Lock v. Am. Family Ins. Co.

460 P.3d 683

Stephanie LOCK, an individual, Appellant,

v.AMERICAN FAMILY INSURANCE COMPANY, a Foreign Corporation, doing business in Washington, Respondent.

No. 79255-5-I

Court of Appeals of Washington, Division 1.

FILED April 6, 2020

Vonda Michell Sargent, Carol Farr, The Law Offices of Vonda M. Sargent, 119 1st Ave. S Ste. 500, Seattle, WA, 98104-3400, for Appellant.

Rory W. Leid, Christopher Roslaniec, Cole | Wathen | Leid | Hall, P.C., 1505 Westlake Ave. N Ste. 700, Seattle, WA, 98109-6243, for Respondent.

PUBLISHED OPINION

Mann, A.C.J.

¶1 Stephanie Lock sued American Family Insurance Company (American Family) seeking coverage under her uninsured motorist (UIM) policy after she was injured in a motor vehicle accident. Her lawsuit included extra-contractual claims for common law insurance bad faith, violation of the Washington Consumer Protection Act (CPA), chapter 19.86 RCW, and violation of the Insurance Fair Conduct Act (IFCA), RCW 48.30.015. After a jury verdict in Lock’s favor, the trial court granted a judgment notwithstanding the verdict (JNOV) on the extra-contractual claims. The trial court concluded that Lock failed to prove damages proximately caused by American Family’s bad faith and failed to demonstrate injury to business or property in support of her CPA claim. The trial court let stand the jury’s $21,000 verdict on Lock’s UIM claim.

¶2 Lock appeals and contends (1) the trial court erred by excluding evidence of American Family’s bad faith conduct during litigation, (2) the trial court improperly granted a JNOV on the extra-contractual claims, and (3) the trial court improperly vacated its order granting attorney fees to Lock.

¶3 American Family cross appeals, contending, in part, that the trial court erred in failing to apply an offset to the UIM verdict to take into account payments made under Lock’s Personal Injury Protection (PIP) policy.

¶4 We affirm in part, reverse in part, and remand for retrial on portions of Lock’s insurance bad faith claim. We also remand for the trial court to offset the UIM verdict to take into account payments made under Lock’s PIP policy.

I.

¶5 On February 22, 2013, Lock was rear-ended by an uninsured driver. An emergency room visit after the accident confirmed that Lock had no head injury, Computerized tomography (CT) scans of Lock’s neck and back also confirmed no disk injury or fracture. Lock was discharged from the emergency room with a diagnosis of neck and back pain.

¶6 At the time of the accident Lock’s auto insurance policy with American Family included PIP benefits of $35,000, available for up to 3 years of treatment, and UIM benefits of $100,000. American Family paid for the damage to Lock’s car and extended rental coverage while she shopped for a new car. American Family also began paying for Lock’s medical treatments. As of March 1, 2013, American Family had resolved all of Lock’s claims other than the resolution of her PIP and UIM claims.

¶7 Lock was treated by her long-time primary care physician, Dr. John Mayeno. At her March 27, 2013, examination–roughly one month after the accident–Dr. Mayeno noted full, pain free, range of motion in Lock’s neck and back. The sole remaining issue was a trapezius spasm. Mayeno testified that Lock was fully recovered by early 2014, and that she had not suffered any permanent injury.

¶8 Lock was discharged from physical therapy to home exercise on December 18, 2013. Lock’s last massage therapy appointment was December 9, 2013. A January 20, 2014, discharge note stated "Reason Given: She feels like she has recovered well." After Lock was involved in another motor vehicle accident in May 2014, Dr. Mayeno noted:

Stephanie states that she was feeling much better in late December. Physical therapy was discontinued in late January and since early February she has felt well with no stiffness or pain in the neck or back.

....

Will close her claim from her [motor vehicle accident] dated 2/22/13 in view of her subjective clinical course of pain and spasm complaints which had resolved as of earlier this year, her discharge from physical therapy and her self-reported [independent medical exam (IME) ] that was negative. She is in agreement with this plan. She will discuss this with her lawyer.

¶9 As required under her policy with American Family, Lock submitted to an independent medical exam (IME) with Dr. Dennis Chong in January 2014. Dr. Chong diagnosed Lock with soft tissue injuries, which he said should have fully healed two to three months after the accident. Dr. Chong found Lock to be "medically stationary" and capable of performing her "functional job duties and normal activities of daily living" at the time of the examination. He indicated that "no further diagnostic testing or additional treatment is medically necessary."

