Safeco Ins. Co. v. Barcom

• Decision Date: 18 May 1989
• Docket Number: Nos. 54946-0,54997-4,s. 54946-0
• Citation: 112 Wn.2d 575,773 P.2d 56
• Parties: SAFECO INSURANCE COMPANY, Petitioner, v. Gaylon M. BARCOM, Respondent. In re the Matter of the ESTATE OF Barbara Bell BOWERS, Deceased. Stephen GADDIS, Petitioner, v. SAFECO INSURANCE COMPANY, Respondent.
• Court: Washington Supreme Court

Page 575

112 Wn.2d 575

773 P.2d 56

SAFECO INSURANCE COMPANY, Petitioner, v. Gaylon M. BARCOM, Respondent.

In re the Matter of the ESTATE OF Barbara Bell BOWERS, Deceased.

Stephen GADDIS, Petitioner, v. SAFECO INSURANCE COMPANY, Respondent.

Nos. 54946-0, 54997-4.

Supreme Court of Washington En Banc.

May 18, 1989.

Merrick, Hofstedt & Lindsey, P.S., Sidney R. Snyder, Seattle, Leavy, Schultz & Sweeney, John Schultz, Pasco, for petitioner Safeco Ins. Co.

Fiore J. Pignataro, Seattle, for petitioner Gaddis.

Westland, Libler, Ivey, Larsen, Quigley & Hugill, Michael L. Larsen, Kennewick, for respondent Barcom.

Gary W. House, Seattle, for respondent Safeco Ins. Co. Bryan P. Harnetiaux, Gary N. Bloom, Spokane, for amicus curiae on behalf of Washington State Trial Lawyers Ass'n PEARSON, Justice.

These two cases, consolidated by order of this court for purposes of this opinion, both present the issue of whether the 6-year, contract statute of limitation, or the 3-year, tort statute of limitation applies to an insured's action against his or her insurer for benefits under the uninsured motorist (UIM) provisions of an automobile insurance policy.

FACTS PERTAINING TO SAFECO V. BARCOM

On April 27, 1979, while riding as a passenger in his son's automobile, Gaylon Barcom was injured by an unidentified vehicle. At the time of the accident, Barcom and his son were each insured under their own Safeco Insurance Company (Safeco) automobile liability policy. One policy provided UIM coverage on each of Barcom's three automobiles and the other on his son's three automobiles. On August 13, 1979, Barcom's attorney informed Safeco that Barcom was claiming damages sustained in the accident under the UIM portion of his automobile policy. For the next 6 years, Barcom's attorney and Safeco engaged in numerous conversations regarding the accident and the extent of Barcom's injuries.

On January 8, 1986, nearly 7 years following the accident, Barcom's attorney made the first formal settlement demand for $90,000 of UIM coverage. One month later, on February 7, 1986, Barcom's attorney filed a demand for arbitration. On August 1, 1986, Safeco filed this action, a complaint for declaratory judgment against Barcom, alleging that the statute of limitation had run as to any claims Barcom might otherwise have had under the insurance policy. The trial court granted Safeco's motion for summary The Court of Appeals, Division III, reversed, holding that the 6-year statute of limitation applied, and that it did not begin to run until there was a breach of the contract of insurance. Safeco Ins. Co. v. Barcom, 49 Wash.App. 903, 746 P.2d 1226 (1987).

judgment, holding as a matter of law that the statute of limitation barred Barcom's recovery under the policy.

FACTS PERTAINING TO IN RE ESTATE OF BOWERS

Barbara Bell Bowers was struck and killed by an uninsured motorcyclist on July 8, 1980. Bowers was the mother of two children, whose ages at that time were 10 and 8, and whose legal custodian was Bowers' former husband, Stephen Gaddis. At the time of the accident, Gaddis was insured under a Safeco automobile liability insurance policy providing UIM coverage on each of Gaddis's two automobiles. While Bowers was not a named insured under Gaddis's policy, their two children resided with Gaddis.

Within 1 month following Ms. Bowers' death, Gaddis informed his insurance agent of the accident, and was told there was no coverage available under his policies. Additionally, a lawsuit was instituted against the uninsured motorcyclist on behalf of Gaddis's children, resulting in a judgment in their favor. In November 1983, Gaddis's attorney notified Safeco of the uninsured motorist claim on behalf of Gaddis's children, and on December 5, 1984, Gaddis demanded arbitration of that claim.

Upon receiving no response from Safeco, Gaddis filed a complaint to compel arbitration. On April 3, 1985, upon an order to show cause, the trial court ordered both parties to proceed to arbitration. In a 2-to-1 decision, the arbitrators awarded $175,000 or the policy limits, whichever was less, to each child. On Gaddis's motion to confirm the arbitration award, a second trial judge deferred confirmation pending the resolution of three specific legal issues in an ordered declaratory judgment action: (1) whether the action is barred by the statute of limitation; (2) whether Gaddis's policy provides coverage in this instance; and (3) if the policy provides coverage, what are the policy limits.

