Lear et al v. IDS Property Casualty Insurance Company, No. 2:2014cv01040 - Document 74 (W.D. Wash. 2017)

Court Description: ORDER granting in part and denying in part Defendant's 48 Motion for Summary Judgment and directing Clerk to terminate as moot Defendant's 66 Motion to exclude Gary Williams's testimony, by Judge Richard A Jones. (PM)
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Lear et al v. IDS Property Casualty Insurance Company 1 Doc. 74 HONORABLE RICHARD A. JONES 2 3 4 5 6 7 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE 8 9 10 KYLE LEAR, and RICHARD and DEBRA LEAR, husband and wife, and the marital community composed thereof, 11 12 13 CASE NO. C14-1040 RAJ ORDER Plaintiffs, 14 v. 15 17 IDS PROPERTY CASUALTY INSURANCE COMPANY, an admitted insurer, 18 Defendant. 16 19 20 This matter comes before the Court on Defendant’s motion for summary 21 judgment, pursuant to Federal Rule of Civil Procedure 56. Dkt. # 48. Plaintiffs oppose 22 the motion. Dkt. # 55. 1 For the reasons that follow, the Court GRANTS in part and 23 24 25 1 The Court strongly disfavors footnoted legal citations. Footnoted citations serve as an end-run around page limits and formatting requirements dictated by the Local Rules. See Local Rules W.D. Wash. LCR 26 7(e). Moreover, several courts have observed that “citations are highly relevant in a legal brief” and including them in footnotes “makes brief-reading difficult.” Wichansky v. Zowine, No. CV-13-0120827 PHX-DGC, 2014 WL 289924, at *1 (D. Ariz. Jan. 24, 2014). The Court strongly discourages the parties ORDER- 1 Dockets.Justia.com 1 DENIES in part the motion. 2 I. 3 This case arises from an October 31, 2012 auto collision in which Kyle Lear’s BACKGROUND 4 1995 Pontiac Grand Am rear-ended Troy Milles’s Nissan. Mr. Lear claims that he is the 5 victim of a hit-and-run, the impact of which propelled him into the rear end of Mr. 6 Milles’s vehicle. Dkt. # 55, at pp. 1-2. Because his parents owned the Pontiac, Mr. Lear 7 was covered under his parents’ insurance policy with Defendant IDS Property Casualty 8 Insurance Company (“Defendant” or “IDS”). Id. This policy included personal injury 9 protection (PIP), underinsured motorist coverage (UIM), liability coverage, and collision 10 coverage. Id.; see also Dkt. # 50-1 (Policy). Mr. Lear claimed injuries as a result of the 11 collision and therefore asserted a PIP and UIM claim, and his parents asserted a collision 12 claim with IDS. Dkt. # 55, at p. 2. 13 Soon after the collision, IDS recorded statements from both Mr. Lear and Mr. 14 Milles. Dkt. ## 50-2, 50-3. Mr. Lear told IDS that an unknown driver hit him from 15 behind and drove away without accounting for the damage. Dkt. # 50-2, at pp. 8-9. Mr. 16 Lear could not identify the unknown driver or vehicle. Mr. Milles told IDS that Mr. Lear 17 claimed to have been hit from behind but Mr. Milles did not witness a third vehicle or 18 hear that alleged impact. Dkt. # 50-3, at p. 11. Both Mr. Lear and Mr. Milles agreed that 19 traffic was heavy the day of the collision. Dkt. ## 50-2, at p. 12, 50-3, at pp. 15-16. Such 20 heavy traffic suggests that it would be a challenge for any hit-and-run driver to escape the 21 22 23 from footnoting their legal citations in any future submissions. See Kano v. Nat’l Consumer Co-op Bank, 22 F.3d 899-900 (9th Cir. 1994). 24 The Court further notes that Plaintiffs failed to cite to the record in their brief. This is unacceptable 25 practice. The Court declines to use its discretion to strike the factual portions of Plaintiffs’ brief and the Court will decline to issue sanctions at this time. However, Plaintiffs would be prudent to cite to the 26 record in any subsequent submissions to the Court as the Court may not extend such leniency in the 27 future. ORDER- 2 1 scene of the collision without recognition or identification. 