¶10 As a result, American Family notified Lock on January 20, 2014, that it would not pay for any further medical treatments after January 14, 2014. The letter from American Family informed Lock that "[a]ny reductions in your client’s billings or treatment not considered reasonable, necessary and related to your client’s automobile accident are subject to rebuttal on your client’s part." Lock did not dispute the IME.

¶11 American Family paid $13,541.98 of Lock’s PIP benefits. All of Lock’s medical bills were paid by American Family. American Family acknowledged that Lock was still seeking treatment for an injury in September 2013 and valued Lock’s remaining insurance claim at up $8,500. American Family initially offered to settle for $5,000, and then increased its offer to $7,500 on December 15, 2014. Lock did not accept the $7,500 offer to settle.

¶12 Lock filed a UIM lawsuit against American Family in March 2015. Lock amended her complaint in November 2015, adding extra-contractual causes of action for violation of the IFCA, CPA, and a common law insurance bad faith claim. Lock alleged that American Family failed to reasonably investigate her claim, failed to explain its offer, and failed to reasonably communicate, leading her to file the UIM suit.

¶13 After Lock added her extra-contractual claims, American Family removed the case to federal court claiming an amount in controversy over $75,000. After a hearing, U.S. District Court Judge James Robart remanded the case back to the King County Superior Court on February 10, 2016.

¶14 After remand, trial was set for October 3, 2016, before King County Superior Court Judge Beth Andrus. On August 12, 2016, Judge Andrus denied American Family’s motion for a continuance of the trial. The court then denied American Family’s motion for a hearing on summary judgment on shortened time and denied American Family’s request to calendar a hearing on its motion for summary judgment before trial. On September 1, 2016, American Family removed the case to the U.S. District Court a second time. American Family again alleged an amount in controversy in excess of $75,000. After removal, American Family filed the same summary judgment motion before the U.S. District Court.

¶15 American Family relied on Lock’s statement of damages to support its claim that the amount in controversy exceeded $106,000. Lock’s statement of damages identified $13,541.98 in special damages and identified that general damages for the IFCA, CPA, and bad faith claims were unknown as they would be determined by a jury. The statement of damages indicated that American Family had previously estimated the general damages as being a minimum of $92,709.90. Judge Robart rejected American Family’s reliance on its own estimate of general damages and agreed with Lock that general damages would be determined by a jury. Judge Robart sanctioned American Family and remanded the case again after finding that American Family "flat-out lied to the Court" about the amount in controversy and used "cheap trial tactics" by removing the case in order to file its motion for summary judgment.

¶16 In superior court, on March 17, 2017, Judge Andrus set trial for May 1, 2017, deemed discovery complete, and once again denied American Family’s request to calendar its motion for summary judgment due to its bad faith litigation tactics.

¶17 Judge Andrus granted American Family’s motion in limine to exclude testimony from Lock’s insurance expert, Mary Owen, about "choices litigation counsel made in this lawsuit" as irrelevant. The trial court allowed Owen to "opine regarding the substance of what American Family did or failed to do in investigating the Plaintiff’s UIM claim or in explaining how it reached its decision to cut off Plaintiff’s benefits."

¶18 On March 30, 2017, American Family’s corporate counsel, Christopher Strickland, mailed a check for $4,153.75 and a cover letter directly to Lock’s home. The cover letter was on letterhead from American Family "Claims Legal Division," and captioned with the case name and King County Superior Court case number. The letter stated "[e]nclosed please find a draft in the amount of $4153.75 made payable to you. Said draft represents full and final settlement of all claims in the above-captioned matter."

¶19 The case went to trial before King County Superior Court Judge Ken Schubert. Judge Schubert adopted Judge Andrus’s pretrial order excluding evidence of American Family’s bad faith conduct during litigation. The trial court interpreted the order to exclude all evidence of conduct after Lock’s filing of her UIM complaint. The court concluded that "in my understanding of the orders that have been entered in this case, there was a clear line that’s been drawn in the sand by Judge Andrus. After the filing of the complaint, conduct, bad faith, or good faith, doesn’t come in." The court granted American Family’s motions in limine excluding "evidence concerning litigation history, motions practice, or the Court’s ruling."

¶20 The trial court also granted American Family’s motions in limine excluding "any discussion of the [sanctions] check sent to Plaintiff for fees on remand." Similarly, the trial court exclud...