The Dolsen Companies et al v. QBE Insurance Company et al, No. 1:2016cv03141 - Document 165 (E.D. Wash. 2018)
Court Description: ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS MOTION TO DISMISS. Defendants Motions to Dismiss ECF Nos. 136 , 139 are GRANTED IN PART AND DENIED IN PART. Signed by Chief Judge Thomas O. Rice. (LLH, Courtroom Deputy)
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ome of the 2 materials indicated Defendants were aware of additional first-party property 3 coverage under the policies for expenses incurred in extracting pollutants, but 4 Defendants never informed Plaintiffs of such. The Court ordered disclosure. After 5 Plaintiffs reviewed the material, Plaintiffs filed an Amended Complaint (ECF No. 6 125) asserting claims based on the newly-discovered insurance benefit for breach 7 of contract, insurance bad faith, violation of the Washington Consumer Protection 8 Act (CPA), and violation of the Washington Insurance Fair Conduct Act (IFCA). 9 Around this time, Plaintiffs provided Defendants with supplemental 10 discovery relating to the newly-discovered claims. In response, Defendants moved 11 the Court to sanction Plaintiffs and exclude the evidence from trial, arguing 12 Plaintiffs should have disclosed the information sooner. ECF No. 126. The Court 13 disagreed, finding Plaintiffs’ disclosures were timely considering Defendants 14 concealed the existence of the underlying claims and Plaintiffs, upon discovering 15 the claims, soon thereafter supplemented their initial disclosures. ECF No. 137. 16 Defendants are now (again) attempting to extinguish Plaintiffs’ newly- 17 discovered claims – along with a pre-existing theory for bad faith based on a 18 purported duty to inform the insured that the insurer has a duty to mediate if 19 requested by the insured – with a Motion to Dismiss. ECF No. 136. This matter is 20 now before the Court. ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS ~ 4 1 DISCUSSION 2 Defendants’ Motion to Dismiss asserts three main arguments. 2 First, 3 Defendants argue that Plaintiffs did not tender a request for first-party benefits to 4 the insurer and Defendants therefore never denied the request. As a consequence, 5 Defendants argue, the newly-discovered claims are premature and the Amended 6 Complaint fails to state a claim as to these claims. Second, Defendants argue that 7 Plaintiffs’ IFCA claim (based on the newly-discovered claim) should be dismissed 8 because Plaintiffs did not identify first-party coverage on the IFCA notice form 9 sent to Defendants before Plaintiffs filed suit. Third, Defendants argue the Court 10 should dismiss Plaintiffs’ bad faith claim premised on Defendants’ purported duty 11 to notify Plaintiffs that, if requested, Defendants would enter into mediation with 12 Plaintiffs. Except as to the last theory for bad faith, Defendants’ Motion to 13 Dismiss is denied. These issues are addressed in turn. 14 15 2 16 Covered Cause of Loss is involved” with the newly-discovered claim in Plaintiffs’ 17 Amended Complaint, ECF No. 136 at 14, but Defendants do not provide any 18 support for the proposition that such is required to survive a motion to dismiss, see 19 ECF No. 136 at 14-15, and the materials Defendants were forced to produce 20 indicate a “Covered Cause of Loss” is involved. Defendants also argue that Plaintiffs did not specifically state that “a ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS ~ 5 1 A. First-Party Breach of Contract and Related Claims 2 The crux of Defendants’ argument is that Plaintiffs never tendered a claim 3 for first-party insurance benefits. See ECF No. 136 at 5-15. Defendants argue 4 that, as a result, the newly-discovered claims are not ripe and are insufficiently 5 plead because there has been no request for benefits and thus no corresponding 6 duty has been triggered. 3 ECF No. 136 at 5-15. Critically, Defendants simply 7 assume the original tender is not effective as to the newly-discovered claims. 8 Defendants have not provided any support for its position that the original tender is 9 not effective as to the newly-discovered claims. Rather, Defendants merely cite 10 cases where there was either no tender at all or where the tender was late, as 11 opposed to addressing whether an earlier tender was effective as to a concealed 12 claim, later discovered by Plaintiffs. See ECF No. 136. Defendants’ assumption is 13 incorrect and the arguments depending on such thus fail. The Court finds that Plaintiffs’ original tender for defense and indemnity is 14 15 effective as to the newly-revealed claims. In Washington, “the insured must 16 17 3 18 controversy, etc., ECF No. 136 at 5-13, but these arguments all harken back to the 19 assumption that Plaintiffs did not tender a request for coverage as to the newly- 20 discovered claims. Defendants also argue Plaintiffs lack standing, there is no justiciable ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS ~ 6 1 affirmatively inform the insurer that its participation is desired” before the 2 insurer’s duty to provide benefits is triggered because the “insurer cannot be 3 expected to anticipate when or if an insured will make a claim for coverage[.]” 4 Unigard Ins. Co. v. Leven, 97 Wash. App. 417, 427 (1999); Mut. of Enumclaw Ins. 5 Co. v. USF Ins. Co., 164 Wash.2d 411, 421 (2008). This recognizes the reality that 6 “[a]n insured may choose not to tender a claim to its insurer for a variety of 7 reasons. Like a driver involved in a minor accident, an insured may choose not to 8 tender in order to avoid a premium increase.” Mut. of Enumclaw, 164 Wash.2d at 9 422. 