Are Your Pre-Litigation UIM Investigations and Negotiations Setting You Up for Potential Attorney Fee Awards and Costs if Subsequent Litigation is Filed?

From the Desk of Ashley Nagrodski:

It is imperative that your pre-litigation UIM evaluations take a pro-active approach when investigating your insured’s claims and that you make an offer to pay once the investigation is complete. Failure to properly investigate, evaluate, and make offers may end in future litigation and an award of actual attorney fees and costs.

Claims Pointer:

In this case, the Washington Court of Appeals upheld the trial court’s finding that “plaintiff should not have to bear the burden of her legal action to obtain the benefits of the insurance contract,” upholding an award of attorney fees under Olympic Steamship Co. v. Centennial Ins. Co. and costs under RCW 4.84.015(1)(b).

Debby Ratty v. Progressive Insurance Company (2023 WL 3171545)

Facts:

Plaintiff was a passenger in a car hit from behind by another vehicle. Plaintiff suffered injuries to her neck and back and had an exacerbation of her pre-existing depression, anxiety, and post-traumatic stress disorder. As a result of her injuries, she was unable to continue her work as a social worker at Harborview Medical Center. Plaintiff settled with the underlying driver’s insurance company, and then made a UIM claim with her insurance company.

Plaintiff had a $100,000 underinsured motorist policy with Defendant. In July 2017, Plaintiff demanded the policy limits. Over the course of the next two years, Plaintiff provided medical documentation to support her demand, which Defendant discounted. At no time during the pre-litigation process did Defendant make any offer of settlement, instead it monitored Plaintiff’s injuries and evaluated its liability.  In 2019, Plaintiff sent a letter summarizing her expenses related to the collision and providing documentation supporting the same. Defendant responded that it needed additional information before assessing the claim’s value.

In November of 2019, Plaintiff filed suit against Defendant, alleging that Defendant had breached the insurance contract and requesting the total policy benefit of $100,000 along with attorney fees and costs. The parties engaged in discovery and litigation for years before Defendant tendered the policy in January 2022, two months before trial. Defendant moved for summary judgment on the breach of contract claim because it had tendered its limits. The Court granted the motion but denied Defendant’s request to do so without fees and costs. Plaintiff moved for attorney fees under Olympic Steamship and costs under RCW 4.84.030.  The Court granted the motion, finding that the attorney fees were appropriate under Olympic Steamship and principles of equity because “plaintiff should not have to bear the burden of her legal action to obtain the benefits of the insurance contract.”

Law:

The Washington State Supreme Court has granted insured parties the right to recover their attorney fees when insurers “refuse to defend or pay the justified action or claim of the insured.” Under Olympic Steamship, an award attorney fees is appropriate where the claims are for coverage not a dispute over the claim’s value.

Where coverage is at issue, all that is necessary to recover fees under Olympic Steamship is that the “insurer compels the insured to assume the burden of legal action to obtain the full benefit of the insurance contract.” Leingang v. Pierce County Med. Bureau, Inc., 131 Wn.2d 133, 148-49, 930 P.2d 288 (1997).

Analysis:

Defendant appealed whether the trial court erred in granting Plaintiff’s motion for attorney fees and costs.

Defendant argued the underlying action was not a coverage dispute but rather a disagreement over the value of the claim made under the policy, claiming the case was similar to Dayton v. Farmers Ins. Group where the insurer did not dispute liability but only disagreed on the claim’s value. However, unlike in the subject case in Dayton the insurance carrier acknowledged liability and offered to pay the insured $10,000 under the UIM policy even though Dayton insisted on a $16,000 valuation. Disputes over claim value are not governed by the rule in Olympic Steamship.

Here, Defendant’s entire appeal hinges on the argument that they “never denied coverage; the question was always about the amount of benefits she was entitled to recover.” However, the Court found Defendant did not provide any support for this conclusory statement. Defendant did not dispute the trial court’s finding that (1) Plaintiff continually provided medical documentation that Defendant discounted; (2) Defendant deposed Plaintiff’s doctors and tendered limits after summary judgments were filed and continuances were granted; (3) Plaintiff was forced to file suit to get the benefits of the insurance contract; and (4) Defendant’s intransigence unfairly increased the costs of the litigation to Plaintiff. Thus, those arguments were not addressed by the Court of Appeals.

The trial court’s decision to award attorney fees to Plaintiff under Olympic Steamship and the principles of equity was not an abuse of discretion.  The Court also found that Plaintiff’s initial complaint provided written notice that she sought “judgment against the defendant … [f]or costs and disbursements, including reasonable attorney fees.” Therefore, Plaintiff satisfied the requirements of RCW 4.84.015(1)(b), and thus an award of costs was also not an abuse of discretion.

Big Picture:

Defendant’s failure to take a pro-active approach to investigating Plaintiff’s pre-litigation UIM claim and providing a pre-litigation settlement offer following said investigation had severe repercussions in the form of actual attorney fees and costs in subsequent litigation.  When there is only a dispute over value, UIM carriers should make it clear that there is no dispute over coverage under the policy but there is a dispute as to the value of the claim.  Pre-litigation evaluation should be pro-active and offers of compromise should be extended upon completion of any evaluation.