Hell Yeah Cycles v. Ohio Security Insurance Company, No. 2:2013cv00184 - Document 30 (E.D. Wash. 2014)

Court Description: ORDER GRANTING IN PART AND DENYING IN PART 14 PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT. Signed by Judge Thomas O. Rice. (BF, Judicial Assistant)

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1 2 3 4 5 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WASHINGTON 6 7 HELL YEAH CYCLES, NO: 13-CV-0184-TOR 8 9 10 Plaintiff, v. OHIO SECURITY INSURANCE COMPANY, ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S PARTIAL MOTION FOR SUMMARY JUDGMENT 11 Defendant. 12 13 BEFORE THE COURT is Plaintiff’s Motion for Partial Summary Judgment 14 (ECF No.14). This matter was heard with telephonic oral argument on March 13, 15 2014. Brian Sheldon appeared on behalf of the Plaintiff. John Silk appeared on 16 behalf of Defendant. The Court has reviewed the briefing and the record and files 17 herein, and is fully informed. 18 19 20 BACKGROUND This case concerns an insurance policy covering business property damaged in a fire. ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S PARTIAL MOTION FOR SUMMARY JUDGMENT ~ 1 1 2 FACTS Plaintiff Hell Yeah Cycles (“HYC”) is a Washington limited liability 3 company owned by Frank Smith (“Smith”). Defendant Ohio Security Insurance 4 Company (“OSI”) is a foreign insurer licensed to do business in Washington. On 5 November 28, 2012, an electrical fire caused extensive damage to the building 6 HYC was occupying and to HYC’s property in the building. At the time of the fire, 7 HYC was insured under a business owner’s policy issued by OSI. 8 Plaintiff reported the fire loss to OSI the day after the fire, and OSI assigned 9 adjuster David Bjorklund (“Bjorklund”) to the claim. Bjorklund went to the fire- 10 damaged property at least twice to document and photograph damage. Within two 11 months after the fire, OSI issued checks to HYC for $5,000, $25,000 and $50,000. 12 Subsequently, OSI issued payment of $14,000 for temporary rental space and 13 $1,626.79 for labor costs to mitigate further losses to HYC property. 14 The parties dispute much of what happened otherwise. In particular, the 15 parties disagree about the maximum limits of the insurance policy. Defendant 16 maintains that the maximum limit of Plaintiff’s Business Personal Property 17 coverage was $80,000. ECF No. 20 at 6. Plaintiff contends that its Business 18 Personal Property coverage was subject to “additional coverages” that extended the 19 limits above $80,000. ECF No. 15 at 1, 2. But Defendant claims that Plaintiff has 20 ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S PARTIAL MOTION FOR SUMMARY JUDGMENT ~ 2 1 failed to produce evidence of damages necessitating the application of “additional 2 coverages” to the policy beyond those paid by OSI to date. ECF No. 20 at 7. 3 The parties’ specific disputes over coverage limits include the following: 4 Smith claims he was storing kitchen cabinets in the basement of the building 5 for use in his home. ECF No. 15 at 4. Plaintiff contends that Bjorklund 6 advised Smith that the cabinets were subject to a $2,500 limit applicable to 7 personal effects of the insured, but that the actual limit for personal effects 8 under the policy was $15,000. Id. Plaintiff also claims that Bjorklund took 9 photos of the cabinets the day after the fire. Id. at 4-5. But Defendant 10 maintains that Plaintiff failed to provide evidence of the value of the 11 cabinets. ECF No. 20 at 7. 12 Plaintiff contends that the policy contains an endorsement that added 13 $25,000 of additional coverage for employee tools, and claims to have 14 submitted an inventory of damaged tools in the amount of $67,213. ECF No. 15 15 at 7. Plaintiff claims that Bjorklund advised Smith that he no longer 16 needed to keep tools damaged in the fire in order to document the claim. 17 ECF No. 15 at 3. Defendant contends that Bjorklund told Smith that the 18 tools would likely clean up with labor. ECF No. 20 at 7. 19 20 Plaintiff contends that Bjorklund told Smith in error that coverage for employee wages is limited to 60 days from the date of loss, and that as a ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S PARTIAL MOTION FOR SUMMARY JUDGMENT ~ 3 1 result, he terminated one of his employees on the belief that OSI would no 2 longer cover her lost wages. ECF No. 15 at 4. Plaintiff contends that Smith 3 provided W-2 forms for his two employees at the time of the fire, but OSI 4 has made no payment to HYC for employee wages. ECF No. 15 at 4, 7. 