Moeller v. Farmers Ins. Co. of Washington

• Decision Date: 16 March 2010
• Docket Number: No. 30880-1-II.,30880-1-II.
• Citation: 229 P.3d 857
• Parties: David MOELLER, on behalf of himself and all others similarly situated, Appellant and Cross Respondent, v. FARMERS INSURANCE COMPANY OF WASHINGTON and Farmers Insurance Exchange, Respondents and Cross Appellants.
• Court: Washington Court of Appeals

229 P.3d 857

David MOELLER, on behalf of himself and all others similarly situated, Appellant and Cross Respondent, v.FARMERS INSURANCE COMPANY OF WASHINGTON and Farmers Insurance Exchange, Respondents and Cross Appellants.

No. 30880-1-II.

Court of Appeals of Washington, Division 2.

March 16, 2010.

COPYRIGHT MATERIAL OMITTED

Stephen Michael Hansen, Attorney at Law, Tacoma, WA, Elizabeth Cabraser, Scott P. Nealey, Lieff Cabraser Heimann & Bernstein, San Francisco, CA, Kenneth Wendell Masters, Wiggins & Masters PLLC, Bainbridge Island, WA, for Appellant/Cross-Respondent.

Scott Anthony Jonsson, The James Law Group LLC, Portland, OR, Jill Diane Bowman, Stoel Rives LLP, Seattle, WA, for Respondents/Cross-Appellants.

HOUGHTON, P.J.

¶ 1David Moeller insured his automobile through Farmers Insurance Company.After the vehicle sustained damage in a collision, Farmers paid the full cost of repairs, less a deductible.Moeller claimed that the policy covered loss for the diminished value of his vehicle, but Farmers disagreed.

¶ 2 Moeller filed a class action lawsuit, alleging breach of contract, insurance bad faith, and violations of the Washington Administrative CodeandConsumer Protection Act (CPA).¹The trial court certified a class under CR23(b)(3).It then granted Farmers' motion for summary judgment, finding that the policy did not cover diminished value, and dismissed the CPA claims.

¶ 3 Moeller appeals the order granting summary judgment.Farmers cross-appeals the class action certification.We affirm in part, reverse in part, and remand for further proceedings.

FACTS

¶ 4 Moeller owned a 1996 Honda Civic CRX.Farmers insured the vehicle, covering loss from collision and comprehensive damage.After his vehicle sustained accident damage, Moeller notified Farmers.An adjuster inspected and elected to repair the vehicle.Farmers did not compensate Moeller for the vehicle's diminished value, that is damage that cannot be repaired such as weakened metal.

¶ 5 Moeller filed a third amended class action complaint against Farmers and Farmers Insurance Exchange (collectively Farmers) on behalf of himself and all others similarly situated (collectively Moeller).In his complaint, Moeller alleged (1) breach of contract, (2) insurance bad faith, (3) failure to disclose information/CPA violation, and (4) failure to make prompt payment of claim.

¶ 6 At the crux of Moeller's complaint was Farmers' failure to restore his vehicle to its "pre-loss condition through payment of the difference in the value between the vehicle's pre-loss value and its value after it was damaged, properly repaired and returned."Clerk's Papers(CP)at 435.

¶ 7 After four days of oral argument, the trial court certified a class under CR23(b)(3).We denied Farmers' motion for discretionary review of that order.

¶ 8 Farmers moved for summary judgment, claiming (1) the policy did not cover diminished value and (2) its denial of the diminished value claim was reasonable as a matter of law, thus barring Moeller's bad faith and CPA claims.²The trial court granted the motion.

¶ 9 Moeller appeals and Farmers cross-appeals.

ANALYSIS

Policy Language

¶ 10 The relevant portions of the policy provide:

DEFINITIONS

....

Accident or occurrence means a sudden event, including continuous or repeated exposure to the same conditions, resulting in bodily injury or property damage neither expected nor intended by the Insured person.

....

Damages are the cost of compensating those who suffer bodily injury or property damage from an accident.

....

Property damage means physical injury to or destruction of tangible property, including loss of its use.

....

PART IV—DAMAGE TO YOUR CAR

....

Coverage G—Collision

We will pay for loss to your Insured car caused by collision less any applicable deductibles.

....

Additional Definitions Used in This Part Only

....

2.Loss means direct and accidental loss of or damage to your Insured car, including its equipment.

....

Limits of Liability

Our limits of liability for loss shall not exceed:

1.The amount which it would cost to repair or replace damaged or stolen property with other of like kind and quality, or with new property less an adjustment for physical deterioration and/or depreciation.

....

Payment of Loss

We may pay the loss in money or repair or replace damaged or stolen property.

CPat 12, 19-20.

Standard of Review

¶ 11We review orders granting summary judgment de novo, engaging in the same inquiry as the trial court.Qwest Corp. v. City of Bellevue,161 Wash.2d 353, 358, 166 P.3d 667(2007).On review of any pleadings, depositions, answers to interrogatories, admissions, and affidavits on file, a court may grant summary judgment if there are no genuine issues as to any material fact, thus entitling the moving party to judgment as a matter of law.Vallandigham v. Clover Park Sch. Dist. No. 400,154 Wash.2d 16, 26, 109 P.3d 805(2005);CR56(c).³When reasonable persons could reach but one conclusion, summary judgment may be granted.Hansen v. Friend,118 Wash.2d 476, 485, 824 P.2d 483(1992).