2 Mr. Lear sought medical treatment for pain in his neck, lower back, and left 3 extremities. IDS covered his medical treatment pursuant to the PIP portion in the policy. 4 Dkt. # 49-1. However, IDS questioned whether a third driver rear-ended Mr. Lear and 5 sought examinations under oath of Mr. Lear and his parents. In response, the Lears 6 obtained counsel who accepted the case on contingency. While IDS investigated the hit7 and-run claim from January to May of 2013, it suspended any additional PIP payments, 8 which at the time amounted to one pending payment for medical services. Dkt. # 50 9 (Michalak Decl.), at ¶ 12. However, with the PIP portion of the policy suspended, Mr. 10 Lear was unable to seek further treatment. Dkt. # 56-2. His attorney attempted on 11 several occasions to discuss the PIP issue with IDS’s attorney, stressing that Mr. Lear 12 wished to pursue treatment but could only do so if IDS would cover the costs under the 13 PIP portion of the policy. Dkt. # 56-2, at p. 18. 14 As part of its investigation, IDS retained David Wells, an accident reconstruction 15 expert, to analyze Mr. Lear’s Pontiac. Dkt. ##49-3, 49-4. Mr. Wells conducted several 16 calculations to reconstruct the accident. He concluded on a more probable than not basis 17 that an unknown driver did not rear-end Mr. Lear. Id. However, Mr. Lear’s father 18 brought the Pontiac to a trusted auto appraiser who conducted a quick inspection and 19 found that the damage to the rear of the vehicle could have resulted from a low-impact, 20 rear-end collision. Dkt. # 49-16. 21 Upon completion of its investigation, IDS paid all PIP claims and covered any 22 property damage. Mr. Milles filed a tort claim against Mr. Lear as a result of the 23 collision, and IDS assumed the defense on behalf of Mr. Lear. At issue are whether IDS 24 25 is still liable under the UIM portion of the policy and any damages resulting from IDS’s handling of the PIP and collision claims. 26 27 ORDER- 3 1 II. 2 Summary judgment is appropriate if there is no genuine dispute as to any material LEGAL STANDARD 3 fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 4 56(a). The moving party bears the initial burden of demonstrating the absence of a 5 genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). 6 Where the moving party will have the burden of proof at trial, it must affirmatively 7 demonstrate that no reasonable trier of fact could find other than for the moving party. 8 Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007). On an issue where 9 the nonmoving party will bear the burden of proof at trial, the moving party can prevail 10 merely by pointing out to the district court that there is an absence of evidence to support 11 the non-moving party’s case. Celotex Corp., 477 U.S. at 325. If the moving party meets 12 the initial burden, the opposing party must set forth specific facts showing that there is a 13 genuine issue of fact for trial in order to defeat the motion. Anderson v. Liberty Lobby, 14 Inc., 477 U.S. 242, 250 (1986). The court must view the evidence in the light most 15 favorable to the nonmoving party and draw all reasonable inferences in that party’s favor. 16 Reeves v. Sanderson Plumbing Prods., 530 U.S. 133, 150-51 (2000). 17 However, the court need not, and will not, “scour the record in search of a genuine 18 issue of triable fact.” Keenan v. Allan, 91 F.3d 1275, 1279 (9th Cir. 1996); see also 19 White v. McDonnell-Douglas Corp., 904 F.2d 456, 458 (8th Cir. 1990) (the court need 20 not “speculate on which portion of the record the nonmoving party relies, nor is it obliged 21 to wade through and search the entire record for some specific facts that might support 22 the nonmoving party’s claim”). The opposing party must present significant and 23 probative evidence to support its claim or defense. Intel Corp. v. Hartford Accident & 24 Indem. Co., 952 F.2d 1551, 1558 (9th Cir. 1991). Uncorroborated allegations and “self25 serving testimony” will not create a genuine issue of material fact. Villiarimo v. Aloha 26 Island Air, Inc., 281 F.3d 1054, 1061 (9th Cir. 2002); T.W. Elec. Serv. V. Pac Elec. 27 ORDER- 4 1 Contractors Ass’n, 809 F. 2d 626, 630 (9th Cir. 1987). 