Wash. Greensview Apartment Assocs. v. Travelers Prop. Cas. Co. of Am.

• Decision Date: 19 February 2013
• Docket Number: No. 67879–5–I.,67879–5–I.
• Citation: 295 P.3d 284,173 Wash.App. 663
• Court: Washington Court of Appeals
• Parties: WASHINGTON GREENSVIEW APARTMENT ASSOCIATES, a California Limited Partnership, Appellant, v. TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA (f/k/a The Travelers Indemnity Company of Illinois), a foreign insurance company, Travelers Excess and Surplus Lines Company, a foreign insurance company, Respondents, National Surety Corporation, a foreign insurance company, and The American Insurance Company, a foreign insurance company, Defendants.

173 Wash.App. 663

295 P.3d 284

WASHINGTON GREENSVIEW APARTMENT ASSOCIATES, a California Limited Partnership, Appellant,

v. TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA (f/k/a The Travelers Indemnity Company of Illinois), a foreign insurance company, Travelers Excess and Surplus Lines Company, a foreign insurance company, Respondents,National Surety Corporation, a foreign insurance company, and The American Insurance Company, a foreign insurance company, Defendants.

No. 67879–5–I.

Court of Appeals of Washington, Division 1.

Feb. 19, 2013.

Todd Christopher Hayes, Gregory Louis Harper, Seattle, WA, for Appellant.

John A. Bennett, Attorney at Law, Sean William Carney, Parsons Farnell & Grein, LLP, Portland, OR, for Respondent American Insurance and National Surety Corp.

James Thomas Derrig, Attorney at Law, Seattle, WA, for Respondent Travelers Property.

DWYER, J.

¶ 1 Where a Civil Rule (CR) 68 offer of judgment, accepted by the offeree, does not indicate whether an award of attorney fees is included in the offer, and where the underlying authority for such an award does not define “attorney fees” as “costs,” the offeree is entitled to an award of attorney fees in addition to the judgment amount specified in the offer of judgment. Because CR 68 imposes upon offerees risks not imposed by private settlement offers, any ambiguity in the offer of judgment is construed against the offeror. Thus, in order to preclude an award of attorney fees in addition to the judgment amount, the offer of judgment must unambiguously indicate that the offer amount includes attorney fees.

¶ 2 Here, Travelers Property Casualty Company of America and Travelers Excess and Surplus Lines Company (collectively, Travelers) served an offer of judgment, pursuant to CR 68, on Washington Greensview Apartment Associates (Greensview). Because the offer of judgment did not unambiguously indicate whether attorney fees were included within the offer amount, the offer did not preclude Greensview from recovering an award of attorney fees in addition to having judgment entered in the confessed amount. With regard to Greensview's insurance coverage claim, an attorney fee award is authorized by our Supreme Court's decision in Olympic Steamship,¹ which does not define attorney fees as costs. Accordingly, the trial court erred by denying Greensview's request for an award of attorney fees in addition to the amount of the judgment entered pursuant to Travelers' offer of judgment.

I

¶ 3 In January 2010, Greensview, the owner of a multi-building apartment complex in Everett, filed a lawsuit against Travelers, which had previously issued property insurance to Greensview.² Greensview alleged that, in the summer of 2008, it discovered severe decay in its buildings that substantially impaired their structural integrity and that this decay had commenced while its Travelers insurance policies were in force. Greensview further alleged that, when it notified Travelers of the damage and requested that Travelers investigate and provide the coverage afforded by its policies, Travelers neglected to respond. Greensview filed a claim for declaratory relief, seeking a declaration that the Travelers policies provided coverage for the property damage. In addition, Greensview sought monetary damages for (1) breach of an insurance contract, (2) negligence in handling Greensview's claim for benefits, and (3) violations of Washington's Unfair Claims Settlement Practices Regulation (chapter 284–30 WAC), violations of Washington's Consumer Protection Act (CPA) (chapter 19.86 RCW), and bad faith.

¶ 4 On May 23, 2011, the trial court granted Greensview's motion for partial summary judgment regarding standing and the alleged violations of our state's Unfair Claims Settlement Practices Regulation and the CPA. The trial court determined that Travelers had violated various sections of the regulations and, as a result, had committed per se violations of the CPA. Proximate cause and damages remained to be determined at trial. Moreover, the summary judgment order did not address Greensview's claim that its Travelers insurance policies provided coverage for the alleged damage. Thus, the order did not resolve all claims pending before the court.

¶ 5 Then, on October 11, 2011, Travelers served Greensview with a CR 68 offer of judgment.³ The offer of judgment stated:

Pursuant to CR 68, defendants Travelers Property Casualty Company of America and Travelers Indemnity Company of Illinois offer to have judgment entered against the two of them for a total judgment amount of $30,000 plus costs then accrued. This means a single $30,000 payment on behalf of both defendants, not two $30,000 payments. The term “costs” is defined in the same manner as in RCW 4.84.010.⁴Greensview accepted Travelers' offer of judgment on October 21, 2011.

