm now appeals. The issues are whether State Farm was entitled to offset the sum of Johnson's and Woods' liability limits, and whether Mailloux is entitled to reasonable attorney fees.

I

Washington's UIM statute is RCW 48.22.030. It requires that UIM insurance be "provided ... for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of underinsured motor vehicles". RCW 48.22.030(2). It defines an "underinsured motor vehicle" as

a motor vehicle ... with respect to which the sum of the limits of liability under all bodily injury or property damage liability bonds and insurance policies applicable to a covered person after an accident is less than the applicable damages which the covered person is legally entitled to recover.

RCW 48.22.030(1).

Essentially, this statutory language requires that a lower number, hereafter called the subtrahend, be subtracted from an upper number, hereafter called the minuend. The minuend is "the applicable damages which the covered person is legally entitled to recover". RCW 48.22.030(1). The subtrahend is "the sum of the limits of liability under all bodily injury or property damage liability bonds and insurance policies applicable to a covered person after an accident". ⁵ RCW 48.22.030(1).

The minuend is not in issue here. It is apparent that the arbitrators calculated it in accordance with RCW 4.22.070(1), ⁶ and neither party disputes the result.

The subtrahend cannot be understood without first understanding RCW 4.22.070(1). ⁷ Under that statute, any party to a proceeding can assert that another person is at fault. Adcox v. Children's Orthopedic Hosp. & Med. Ctr., 123 Wash.2d 15, 25, 864 P.2d 921 (1993). Only the plaintiff, however, can assert that another person is liable to the plaintiff. If no one proves fault, the other person is neither at fault nor liable to the plaintiff. Adcox, 123 Wash.2d at 25-26, 864 P.2d 921. If the plaintiff proves fault that is a proximate cause of the plaintiff's damages, the person at fault is also liable to the plaintiff, and judgment is entered as set forth in the statute. If a party other than the plaintiff proves fault that is a proximate cause of the plaintiff's damages, the person at fault is not liable to the plaintiff--the plaintiff has made no claim against him or her--but his or her fault nevertheless operates to reduce the "proportionate share" of damages that the plaintiff can recover from those against whom the plaintiff has claimed.

Because of these provisions, the subtrahend involves at least two distinct questions. ⁸ (1) Should the subtrahend include the liability limits of a liability insured when the plaintiff claims that the liability insured's fault is a proximate cause of the plaintiff's legally recoverable damages? (2) Should the subtrahend include the liability limits of a liability insured when the plaintiff does not claim that the liability insured's fault is a proximate cause of the plaintiff's legally recoverable damages, but the UIM carrier does? The second question involves what we hereafter call an "empty chair liability insured".

The second question is the one in issue here. Mailloux claimed against Johnson, but declined to claim against Woods. State Farm injected Woods into the arbitration proceeding, and successfully proved that he was 10 percent at fault. Under RCW 4.22.070(1), Woods' fault operated to reduce the percentage of damages that Mailloux could recover from Johnson, but it did not make Woods liable to Mailloux. Thus, Woods was an empty chair liability insured, and the question presented is whether the subtrahend should include the liability limits of an empty chair liability insured.

Although the second question is the one in issue, most of the parties' argument bears on the first question or is immaterial to the case. State Farm argues that Johnson and Woods are jointly and severally liable, and that the subtrahend therefore includes the sum of their liability limits. See Allstate Ins. Co. v. Dejbod, 63 Wash.App. 278, 292, 818 P.2d 608 (1991). A person is not liable to the plaintiff at all, much less jointly and severally, if he or she has not been named by the plaintiff. Thus, State Farm's argument rests on the presupposition that Mailloux made UIM claims based on the conduct of both Johnson and Woods.

That presupposition is incorrect. As shown above, Mailloux claimed against Johnson, but never against Woods. When Mailloux proved his claim against Johnson, Johnson became liable for purposes of arbitration; but when State Farm proved its claim against Woods, Woods became merely an empty chair liability insured--i.e., a person whose fault reduced the percentage of damages Mailloux was entitled to recover from Johnson, but whose fault did not make him liable to Mailloux, jointly, severally, or in any other way. We hold that Johnson and Woods are not jointly and severally liable for purposes of this UIM arbitration, and that State Farm is not entitled to cumulate their liability limits on that basis.

Mailloux argues that Johnson and Woods cannot be jointly and severally liable because he settled with Johnson before the UIM arbitration took place. For the reasons already stated, however, Johnson and Woods would not be jointly and severally liable to Mailloux even if Mailloux had not settled with Johnson. Thus, this argument is immaterial to the case.

State Farm relies on Allstate Ins. Co. v. Dejbod, supra, but that case does not help with the question at hand. In Dejbod, there were two potential tortfeasors, Gilven and Church, and the plaintiff, Dejbod, was actively claiming against both. There was no person against whom Dejbod was not claiming, but whose fault nonetheless was a proximate cause of Dejbod's legally recoverable damages. Thus, the question we considered was whether the subtrahend should include the limits of a liability insured against whom the UIM plaintiff was claiming. ⁹ We did not consider the question of whether the subtrahend should include the liability limits of an empty chair liability insured.

State Farm makes only one argument that bears on whether the subtrahend should include the limits of an empty chair liability insured. Pointing out that RCW 48.22.030 allows a UIM carrier to offset "the sum of the limits of liability under all bodily injury or property damage liability bonds and insurance policies applicable to a covered person after an accident", and assuming that the liability policy of an empty chair insured is "applicable" to a UIM plaintiff, State Farm asserts that Woods' policy should have been included in the subtrahend.

We disagree. We think that the test for "applicable" liability insurance is whether the liability insured has been found liable to the plaintiff in the UIM proceeding. See Allstate Ins. Co. v. Dejbod, 63 Wash.App. at 286, 818 P.2d 608 (whether to include liability limits in subtrahend is tested by tortfeasor's liability, not by fact of settlement). As explained above, the mere fact that arbitrators assign fault to an empty chair insured does not make that person liable to the plaintiff for purposes of the UIM proceeding. Thus, the mere fact that arbitrators assign fault to an empty chair liability insured does not, by itself,...