Panag v. Farmers Ins. Co. of Washington

• Decision Date: 02 April 2009
• Docket Number: No. 80366-8.,No. 80357-9.,80357-9.,80366-8.
• Citation: 204 P.3d 885
• Parties: Rajvir PANAG, on behalf of herself and all others similarly situated, Respondent, v. FARMERS INSURANCE COMPANY OF WASHINGTON, a domestic insurance company, and Credit Control Services, Inc., d/b/a Credit Collection Services, Petitioners. Michael Stephens, on behalf of himself and all others similarly situated, Respondent, v. Omni Insurance Company, a foreign insurance company, Defendant, and Credit Control Services, Inc., d/b/a Credit Collection Services, Petitioner.
• Court: Washington Supreme Court

204 P.3d 885

Rajvir PANAG, on behalf of herself and all others similarly situated, Respondent, v. FARMERS INSURANCE COMPANY OF WASHINGTON, a domestic insurance company, and Credit Control Services, Inc., d/b/a Credit Collection Services, Petitioners.

Michael Stephens, on behalf of himself and all others similarly situated, Respondent, v. Omni Insurance Company, a foreign insurance company, Defendant, and Credit Control Services, Inc., d/b/a Credit Collection Services, Petitioner.

No. 80357-9.

No. 80366-8.

Supreme Court of Washington, En Banc.

Argued June 24, 2008.

Decided April 2, 2009.

John Arthur Granger, Attorney at Law, Camano Island, WA, Melissa O'Loughlin White, Kevin Anthony Michael, Cozen O'Connor, Margarita V. Latsinova, Stevan David Phillips, Stoel Rives LLP, Seattle, WA, Philip Albert Talmadge, Talmadge Fitzpatrick, Tukwila, WA, for Petitioners.

Matthew James Ide, Ide Law Offices, Murray T. Stakesby Lewis, Attorney at Law, Seattle, WA, for Respondents.

John Earl Woodring, Attorney at Law, Olympia, WA, Amicus Curiae on behalf of ACA International.

Melvin Neil Sorensen, Clifford Allan Webster, Carney Badley Smith & Spellman, Seattle, WA, Amicus Curiae on behalf of American Insurance Association, Property Casualty Insurers Association of America.

Shannon E. Smith, Attorney General's Office, Seattle, WA, Amicus Curiae on behalf of Attorney General's Office.

Thomas Alden Wolfe, Attorney at Law, Seattle, WA, Amicus Curiae on behalf of National Association of Subrogation Professionals.

Timothy C. Layton, Washington State Medical Association, Olympia, WA, Amicus Curiae on behalf of Washington Liability Reform Coalition.

Kelby Dahmer Fletcher, Peterson Young Putra, Seattle, WA, Sarah C. Schreck, Attorney at Law, Portland, OR, Bryan Patrick Harnetiaux, Attorney at Law, Spokane, WA, Amicus Curiae on behalf of Washington State Association for Justice Foundation.

Jerret E. Sale, Bullivant Houser Bailey PC, Seattle, WA, for Omni Insurance Company.

MADSEN, J.

¶ 1 These consolidated cases present the issue whether the Consumer Protection Act (CPA), chapter 19.86 RCW, applies to a collection agency's allegedly deceptive efforts to collect on an insurance company's subrogation claim against an underinsured motorist. Petitioners, Credit Control Services and its client insurance companies, contend persons who receive allegedly deceptive insurance subrogation collection notices lack standing to bring a CPA claim because the CPA applies only to disputes arising from a consumer or business transaction, not an alleged tort. Petitioners also contend the collection notices at issue are not deceptive and the respondents failed to establish injury. The Court of Appeals affirmed the trial court's grant of partial summary judgment in favor of one of the respondents and reversed summary judgment of dismissal in the case of the other respondent on these issues, and remanded for trial. Stephens v. Omni Ins. Co., 138 Wash.App. 151, 159 P.3d 10 (2007). We affirm the Court of Appeals.

FACTS

¶ 2 Rajvir Panag and Michael Stephens were involved in automobile accidents. The drivers of the other cars claimed underinsured motorist benefits from their respective insurance providers, Farmer's Insurance, in Panag's case, and Omni Insurance, in Stephens' case.

¶ 3 A Farmer's insurance adjuster concluded Panag was 40 percent at fault and its insured was 60 percent at fault. The adjuster contacted Panag's insurance provider and determined her policy was canceled for nonpayment of the premium three weeks before the accident. Panag retained an attorney to dispute the cancellation of her insurance and to pursue a personal injury claim against the other driver.¹ Farmer's retained a collection agency, Credit Control Services (CCS), to recover the full amount it had paid on the claim.

