Mulcahy v. Farmers Ins. Co. of Washington

Decision Date25 November 2002
Docket NumberNo. 49657-3-I.,49657-3-I.
Citation114 Wash.App. 459,58 P.3d 307
CourtWashington Court of Appeals
PartiesMary MULCAHY, Appellant, v. FARMERS INSURANCE COMPANY OF WASHINGTON; Farmers Group Inc., d/b/a Farmers Insurance Group of Companies; and Farmers Insurance Exchange, Respondents.

Mary Mulcahy, Seattle, WA, for Appellant. Sidney Robert Snyder, Merrick, Hofstedt & Lindsey, PS, Seattle, WA, for Respondents.



This case raises an issue of first impression in Washington — whether an insurer that has issued an automobile insurance policy in Washington, insuring a Washington-licensed automobile owned by a Washington resident under which the insurer is obligated to pay no-fault personal injury protection (PIP) benefits in a specific amount, must nevertheless pay greater PIP-type benefits than provided by the insurance policy (1) where the insured has been injured in an automobile accident in British Columbia, Canada, (2) where the insurer would have been obligated to pay the greater benefits if the insurance policy had been issued in British Columbia in accordance with the laws governing motor-vehicle insurance plans issued in that province, (3) where the insurer has filed a Power of Attorney and Undertaking (PAU) in British Columbia, thereby waiving its right to raise certain defenses as to claims, actions or proceedings brought in British Columbia that it could not raise if the insurance policy had been issued in accordance with the laws of British Columbia, and (4) where the insured files an action against the insurer in Washington, seeking to recover the greater benefits provided by British Columbia law.

Appellant Mary Mulcahy, the insured in this case, was seriously injured in a motor vehicle accident in Vancouver, British Columbia, Canada. At the time of the accident, she was a resident of Seattle, Washington and was driving her Washington-licensed automobile, which was insured by Farmers Insurance Company of Washington under a motor-vehicle insurance policy that was issued in Washington. The policy provided Ms. Mulcahy with PIP medical benefits of $10,000, which Farmers paid. Ms. Mulcahy's actual medical expenses for her injuries sustained in the accident were much higher than the PIP benefits provided under her insurance policy.

Ms. Mulcahy sued the at-fault driver, a Canadian citizen who was insured by the Insurance Corporation of British Columbia, in British Columbia. She eventually settled her claim for $375,000 (Canadian). But ICBC deducted $150,000 (Canadian) from her settlement proceeds, taking the position that Ms. Mulcahy must collect this amount from her own insurer — in that Farmers Insurance Group had filed a PAU in British Columbia by which it agreed to be bound by the reciprocal laws that govern motor vehicle insurance claims in Canada. Farmers refused to pay Ms. Mulcahy $150,000 (Canadian). She thereupon filed virtually identical actions in British Columbia and Washington, seeking to enforce her rights under the PAU.

A judge of the King County Superior Court subsequently granted Farmers' motion for summary judgment, and entered an order dismissing Ms. Mulcahy's action in Washington. Ms. Mulcahy appealed that order to this court. Farmers moved in British Columbia for dismissal of Ms. Mulcahy's suit there, contending that Ms. Mulcahy was estopped from litigating the issue in British Columbia, under the doctrine of res judicata. The British Columbia trial court denied that motion. Farmers sought and was granted leave to appeal that ruling in the British Columbia Court of Appeal. That appeal is now pending.

We affirm the King County Superior Court's summary judgment of dismissal. Based on the plain language of the PAU, Farmers agreed to be bound by British Columbia motor vehicle insurance law for purposes of actions brought against it in British Columbia, but did not agree to be so bound for purposes of actions brought against it in Washington. In so ruling, we do not purport to resolve the merits of Ms. Mulcahy's action in British Columbia. Indeed, the PAU operates as a contract between Farmers and the government of British Columbia, so that Farmers' obligations to Ms. Mulcahy under the PAU and British Columbia law are better determined by the courts in British Columbia than by us.1


On May 7, 1994, the appellant Mary Mulcahy was severely injured in an automobile accident in Vancouver, British Columbia, Canada. The accident was entirely the fault of the driver of the other vehicle involved in the accident, a Canadian citizen who was insured by the Insurance Corporation of British Columbia (ICBC). Ms. Mulcahy resided in Seattle at the time of the accident. She was driving her Washington-licensed automobile, which was insured under an automobile insurance policy issued in Washington by Farmers Insurance Company of Washington.

