Merriman v. Am. Guarantee & Liab. Ins. Co.

• Decision Date: 11 April 2017
• Docket Number: No. 33929-7-III,33929-7-III
• Citation: 198 Wash.App. 594,396 P.3d 351
• Court: Washington Court of Appeals
• Parties: William MERRIMAN and Colleen Merriman, husband and wife, Appellants, v. AMERICAN GUARANTEE & LIABILITY INSURANCE COMPANY; Partners Claim Services, Inc. ; Bernd Moving Systems, Inc., a Washington corporation; Douglas A. Bernd and Jane Doe Bernd; John Does 1-5, Defendants, York Risk Services Group, Inc., Respondent.

198 Wash.App. 594

396 P.3d 351

William MERRIMAN and Colleen Merriman, husband and wife, Appellants,

v.AMERICAN GUARANTEE & LIABILITY INSURANCE COMPANY; Partners Claim Services, Inc. ; Bernd Moving Systems, Inc., a Washington corporation; Douglas A. Bernd and Jane Doe Bernd; John Does 1-5, Defendants,York Risk Services Group, Inc., Respondent.

No. 33929-7-III

Court of Appeals of Washington, Division 3.

April 11, 2017

William Candler Smart, Ian S. Birk, Isaac Ruiz, Kathryn Manning Knudsen, Keller Rohrback, LLP, 1201 3rd Ave., Ste. 3200, Seattle, WA, 98101-3052, Jeffrey Iver Tilden, Gordon Tilden Thomas & Cordell LLP, 1001 4th Ave., Ste. 4000, Seattle, WA, 98154-1007, for Appellants.

John Jay Carroll, James Stephen Elliott, Halverson Northwest Law Group P.C., P.O. Box 22550, Yakima, WA, 98907-2550, for Respondent.

Siddoway, J.¶1 William and Colleen Merriman brought a negligence action against Bernd Moving Systems after a fire at Bernd's storage warehouse destroyed over $300,000 worth of the Merrimans' property. When the Merrimans learned through litigation that Bernd had substantial insurance protecting its storage customers against property loss that had never been disclosed by Bernd's insurer, its adjuster, or the adjuster's local agent, they amended their complaint to assert claims against all three companies. They also moved, successfully, for certification of a class action. Settlements were reached between the class and Bernd, the insurer, and the adjuster's local agent.

¶2 No settlement was reached with the adjuster, York Risk Services Group (York), and the trial court eventually decertified the class and granted summary judgment dismissal of the Merrimans' claims against it. We reverse the dismissal of the Merrimans' claims against York for insurance bad faith, negligent misrepresentation, and non per se violations of Washington's Consumer Protection Act (CPA).¹ We also reverse dismissal of the Merrimans' negligence claim in light of York's broad contractual claims administration undertakings, which were intended in part to benefit insureds. Finally, having reinstated two claims that were never decertified as class actions, we direct the trial court to reexamine its decertification of the negligent misrepresentation, negligence, and non per se CPA claims.

FACTS² AND PROCEDURAL BACKGROUND

¶3 On August 5, 2012, a storage warehouse in Yakima owned and operated by Bernd Moving Systems burned to the ground. In addition to destroying the warehouse itself, the fire destroyed Bernd's personal property and the property of 38 of its customers who stored property in the warehouse—among them, the Merrimans.

¶4 Over $300,000 worth of the Merrimans' property was destroyed in the fire. Before placing property in storage at the Bernd warehouse, the Merrimans had been told by Doug Bernd that their property would be fully insured. Following the fire, they spoke with a representative of Bernd who told them they would be contacted by insurance representatives.

¶5 Bernd was insured by American Guarantee & Liability Insurance Company (American Guarantee). Its commercial insurance policy provided many types of property and liability coverage. American Guarantee engaged York to not only adjust claims for the Bernd warehouse fire, but to more broadly administer the entire review, adjustment, settlement, and payment process under a preexisting third party administrator agreement between its parent company and York.

¶6 York, in turn, engaged Partners Claim Services, Inc. (Partners) to serve as its " 'boots on the ground' " for the Bernd claims administration engagement. Br. of Resp't at 1. It was Partners whose representatives communicated with the Merrimans and other insurance claimants.

¶7 Within two days of the fire, York's field adjuster had reviewed Bernd's insurance policy with American Guarantee and seen that property provisions of the policy insured not only Bernd's business personal property from loss or damage but also covered "Personal property of others in your care, custody and control." Clerk's Papers (CP) at 2037, 1881.³ The policy form went on to provide, "[O]ur payment for loss of or damage to personal property of others will only be for the account of the owner of the property." Id. Blanket limits of Bernd's business and personal property coverage were $777,500, and $435,000 of coverage for property loss was available under a commercial inland marine policy if Bernd were found liable for the loss.

