Lear et al v. IDS Property Casualty Insurance Company

Filing 74

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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HONORABLE RICHARD A. JONES

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

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KYLE LEAR, and RICHARD and
DEBRA LEAR, husband and wife, and
the marital community composed
thereof,

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CASE NO. C14-1040 RAJ
ORDER

Plaintiffs,

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v.

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IDS PROPERTY CASUALTY
INSURANCE COMPANY, an
admitted insurer,

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Defendant.

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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
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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

1 DENIES in part the motion.
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I.

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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.
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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
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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).

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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
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future.

ORDER- 2

1 scene of the collision without recognition or identification.
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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.
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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.
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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
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is still liable under the UIM portion of the policy and any damages resulting from IDS’s
handling of the PIP and collision claims.

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ORDER- 3

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II.

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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).
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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.
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ORDER- 4

1 Contractors Ass’n, 809 F. 2d 626, 630 (9th Cir. 1987).
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III.

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A. Underinsured Motorist Benefits

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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.”).
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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).
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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
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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.

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ORDER- 5

1 # 48, at pp. 9-10.
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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.
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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.
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B. Insurance Bad Faith

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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,
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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)).
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“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.
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1. IDS’s Investigation and Pending of the PIP Benefits

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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).
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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
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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.
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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.
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2. IDS’s Investigation and Pending of the Collision Benefits

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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.
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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
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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
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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.
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C. Insurance Fair Conduct Act

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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).
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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.
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D. Consumer Protection Act

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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.
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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.
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E. Breach of Contract Claims

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“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.
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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.
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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.
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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.
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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.
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IV.

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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

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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.
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Dated this 11th day of January, 2017.

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The Honorable Richard A. Jones
United States District Judge

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ORDER- 12