PMC v. Those Certain Underwriters at Lloyd's

Decision Date13 October 2003
Docket NumberNo. 50804-1-I.,50804-1-I.
Citation118 Wn. App. 694,77 P.3d 658,118 Wash. App. 694
CourtWashington Court of Appeals
PartiesPROFESSIONAL MARINE COMPANY, Albany Insurance Company, Fireman's Fund Insurance Company, Lorraine Johnson, Respondent. v. THOSE CERTAIN UNDERWRITERS AT LLOYD'S, London, each for his/her own part and not for one another, severally subscribing Policy No. VM0000122-00, Defendant/Respondent.

Jerret E. Sale, Deborah Carstens, Thomas Dean Adams, Seattle, WA, for Appellant.

M.A. Michelle Buhler, Randall Thomsen, Stuart P. Kastner, Montgomery Purdue Blankinship & Austin, Seattle, WA, for Respondent.


The trial court denied insurer Underwriters at Lloyd's (Lloyd's) motion to vacate a default judgment entered against it in favor of its insured, Professional Marine Company (PMC). Lloyd's appeals the trial court's decision and argues that Lloyd's is not a legal entity and cannot be sued, service was improper, and because it had informally appeared, the judgment must be set aside. Lloyd's also challenges the trial court's award of attorney fees. PMC's complaint was consistent with the insurance policy and gave sufficient notice of the lawsuit to the underwriters. PMC also served Lloyd's in accordance with the policy. The trial court did not abuse its discretion in concluding that Lloyd's had not informally appeared in the declaratory judgment and damages lawsuit brought by PMC. And the trial court properly awarded fees under Olympic Steamship Co. v. Centennial Ins. Co., 117 Wash.2d 37, 811 P.2d 673 (1991) and Washington's Consumer Protection Act (CPA), RCW 19.86 et seq. We affirm.


PMC owns and operates a boat yard at the north end of Lake Union in Seattle. In February 1999, PMC agreed to do repair work on two yachts, the M/V Northern Lights and the M/V Vincent B. Both vessels were moored at PMC's boat yard; one was docked underneath a satellite shelter that was attached to the dock and the other was adjacent to the shelter. Early in the morning of March 3, 1999, a severe windstorm ripped the shelter away from the dock and its foundation, causing damage to both vessels.

PMC was insured under a marina policy by Lloyd's.1 On the day of the storm, PMC notified its insurance broker of the damages. The broker sent PMC a letter confirming that the reported loss had been "forwarded to the insurance carrier."2

On March 17, Elliston Inc., the claims management company for Lloyd's, advised PMC that it had received and was investigating the damage claims. On March 24, Elliston wrote PMC that:

Our investigation has determined the cause of this loss was the extreme force of the windstorm. It does not appear your company is legally liable for the damages.[3]

In this letter, Elliston also told PMC that it had talked to an adjuster from Fireman's Fund Insurance Co. (Fireman's Fund) to discuss the damages to the M/V Northern Lights. Elliston said its investigation was continuing and requested some additional information from PMC.

A couple of weeks later, Elliston's agent informed the owner of the M/V Northern Lights, Lorraine Johnson, and Albany Insurance (Albany), the insurer of the M/V Vincent B., that PMC was not liable for the damage to the vessels caused by the windstorm.

Fireman's Fund and Albany paid for the repairs to the damaged vessels and, in July 1999, demanded reimbursement from PMC. PMC immediately submitted these claims to Elliston. On August 3, 1999, an Elliston claims adjuster wrote to PMC to explain that it had offered Fireman's Fund the per vessel policy limit of $10,000 to settle the claim, but the offer was rejected. Elliston also told PMC that Fireman's Fund intended to sue PMC for the repairs and that Lloyd's did not intend to defend PMC in that lawsuit:

Underwriters provide coverage for damages to property of others under Section II of your policy. Underwriters do not have any right or duty to defend any suit against you under Section II, for damage to property of others in your care, custody and control. Your policy does cover you for legal costs or fees incurred in the defense of a claim covered under Section II, but payment of any such expenses will reduce your $10,000 limit of liability accordingly. Therefore, any combination of legal costs or [judgment] against you in excess of $10,000 will be your personal/corporate financial responsibility.[4]

Elliston asked PMC to send copies of Fireman's Fund's civil complaint when it was served on PMC.

