Sharbono v. Universal Underwriters Ins. Co.

• Decision Date: 26 June 2007
• Docket Number: No. 33379-1-II.,33379-1-II.
• Citation: 139 Wn. App. 383,161 P.3d 406
• Court: Washington Court of Appeals
• Parties: James and Deborah SHARBONO, individually and the marital community composed thereof; Cassandra Sharbono, Respondents/Cross-Appellants, v. UNIVERSAL UNDERWRITERS INSURANCE COMPANY, a foreign insurer, Appellant/Cross-Respondent, and Len Van De Wege and "Jane Doe" Van De Wege, husband and wife and the marital community composed thereof, Appellants.

161 P.3d 406

139 Wn. App. 383

James and Deborah SHARBONO, individually and the marital community composed thereof; Cassandra Sharbono, Respondents/Cross-Appellants, v. UNIVERSAL UNDERWRITERS INSURANCE COMPANY, a foreign insurer, Appellant/Cross-Respondent, and Len Van De Wege and "Jane Doe" Van De Wege, husband and wife and the marital community composed thereof, Appellants.

No. 33379-1-II.

Court of Appeals of Washington, Division 2.

June 26, 2007.

Philip Albert Talmadge Emmelyn Hart-Biberfeld Talmadge Law Group PLLC Tukwila, WA, Dan'l Wayne Bridges McGaughey Bridges Dunlap PLLC Bellevue, WA, for Appellants.

Timothy R. Gosselin, Attorney at Law, Tacoma, WA, for Respondents.

PUBLISHED OPINION

ARMSTRONG, J.

¶ 1 Cassandra Sharbono lost control of her truck, crossed into the oncoming traffic lane, and hit a car Cynthia Tomyn was driving. Cynthia Tomyn died as a result of the accident and her family claimed damages against Cassandra's parents, James and Deborah Sharbono (the Sharbonos), who owned the vehicle Cassandra was driving. The Sharbonos had primary liability coverage with State Farm Insurance Company and umbrella coverage under their commercial and personal liability policies with Universal Underwriters Insurance Company. The Sharbonos claimed that they had three umbrella policies; Universal advised them they had only one umbrella policy with a $1,000,000 limit. During settlement negotiations with the Tomyns, the Sharbonos several times asked Universal to produce its underwriting file so that they and the Tomyns would know the extent of the Sharbonos' liability coverage. Universal refused. The Tomyns and the Sharbonos ultimately settled for $4,525,000, and the Sharbonos then sued Universal to establish coverage and to recover damages for Universal's alleged bad faith in refusing to produce its underwriting file. The trial judge granted the Sharbonos summary judgment, declaring that they had coverage under three policies for a total of $7,000,000; the trial court also ruled that Universal was liable for bad faith as a matter of law, and found the Tomyn-Sharbono settlement reasonable. At the conclusion of the damages trial, the jury awarded the Sharbonos $4,500,000 for Universal's bad faith. Universal appeals the jury's verdict and the trial court's summary judgments establishing coverage and finding Universal liable for bad faith. Universal also appeals the trial court's determination that the settlement was reasonable. We affirm the summary judgment declaring Universal liable for bad faith and the trial court's ruling that the Tomyn-Sharbono settlement was reasonable. We also affirm the trial court's ruling regarding the settlement's reasonableness. But we reverse the trial court's judgment establishing coverage at $7,000,000; we hold that under the policy's plain language, the Sharbonos had umbrella coverage of $1,000,000 under only one policy. And we reverse the trial court's determination that Universal violated the Consumer Protection Act. Finally, we reverse the jury verdict for bad faith damages and the trial court's dismissal of the Sharbonos' claim against their agent for negligently procuring the Universal umbrella policy.

FACTS

¶ 2 James and Deborah Sharbono owned three transmission shops: "All Transmission & Automotive," "The Trans-Plant," and "Parkland Transmission." The Sharbonos had business partners in the latter two businesses: Clarence and Claudia Ray in The Trans-Plant, and Robert and Debra Huke in Parkland Transmission.

¶ 3 In the mid-1990s, the Sharbonos and their partners bought commercial insurance from Universal, an insurer specializing in coverage for automobile dealers, auto repair shops, and associated enterprises. Universal insured the three transmission shops under separate but similar insurance policies.¹

¶ 4 In 1997, the Sharbonos asked their Universal sales agent, Len Van de Wage, about transferring the family's personal umbrella coverage from State Farm to Universal. Universal offered personal umbrella coverage to the Sharbonos as an adjunct to the Sharbono companies' commercial policies. The Sharbonos claim that they asked Van de Wege for $3,000,000 of personal umbrella coverage. According to the Sharbonos, Van de Wege agreed to add a $1,000,000 personal umbrella to each business policy, providing a total of $3,000,000 in personal umbrella coverage. According to Van de Wege, the Sharbonos did not seek $3,000,000 in personal umbrella coverage.