2 III. 3 A. Underinsured Motorist Benefits 4 Washington law requires that insurance companies who insure “against loss DISCUSSION 5 resulting from liability imposed by law for bodily injury, death, or property damage, 6 suffered by any person arising out of the ownership, maintenance, or use of a motor 7 vehicle” provide coverage for damages arising from hit-and-run motor vehicles. RCW 8 48.22.030(2). Insurance companies may not employ a “physical contact” rule for hit9 and-run incidents such that coverage is premised on there being actual contact between 10 the hit-and-run vehicle and the insured’s vehicle. See Hartford Acc. & Indem. Co. v. 11 Novak, 83 Wash. 2d 576, 582 (1974) (finding that Washington’s law is “intended to 12 afford protection to an insured for injuries or damages proximately caused by a hit-and13 run vehicle, irrespective of its actual physical contact with the vehicle of the insured.”). 14 If an insured claims that the accident arose from the actions of a phantom vehicle 15 that had no physical contact with the insured, then “[t]he company has an opportunity to 16 show fraud.” Id. at 585. In those cases, the insurance company may require evidence 17 “other than the testimony of the insured or any person having an underinsured motorist 18 claim resulting from the accident.” RCW 48.22.030(8)(a). Washington law further 19 requires the insured to report such accidents to the proper authorities within seventy-two 20 hours. RCW 48.22.030(8)(b). 21 IDS’s arguments for summary judgment on Mr. Lear’s UIM claim are premised 22 on the fact that there was no physical contact between the hit-and-run vehicle and Mr. 23 Lear’s Pontiac, and therefore Mr. Lear must provide competent evidence, other than his 24 25 26 own testimony or that of his parents. Dkt. ## 48 (Motion), at pp. 9-10, 50-1, at p. 15. IDS bases its no-contact assumption on the conclusions of its expert and mechanic and on circumstances arising from the inconsistent testimony of Mr. Milles and the Lears. Dkt. 27 ORDER- 5 1 # 48, at pp. 9-10. 2 However, Darrell Harber, who provided his expert opinion regarding the appraisal 3 of Mr. Lear’s Pontiac, disagreed that there was no contact between the alleged hit-and4 run vehicle and the Pontiac. Dkt. # 49-16, at p. 35 (IDS’s attorney asked Mr. Harber 5 whether he believed there was evidence of a rear-end collision with the Pontiac. Mr. 6 Harber answered “yes.”). Mr. Harber admits that he did not remove the rear bumper to 7 conduct a closer inspection, but he nonetheless believed that a vehicle hit the rear of the 8 Pontiac at a low speed. Id. at 37. 9 At this stage, the Court is not permitted to invade the province of the jury by 10 weighing evidence or judging the credibility of witnesses. Neely v. St. Paul Fire & 11 Marine Ins. Co., 584 F.2d 341, 344 (9th Cir. 1978). Accordingly, there is a genuine issue 12 of material fact whether an unknown driver hit Mr. Lear’s Pontiac on the day of the 13 accident. If an unknown driver did hit Mr. Lear’s Pontiac, then IDS’s arguments based 14 on the no-contact provision of the policy are moot. As such, the Court DENIES IDS’s 15 motion with regard to Plaintiffs’ UIM claim. 