10 While the insured must inform the insurer that its participation is desired, a 11 tender for one benefit under a policy is effective as to any pertinent coverage under 12 the policy because the request for benefits triggers the insurer’s duty to not only 13 consider the specific benefits requested, but also the duty to disclose pertinent 14 coverage to the insured. See Anderson v. State Farm Mut. Ins. Co., 101 Wash. 15 App. 323, 330 (2000) (claims for damages caused by insurer’s failure to disclose 16 pertinent coverage when insured first contacted the insurer are ripe upon first 17 request for coverage). Further, “as a matter of both Washington law and of simple 18 logic, . . . [a] lawsuit itself constitutes a request for payment . . . under the policy, 19 and at that point, the late notice rule applies.” Goodstein v. Cont’l Cas. Co., 509 20 F.3d 1042, 1057 (9th Cir. 2007) (footnoted omitted). Pursuant to the late notice ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS ~ 7 1 rule, “the insurer is not relieved of its obligation to perform on the policy unless it 2 can show that the late notice actually and substantially prejudiced it.” Mut. of 3 Enumclaw, 164 Wash.2d at 425. 4 The Court finds the earlier tender is effective as a tender for the newly- 5 revealed claims. It is true that Plaintiffs’ pre-suit requests for benefits did not 6 identify the newly-revealed benefit. However, Plaintiffs’ newly-revealed benefit is 7 clearly “pertinent coverage[]” that Defendants were obligated to disclose to 8 Plaintiffs once the initial claim was presented. Anderson, 101 Wash. App. at 330. 9 As such, the initial request was effective as to the newly-revealed benefit. In other 10 words, the initial request gave Defendants more than mere notice of a potential 11 claim; it clearly signaled to the Defendants that Plaintiffs were seeking benefits to 12 cover the losses attributable to the overuse and seepage of manure—i.e. Plaintiffs 13 actions clearly “inform[ed] the insurer that its participation [was] desired.” 14 Unigard, 97 Wash. App. at 427. Moreover, even if the early tender specifying 15 defense and indemnity is not effective as to the newly-revealed claims, the Court 16 finds that Plaintiffs have effectively requested benefits in their Amended 17 Complaint. Goodstein, 509 F.3d at 1057. 18 Because Defendants entire argument is based on a false premise – without 19 any discussion about why a motion to dismiss would be proper if the Court found a 20 tender was made – Defendants Motion to Dismiss as to these claims is denied. ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS ~ 8 1 B. IFCA Notice Sufficiency 2 Defendants complain that Plaintiffs did not file an IFCA notice identifying 3 the newly-revealed claims, ECF No. 137 at 3, while conceding Plaintiffs did file an 4 IFCA notice as to the original claims involving Plaintiffs’ request for defense and 5 indemnity in the underlying CARE litigation. As above, Defendants assume an 6 IFCA notice is only effective for a claim if the claim is specifically listed. Again, 7 Defendants offer no case law in support of the proposition that such specificity, 8 especially under the current facts, is required. And, again, the Court disagrees with 9 Defendants’ assumption. 10 Revised Code of Washington 48.30.015 requires a first party claimant to 11 “provide written notice of the basis for the cause of action to the insurer and office 12 of the insurance commissioner” twenty days before filing an action based on RCW 13 48.30.015—i.e. an unreasonable denial of a claim. The courts have held “IFCA’s 14 pre-suit notice provision is a mandatory condition precedent to an IFCA lawsuit.” 15 MKB Constructors v. Am. Zurich Ins. Co., 49 F. Supp. 3d 814, 840 (W.D. Wash. 16 2014). Notably, the IFCA notice form does not require the insured to identify the 17 specific benefits sought, but rather only requires the insured to identify the policy 18 (or policies) at issue and the legal basis for the alleged violations. See ECF No. 19 140-1. 20 ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS ~ 9 1 The Court finds that the original IFCA notice is effective as to the newly- 2 revealed claims, at least under the facts before the Court where Defendants were 3 obligated but failed to disclose the benefit to Plaintiffs, Anderson, 101 Wash. App. 4 at 330, and where the newly-discovered benefit (1) involves the same underlying 5 damages as the pre-suit IFCA notice and (2) is found under the policies identified 6 in the pre-suit IFCA notice. 4 While Defendants argue for a limited scope of the 7 IFCA notice, the IFCA notice itself only identifies the policies – not the specific 8 benefits sought – and these policies include the newly-revealed benefit. As such, 9 the IFCA notice appears to have a broad application on its face. 10 C. Bad Faith under WAC § 284-30-040 11 Defendants also argue that Plaintiffs’ claim for insurance bad faith under 12 WAC 284-30-940 does not state a claim upon which relief may be granted. ECF 13 No. 136 at 15-16. Defendants concede that the insurer has a duty to participate (in 14 good faith) in nonbinding mediation if requested by an insured, but Defendants 15 argue this does not impose a duty on the insurer to inform the insured of the 16 mediation program before the insured requests mediation. ECF No. 136 at 15-16. 17 18 4 19 the policies identified in the IFCA notice, see ECF No. 39-8 at 40, and Defendants 20 have not argued anything to the contrary. The provisions at issue for the newly-revealed claims appear to fall under ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS ~ 10 1 On this point, Defendants are correct. The plain language of WAC 284-30-940 2 merely requires participation in mediation if requested; it does not require the 3 insurer to inform the insured of such. Defendants Motion to Dismiss is granted as 4 to this theory for insurance bad faith (bearing in mind Plaintiffs have asserted other 5 theories for bad faith that do survive the Motion). 6 ACCORDINGLY, IT IS HEREBY ORDERED: 7 8 9 10 11 Defendants’ Motions to Dismiss (ECF Nos. 136, 139) are GRANTED IN PART AND DENIED IN PART. The District Court Executive is directed to enter this Order and furnish copies to counsel. DATED May 16, 2018. 12 13 THOMAS O. RICE Chief United States District Judge 14 15 16 17 18 19 20 ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS ~ 11
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