5 Defendant maintains that Plaintiff has failed to submit evidence of damages 6 related to employee wages beyond the W-2s. ECF No. 20 at 7. 7 Plaintiff rented storage units to store HYC’s damaged inventory and 8 equipment. ECF No. 15 at 5. Plaintiff contends that Bjorklund approved 9 their rental, but that although Smith submitted receipts for the units, OSI has 10 not issued payments. Id. 11 Plaintiff contends that Smith rented a truck to move the damaged property 12 out of the building to be stored and inventoried. ECF No. 15 at 5. Because 13 two of Smith’s business were operating out of the building—HYC and the 14 Handlebar, a restaurant/bar—Smith proposed that OSI pay half the truck 15 rental fee. Id. Plaintiff contends that OSI agreed to pay for one week of 16 rental but has not done so. Id. 17 Plaintiff contends that the OSI policy contained an additional coverage for 18 outdoor signs. ECF No. 15 at 5. Plaintiff claims that Bjorklund inspected 19 and photographed the damage to the existing signs, and Smith submitted an 20 ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S PARTIAL MOTION FOR SUMMARY JUDGMENT ~ 4 1 estimate for their replacement, but OSI has not paid Plaintiff for any of the 2 signs. Id. 3 Plaintiff claims that the OSI policy contained additional coverage for 4 computer equipment. ECF No. 15 at 5. Plaintiff contends that Bjorklund 5 documented damage to Plaintiff’s computer equipment but that OSI has 6 issued no payment for the computers. Id. 7 Plaintiff claims that the OSI policy contained additional coverage for lost 8 business income. ECF No. 15 at 6. Plaintiff contends that OSI advised 9 Plaintiff that it would have to produce documents that did not exist. Id. 10 Furthermore, Plaintiff states that documentation was difficult to procure 11 because its records were destroyed in the fire and because it had only been in 12 business for six weeks at the time of the fire. Id. 13 Plaintiff contends that the OSI policy covered additional expenses incurred 14 as a result of the loss. ECF No. 15 at 6. Plaintiff claims it submitted invoices 15 for costs of improvements to the new building, but OSI has not made any 16 payments for these additional expenses. Id. 17 Plaintiff contends that the policy contained additional coverage for tenant 18 improvements and glass, but that the claim for glass has not been paid. ECF 19 No. 15 at 7. 20 ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S PARTIAL MOTION FOR SUMMARY JUDGMENT ~ 5 Plaintiff claims Smith asked Bjorklund “multiple” times to explain the 1 2 available coverage under the policy. ECF No. 15 at 3. Plaintiff contends that OSI 3 never requested additional information to substantiate the claims nor responded to 4 HYC’s attempts to resolve the remaining claims. 5 Plaintiff now moves for partial summary judgment on the following issues: 6 1. Whether OSI violated WAC 284-30-330(9) by issuing payments to HYC 7 that were not accompanied by a statement setting forth the coverage under 8 which the payment was made. 9 2. Whether OSI violated WAC 284-30-330(1) and WAC 284-30-350 by 10 misrepresenting or concealing pertinent benefits, coverages, or policy 11 provisions. 12 3. Whether OSI violated WAC284-30-330 by failing to attempt to settle HYC’s claim in good faith. 13 14 4. Whether OSI violated the Consumer Protection Act by violating the unfair 15 claims practices regulations. 16 5. Whether OSI’s denial of benefits violated the Insurance Fair Conduct Act. 17 6. Whether OSI’s handling of HYC’s insurance claim constitutes bad faith. 18 /// 19 /// 20 /// ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S PARTIAL MOTION FOR SUMMARY JUDGMENT ~ 6 1 2 DISCUSSION 1. Whether the Court Should Continue Consideration of Plaintiff’s Motion Pursuant to Rule 56(d) 3 As a preliminary matter, the Court must consider Defendant’s Motion for a 4 Rule 56(d) Continuance. ECF No. 18 at 1. Defendant requests additional time for 5 discovery to respond to Plaintiff’s allegations pursuant to Fed. R. Civ. P. 56(d). Id. 6 at 10. Defendant contends that Plaintiff assured OSI that it would supplement its 7 discovery responses, produce evidence of damages, and make evidence available 8 for inspection. Id. at 11. By moving for summary judgment before doing so, 9 Defendant contends, Plaintiff has denied OSI a reasonable opportunity to show the 10 existence of several genuine issues of material fact. Id. 11 Rule 56(d) provides: 12 13 14 15 16 17 If a nonmovant shows by affidavit