Ms. Mulcahy's policy provided no-fault personal injury protection (PIP) coverage. The policy provided PIP medical benefits as follows: "We will pay for all reasonable and necessary medical and hospital expenses incurred for services furnished within one year from the date of the accident which caused the injury.... We will not pay more than $10,000 for each insured person." Clerk's Papers at 476. On June 4, 1994, Ms. Mulcahy made a claim for PIP benefits under her policy, and Farmers paid her medical bills as they were incurred, until April 1995, when the $10,000 limit was reached. Ms. Mulcahy's actual medical expenses stemming from her injuries far exceeded that amount however, so she wrote a letter to Farmers asking what she should do about her unpaid medical bills. Farmers wrote back advising Ms. Mulcahy to contact ICBC. Although Farmers had filed a PAU in British Columbia in 1986, Farmers did not advise Ms. Mulcahy of this fact. Farmers wrote to ICBC, requesting ICBC to protect Farmers' right to recover the $10,000 it had paid in PIP benefits, at such time as Ms. Mulcahy's pending claim against the at-fault driver might be resolved.

In 1995, Ms. Mulcahy filed a lawsuit in British Columbia against the at-fault tortfeasor, to recover for injuries and damages she sustained in the May 1994 accident. During the four years that lawsuit was pending, Ms. Mulcahy's health deteriorated, she was unable to support herself, and in February 1996, she lost her home in Seattle. She lived for a time in a transitional house for homeless women. After that, she was reduced to living in her automobile.

In February 1997, Ms. Mulcahy wrote a letter to Washington's Insurance Commissioner, asking whether Farmers or ICBC was required to pay no-fault benefits beyond the $10,000 limit in PIP benefits payable under her Farmers policy. The Insurance Commissioner forwarded a copy of the letter to Farmers, which stated in a letter of reply that although it had filed a PAU in Canada on August 4, 1986, the PAU did not operate to increase Ms. Mulcahy's PIP benefits provided under her insurance policy.

In November 1998, British Columbia Ombudsman Officer Elizabeth Nichols suggested that Ms. Mulcahy, who was homeless and destitute, write a hardship letter to ICBC. Ms. Mulcahy did so. The following month, she received a letter from Mr. Alex van Grondelle stating that ICBC was not responsible for paying what is known under British Columbia automobile insurance law as "Part 7 benefits." Part 7 benefits arise under Part 7 of a regulation issued under British Columbia's Insurance (Motor Vehicle) Act, 447/83 B.C. Reg. Part 7 Benefits §§ 78-104. Part 7 benefits are no-fault benefits similar to PIP benefits. Insurers that are bound by British Columbia motor-vehicle insurance statutes and regulations must provide coverage for medical, rehabilitative and disability pay, up to a maximum of $150,000 (Canadian). Mr. van Grondelle informed Ms. Mulcahy that her own insurer, Farmers Insurance Company of Washington, was responsible to pay for her Part 7 benefits because Farmers had filed a PAU in British Columbia agreeing to be bound by British Columbia's reciprocal insurance laws.

Ms. Mulcahy sent a copy of Mr. van Grondelle's letter to Farmers, which denied having any such obligation.

In December 1999, Ms. Mulcahy and ICBC mediated her claim against the at-fault driver. As a result of the mediation, Ms. Mulcahy settled her claim for $375,000 (Canadian), and ICBC agreed to indemnify Ms. Mulcahy from obligation for the $10,000 ($15,000 Canadian) that was paid by Farmers for her PIP benefits. On December 13, 1999, Mr. Peter Collins, defense attorney for ICBC, informed Ms. Mulcahy that ICBC had the right to deduct $150,000 (Canadian) from her $375,000 (Canadian) settlement, under § 25 of British Columbia's Insurance (Motor Vehicle) Act, R.S.B.C.1996, Chapter 231 (formerly Chapter 204), and that she must look to her own insurer for the difference between the amount of her settlement and the net settlement proceeds. Accordingly, when ICBC paid Ms. Mulcahy her settlement proceeds in January 2000, it paid her only $225,000 (Canadian).

On March 23, 2000, Ms. Mulcahy filed an action against Farmers in British Columbia, seeking to recover $150,000 (Canadian) under the PAU and the reciprocal provisions of British Columbia insurance law. On May 2, 2000, two days before the expiration of Washington's six-year statute of limitations for bringing a first-party lawsuit under a policy of insurance issued in Washington, Ms. Mulcahy filed an action against Farmers in King County Superior Court in Seattle seeking to recover $150,000 (Canadian) under the PAU, and also seeking to recover damages for extra-contractual bad faith and for violation of the Consumer Protection Act (CPA).

Ms. Mulcahy, who is represented by counsel in the British Columbia action, but who is pro se in the Washington action, rather naively expected that the Washington action would lie quiescent during the litigation of the action in British Columbia. But Farmers...

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