16 B. Insurance Bad Faith 17 In Washington, “an insurer has a duty of good faith to its policyholder and 18 violation of that duty may give rise to a tort action for bad faith.” Smith v. Safeco Ins. 19 Co., 78 P.3d 1274, 1276 (Wash. 2003). Like other torts, establishing a claim for bad faith 20 requires proof of duty, breach, proximate cause, and damages. Id. “In order to establish 21 bad faith, an insured is required to show the breach was unreasonable, frivolous, or 22 unfounded.” Kirk v. Mt. Airy Ins. Co., 951 P.2d 1124, 1126 (Wash. 1998). “Claims of 23 bad faith ‘are not easy to establish and an insured has a heavy burden to meet.’” Bayley 24 Constr. v. Great Am. E & S Ins. Co., 980 F. Supp. 2d 1281, 1290 (W.D. Wash. 2013) 25 (quoting Overton v. Consol. Ins. Co., 38 P.3d 322, 329 (Wash. 2002)). Courts must place 26 the insurer’s actions in context when deciding whether they were unreasonable, frivolous, 27 ORDER- 6 1 or unfounded. Berkshire Hathaway Homestate Ins. Co. v. SQI, Inc., 132 F. Supp. 3d 2 1275, 1288 (W.D. Wash. 2015) (citing Keller v. Allstate Ins. Co., 915 P.2d 1140, 1145 3 (Wash. App. 1996)). “Violation of Washington’s insurance regulations is evidence of 4 bad faith.” Id. at 1252 (citing Coventry Associates v. Am. States Ins. Co., 274, 961 P.2d 5 933, 935 (1998)). 6 “A claim of bad faith cannot succeed when the insurer ‘acts honestly, bases its 7 decision on adequate information, and does not overemphasize its own interest.’” 8 Beasley, 2014 WL 1494030, at *7 (quoting Werlinger v. Clarendon Nat. Ins. Co., 120 9 P.3d 593, 595 (Wash. Ct. App. 2005)). A bad faith claim cannot succeed without proof 10 of harm. Id. “Because bad faith is a question of fact, ‘[a]n insurer is entitled to a 11 dismissal on summary judgment if, after viewing the facts in the insured’s favor, a 12 reasonable person could only conclude that its actions were reasonable.’” Id. (quoting 13 Werlinger, 120 P.3d at 595). Summary judgment is also appropriate in instances where a 14 reasonable person could only conclude the insured was not harmed. Id. 15 1. IDS’s Investigation and Pending of the PIP Benefits 16 An insurer must reasonably investigate an insured’s claim. Anderson v. State 17 Farm Mut. Ins. Co., 2 P.3d 1029, 1035 (Wash. Ct. App. 2000). This requirement is set 18 forth in the Washington Administrative Code (“WAC”). “Refusing to pay claims without 19 conducting a reasonable investigation” is an unfair or deceptive act. WAC 284-3020 330(4). It is also unfair to “[f]ail to affirm or deny coverage of claims within a 21 reasonable time after fully completed proof of loss documentation has been submitted.” 22 WAC 284-30-330(5). 23 Plaintiffs claim that IDS was unreasonable when it suspended the PIP portion of 24 the policy pending its investigation. Plaintiffs present no authority supporting its view 25 26 27 ORDER- 7 1 that IDS was completely barred from investigating the PIP claims. 2 Plaintiffs cite to 2 Sherry v. Financial Indem. Co., but there the court confirmed that insurance companies 3 are responsible for paying insurers their PIP benefits even when the insurer is at fault. 4 160 Wash. 2d 611, 624 (2007). Sherry made no comment or finding with regard to an 5 insurance company’s ability to investigate PIP claims. Moreover, whether Mr. Lear was 6 at fault is not the issue raised by IDS. Instead, IDS was concerned with fraud, and for 7 that reason it was entitled to reasonably investigate the claim. Ki Sin Kim v. Allstate Ins. 8 Co., 153 Wash. App. 339, 361 (2009) (finding that Allstate did not act in bad faith when 9 simultaneously investigating Kim’s PIP and UIM claims). Notably, IDS pended a single 10 medical payment during the investigation; it did not categorically suspend all payments. 11 Dkt. # 50, ¶ 12. 12 The Court finds that IDS’s investigation into the PIP claims was reasonable and 13 ultimately IDS paid Mr. Lear’s medical expenses. A reasonable jury would not conclude 14 otherwise. As such, the Court GRANTS IDS’s motion with regard to bad faith handling 15 of the PIP claims. 16 2. IDS’s Investigation and Pending of the Collision Benefits 17 The Lears argue that IDS acted in bad faith when it suspended payments under the 18 collision coverage portion of the policy during the investigation. Dkt. # 1-2 (Complaint), 19 at ¶¶ 8.1-8.21. 