Schiff v. Liberty Mut. Fire Ins. Co.

Decision Date28 November 2022
Docket Number82554-2-I (consol. with No. 82558-5-I)
Citation520 P.3d 1085
Parties Stan SCHIFF, M.D., Ph.D., on behalf of himself and a Class Of Similarly Situated Providers, Respondent/Cross-Petitioner, v. LIBERTY MUTUAL FIRE INSURANCE CO. and Liberty Mutual Insurance Company, Foreign Insurance Companies, Petitioners/Cross-Respondents.
CourtWashington Court of Appeals

Philip Albert Talmadge, Talmadge/Fitzpatrick, 2775 Harbor Ave. Sw., Third Floor Ste. C, Seattle, WA, 98126-2138, John Michael Silk, Wilson Smith Cochran Dickerson, 1000 Second Ave., Suite 2050, Seattle, WA, 98104, James Morsch, Butler Rubin Saltarelli & Boyd LLP, 70 West Madison Street, Suite 1800, Chicago, IL, 60602-4257, Marc Fuller, Vinson and Elkins, 2001 Ross Ave., Ste. 3700, Dallas, TX, 75201-2975, for Petitioners/Cross-Respondents.

David Elliot Breskin, Cynthia J Heidelberg, Breskin Johnson & Townsend PLLC, 1000 2nd Ave. Ste. 3670, Seattle, WA, 98104-1053, for Respondent/Cross-Petitioner.


Dwyer, J.

¶1 Washington's insurance code and regulations prohibit persons engaged in the business of insurance from engaging in unfair methods of competition or in unfair or deceptive acts or practices in that business. In our state's Consumer Protection Act1 (CPA), our legislature expressly provided that violations of that prohibition subject insurers to liability pursuant to the consumer protection law. In the first party insurance context, we recently held that an insurer engages in an unfair practice in violation of the insurance regulations and the CPA by failing to conduct an individualized assessment of the reasonableness of a medical provider's bill and, instead, relying solely on a mechanistic, formulaic approach that compares charges within a geographic area to determine if the amounts billed are reasonable.

¶2 Here, the insurer engaged in the precise conduct that we have recently determined constitutes an unfair practice. Because the plaintiff challenging the lawfulness of the insurer's conduct has additionally established the other elements of a CPA claim, we conclude that he is entitled to entry of summary judgment on that claim.

¶3 In addition, we reject the insurer's assertion that it is exempt from liability for this conduct pursuant to the CPA's exemption provision. Such a reading of that provision would contravene our legislature's clear intent that an insurer is subject to CPA liability for actions prohibited by the insurance code and regulations. Moreover, because there is no "good faith" defense to the claim presented here, we additionally reject the insurer's contention that such a defense shields it from liability. Accordingly, we conclude that the insurer is subject to CPA liability for the unfair practice challenged here.


¶4 Stan Schiff, M.D., Ph.D., is a neurologist who practices in Shoreline. Schiff sometimes treats patients insured by Liberty Mutual personal injury protection (PIP) and "med pay" automobile insurance policies.2 Schiff submitted to Liberty Mutual two bills for treating its insureds, in September 2015 and October 2016, that the insurer did not pay in full. Instead, Liberty Mutual, pursuant to the applicable insurance policy language, determined that the full amount of the charges was not "reasonable." To make this determination, the insurer relied solely on the FAIR Health database, a computer database that compares billed charges to the charges submitted by other medical providers within the same broad geographical area. Because the charges billed by Schiff exceeded the 80th percentile of charges in the FAIR Health database for the same services within the same geographical area, Liberty Mutual reduced its payment on the bills to the 80th percentile amount (the 80th percentile practice).3

¶5 In May 2017, Schiff filed a class action lawsuit against Liberty Mutual, asserting that the insurer's 80th percentile practice violates provisions of Washington's insurance code and insurance regulations defining unfair claims settlement practices. Schiff further asserted that the 80th percentile practice constitutes an unfair act pursuant to the CPA. In the complaint, Schiff requested certification of the class, an award of actual damages to be established at trial, an award of treble damages pursuant to the CPA, and an award of attorney fees and costs, prejudgment interest, and reasonable litigation expenses. Schiff subsequently amended his complaint to additionally request that the trial court enjoin Liberty Mutual from continuing to reduce the amount paid on medical providers’ bills using the 80th percentile practice.