¶ 12We interpret an insurance policy using contract analysis as a matter of law.Quadrant Corp. v. Am. States Ins. Co.,154 Wash.2d 165, 171, 110 P.3d 733(2005).We review de novo a summary judgment ruling on contract interpretation.Allstate Ins. Co. v. Peasley,131 Wash.2d 420, 423-24, 932 P.2d 1244(1997).

¶ 13 When interpreting a policy's terms, we do not analyze words and phrases in isolation.Peasley,131 Wash.2d at 424, 932 P.2d 1244.Rather, we read the policy in its entirety, giving effect to each provision.Peasley,131 Wash.2d at 424, 932 P.2d 1244.

¶ 14 An insurance policy must be interpreted in the manner in which the average insured would understand it.Weyerhaeuser Co. v. Commercial Union Ins. Co.,142 Wash.2d 654, 666, 15 P.3d 115(2000).We give terms not defined in the policy their "`plain, ordinary, and popular'" meaning.Kitsap County v. Allstate Ins. Co.,136 Wash.2d 567, 576, 964 P.2d 1173(1998)(quotingBoeing Co. v. Aetna Cas. & Sur. Co.,113 Wash.2d 869, 877, 784 P.2d 507(1990)).We may ascertain this by referring to standard English dictionaries.Matthews v. Penn-America Ins. Co.,106 Wash.App. 745, 765, 25 P.3d 451(2001).

¶ 15 When faced with clear and unambiguous language, we enforce the policy as written.Peasley,131 Wash.2d at 424, 932 P.2d 1244.An ambiguous clause is one susceptible to two different, reasonable interpretations.McDonald v. State Farm Fire & Cas. Co.,119 Wash.2d 724, 733, 837 P.2d 1000(1992).Extrinsic evidence is admissible to assist the court in ascertaining the parties' intent and in interpreting the contract.U.S. Life Credit Life Ins. Co. v. Williams,129 Wash.2d 565, 569, 919 P.2d 594(1996).After examining the available extrinsic evidence, we resolve any remaining ambiguity against the insurer and in favor of the insured.Quadrant Corp.,154 Wash.2d at 172, 110 P.3d 733.

¶ 16 Our analysis differs, depending on whether an inclusionary or exclusionary clause is at issue.SeeMercer Place Condo. Ass'n v. State Farm Fire & Cas. Co.,104 Wash.App. 597, 602-03, 17 P.3d 626(2000).We liberally construe inclusionary clauses, providing coverage whenever possible.Ross v. State Farm Mut. Auto. Ins. Co.,132 Wash.2d 507, 515-16, 940 P.2d 252(1997).In contrast, we strictly construe exclusionary clauses against the drafter.Quadrant Corp.,154 Wash.2d at 172, 110 P.3d 733.

BREACH OF CONTRACT

Coverage Clause⁴

¶ 17 First, Moeller contends that his policy covers diminished value.⁵Although Moeller does not seek stigma damages, we begin our analysis by explaining the differences between diminished value and stigma damages.A vehicle suffers diminished value when it sustains physical damage in an accident, but due to the nature of the damage, it cannot be fully restored to its pre-loss condition.The remaining, irreparable physical damage, such as, for example, weakened metal which cannot be repaired and which results in diminished value.In contrast, stigma damages occur after the vehicle has been fully restored to its pre-loss condition, but it carries an intangible taint due to its having been involved in an accident.

¶ 18 The coverage clause states that Farmers "will pay for loss to your Insured car caused by collision less any applicable deductibles."⁶CPat 19.The definitions state that "loss" is the "direct and accidental loss of or damage to your Insured car, including its equipment."CPat 19.Although the policy does not define "accidental," it provides that "accident" means "a sudden event... resulting in ... property damage neither expected nor intended by the Insured person."CPat 12.Moreover, the policy defines "property damage" as "physical injury to or destruction of tangible property, including loss of its use."CPat 12.

¶ 19 But the policy does not define "direct" and "damage."⁷Accordingly, we examine a standard English dictionary to determine their plain and ordinary meanings.Matthews,106 Wash.App. at 765, 25 P.3d 451.

¶ 20"Direct" means "without any intervening agency or step: without any intruding or diverting factor."Webster's Third New Int'l Dictionary 640 (1976).Commentators generally agree with this definition.As noted in Couch on Insurance, where an insurance policy covers direct and accidental loss to the insured vehicle, the term "direct""refers to a causal relationship, and is to be interpreted as limited to the harm resulting from an immediate or proximate cause as distinguished from a remote cause."11 Lee R. Russ, Couch on Insurance, § 156:21 (3d ed. 1998)(Supp. 2009)(footnotes omitted).In addition, "damage" is defined as "loss due to injury: injury or harm to person, property, or reputation."Webster's, supra, at 571.

¶ 21 Moeller's collision damages have been repaired and Farmers paid for those repairs.But there remains damage that cannot be repaired, e.g., weakened metal.Farmers has not paid for...