¶ 6 Greensview thereafter filed a motion for entry of judgment and for an award of attorney fees against the Travelers defendants. Pursuant to the offer of judgment, Greensview sought a judgment against Travelers in the amount of $30,000 in damages and $440 in costs. Additionally, Greensview requested a separate award of $192,408.39 in attorney fees. Greensview contended that, because the offer of judgment did not mention attorney fees, and because the authority for the award of attorney fees did not define such fees as “costs,” Greensview was entitled to an award of attorney fees in addition to the judgment amount specified in the offer of judgment.

¶ 7 On November 7, 2011, the trial court granted in part and denied in part Greensview's motion.⁵ Based upon the offer of judgment, the court entered judgment against Travelers in the amount of $30,000 and awarded to Greensview costs in the amount of $440. However, the trial court denied Greensview's motion for an award of attorney fees.

¶ 8 Greensview appeals.

II

¶ 9 Greensview contends that it was entitled to an award of attorney fees because the offer of judgment did not unambiguously indicate whether such fees were included in the offer and because the authority for such an award does not define attorney fees as costs. Accordingly, Greensview asserts that the trial court erred by denying its motion for an award of attorney fees. We agree.

¶ 10 Where a CR 68 offer of judgment is served upon an offeree, and the offeree thereafter accepts the offer, judgment, as set forth in the offer, is to be entered by the trial court. CR 68 (“If within 10 days after the service of the offer the adverse party serves written notice that the offer is accepted, either party may then file the offer and notice of acceptance together with proof of service thereof and thereupon the court shall enter judgment.”). By virtue of the entry of judgment, the offeree becomes the prevailing party as to all claims pending at the time of the offer. Delta Air Lines, Inc. v. August, 450 U.S. 346, 363, 101 S.Ct. 1146, 67 L.Ed.2d 287 (1981) (Powell, J., concurring) (“A Rule 68 offer of judgment is a proposal of settlement that, by definition, stipulates that the plaintiff shall be treated as the prevailing party.”); accord Util. Automation 2000, Inc. v. Choctawhatchee Elec. Co-op., Inc., 298 F.3d 1238, 1248 (11th Cir.2002); Spegon v. Catholic Bishop of Chicago, 175 F.3d 544, 550 (7th Cir.1999); Webb v. James, 147 F.3d 617, 623 (7th Cir.1998); Lyte v. Sara Lee Corp., 950 F.2d 101, 102 (2d Cir.1991); Baird v. Boies, Schiller & Flexner LLP, 219 F.Supp.2d 510, 522 n. 9 (S.D.N.Y.2002). A prevailing party may be entitled to an award of attorney fees where such an award is authorized by statute, contract, or a recognized ground of equity. Newport Yacht Basin Ass'n of Condo. Owners v. Supreme Nw., Inc., 168 Wash.App. 86, 97, 285 P.3d 70,review denied,175 Wash.2d 1015, 287 P.3d 10 (2012). In the context of a CR 68 offer of judgment, whether the offeree, as the prevailing party, may be entitled to such an award—or, conversely, whether the offer of judgment precludes such an award—depends upon the language set forth in the offer of judgment itself.

¶ 11 We review de novo issues involving construction of CR 68 offers of judgment; we review “for clear error disputed factual findings concerning the circumstances under which the defendant made the offer.” Lietz v. Hansen Law Offices, P.S.C., 166 Wash.App. 571, 580, 271 P.3d 899 (2012) (citing Seaborn Pile Driving Co. v. Glew, 132 Wash.App. 261, 266, 131 P.3d 910 (2006)). Here, the parties dispute whether Travelers' offer of judgment addressed attorney fees, such that those fees were included in the offer amount. Because this issue involves construction of the offer of judgment, our review is de novo.

¶ 12 CR 68 provides a means by which litigating parties may settle and have judgment entered upon a pending claim. It provides, in part:

At any time more than 10 days before the trial begins, a party defending against a claim may serve upon the adverse party an offer to allow judgment to be taken against him for the money or property or to the effect specified in his offer, with costs then accrued. If within 10 days after the service of the offer the adverse party serves written notice that the offer is accepted, either party may then file the offer and notice of acceptance together with proof of service thereof and thereupon the court shall enter judgment.

CR 68. A CR 68 offer of judgment, however, is not a private settlement agreement; rather, in order to encourage settlement, the rule confers upon offerors certain “tactical advantages” and, unlike a private settlement agreement, has implications for the offeree whether accepted or rejected:

By choosing to couch their settlement offer in terms of a Rule 68(a) offer of judgment, Appellants availed themselves of the tactical advantages not available to the offeror of an ordinary settlement offer-namely, the ability to eliminate liability for any post-offer attorney's fees and costs in the event of a less favorable judgment after trial. A Rule 68(a) offeree is in...