Following a bench trial, a third judge resolved these three legal issues in favor of Gaddis, and entered a judgment in his favor, as personal representative of the estate of Bowers, in the amount of $175,000 for each of the minor children for a total of $350,000. The Court of Appeals, Division I, reversed and dismissed the action, holding that the 3-year tort statute of limitation barred Gaddis's action. In re Estate of Bowers, 50 Wash.App. 691, 750 P.2d 275 (1988).

ANALYSIS

The major issue presented in this consolidated case is whether the tort statute of limitation or the contract statute of limitation applies to an insured's claim for UIM benefits against his insurer. As the two conflicting Court of Appeals decisions illustrate, this issue is one of first impression for this court. In holding that the terms of the contracts of insurance have not displaced the statute of limitation otherwise applicable to all written contracts, we affirm the decision in Barcom and reverse the decision in In re Bowers.

In both Barcom and In re Bowers, Safeco's obligation to its insured stems from a contractual agreement. In each case, Safeco specifically promised to

pay damages which a covered person is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury sustained by a covered person and caused by accident.

The policies of insurance in both cases contain no provisions with respect to a statute of limitation. The rule is well established that absent an agreement expressly displacing existing law, the statute provided by the Legislature will pertain. Wagner v. Wagner, 95 Wash.2d 94, 621 P.2d 1279 (1980). Accordingly, upon Safeco's breach of this contractual agreement, each insured had 6 years in which to commence an action for recovery:

Actions limited to six years. Within six years:

(1) An action upon a contract in writing, or liability express or implied arising out of a written agreement.

RCW 4.16.040.

Nevertheless, without reference to this rule of contractual construction, Safeco relies upon language in the policies to deny coverage by arguing that in order for an insured to be entitled to UIM coverage under the policy, the insured must first be "legally entitled to recover" from the actual tortfeasor. Theoretically, then, had either of the insureds proceeded against their respective tortfeasors on the same dates they proceeded against Safeco, they would have been barred all legal entitlement to damages under the tort statute of limitation:

Actions limited to three years. Within three years:

. . . . .

(2) An action for taking, detaining, or injuring personal property, including an action for the specific recovery thereof, or for any other injury to the person or rights of another not hereinafter enumerated ...

RCW 4.16.080. Thus, Safeco argues, recovery against Safeco is barred under the contract of insurance as well. We are, however, thoroughly unpersuaded that the parties agreed to displace the applicable contract statute of limitation based solely upon this language pertaining to coverage.

One simple example from the factual situation in In re Bowers reveals the confused logic of Safeco's analysis, highlights the disorder that would ensue in attempting to enforce the contract in any instance were the tort statute of limitation to control, and provides proof positive that no clause in the contract displaced the otherwise applicable statute. A judgment, albeit an uncollectible judgment, presently exists against the motorcyclist who caused Ms. Bowers' death. In the strictest sense, there can be no instance of a greater legal right to recover than an already recorded judgment. To this day then, the precise policy language upon which Safeco relies to deny coverage continues to require Safeco to pay damages sustained by the insured.

Safeco argues Sayan v. United Servs. Auto. Ass'n, 43 Wash.App. 148, 716 P.2d 895 (1986) persuasively supports its position. In that case, as a result of sovereign immunity, no cause of action existed against the tortfeasor. Accordingly, the Court of Appeals held that no UIM coverage existed under the policy language, nor was it mandated by the UIM statute since at no time was the insured "legally entitled to recover" from the tortfeasor. Sayan simply does not provide the support Safeco advocates. Even if one were to ignore what some would term the artificial distinction between a substantive bar, such as sovereign immunity, and a personal defense, such as a statute of limitation, at no time was the insured in Sayan legally entitled to recovery from the tortfeasor. Whereas, in both Barcom and In re Bowers, the condition precedent to coverage existed for 3 years following the accident in each case, and continues to exist in In re Bowers to this day.

While it is true, as Safeco argues, that a UIM insurer steps into the shoes of the tortfeasor, blind application of this rule disregards the very real distinctions between the insured/insurer relationship and the plaintiff/tortfeasor relationship. Most noticeably, no contract exists between a plaintiff and his or her tortfeasor compelling payment of damages following an accident. Thus, there is less probability of amicable settlement in such an instance and no probability of forced arbitration.

At first glance, it would appear the rule advocated by Safeco would merely force every insured to file suit against his or her insurer within 3 years of an...