or declaration that, for specified reasons, it cannot present facts essential to justify its opposition, the court may: (1) defer considering the motion or deny it; (2) allow time to obtain affidavits or declarations or to take discovery; or (3) issue any other appropriate order. Fed. R. Civ. P. 56(d). Under Rule 56, “a trial court may order a continuance on a motion for 18 summary judgment if the party requesting a continuance submits affidavits 19 showing that, without Rule 56 assistance, it cannot present facts necessary to 20 justify its claims.” Family Home & Fin. Ctr., Inc. v. Fed. Home Loan Mortgage ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S PARTIAL MOTION FOR SUMMARY JUDGMENT ~ 7 1 Corp., 525 F.3d 822, 827 (9th Cir. 2008) (citing Fed. R. Civ. P. 56(f); according to 2 the notes on the 2010 amendments, “subdivision (d) carries forward without 3 substantial change the provisions of former subdivision (f)”). “The requesting party 4 must show: (1) it has set forth in affidavit form the specific facts it hopes to elicit 5 from further discovery; (2) the facts sought exist; and (3) the sought-after facts are 6 essential to oppose summary judgment.” Id. 7 Plaintiff opposes this motion, arguing that Defendant has failed to meet its 8 burden because (1) OSI has not identified specific facts it hopes to elicit from 9 further discovery, (2) it has failed to show that the information it hopes to discover 10 exists, (3) it has failed to identify specific records it hopes to obtain, and (4) it has 11 failed to state how any of the information it wishes to obtain is essential to oppose 12 summary judgment. ECF No. 21 at 4. 13 Despite Plaintiff’s contention, Defendant in fact submitted an affidavit in 14 support of its motion for a continuance. The Affidavit of Joshua Lane states that 15 OSI requested evidence of loss and Plaintiff failed to produce such evidence. ECF 16 No. 19 at 2. Specifically, Lane’s affidavit indicates that “Plaintiff failed to produce 17 evidence of damages necessitating the application of ‘additional coverages’ to the 18 policy beyond those paid by Ohio Security to date.” ECF No. 19 at 6-7. Lane states 19 that Plaintiff failed to produce evidence of damages related to employee wages 20 beyond the W-2 forms, evidence of value of the cabinets, and other evidence of ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S PARTIAL MOTION FOR SUMMARY JUDGMENT ~ 8 1 value of the employee tools. ECF No. 19 at 6-7. Lane’s affidavit also states that 2 Plaintiff has failed to identify the other businesses that were using the space 3 occupied by HYC at the time of the loss, and which may have had property 4 damaged in the loss. Id. at 6. The affidavit also contends that Plaintiff failed to 5 provide evidence that any of Bjorklund’s errors caused measurable damage to 6 Plaintiff. Id. at 8. The affidavit explains that OSI requested this information at 7 discovery (in interrogatories and requests for production), and that Plaintiff failed 8 to provide the evidence but “promised to supplement its productions and notify 9 Ohio Security when Ohio Security could inspect the requested records….” ECF 10 No. 19 at 7. Defendant states that the extent of Plaintiff’s losses in the fire remain 11 disputed, thus the Court can infer that evidence of those losses would be necessary 12 for OSI to defend against Plaintiff’s summary judgment claim. 13 However, the motion before the Court is a partial motion for summary 14 judgment, partly on the question of whether Defendant’s actions constituted a per 15 se violation of the relevant consumer protection statutes. In the context of the 16 present motions, the Court finds that Defendant has defended against Plaintiff’s 17 motion for summary judgment, and that the additional evidence sought would have 18 no effect on the Court's findings in this order. 19 20 2. Plaintiff’s Motion for Summary Judgment Plaintiff moves for partial summary judgment on the issues of whether OSI ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S PARTIAL MOTION FOR SUMMARY JUDGMENT ~ 9 1 committed certain unfair and deceptive acts constituting a violation of the 2 Washington Consumer Protection Act (“WCPA”) and the Insurance Fair Conduct 3 Act (“IFCA”), and whether OSI’s claim handling constituted bad faith. 