¶8 American Guarantee would ultimately concede that Bernd's policy covered the Merrimans' and other storage customers' property loss but it never disclosed the coverage to the Merrimans. It claimed it relied on York to perform its "contractual job duties," including to make required disclosures of coverage to potential insureds. CP at 2760-61, 2848-49.

¶9 York agreed that covered business personal property included customer property stored at the warehouse, but it did not provide a copy of the policy to Partners nor inform Partners of coverage for those property owners. Instead, York instructed Partners to tell property owners that Partners did not know what Bernd's coverages were, or whether its policy would apply to their loss. It further instructed Partners to tell property owners they should file a claim under their own homeowner's insurance, which might expedite payment for their loss. During discovery, York's CR 30(b)(6) designee admitted that in light of the limited information it provided to Partners, no property owner could expect to get a full explanation of the coverage provisions in Bernd's policy.

¶10 Mr. Merriman's communications about Bernd's policy's coverage for the Merrimans' property loss began with a call from Liz Bowers, a Partners employee, 12 days after the fire. In contacting property owners, Ms. Bowers informed them she was calling on behalf of York, who was managing claims on behalf of the insurance company. She told Mr. Merriman she would be handling the Merrimans' claim for their property loss. She initially told him she would send him forms for preparing an inventory and hoped to meet with all of the property owners and take them through the claim process. Shortly thereafter, however, she told Mr. Merriman not to bother with the inventory because there would most likely be no coverage under Bernd's policy. In another, later call, she repeated it would be a waste of time to put together an inventory because there would likely be no coverage for the Merrimans' goods under Bernd's policy. She left Mr. Merriman with the impression that the couple's only source of recovery would be through their own homeowner's policy. Their homeowner's policy covered only $15,000 of their loss.

¶11 After learning that the warehouse fire was likely caused by a cigarette left burning by a Bernd employee, the Merrimans sued Bernd for negligence. Through discovery, the Merrimans obtained a copy of Bernd's policy. They learned it included a $3 million limit on liability coverage. But they also learned for the first time of the earlier undisclosed property coverage, which applied whether or not Bernd was at fault. They amended their complaint to address the failure to disclose the coverage, naming American Guarantee, York, and Partners as additional defendants and framing a later complaint as a class action. The trial court granted the Merrimans' motion to certify a class action.

¶12 Partners settled a couple of months after entry of the order certifying the class action. The fairness and reasonableness of its settlement was approved by the court.

¶13 While American Guarantee conceded that Bernd's policy covered the Merrimans' and other storage customers' property, it, and York, have always contended that Bernd's customers were not insureds with first party claims, but were instead third party claimants, and that only Bernd could have made a claim for their property losses. York also contended that as an adjuster rather than an insurer, it could not be sued for insurance bad faith and did not owe any of an insurer's statutory or regulatory duties to insureds.

¶14 After motions for summary judgment resulted in the dismissal of some of the claims asserted against York—those characterized as "insurance" claims—York moved to decertify the class as to the remaining claims against it, arguing that liability for those claims (negligent misrepresentation, constructive fraud, and non per se CPA claims) were individualized. The trial court granted the motion. York then moved again for summary judgment of the three remaining claims, and the court granted the motion.

¶15 American Guarantee never sought decertification. Instead, it reached a settlement with the class that the court found to be fair and reasonable in November 2015.

¶16 The Merrimans appeal.

ANALYSIS

¶17 The Merrimans appeal dismissal of their claims against York for insurance bad faith, negligent misrepresentation, negligence, and violation of the CPA. They also appeal decertification of the class.

¶18 We first address a threshold issue of whether the Merrimans' claim under the property provisions of the policy is a first party claim by an insured or a third party claim. We then address the dismissal of their claims for insurance bad faith, negligent misrepresentation, negligent claims handling, and violation (per se and non per se) of the CPA, in the order stated. We conclude with their challenge to the decertification of the class.

I. The Merrimans' claim is a first party claim, as an insured

Standards of review, interpretation, and construction

¶19 When resolving issues involving the interpretation of an insurance contract, summary judgment is appropriate unless relevant terms of the contract are ambiguous and the parties introduce conflicting evidence to clarify the ambiguity. Nat'l Gen. Ins. Co. v. Sherouse, 76 Wash.App. 159, 162, 882 P.2d 1207 (1994). The parties did not offer conflicting evidence to resolve an ambiguity below; both agreed there and agree on appeal that Bernd's...