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Jain v. State Farm Mutual Automo-Bile Insurance Co.

November 27, 1996

SUNGEETA JAIN, INDIVIDUALLY, AND ALL THE MEMBERS OF THE CLASS OF PERSONS SIMILARLY DENIED UIM COVERAGE BY ONE OR MORE OF THE DEFENDANTS, PLAINTIFFS,
v.
STATE FARM MUTUAL AUTOMO-BILE INSURANCE COMPANY, A CORP.; STATE FARM FIRE & CASUALTY CO., A CORP.; STATE FARM GENERAL INS. CO., A CORP., DEFENDANTS.



Appeal from CERTIFIED Court. U.S. DISTRICT COURT WESTERN DISTRICT (C95-0823R) County. Hon. Barbara Rothstein, Judge. Date first document (petition, etc) was filed at Supreme Court: 11/28/95.

Authored by Richard B. Sanders. Concurring: Charles W. Johnson, James M. Dolliver, Barbara A. Madsen, Charles Z. Smith, Richard P. Guy, Gerry L. Alexander. Dissenting: Barbara Durham, Philip A. Talmadge.

The opinion of the court was delivered by: Sanders

En Banc

SANDERS, J. The United States District Court certified a question to this court regarding underinsured motorist insurance, retroactive application of case law, and the voidability of releases. The question is:

Whether pursuant to Bradbury v. Aetna Cas. & Sur. Co., 91 Wash. 2d 504, 589 P.2d 785 (1979), Tissell v. Liberty Mut. Ins. Co., 115 Wash. 2d 107, 795 P.2d 126 (1990) should be applied retroactively to void the release at issue.

We answer yes and hold under Bradbury v. Aetna Cas. & Sur. Co., 91 Wash. 2d 504, 589 P.2d 785 (1979) Tissell should be retroactively applied to void the release enabling plaintiff to collect under the policy's UIM coverage.

In June 1986, 10-year-old plaintiff Sungeeta Jain was seriously injured when the car driven by her mother left the roadway and rolled. Sungeeta was rendered and remains paraplegic, being immobile from the upper lumbar spine down.

The car, owned by Sungeeta's father and his business partner, was insured by State Farm Mutual Automobile Insurance Company (State Farm). Under the terms of the policy, Sungeeta Jain, as a relative of her father, is a named insured. The insurance policy included coverage for bodily injury liability (liability), personal injury protection (PIP), and underinsured motor vehicle bodily injury (UIM).

Sungeeta's attorney and her court-appointed guardian ad litem negotiated two consecutive settlements, obtaining a total of $325,000 for Sungeeta under the liability and PIP coverage. The $325,000 was the maximum available to Sungeeta under these coverages but was well below actual damages.

At the time, her attorneys, knowledgeable in insurance matters, did not press for UIM benefits because the policy explicitly excluded the vehicles covered by the policy (i.e., the Jain vehicle) from the definition of underinsured motor vehicle. *fn1 Upon receipt of the maximum liability and PIP benefits, Sungeeta signed a final settlement agreement releasing State Farm forever from any further liability under the policy *fn2 but without specific reference to UIM coverage or consideration for the settlement of any potential UIM claim. *fn3

Five months after this settlement and release, our court published its opinion in Tissell v. Liberty Mut. Ins. Co., 115 Wash. 2d 107, 795 P.2d 126 (1990) which held clauses excluding the policyholder's own car from the definition of underinsured vehicle void as against public policy when same deny UIM recovery to the named insured (i.e., the policyholder and immediate family). If Tissell had been decided prior to Sungeeta's settlement, the policy clause denying her UIM benefits would have been demonstrably void, obviously entitling her to UIM benefits.

Sungeeta then brought suit claiming that under Bradbury v. Aetna Cas. & Sur. Co., 91 Wash. 2d 504, 589 P.2d 785 (1979) Tissell must be retroactively applied to void the UIM exclusionary clause, to void the release, and to require State Farm to pay additional benefits under UIM coverage.

Bradbury indeed holds that decisional law handed down after a final settlement between insurer and insured should be retroactively applied to void an otherwise valid release, unless the insurer reasonably and justifiably relied upon the state of the predecisional law. Id. at 509. State Farm does not ask us to overrule Bradbury but rather asserts under Bradbury it reasonably and justifiably relied on pre-Tissell law, and, accordingly, Tissell should be given prospective application only and the release should remain final.

We reaffirm Bradbury, disagree that it was reasonable and justifiable for State Farm to rely on pre-Tissell law, and hold that Tissell should be retroactively applied to void the release at issue ...


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