4 Summary judgment may be granted to a moving party who demonstrates 5 “that there is no genuine dispute as to any material fact and that the movant is 6 entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The moving party 7 bears the initial burden of demonstrating the absence of any genuine issues of 8 material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The burden then 9 shifts to the non-moving party to identify specific genuine issues of material fact 10 which must be decided by a jury. See Anderson v. Liberty Lobby, Inc., 477 U.S. 11 242, 256 (1986). “The mere existence of a scintilla of evidence in support of the 12 plaintiff’s position will be insufficient; there must be evidence on which the jury 13 could reasonably find for the plaintiff.” Id. at 252. 14 For purposes of summary judgment, a fact is “material” if it might affect the 15 outcome of the suit under the governing law. Id. at 248. A dispute concerning any 16 such fact is “genuine” only where the evidence is such that a reasonable jury could 17 find in favor of the non-moving party. Id. In ruling upon a summary judgment 18 motion, a court must construe the facts, as well as all rational inferences therefrom, 19 in the light most favorable to the non-moving party. Scott v. Harris, 550 U.S. 372, 20 ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S PARTIAL MOTION FOR SUMMARY JUDGMENT ~ 10 1 378 (2007). Only evidence which would be admissible at trial may be considered. 2 Orr v. Bank of America, NT & SA, 285 F.3d 764 (9th Cir. 2002). 3 A. Violations of the Washington Consumer Protection Act (“CPA”) 4 Plaintiff claims that OSI committed unfair and deceptive acts by issuing 5 payments to HYC that were not accompanied by a statement setting forth the 6 coverage under which payment was made; by misrepresenting the policy 7 provisions; and by not attempting in good faith to effectuate prompt, fair and 8 equitable settlement of HYC’s claim. As such, Plaintiff maintains, OSI’s unfair 9 and deceptive acts constitute a per se violation of the CPA. 10 A claim for damages under the CPA, RCW Chapter 19.86.010, et seq., 11 requires a plaintiff to demonstrate: (1) an unfair or deceptive act or practice; (2) 12 occurring in the conduct of trade or commerce; (3) which impacts the public 13 interest; (4) an injury to business or property; and (5) a causal link between the 14 injury and the deceptive act or practice. Columbia Physical Therapy, Inc., P.S. v. 15 Benton Franklin Orthopedic Assoc., P.L.L.C., 168 Wash.2d 421, 442 (2010). “A 16 violation of WAC 284–30–330 constitutes a violation of RCW 48.30.010(1), 17 which in turn constitutes a per se unfair trade practice by virtue of the legislative 18 declaration in RCW 19.86.170.” Industrial Indemnity Co. of the Northwest v. 19 Kallevig, 114 Wash.2d 907, 923 (1990). “This per se unfair trade practice may 20 result in CPA liability if the remaining elements of the 5–part test for a CPA action ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S PARTIAL MOTION FOR SUMMARY JUDGMENT ~ 11 1 under RCW 19.86.090 are established.” Id. The second prong is satisfied where an 2 action involves insurance contracts. See Bryant v. Country Life Ins. Co, 414 3 F.Supp.2d 981, 1003 (W. D. Wash. 2006). CPA claims alleging unfair insurance 4 claims practices always meet the third element because RCW 48.01.030 declares 5 that the “business of insurance is one affected by the public interest.” Id. (citing 6 Anderson v. State Farm Mut. Ins. Co., 101 Wash. App. 323, 329 (2000)). Finally, a 7 claimant must present some evidence showing injury to its business or property 8 caused by the violation. See Sign-O-Lite Signs, Inc. v. DeLaurenti Florists, Inc., 64 9 Wash.App. 553, 563 (1992) (“There must be some evidence, however slight, to 10 11 show injury to the claimants' business or property.”). However, “an insurer's reasonable denial of coverage does not constitute an 12 unfair practice.” Estate of Hall v. HAPO Fed. Credit Union, 73 Wash. App. 359, 13 366 (1994) (citing Villella v. Public Employees Mut. Ins. Co., 106 Wash.2d 806, 14 821 (1986)). RCW 19.86.920 imports the reasonableness standard into the CPA as 15 a whole: 16 18 It is, however, the intent of the legislature that this act shall not be construed to prohibit acts or practices which are reasonable in relation to the development and preservation of business or which are not injurious to the public interest, nor be construed to authorize those acts or practices which unreasonably restrain trade or are unreasonable per se. 19 (emphasis added) (quoted in Am. Manufacturers Mut. Ins. Co. v. Osborn, 104 20 Wash. App. 686, 699, 17 P.3d 1229, 1235 (2001)). 