Pilgrim v. State Farm Fire & Cas. Ins. Co., 38549-6-I
| Decision Date | 22 September 1997 |
| Docket Number | No. 38549-6-I,38549-6-I |
| Citation | 950 P.2d 479,89 Wn.App. 712 |
| Court | Washington Court of Appeals |
| Parties | Keith PILGRIM and Renae Pilgrim, husband and wife, and the marital community composed thereof, Appellants, v. STATE FARM FIRE & CASUALTY INSURANCE COMPANY, foreign insurance corporation; and Gailann Stargardter and John Doe Stargardter, husband and wife, and the marital community composed thereof, Respondents. |
Robert G. Nylander, Cutler & Nylander PS, Seattle, for Appellants.
W. George Bassett, Graham & Dunn, Seattle, for Respondents.
This case concerns the cooperation clause in an insurance contract and the legislature's recent efforts to diminish fraud in the making of insurance claims. Here, the Pilgrims, who were in the process of selling their home, reported a theft of approximately $15,000 in personal property from their home to the police; the investigating officer found no evidence of forced entry. When filing an itemized claim with State Farm Insurance, the Pilgrims claimed approximately $148,000 in stolen personal property. When analyzing the claim, State Farm questioned whether the Pilgrims had sufficient income to purchase the property that they claimed had been stolen. It demanded personal financial information necessary to prove or disprove its suspicion that the claim was fraudulent. Although the insurance policy required the Pilgrims to provide State Farm with records and documents as requested, the Pilgrims refused to turn over their tax returns and financial documents relating to their businesses. State Farm denied coverage for breach of the cooperation clause, and the Pilgrims sued. The trial court held that the Pilgrims' refusal to cooperate excluded coverage, and we affirm.
In fall 1993, Keith and Renae Pilgrim wanted to sell their King County house and move to eastern Washington. During the time the house was on the market, the Pilgrims returned home after dinner with friends one October evening to find that their home had been burglarized. 1 A King County police officer investigated, and determined that force had not been used to get inside the home. 2 The officer reported that "everything was left neat, except the jewelry box on the bed." 3 The Pilgrims made a preliminary list of missing property, assigning value to most of the listed items; they alleged that approximately $15,000 worth of items had been stolen. 4 They also immediately notified State Farm Insurance, with whom they had homeowner's insurance that included defined peril personal property coverage. Keith Pilgrim gave State Farm a statement. 5 The Pilgrims began working to uncover and document The police officer called Keith a month later. Because the theft did not involve forced entry, the Pilgrims were selling their house, and the officer believed that they were having financial difficulties and had submitted a high claim, he told Keith that it "made him wonder." 7 When he directly asked if Keith had filed a false claim, Keith answered negatively. 8 The record contains no support for the officer's assertion that the Pilgrims were having financial difficulties.
the extent of their loss. 6
Keith Pilgrim sent State Farm two signed inventory forms describing the stolen property, its replacement cost, and its actual cash value. The replacement cost on those December 1993 and January 1994 forms totaled $70,372.94 and $78,083.18 respectively. 9 The personal property limit under the Pilgrim's policy was $127,800, and State Farm advanced the Pilgrims $15,000 on their claim. 10
The following April, without being under oath, and accompanied by their attorney, Keith and Renae answered the claim specialist's questions. State Farm requested authorization to obtain credit reports; the record contains no response. 11 When scheduling examinations under oath, State Farm requested, in addition to several other types of documents, personal income tax returns (1990-93), documents relating to their personal financial condition in the twelve months preceding the loss, documents relating to the financial condition of businesses in which they had an ownership interest at the time of the loss, and any financial statements prepared over the past four years. 12 State Farm subsequently told the Pilgrims that the information related to their financial status, their ability to have acquired the items claimed as stolen, and "any possible motive for falsifying or overvaluing their claimed losses." 13 The Pilgrims refused to produce the documents unless State Farm executed a confidentiality agreement. 14 That agreement would have prohibited State Farm from divulging, to third parties including the police, information received from the Pilgrims. 15
Later, in fall 1994, the Pilgrims informed State Farm that many types of documents that it sought were not "known to exist." For example, the Pilgrims were not involved in any litigation that had settled during the year preceding the loss. 16 As to the financial documents that State Farm requested, the Pilgrims produced their W-2 forms for 1990-1993, but refused to produce anything else in light of State Farm's refusal to sign the confidentiality agreement. 17 Eventually, State Farm canceled the examinations under oath. 18
The Pilgrims filed this action against State Farm in early October 1994, seeking a coverage declaration, attorney fees, and damages pursuant to the Consumer Protection Act. Before they served the complaint, State Farm denied the Pilgrims theft claim. After receiving the complaint, State Farm counterclaimed for restitution of the $15,000. 19
State Farm moved for summary judgment, contending that the Pilgrims breach of the policy's cooperation and concealment clauses compelled dismissal. 20 It relied entirely on its own attorney's affidavit authenticating documents. The documents laid out the reasons that State Farm suspected fraud, and the Pilgrims' failure to cooperate:
* An investigating police officer told Keith that the circumstances "made him wonder" * The Pilgrims refused to authorize third parties to give State Farm documents. On the other hand, because the record contains only a credit bureau authorization, we do not know whether State Farm sought other records.