¶ 5 When the Sharbonos renewed their Universal policies in 1998, they added their personal motor vehicles to their personal umbrella coverage.

¶ 6 On December 11, 1998, Cassandra Sharbono, the Sharbonos' daughter, lost control of the family truck and swerved into oncoming traffic, striking an approaching car head-on and killing Cynthia Tomyn. The police cited Cassandra for second degree negligent driving, and the Sharbonos later admitted that Cassandra was "at least partially at fault" for the accident. Clerk's Papers (CP) at 557. Cynthia Tomyn, who was 34 years old, was survived by her husband Clinton and their three minor children.

¶ 7 The Tomyns retained attorney Ben Barcus to pursue a wrongful death claim against the Sharbonos. The Tomyns initially attempted to settle with the Sharbonos, negotiating with the Sharbonos' primary auto liability carrier, State Farm, and the Sharbonos' personal attorneys, Timothy Gosselin and Maureen Falecki.

¶ 8 Over the next few months, Falecki wrote to Universal asking for documents pertaining to the Sharbonos' insurance coverage. Specifically, Falecki asked Universal to produce its underwriting files on the Sharbonos' policies, explaining that the Sharbonos believed they had $3,000,000 of personal umbrella coverage. Universal produced copies of the Sharbonos' application for the personal umbrella coverage and offered to provide the Sharbonos with any other documents they had signed or submitted. But Universal refused to produce its underwriting files, explaining that the files contained proprietary information and that it was unaware of any authority that supported Falecki's request.

¶ 9 The Sharbonos and Tomyns participated in two mediation sessions. At the first session, Universal offered to pay the Sharbonos' $1,000,000 umbrella limit toward any settlement above State Farm's $250,000 in primary coverage. The first mediation failed and Falecki again asked Universal to produce its underwriting files, stating that Universal's failure to disclose the files was one reason the mediation failed. Universal again refused.

¶ 10 At the second settlement mediation, the Sharbonos asked for Universal's underwriting files from Glenn Reid, a Universal representative who attended the mediation. Universal again refused to produce its underwriting file. After the second failed mediation, Falecki again wrote Universal asking for its underwriting files. In the same letter, Falecki advised Universal that if it failed to cooperate, the Sharbonos would assert bad faith claims against Universal. Universal still refused to produce the file and advised Falecki that if the Sharbonos sued for bad faith, it would counterclaim for abuse of process.

¶ 11 Aware of the dispute about coverage, the Tomyns' attorney threatened to sue the Sharbonos unless Universal cooperated. Universal again refused, and the Tomyns sued the Sharbonos.

¶ 12 The Tomyns subpoenaed Universal's underwriting file, and Universal moved to quash the subpoena on the ground that its files were not discoverable in a suit against its insureds. The trial court denied the motion to quash and ordered Universal to produce the underwriting files. Universal then sought discretionary review; a commissioner of this court, finding probable error in the trial court's order to produce, granted review and stayed enforcement of the subpoena.

¶ 13 Before we considered the appeal, the Tomyns and Sharbonos settled. The Sharbonos agreed to confess judgment for $4,525,000 and to assign their insurance claims to the Tomyns in exchange for covenants not to execute (as to James and Deborah Sharbono) and to forebear (as to Cassandra Sharbono). The agreement also required the Sharbonos to sue Universal to recover insurance proceeds to satisfy the confessed judgment amount.

¶ 14 The Sharbonos then commenced this action against Universal and Van de Wege, alleging (1) breach of contract, (2) violation of the Consumer Protection Act (CPA), (3) negligence or negligent misrepresentation, (4) bad faith, (5) breach of quasi-fiduciary duty (Universal), (6) breach of fiduciary duty (Van de Wege), and (7) reformation.

¶ 15 The Sharbonos moved for summary judgment to establish $3,000,000 of coverage under each of their commercial policies' Umbrella Coverage Part 980. The trial court granted the Sharbonos' motion, stating that each policy's Umbrella Coverage Part 980 provided personal liability coverage to the Sharbonos. In a later ruling, the trial court found that the Sharbonos could combine the policies' limits for $6,000,000 in addition to the $1,000,000 personal umbrella coverage that Universal conceded was available.

¶ 16 The Sharbonos moved for an order declaring their settlement with the Tomyns reasonable under RCW 4.22.060. The trial court ruled that the settlement was reasonable.

¶ 17 Before trial, the Sharbonos filed a second motion for summary judgment, declaring that Universal had acted in bad faith when it refused to turn over its underwriting file to the Tomyns' attorney and when it allegedly did not explain why it denied coverage under its umbrella policies. The Sharbonos also alleged that Universal violated the CPA by forcing them to litigate to recover insurance proceeds, failing to provide the underwriting documents, and failing to provide a reasonable explanation for its position. See WAC 284-30-330(6), (7), (13). Universal also moved for summary judgment, seeking dismissal of the Sharbonos' claims for negligence or negligent misrepresentation,...