17 ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S PARTIAL MOTION FOR SUMMARY JUDGMENT ~ 12 1 Here, Plaintiff’s summary judgment briefing cites alleged violations of the 2 following regulations: WAC 284-30-350 (misrepresentation); (b) WAC 284–30– 3 330 (1) (failure to disclose pertinent coverage provisions); WAC 284–30–330 (5) 4 (failure to affirm or deny coverage within a reasonable time); WAC 284–30–330 5 (6) (not attempting in good faith to effectuate prompt settlement); WAC 284–30– 6 330 (9) (making a claim payment that does not include a statement of coverage); 7 WAC 284–30–330 (12) (failure to promptly settle claims); WAC 284–30–330 (13) 8 (failure to provide reasonable explanation for denial); WAC 284–30–330 (16) 9 (failure to adopt reasonable standards for the payment of claims). The Court 10 11 12 13 14 considers each in turn. a. Misrepresentation Plaintiff contends that OSI committed unfair and deceptive acts by misrepresenting the insurance policy provisions. WAC 284-30-330(1) provides that it is an unfair and deceptive practice to 15 misrepresent pertinent facts or insurance policy provisions. WAC 284-30-350 16 provides with respect to misrepresentation of policy provisions that 17 18 19 (1) No insurer shall fail to fully disclose to first party claimants all pertinent benefits, coverages or other provisions of an insurance policy or insurance contract under which a claim is presented. (2) No insurance producer or title insurance agent shall conceal from first party claimants benefits, coverages or other provisions of any insurance 20 ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S PARTIAL MOTION FOR SUMMARY JUDGMENT ~ 13 1 policy or insurance contract when such benefits, coverages or other provisions are pertinent to a claim. 2 3 WAC 284-30-350. 4 Here, as Plaintiff contends, there is no genuine issue of material fact that 5 OSI misrepresented or concealed coverage applicable to HYC’s claim in several 6 ways: 7 i. Bjorklund told Smith that employee tools were subject to the $80,000 8 limit. See Pl. Ex. B at 13. Later, in his deposition, Bjorklund admitted 9 that this was not the case. Bjorklund Depo. at 45:3-45:15, ECF No. 10 11 16-1 at 18. ii. Bjorklund advised HYC that coverage for employee wages was 12 limited to 60 days when in fact there was no such limitation in the 13 policy. Bjorklund Depo. at 33:2-33:11, ECF No. 16-1 at 7. 14 iii. Bjorklund advised Smith that coverage for his personal effects was 15 limited to $2,500 when in fact the limit was higher. See Bjorklund 16 Depo. at 42:17-43:11, ECF No. 16-1 at 15. 17 iv. Bjorklund likewise admitted that he had indicated to Smith that the 18 $2,000 for rent at HYC’s new location was included in the $80,000 19 limits, but that this too was a mistake. Bjorklund Depo. at 52:3-52:14, 20 ECF No16-1 at 23. ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S PARTIAL MOTION FOR SUMMARY JUDGMENT ~ 14 1 Plaintiff also contends that Bjorklund advised Smith that computers were 2 covered under coverage extensions subject to the $80,000 limit, though they were 3 in fact covered under the additional coverage provisions. ECF No. 14 at 10. The 4 Court can find no support for this assertion, however; Plaintiff’s statement of facts 5 does not indicate that there was a misrepresentation involved. See ECF No. 15 at 5 6 (“The OSI policy contained additional coverage for computer equipment. Mr. 7 Bjorklund inspected and photographed damage to the computer equipment on 8 November 29, 2012. OSI has issued no payment for the computers.” (internal 9 citations omitted)). 10 For the above-stated reasons, the Court finds that a per se unfair trade 11 practice has been established by the actions listed above; however, Plaintiff has not 12 established liability as a whole under the CPA, because there remain questions of 13 fact as to what damages, if any, arise from these clear misrepresentations. Thus, the 14 final prong of the five-part test for liability under the CPA has not yet been met. 15 b. Payments unaccompanied by a statement setting forth the coverage under 16 which payment was made 17 Plaintiff contends that OSI committed unfair and deceptive acts by issuing 18 payments to HYC that were not accompanied by a statement setting forth the 19 coverage under which payment was made. 20 ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S PARTIAL MOTION FOR SUMMARY JUDGMENT ~ 15 1 Under the Washington Administrative Code, “making a claim payment to a 2 first party claimant or beneficiary not accompanied by a statement setting forth the 3 coverage under which the payment is made” is defined as one of the “unfair or 4 deceptive acts or practices of the insurer” WAC 284-30-330(9). 