20 IDS was reasonable in conducting an investigation when it received competing 21 narratives of the accident—Mr. Lear claiming there was a hit-and-run driver and Mr. 22 Milles denying having heard or witnessed any such impact or driver. Ultimately, IDS 23 24 2 Plaintiffs cite to WAC 284-30-395 to argue that IDS could not suspend PIP benefits while it investigated potential fraud. However, that statute applies when an insurer consults with health 25 professionals when evaluating the reasonableness or necessity of treatment. WAC 284-30-395 26 (stating that the statute “applies only where the insurer relies on the medical opinion of health care professionals to deny, limit, or terminate medical and hospital benefit claims.”). This is not 27 the situation here; the statute is inapplicable for these purposes. ORDER- 8 1 honored the collision benefits once it completed the investigation. The Court finds this 2 analysis similar to the bad faith analysis with regard to the PIP benefits, and once more 3 finds that IDS was reasonable. For similar reasons, the Court GRANTS IDS’s motion 4 with regard to bad faith handling of the collision claims. 5 C. Insurance Fair Conduct Act 6 Under the Insurance Fair Conduct Act (“IFCA”), an insurance policyholder who 7 has been “unreasonably denied a claim for coverage or payment of benefits by their 8 insurer” may file an action for damages. RCW 48.30.015. An insurer’s alleged violation 9 of a WAC provision is not actionable under the IFCA unless it is accompanied by an 10 unreasonable denial of coverage or payment: “By its plain language, IFCA gives an 11 insured no right to sue solely for a violation of a Washington insurance regulation. The 12 right to sue arises solely from an unreasonable denial of a claim for coverage or payment 13 of benefits.” Seaway Props., LLC v. Fireman’s Fund Ins. Co., 16 F. Supp. 3d 1240, 1255 14 (W.D. Wash. 2014). Offering or paying a settlement that is not based on a reasoned 15 evaluation of what the insurer knew or should have known at the time about the insured’s 16 claim is an unreasonable denial of coverage under the IFCA. Morella v. Safeco Ins. Co. 17 of Ill., No. C12-0672RSL, 2013 WL 1562032, at *3 (W.D. Wash. 2013). But if there is a 18 delay in payment or coverage “due to a dispute over the amount owed, the delay alone 19 does not constitute a denial of payment under IFCA.” Beasley v. State Farm Mut. Auto. 20 Ins. Co., No. C13-1106RSL, 2014 WL 1494030, at *6 (W.D. Wash. 2014). 21 IDS encountered what it believed to be competing narratives of the alleged hit- 22 and-run on October 31, 2012. Dkt. # 50-4 (Reservation of Rights Letter). As such, it 23 investigated the issue and pended benefits in the interim. The Court finds the IFCA 24 analysis similar to the bad faith analysis above. That is, the Court does not find that a 25 reasonable jury would conclude from the evidence that IDS unreasonably denied any 26 claims for coverage or that it unreasonably delayed paying benefits while an investigation 27 was pending. Ultimately, IDS paid Mr. Lear’s medical expenses and negotiated a ORDER- 9 1 settlement amount for the value of the car. Dkt. # 49-12, at p. 33. Accordingly, the Court 2 GRANTS IDS’s motion with regard to Plaintiffs’ IFCA claims. 3 D. Consumer Protection Act 4 A Consumer Protection Act (CPA) claim requires proof of five elements: “(1) 5 unfair or deceptive act or practice; (2) occurring in trade or commerce; (3) public interest 6 impact; (4) injury to plaintiff in his or her business or property; (5) causation.” Hangman 7 Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 719 P.2d 531, 533 (Wash. 1986). 8 Parties initiating suit under the CPA may recover actual damages, costs, and reasonable 9 attorney’s fees. RCW 19.86.090. Both parties agree that Mr. Lear is not entitled to 10 emotional distress damages under the CPA. Dkt. # 55, at p. 13. 