¶6 In January 2020, the trial court ruled that an Oregon class action settlement agreement and the judgment approving that agreement (the Froeber settlement) barred Schiff from asserting the class action and injunctive relief claims pleaded in his complaint. See Froeber v. Liberty Mut. Ins. Co., 222 Or.App. 266, 193 P.3d 999 (2008) ; Froeber v. Liberty Mutual Ins. Co., 2003 WL 25854983 (Circuit Court of Oregon, Marion County). However, the trial court ruled that the Froeber settlement does not bar Schiff from pursuing the individual CPA claim for monetary damages based on the September 2015 and October 2016 billing incidents. Thus, the trial court dismissed Schiff's "class action claims and injunctive claims" and denied Schiff's motion for class certification.

¶7 Schiff thereafter filed a motion for partial summary judgment on CPA liability, asserting that Liberty Mutual's 80th percentile practice violates the CPA as a matter of law pursuant to our decision in Folweiler Chiropractic, PS v. Am. Fam. Ins. Co., 5 Wash. App. 2d 829, 429 P.3d 813 (2018). In its response in opposition to Schiff's motion, Liberty Mutual asserted that, even if the challenged practice violates the CPA, Schiff's claim is barred by so-called "safe harbor"4 and "good faith" affirmative defenses. In February 2020, the trial court ruled that it was undisputed, on the current record, "that Liberty Mutual did not do the kind of individualized investigation" required by our Folweiler decision. The trial court nevertheless denied Schiff's motion for partial summary judgment, ruling that disputed facts remained regarding the defenses asserted by Liberty Mutual.

¶8 In June 2020, in response to Liberty Mutual's motion to dismiss Schiff's third amended complaint, the trial court again ruled that the Froeber settlement bars Schiff from asserting CPA class action and injunctive relief claims. The trial court thus ruled, for a second time, that Schiff can pursue only his individual CPA claims for monetary relief allegedly sustained as a result of the September 2015 and October 2016 billing incidents. The trial court denied Liberty Mutual's motion for summary judgment regarding Schiff's individual claims.

¶9 The parties thereafter filed the cross motions for summary judgment that are the basis of this discretionary review. In a hearing on the motions, the trial court ruled that issues of fact remained regarding Liberty Mutual's asserted affirmative defenses. Accordingly, on April 8, 2021, the trial court denied the partiesmotions for summary judgment.

¶10 Both Schiff and Liberty Mutual filed motions for discretionary review of the trial court's April 2021 orders. Our commissioner granted the parties’ motions. The commissioner ruled that, to the extent the parties disagreed regarding the appropriate scope of review, they could present such argument in their merits briefing.


¶11 Schiff asserts that Liberty Mutual's 80th percentile bill review practice constitutes an unfair practice pursuant to the CPA. This is so, he contends, because the practice violates provisions of the insurance code and regulations promulgated by the insurance commissioner. Liberty Mutual disagrees, asserting that its practice was approved by the Office of the Insurance Commissioner (OIC), and, thus, that this court's Folweiler decision is inapplicable. In addition, Liberty Mutual contends that Schiff has not demonstrated the injury and causation elements of his CPA claim.

¶12 Schiff's analysis of the questions presented is the more compelling. The undisputed and pertinent facts indicate that Liberty Mutual's 80th percentile practice is indistinguishable from the practice we held unlawful in the Folweiler decision. Because we also conclude that the additional elements of Schiff's individual CPA claim have been established, Schiff is entitled to summary judgment for liability on that claim.


¶13 We review de novo orders on motions for summary judgment, performing the same inquiry as the trial court. Jones v. Allstate Ins. Co., 146 Wash.2d 291, 300, 45 P.3d 1068 (2002). "All evidence must be considered in the light most favorable to the nonmoving party, and summary judgment may be granted only where there is but one conclusion that could be reached by a reasonable person." Cornish Coll. of the Arts v. 1000 Virginia Ltd. P'ship, 158 Wash. App. 203, 216, 242 P.3d 1 (2010) (citing Lamon v. McDonnell Douglas Corp., 91 Wash.2d 345, 349-50, 588 P.2d 1346 (1979) ). Summary judgment is properly granted when the pleadings, affidavits, depositions, and admissions on file demonstrate "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." CR 56(c).


¶14 Washington's CPA makes unlawful "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." RCW 19.86.020. The CPA provides for a private right of action whereby individual citizens may bring suit to enforce the statute. Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wash.2d 778, 784, 719 P.2d 531 (1986) ; RCW 19.86.090. A plaintiff must establish five elements to prevail in a private CPA action: (1) an unfair or deceptive act or practice, (2) occurring in trade or commerce, (3) with public interest impact, (4) an injury to the plaintiff's business or property, and (5) c...

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