5 Here, none of the checks OSI sent to Plaintiff included a statement 6 identifying what coverage the payment was issued under. See Pl.’s Statement of 7 Facts, ECF No. 15 at 2; and Bjorklund Depo. at 52:1-54:1, ECF No. 16-1 at 23-25. 8 Defendant does not appear to dispute that it did not set forth the coverage under 9 which payment was made. 10 Accordingly, the Court finds that a per se unfair trade practice has been 11 established by this omission; however, Plaintiff has not established liability as a 12 whole under the CPA, because there remain questions of fact as to the damages 13 incurred by such a violation. 14 15 c. Good faith claim settlement Plaintiff contends that OSI committed unfair and deceptive acts by not 16 attempting in good faith to effectuate prompt, fair, and equitable settlement of 17 HYC’s claim. ECF No. 14 at 11. Plaintiff cites WAC 284-30-330 (6), (12), (13), 18 and (16) as “unfair or deceptive acts or practices” it alleges OSI violated by not 19 settling. These sections provide as follows: 20 (6) Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear…. ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S PARTIAL MOTION FOR SUMMARY JUDGMENT ~ 16 1 2 3 4 5 6 7 8 9 … (12) Failing to promptly settle claims, where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage. (13) Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement. … (16) Failing to adopt and implement reasonable standards for the processing and payment of claims after the obligation to pay has been established….. WAC 284-30-330. Plaintiff argues that several incidents establish OSI’s liability. First, Plaintiff contends that it completed extensive improvements to the building, including 10 replacement of all the exterior glass and submitted an estimate for the replacement 11 cost of the exterior glass, which OSI has not paid. ECF No. 14 at 11. Plaintiff 12 next contends that the OSI policy contains additional coverage for outdoor signs, 13 that it submitted a claim for damage to those signs, and that OSI has made no 14 payment for those signs. ECF No. 14 at 12. Plaintiff contends that it requested 15 reimbursement for additional expenses incurred as a result of the fire, and 16 presented OSI with documentation of expenses incurred by its relocation to a new 17 facility, but that OSI has made no attempt to settle those claims. ECF No. 14 at 12. 18 With respect to violations of WAC 284-30-330 (6), (12), and (16), questions 19 of material fact as to the reasonableness of OSI’s failure to settle preclude 20 summary judgment because these WACs include good faith or reasonableness ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S PARTIAL MOTION FOR SUMMARY JUDGMENT ~ 17 1 standards. See WAC 284-30-330(6) (“good faith”); WAC 284-30-330(12) 2 (“reasonably clear”); WAC 284-30-330(16) (“reasonable standards”). First, 3 Defendant contends that the policy in question is limited to $80,000, while Plaintiff 4 maintains that the extension supplied additional coverage. While Bjorklund’s 5 deposition testimony indicates that there was additional coverage under the 6 extension, Exhibit D, ECF No. 16-1, the parties at minimum dispute the extent of 7 that coverage. Despite Bjorklund’s representation that HYC had additional 8 coverage under the extension, however, later in his deposition Bjorklund noted that 9 the policy limit of $120,000 appeared to go into effect on March 15, 2013, four 10 months after the loss. Bjorklund Depo., ECF No. 19-5 at 24 (“the $80,000 would 11 have been in effect at the date of the loss”). Generally, how a contract is construed 12 is a matter of law for the Court to decide. However, here, the Court was provided 13 only with the Business owners Property Extension Endorsement, not the full 14 policy. Thus, the Court cannot determine if there are limitations on the extension 15 that go to OSI’s reasonableness in denying settlement beyond $80,000. 16 Second, there is a genuine issue of material fact precluding summary 17 judgment with respect to OSI’s nonpayment for the tools. Bjorklund admitted in 18 his deposition that under the coverage extension endorsement, the $25,000 for 19 employee tools was beyond the $80,000 business personal property limit. 