¶ 4 Doing business as "Credit Collection Services," CCS sent to Panag a self-styled "FORMAL COLLECTION NOTICE," which displayed the seals of two collection agency associations. Clerk's Papers (CP) (Panag) at 768. The notice alleged Panag owed the "AMOUNT DUE" of $6,442.53, which was the full amount Farmers had paid its insured. The notice included a detachable form for remitting credit card information. After Panag failed to respond, CCS sent additional letters, taking an increasingly urgent tone. The second one warned of "ACTIVITY PENDING," and advised her to "[a]ct immediately." CP (Panag) at 772. The third one contained a "WESTERN UNION" header and warned that if CCS determined "VOLUNTARY COLLECTION" was "IMPOSSIBLE," Panag could be subject to additional penalties, including license suspension, litigation costs ("WHICH COULD INCLUDE INTEREST, COURT COSTS AND SHERIFF FEES"), and "any other method" of collection allowable by law. Id. at 775.

¶ 5 Panag ultimately obtained a $4,500 settlement from Farmers in connection with her personal injury claim. She then filed a class action, alleging the collection methods Farmers and CCS engaged in constituted an unfair and deceptive business practice in violation of the CPA. Panag's alleged injuries included expenses incurred in investigating the true legal status of the alleged debt, including out-of-pocket expenses for driving, parking, postage, and consulting an attorney.

¶ 6 In Stephens' case, an insurance adjuster determined Stephens was at fault and sent him a bill requesting $444.09 as reimbursement for property damage to its insured's car. Stephens remitted a check for that amount but did not report the claim to his insurance company.²

¶ 7 Omni had no further contacts with Stephens. But over the next six months, Omni paid its insured more than $6,000 on a bodily injury claim arising from the accident. It then retained CCS to recover its subrogation claim against Stephens.

¶ 8 CCS sent Stephens a "FORMAL COLLECTION NOTICE" on the same form it sent to Panag, demanding payment of $6,412. CP (Stephens) at 68, 74-75, 388. Stephens called CCS and disputed the alleged debt. A CCS agent allegedly told him the account was "in `collection'" and indicated there was nothing he could do about it. Id. at 68-69. As in Panag's case, CCS sent a second letter threatening legal action and warning Stephens to "[a]ct immediately." Id. at 69, 77, 390.

¶ 9 Stephens referred the claim to his insurance company, which accepted the claim and paid it in full. Id. at 251-53, 255-56, 258-59, 386. Like Panag, Stephens brought a class action suit against Omni and CCS. He alleged he took substantial time away from his business to investigate the collection notices, resulting in a loss of business profits. He also alleged incidental damages, including the cost of purchasing a credit report and a credit monitoring service, parking, wear and tear on his car, and consulting with an attorney to ascertain the legal status of the alleged debt.

¶ 10 The trial court granted partial summary judgment in favor of Stephens as to liability and reserved ruling on the amount of damages. In Panag's case, the trial court granted the defendant's motion for dismissal on summary judgment, ruling Panag failed to establish injury.

¶ 11 The Court of Appeals granted discretionary review and linked the cases. The court affirmed the trial court in Stephens' case and reversed the trial court in Panag's case. Stephens, 138 Wash.App. 151, 159 P.3d 10.

ANALYSIS

¶ 12 Washington's CPA provides that "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful." RCW 19.86.020. The purpose of the CPA is to "complement the body of federal law governing restraints of trade, unfair competition and unfair, deceptive and fraudulent acts and practices in order to protect the public and foster fair and honest competition." RCW 19.86.920; Haberman v. Wash. Pub. Power Supply Sys., 109 Wash.2d 107, 169, 744 P.2d 1032, 750 P.2d 254 (1987). The CPA is to be "liberally construed that its beneficial purposes may be served." RCW 19.86.920; Short v. Demopolis, 103 Wash.2d 52, 61, 691 P.2d 163 (1984).

¶ 13 The CPA's citizen suit provision states that "[a]ny person who is injured in his or her business or property" by a violation of the act may bring a civil suit for injunctive relief, damages, attorney fees and costs, and treble damages. RCW 19.86.090. To prevail in a private CPA claim, the plaintiff must prove (1) an unfair or deceptive act or practice, (2) occurring in trade or commerce, (3) affecting the public interest, (4) injury to a person's business or property, and (5) causation. Hangman Ridge Stables, Inc. v. Safeco Title Ins. Co., 105 Wash.2d 778, 784, 719 P.2d 531 (1986).³

¶ 14 CCS contends that the respondents lack standing to bring suit under the CPA, that the respondents have failed to establish that the collection notices are unfair or deceptive, and that respondent Panag has not shown sufficient injury for purposes of a CPA claim.

¶ 15 Turning first to CCS's contention that respondents lack standing, CCS contends the Hangman Ridge test states the elements of proof necessary to prevail in a CPA action, but does not address the threshold issue of standing. CCS asks us to hold the CPA applies only to disputes arising from a consumer or business transaction and that only a consumer or someone in a business relationship can bring a private cause of action under the CPA. CCS maintains that the CPA does not apply to individuals who complain of unfair or deceptive efforts to collect on an insurance subrogation claim because the alleged conduct is not consumer-oriented. CCS contends a court must decide whether the plaintiff has standing to bring a CPA claim before applying the five-part Hangman Ridge test.

¶ 16 We decline CCS's invitation to address standing as a separate requirement. As the Court of Appeals recognized, the Hangman Ridge-test incorporates the issue of standing, particularly the elements of public interest impact and injury. See Michelle L. Evans, Who is a `Consumer'...