On August 4, 1999, Fireman's Fund and Johnson sued PMC for the costs to repair the M/V Northern Lights (King County Superior Court Cause No. 99-2-18351-7 SEA).5

On September 8, 1999, PMC sent a letter to Elliston tendering defense of this lawsuit and stating its position that Lloyd's was obligated under the policy to defend. PMC said that if Lloyd's did not respond within five days and agree to defend, PMC would "immediately commence a lawsuit seeking a declaration from the court that Underwriters has a duty to defend."6

When PMC did not receive a response, it sent another demand letter on October 13, stating that if Lloyd's did not respond to its demand for defense within two days, PMC would file suit.

On October 15, Elliston responded on behalf of Lloyd's. According to Elliston, the policy did not impose a duty to defend or indemnify PMC in the lawsuit filed against it beyond the $10,000 policy limit Fireman's Fund had rejected. Elliston asserted that its coverage was excess to amounts paid by other insurance.7 Elliston also asked PMC to forward "any other information or documentation" that had not been provided "because such information could have an impact" on its "analysis and conclusions."8

On January 7, 2000, PMC filed a "Complaint for Declaratory Relief and Damages" against Lloyd's (King County Cause No. 00-2-0027108 SEA).9 PMC requested a declaratory judgment that Lloyd's was obligated to defend and indemnify PMC in the lawsuit filed against it by Fireman's Fund and Johnson. The complaint also alleged that Lloyd's breached its contract with PMC, breached its duty of good faith and fair dealing, and violated the CPA.

On January 17, 2000, PMC served the summons and complaint on the agent identified in the marina policy, Mendes and Mount, a law firm in New York.

When Lloyd's did not answer or respond to the complaint, PMC filed a motion for default. On March 28, 2000, the trial court entered an order of default.10

In September 2000, PMC moved for entry of the default judgment. PMC argued that the policy should be construed to provide coverage to PMC for the claims made by Fireman's Fund, Johnson and Albany and that Lloyd's had a duty to defend. PMC also requested attorney fees on the grounds that Lloyd's had misrepresented the policy provisions in violation of the CPA and because it had been forced to litigate in order to obtain coverage.11 In support of its motion, PMC submitted an affidavit in support of out-of-state service, the insurance policy and correspondence with its insurance broker and with Elliston.

On September 18, 2000, the trial court entered a default judgment against Lloyd's together with findings of fact and conclusions of law.12 The court concluded that Lloyd's policy provided coverage for PMC's liability to Fireman's Fund, Johnson and Albany and that Lloyd[']s had "an absolute duty to defend Professional Marine in the Lawsuit, at Underwriters' sole cost and expense."13 The court also concluded that Lloyd's violated the Washington Administrative Code's Fair Claims Settlement Regulations and that PMC was entitled to attorney fees under Olympic Steamship and the CPA.14

On February 1, 2001, Fireman's Fund, Albany and Johnson (collectively "Fireman's Fund") and PMC entered into an "Assignment Agreement and Covenant Not to Execute".15 PMC assigned all rights and interests under the marina policy with Lloyd's to Fireman's Fund.16 PMC also stipulated to judgment against it in the amount of $199,789.54 plus costs and attorney fees incurred by Fireman's Fund and the parties agreed that payment "shall be made solely from funds recovered from Underwriters at Lloyd's of London."17 The parties agreed "not to execute" on the judgment entered against PMC, that no party would "attempt to collect any judgment ... before September 19, 2001," and that before any party made an attempt to collect on the judgment, it would notify all other parties.18

In May 2001, a "Confession of Judgment by Defendant Professional Marine Company" for $199,789.54 was entered.19 The judgment against PMC included repair costs incurred by Fireman's Fund, Albany, and Johnson, prejudgment interest, and attorney fees.

On September 28, 2001, Fireman's Fund notified Lloyd's of the assignment and demanded payment for the judgment entered against PMC.20

In January 2002,21 Lloyd's filed a motion to vacate the September 2000 default judgment and made two arguments: (1) that under CR 60 the judgment was void and unenforceable because it was entered against a non-legal entity and (2) that it was entitled to notice of the motion for default under CR 55(c) because it had informally appeared in the action.22

The trial court denied Lloyd's motion to vacate. The court concluded that it had jurisdiction over Lloyd's and the default judgment entered against Lloyd's was not unenforceable or void. The court also concluded that Lloyd's had not informally appeared in PMC's lawsuit against it and was not entitled to notice of the default motion.

Lloyd's moved for reconsideration and for the first time, argued that "PMC may have failed to properly serve summons and complaint."23 Lloyd's also claimed that the court erred in determining that it had not informally appeared. The trial court denied the motion for reconsideration.

Fireman's Fund then filed a motion for an award of attorney fees and costs under the CPA and Olympic Steamship for opposing the motion to vacate. PMC joined in the motion. The trial court awarded PMC, Fireman's Fund and...

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