20 Bjorklund Depo. at 45:3-45:15, ECF No. 19-5 at 13. Defendants further contend ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S PARTIAL MOTION FOR SUMMARY JUDGMENT ~ 18 1 that fire investigators and other witnesses identified additional businesses at the 2 location of the fire, but claim that Plaintiff failed to name those other businesses in 3 response to an interrogatory. ECF No. 18 at 8. Defendants claim that there is a 4 question of fact as to the extent of the overlap of the losses of the varied entities 5 and a question as to whether Plaintiff is claiming damages to other entities’ 6 property. ECF No. 18 at 8. 7 The Court, however, finds that Plaintiff is entitled to summary judgment on 8 the issue of violation of WAC 284-30-330(13), “failing to promptly provide a 9 reasonable explanation of the basis in the insurance policy in relation to the facts or 10 applicable law for the denial of a claim…” The undisputed facts indicate that 11 Defendant has provided little or inaccurate explanation for the basis of denial of 12 Plaintiff’s claims. The only explanations for denials cited are those that indicate 13 that the maximum payment amount had been reached, and that Mr. Bjorklund 14 repeatedly misrepresented the nature of the coverage. See above. And OSI advised 15 Smith that the payments represented payments for all aspects of the claim. Thus, 16 there is no indication that OSI provided a reasonable or accurate explanation for its 17 denials. 18 Accordingly, Plaintiffs have established a per se unfair act in satisfaction of 19 the first prong of the CPA liability test with respect to WAC 284-30-330 (13). A 20 question of material fact remains with respect to the other WACs Plaintiff cites. ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S PARTIAL MOTION FOR SUMMARY JUDGMENT ~ 19 1 B. Bad Faith Claim 2 Plaintiff contends that OSI’s misrepresentation of the policy provisions 3 constitutes bad faith. ECF No. 14 at 13. Plaintiff argues that because OSI 4 repeatedly misrepresented HYC’s entitlements under the policy, no reasonable fact 5 finder could determine, on the undisputed facts, that OSI acted in good faith. Id. at 6 14. 7 In Washington, insurers have a duty to act in good faith and to deal fairly 8 with their insureds, and violation of that duty may give rise to a tort action for bad 9 faith. Smith v. Safeco Ins. Co., 150 Wash.2d 478, 484, 78 P.3d 1274 (2003) (citing 10 Truck Ins. Exch. v. Vanport Homes, Inc., 147 Wash.2d 751, 765, 58 P.3d 276 11 (2002)). According to RCW 48.01.030, “[t]he business of insurance is one affected 12 by the public interest, requiring that all persons be actuated by good faith, abstain 13 from deception, and practice honesty and equity in all insurance matters. Upon the 14 insurer, the insured, their providers, and their representatives rests the duty of 15 preserving inviolate the integrity of insurance.” Bad faith handling of an insurance 16 claim is a tort analyzed applying the same principles as other torts: duty, breach of 17 that duty, proximate cause, and damages. Smith, 150 Wash.2d at 485. Insurers have 18 a duty to act in good faith separate from their contractual coverage obligations to 19 their insureds. See Safeco Ins. Co. v. Butler, 118 Wash.2d 383, 393 (1992) 20 (recognizing that insurer has an “enhanced obligation of fairness toward its ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S PARTIAL MOTION FOR SUMMARY JUDGMENT ~ 20 1 insured” that “imposes a duty beyond that of the standard contractual duty of good 2 faith”); Tank v. State Farm Fire & Casualty Co., 105 Wash.2d 381, 385-86 (1986) 3 (holding that the fiduciary relationship underlying the insurer's duty of good faith 4 imposes a responsibility to give equal consideration to an insured's interests). In 5 order to prove that the insurer acted in bad faith, the insured must show the breach 6 was “unreasonable, frivolous, or unfounded.” Smith, 150 Wash.2d at 484, 78 P.3d 7 1274. 8 9 10 11 In Smith, the Washington Supreme Court explained the relative burdens of policyholders and insurers for claims alleging bad faith denial of insurance coverage: 16 If the insured claims that the insurer denied coverage unreasonably in bad faith, then the insured must come forward with evidence that the insurer acted unreasonably. The policyholder has the burden of proof. The insurer is entitled to summary judgment if reasonable minds could not differ that its denial of coverage was based on reasonable grounds ... If, however, reasonable minds could differ that the insurer's conduct was reasonable, or if there are material issues of fact with respect to the reasonableness of the insurer's action, then summary judgment is not appropriate. If the insurer can point to a reasonable basis for its action, this reasonable basis is significant evidence that it did not act in bad faith and may even establish that reasonable minds could not differ that its denial of coverage was justified. 