Northside Auto Service, Inc. v. Consumers United Ins. Co.

• Citation: 25 Wn.App. 486,607 P.2d 890
• Decision Date: 04 March 1980
• Docket Number: No. 3193-III-4,3193-III-4
• Parties: NORTHSIDE AUTO SERVICE, INC., a Washington Corporation, Respondent, v. CONSUMERS UNITED INSURANCE CO., Appellant.
• Court: Court of Appeals of Washington

Page 486

25 Wn.App. 486

607 P.2d 890

NORTHSIDE AUTO SERVICE, INC., a Washington Corporation, Respondent, v. CONSUMERS UNITED INSURANCE CO., Appellant.

No. 3193-III-4.

Court of Appeals of Washington, Division 3 Panel 2.

March 4, 1980.

Reconsideration Denied June 3, 1980.

Steven W. Klug, Spokane, for appellant.

Crane Bergdahl, Pasco, for respondent.

GREEN, Chief Judge.

Northside Auto Service, Inc., brought this action against Consumers United Insurance to collect $973.50 for its work in repairing a vehicle owned by the company's insured. The insurance company unsuccessfully moved for summary judgment, and, subsequently, a jury returned a verdict against it. This appeal followed.

The insurance company's assignments of error present four issues: (1) Did the repair shop's complaint adequately plead a cause of action based upon estoppel? (2) Did the repair shop produce substantial evidence in proof of its claim? (3) Was the insurance company denied a hearing on its affirmative defenses? and (4) Did the trial court err when it awarded attorney fees to the repair shop pursuant to RCW 4.84.250?

Viewing the evidence in a light most favorable to plaintiff, the record indicates that Darlene Hill's 16-year-old son was involved in an accident while driving his mother's car in August 1975. The damaged vehicle was towed to Northside Auto, and Mrs. Hill contacted her insurance agent. Consumers United sent the claim to Arlie Heil, an independent adjuster. Mr. Heil negotiated with Glenn Stroud, the owner of the repair shop, concerning the cost of repairing the Hill vehicle. The two men reached an agreed price. Mr. Heil advised Mr. Stroud that he would tell Mrs. Hill that she could authorize the work at Northside. He did so. After the work was done and Mrs. Hill had taken possession of her car, the insurance company notified her that her son was not covered by her policy. Consequently, the company refused to pay the repair shop bill.

In its complaint for payment, the repair shop alleged that:

Arlie Heil reviewed the repair cost estimate prepared by plaintiff for repair of the Hill vehicle and approved the same.

and further:

That based upon the approval and authorization for repairs received from Consumers United Insurance Co. and justifiable reliance thereon, plaintiff did commence and complete all repairs to the Hill vehicle.

Following trial, the jury returned a special verdict finding that the insurance company was estopped to deny a contract.

First, the insurance company contends that the repair shop's complaint did not state a cause of action based upon equitable estoppel, and, therefore, the company was not prepared to meet the estoppel issue at trial. In its view, the court erred when it allowed the repair shop to present proof in support of its estoppel claim and when it instructed the jury on that issue. We disagree.

Estoppel arises where the acts or statements of a defendant or his agent induce a plaintiff, in reasonable reliance, to act or forebear to act to his prejudice. Harbor Air Service, Inc. v. Board of Tax Appeals, 88 Wash.2d 359, 366-67, 560 P.2d 1145 (1977); Buchanan v. Switzerland General Ins. Co., 76 Wash.2d 100, 455 P.2d 344 (1969); Marsh v. General Adjustment Bureau, Inc., 22 Wash.App. 933, 592 P.2d 676 (1979). Here, the complaint alleged that the work done by the shop had been approved by the insurance company through its adjuster. This allegation includes the elements of a cause of action based upon estoppel. Hence, we find no error in submitting this issue to the jury.

Second, the insurance company asserts that the repair shop did not produce substantial evidence in proof of its estoppel theory. It contends there was no misrepresentation by Mr. Heil and that his statements to Mr. Stroud concerning the repair of the Hill vehicle did not warrant Mr. Stroud's assumption that payment could be expected from the insurance company upon completion of the work. We disagree. Mr. Stroud testified that he and Mr. Heil negotiated an "agreed price" which was equal to the repair shop's original estimate less the storage charges and the $100 deductible. Mr. Heil telephoned Mrs. Hill's mother and told her he had "okayed" the repair of the vehicle by Mr. Stroud's shop. He also confirmed this directly with Mrs Hill. While it is true that Mr. Heil never stated specifically that the insurance company would pay for the repairs, a jury could reasonably infer from his statements that the insurance company would be responsible for the work at the agreed price.

The company also points out that under RCW 48.17.410, ¹ an independent adjuster's license only authorizes the licensed individual to investigate claims. The company concludes that Mr. Stroud should have known that Mr. Heil was not authorized to approve the repairs. This argument was addressed in Buchanan v. Switzerland General Ins. Co., supra. There, the independent adjuster had represented to the insured that he was authorized to submit proofs of loss and that it was unnecessary for the insured to fill out a loss statement. The Buchanan court held that the insurance company was estopped to deny coverage, even though the plaintiff had not shown actual authority on the part of the adjuster. Since abatement of a right by estoppel does not require an intentional, voluntary, or purposeful act by the principal, the court reasoned that the plaintiff had only to establish that the adjuster-agent acted with apparent authority. The court refused to construe RCW 48.17.410 as limiting an adjuster's apparent authority where circumstances indicate it is broader than that delineated in the statute. ² A similar construction was given this statute in United Truck Lines, Inc. v. Employers Mutual Casualty Co., 44 Wash.2d 520, 522-23, 268 P.2d 1014 (1954). Insofar as the trial court's instruction No. 12 ³ may be interpreted to construe the statute differently, it was error. It is noted that the repair shop took exception to this instruction at trial. Since they prevailed, the error need not be assigned on appeal.

Accordingly, one of the principal issues here is whether Mr. Heil had the apparent authority to approve the repair work on behalf of the insurance company. Circumstances are sufficient to establish apparent authority when an ordinarily prudent person reasonably conversant with business practices and customs would have been misled thereby. Lamb v. General Associates, Inc., 60 Wash.2d 623, 374 P.2d 677 (1962); J & J Food Centers, Inc. v. Selig, 76 Wash.2d 304, 456 P.2d 691 (1969). Here, Mr. Stroud testified that as a businessman of 22 years' experience, he has never required an adjuster who authorizes work to furnish proof of his authority to act on the principal's behalf. The inference from this testimony is that in the ordinary course of business, insurance companies stand behind the acts and statements of their adjusters when they approve repairs. Hence, Mr. Stroud's testimony is sufficient to support a finding of apparent authority in Mr. Heil to authorize repair of the vehicle and the insurance company should be estopped from denying its liability. ⁴

Our conclusion is buttressed by Mr. Heil's testimony that the insurance company had misplaced the policy and was unaware that it contained an exclusion for under 25-year-old drivers. Notwithstanding, the company requested Mr. Heil to adjust the claim and as a result of his contacts with Mr. Stroud, Mr. Heil requested a draft from the insurance company for the agreed cost of repair. Subsequently, the company found the policy and determined there was no coverage based upon the exclusion. By that time, Northside Auto had...