11 Because the Court has already concluded that IDS was neither unfair nor deceptive 12 with regard to investigating Mr. Lear’s PIP claims or the Lears’ collision claims, this 13 CPA claim fails on the first element. Accordingly, the Court GRANTS IDS’s motion 14 with regard to Plaintiffs’ claims that IDS violated the CPA when handling the PIP or 15 collision claims. 16 E. Breach of Contract Claims 17 “To prevail on a contract claim, the plaintiff must show an agreement between the 18 parties, a parties' duty under the agreement, and a breach of that duty.” Fid. & Deposit 19 Co. of Maryland v. Dally, 201 P.3d 1040, 1044 (Wash. Ct. App. 2009). Here, Plaintiffs 20 claim that IDS breached the insurance policy because IDS “wrongly resfus[ed] to pay PIP 21 benefits.” Dkt. # 55, at p. 19. To advance their claims, Plaintiffs cite to WAC 284-3022 395, which the Court has already addressed above as inapplicable for these purposes. 23 Plaintiffs do not cite to a provision within the policy that IDS breached. 24 IDS defends its actions by citing to the “What To Do In Case Of An Auto 25 Accident Or Loss” portion of the policy. Dkt. # 48, at p. 13 (citing to Dkt. # 50-1, at p. 26 12). IDS claims that this provision authorized it to examine the Lears under oath. Id. 27 Indeed, this provision of the policy does allow for IDS to conduct such examinations and ORDER- 10 1 requires that the Lears cooperate with any investigation. Dkt. # 50-1, at p. 12. However, 2 IDS is incorrect that the policy authorized it to pend the payment of PIP benefits during 3 the course of the investigation. See Dkt. # 48, at p. 13 (arguing that the policy authorized 4 IDS to “pend the payment of benefits during an investigation”). The Court reviewed the 5 policy that IDS submitted in Docket number 50-1 and finds no such provision. 6 At the same time, there is no provision prohibiting IDS from pending the payment 7 of benefits during the course of an investigation. Moreover, Washington law 8 contemplates that insurance companies will investigate certain claims made by their 9 insureds. See, generally, WAC 284-30-330. Ultimately, IDS was concerned that Mr. 10 Lear was making fraudulent statements, which if true would authorize IDS to deny any 11 claims arising from such statements. Dkt. # 50-1, at p. 18. Therefore, IDS was required 12 to conduct a reasonable investigation before it made any decisions to deny benefits. Of 13 course, after its investigation, IDS decided to extend payment for the benefits rather than 14 deny payment for the benefits. 15 The Court conducts a similar analysis with regard to the Lears’ collision coverage 16 claims and finds a similar result. IDS reasonably investigated those claims and paid the 17 benefits at the conclusion of the investigation. 18 The Court does not find evidence that IDS breached any provisions of the policy 19 when it delayed payment of the PIP or collision benefits during the course of the 20 investigation. However, because the Court finds that a UIM claim may exist, there is a 21 question of fact whether the Lears may maintain a breach of contract claim with regard to 22 any unpaid UIM benefits. Accordingly, the Court GRANTS in part and DENIES in 23 part IDS’s motion with regard to Plaintiffs’ breach of contract claims. 24 IV. 25 For all the foregoing reasons, the Court GRANTS in part and DENIES in part CONCLUSION 26 IDS’s motion for summary judgment. Dkt. # 48. This matter will proceed on Plaintiffs’ 27 UIM claim and any related breach of contract claim. ORDER- 11 1 The Court granted summary judgment as to Plaintiffs’ bad faith claims. As such, 2 IDS’s motion to exclude Gary Williams’s testimony is MOOT. The Court instructs the 3 Clerk to terminate that motion. Dkt. # 66. 4 5 Dated this 11th day of January, 2017. 6 7 A 8 9 The Honorable Richard A. Jones United States District Judge 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 ORDER- 12