17 Smith, 150 Wash.2d at 486, 78 P.3d 1274 (emphasis added). The test is not 18 whether the insurer's interpretation of the policy is correct but whether the insurer's 19 conduct was reasonable. Wright v. Safeco Ins. Co., 124 Wash.App. 263, 279-80, 20 109 P.3d 1 (2004) (citing Torina Fine Homes, 118 Wash.App. at 21, 74 P.3d 648). 12 13 14 15 ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S PARTIAL MOTION FOR SUMMARY JUDGMENT ~ 21 1 This Court must determine whether genuine issues of material fact remain as 2 to the reasonableness of the insurers' policy interpretations and investigations. Bad 3 faith claims generally raise fact issues preventing a determination on summary 4 judgment. See Smith v. Safeco Ins. Co., 150 Wash.2d 478, 484, 78 P.3d 1274 5 (2003). But if reasonable minds could not differ on whether the defendant acted in 6 bad faith or violated the CPA, summary judgment is appropriate. See id.; see also 7 Bryant v. Country Life Ins. Co., 414 F.Supp.2d 981, 1000 (W.D.Wash.2006). 8 9 Here, viewing the evidence in the light most favorable to the nonmoving party, there is a material question of fact as to the reasonableness of OSI’s denial 10 of HYC’s claims. There is a reasonable dispute as to the overall limits of the 11 policy, as well as a dispute as to whether HYC submitted adequate documentation 12 of its losses. Thus, reasonable minds could differ as to whether HYC acted in bad 13 faith, and summary judgment is inappropriate. 14 C. Insurance Fair Conduct Act Claim 15 Plaintiff also contends that that OSI’s denial of benefits owed is a violation 16 of the Washington Insurance Fair Conduct Act (“IFCA”) because OSI denied 17 benefits that were clearly covered under the policy. ECF No. 14 at 14. 18 IFCA, RCW 48.30.015, creates a private right of action in favor of an 19 insured whose insurance company unreasonably denies its claim. The statute 20 provides, in relevant part, that ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S PARTIAL MOTION FOR SUMMARY JUDGMENT ~ 22 1 Any first party claimant to a policy of insurance who is unreasonably denied a claim for benefits by an insurer may bring an action ... to recover the actual damages sustained, together with the costs of the action, including reasonable attorneys' fees and litigation costs[.] 2 3 4 RCW 48.30.015. The statute also specifies that a first-party claimant may sue his 5 or her insurance company for violating any of the claims-handling regulations 6 promulgated by the Washington State Office of the Insurance Commissioner at 7 WAC 284–30–330 et seq. RCW 48.30.015(5). 8 9 Plaintiff contends that OSI committed unfair and deceptive acts by not attempting in good faith to effect prompt, fair, and equitable settlement of HYC’s 10 claims, citing the above-noted alleged misrepresentations, as well as HYC’s 11 alleged failure to pay for replacement of the exterior glass, outdoor signs, and 12 additional expenses. Again, however, there is a question of material fact as to the 13 reasonableness of OSI’s denial of HYC’s claims. The parties dispute the coverage 14 limits under the policy as well as Plaintiff’s documentation of individual claims. 15 Under IFCA, the determination is again one of reasonableness, and here 16 reasonableness is in question. 17 /// 18 /// 19 /// 20 /// ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S PARTIAL MOTION FOR SUMMARY JUDGMENT ~ 23 1 2 3 4 ACCORDINGLY, IT IS HEREBY ORDERED: Plaintiff’s Motion for Partial Summary Judgment (ECF No.14) is GRANTED in part and DENIED in part: 1. Plaintiff’s motion for partial summary judgment on the issue of per se 5 unfair practices is GRANTED with respect to violations of WAC 284- 6 30-330 (1), (9), and (13). 7 8 9 10 11 12 13 2. Plaintiff’s motion for partial summary judgment on the issue of bad faith is DENIED. 3. Plaintiff’s motion for partial summary judgment on the issue of an IFCA violation is DENIED. The District Court Executive is hereby directed to enter this Order and provide copies to counsel. DATED April 28, 2013. 14 15 THOMAS O. RICE United States District Judge 16 17 18 19 20 ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S PARTIAL MOTION FOR SUMMARY JUDGMENT ~ 24

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