and asked Keith if he had filed a false report.
* The discrepancy between the initial valuation of stolen items to police ($14,760) and the itemized claim to State Farm ($148,000).
* The Pilgrims refused to produce personal income tax returns (1990-93), documents relating to their personal financial condition in the twelve months preceding the loss, documents relating to the financial condition of businesses in which they had an ownership interest at the time of the loss, and financial statements (2/15/89--05/94), and produced only their W-2's for 1990-93. The W-2's demonstrated that the Pilgrims had a joint annual gross income ranging from $57,500 to $61,500 in 1991-93. 21
In response, Keith Pilgrim detailed his dealings with State Farm, accused it of rude, adversarial behavior, and denied that he and his wife had any financial problems. 22 In a later declaration, he explained his unwillingness to release documents as reflecting his participation in the sensitive, challenging start-up of two new businesses: "Both of the new businesses involved marketing products and I could not afford to have an individual as callous and reckless with his statements as Mr. Lee (State Farm's claim specialist) evidenced, having my wife's and my private and personal and business financial information spread around in public, let alone in an unfavorable if not defamatory manner." 23
In reply, the State Farm claim specialist who had performed the majority of work on the Pilgrims' claim alleged that (1) when the Pilgrims moved, they refused to give him their new eastern Washington address, (2) having analyzed the claim, nearly $30,000 of the items allegedly stolen were purchased in the 12 months preceding the claim, and (3) State Farm had paid Keith Pilgrim $17,549 for a theft loss in 1988. That loss shared a similarity with the Pilgrims' fall 1993 loss: in both cases, Keith reported that the thieves had stacked a TV and some stereo equipment near the door. 24 The claim specialist also submitted Pilgrim's letter asking the police to withhold the 1988 theft police report from requesters. The police, after notifying Pilgrim, disclosed the report to State Farm under the Public Records Act. 25 Considering this evidence, the claim specialist stated that he "had concerns about whether the loss had actually occurred, whether Mr. Pilgrim had financial difficulties, ... whether he had sufficient discretionary income to afford the items claimed to have been stolen and whether he had overstated the amount of the loss." 26
Keith Pilgrim denied many of the claim specialist's allegations. He had given the specialist his eastern Washington work address. He labeled the alleged attempt to prevent disclosure of the police report as "false." He explained that the items left by the door were old and in poor working condition. 27 And he attacked the specialist's conclusion that $30,000 of the allegedly stolen property had been purchased in the 12 months preceding the claim. We have independently analyzed the inventory forms. Using the Pilgrims' replacement cost figures, they purchased approximately $18,500 worth of personal property in the twelve months preceding the loss. Between January 1, 1992 through October 11, 1992, a 20 month period, they purchased personal property worth approximately $39,000. 28
The trial court granted State Farm's motion for summary judgment. To bifurcate the cooperation and concealment clause issues
from the restitution counterclaim, it also certified its judgment under CR 54(b).
The Pilgrims' homeowner's insurance policy requires that they cooperate with State Farm by providing it...
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