Appeal from Superior Court of Pierce County. Docket No: 90-2-00981-1. Date filed: 09/09/94. Judge signing: Hon. Brian M. Tollefson. Judgement Date: 9-9-94.
Authored by Richard P. Guy. Concurring: Barbara Durham, James M. Dolliver, Barbara A. Madsen, Charles Z. Smith, Charles W. Johnson, Philip A. Talmadge. Dissenting: Richard B. Sanders, Gerry L. Alexander.
The opinion of the court was delivered by: Guy
GUY, J.--In this case, a health care service contractor appeals a trial court's grant of summary judgment in favor of one of its insureds on a Consumer Protection Act cause of action. We find that there is no evidence of an unfair or deceptive act on the part of the health care contractor and reverse the order of summary judgment. We grant summary judgment to the health care service contractor on the Consumer Protection Act cause of action. The health care service contractor also appeals the trial court's award of attorney fees for the declaratory judgment portion of the insured's action which involved a dispute about coverage under an exclusion in the medical insurance contract. We affirm the trial court's award of attorney fees under the rule announced in Olympic S.S. Co. v. Centennial Ins. Co., 117 Wash. 2d 37, 811 P.2d 673 (1991) (Olympic Steamship). We order the award of reasonable attorney fees for the portion of the action in this court which concerned the award of attorney fees in the declaratory judgment action. We affirm the trial court's order of summary judgment in favor of the health care service contractor on the cause of action for intentional interference with a contract.
In May 1989, Dennis Leingang was injured in an automobile accident. At the time of the accident, Mr. Leingang had medical insurance under a health care service contract which his employer had with Pierce County Medical Bureau, Inc. (PCM). PCM is a "health care service contractor" licensed under RCW 48.44. At the time of the accident, Mr. Leingang also had automobile insurance, including uninsured and underinsured motorist (UIM) coverage, with Farmers Insurance Company. The driver of the other vehicle involved in the accident was underinsured.
The "Exclusions" portion of the PCM medical insurance contract contained the following language:
No benefits will be provided any subscriber . . . for any of the following . . .
Benefits to the extent benefits are payable under the terms of any automobile medical, automobile no-fault, underinsured or uninsured motorist or similar contract of insurance, when such contract or insurance is issued to . . . the subscriber . . . . Clerk's Papers at 102-03. *fn1 In July 1989, Mr. Leingang's attorney wrote to PCM demanding payment of the medical bills incurred due to the accident. PCM responded that it was sending Mr. Leingang a copy of their standard subrogation agreement for his signature and would begin making payment on the medical bills on receipt of that agreement. PCM sent with that letter a subrogation agreement which stated in part:
The benefits of this contract will be available to a subscriber . . .
who is injured by another party. If provides benefits under this contract for the treatment of the injury, shall (a) be subrogated to the rights of the subscriber . . . (b) have the right to collect damages from the other party, and (c) have a security interest in any damage recoveries from the other party.
Clerk's Papers at 22. At the bottom of that subrogation agreement, PCM also stated:
Quoted below is the contract wording of an exclusion covering all types of automobile insurance.
Benefits to the extent benefits are payable under the terms of any automobile medical, automobile no-fault, underinsured or uninsured motorist or similar contract of insurance, when such contract or insurance is issued to or on behalf of the subscriber or dependent.
We are calling your attention to this exclusion for in the event we agree to subrogate and any benefits are payable under automobile insurance, we expect full reimbursement to the extent of that payment or benefit received. Clerk's Papers at 22.
Mr. Leingang refused to sign the agreement. In spite of Mr. Leingang's refusal to sign, PCM paid Mr. Leingang's medical bills. However, PCM did continue to maintain that it had a right to be reimbursed if the UIM carrier subsequently paid Mr. Leingang because there was no coverage to the extent of UIM payment.
After paying Mr. Leingang's medical bills, PCM's attorney wrote a letter to Farmers Insurance, Mr. Leingang's UIM carrier, and to Allstate Insurance, the insurance carrier for the other driver. That letter informed them that PCM was asserting a security interest and subrogation claim against any future settlement or judgment for reimbursement for the medical bills it had paid on behalf of Mr. Leingang.
Mr. Leingang filed an action against the alleged tortfeasors (the dealership that had sold him a defective car and the driver of the other car), their insurers, Farmers Insurance and PCM. In that action, Mr. Leingang sought declaratory relief against PCM, requesting a ruling that PCM was not entitled to be reimbursed for payment of the medical bills from any recovery under the UIM insurance. Mr. Leingang also alleged that PCM tortiously interfered with his contract with Farmers, that PCM's conduct had violated the Consumer Protection Act, RCW 19.86, and that he should recover his emotional distress damages from PCM.
After first disputing the claim, Farmers Insurance ultimately paid the $100,000 limits of the UIM policy into the registry of the court pending resolution of the issue whether the funds were due directly to Mr. Leingang or to PCM for reimbursement of the medical bills it had already paid.
Mr. Leingang filed a motion for summary judgment asking the trial court to rule that PCM had no claim against the UIM proceeds and was not entitled to be reimbursed the amounts PCM had paid for his medical bills. PCM made a cross motion for summary judgment.
The trial court granted summary judgment in favor of PCM. The trial court held that PCM's exclusion was enforceable. The trial court stated:
Pierce County Medical has drafted a clear and unambiguous provision which excludes benefits to their subscribers if the same benefits are payable under the terms of any automobile underinsured or uninsured motorist policy provision. There is nothing in statute or judicial decision that would indicate such a provision should not be enforced. Clerk's Papers at 134. The trial court concluded PCM was entitled to judgment as a matter of law on its right to reimbursement of medical bills from the UIM proceeds even before Mr. Leingang had been fully compensated for all of his damages. The trial court explained that it was fair that PCM had paid the bills initially, but that if the UIM carrier did make payment, then the exclusion in the health care contract would allow reimbursement to PCM.
Mr. Leingang appealed this decision to the Court of Appeals. However, prior to oral argument in that court, this court accepted review of the consolidated cases of Brown v. Snohomish County Physicians Corp. and Hogsett v. Snohomish County Physicians Corp., 63 Wash. App. 788, 822 P.2d 336 (1992), which presented the same issue of the enforceability of a UIM exclusion in a health care contract. In the Brown and Hogsett cases, the trial courts and the Court of Appeals had all held that the exclusions in medical insurance contracts for benefits actually paid by UIM insurance were enforceable exclusions to coverage.
In Brown v. Snohomish County Physicians Corp., 120 Wash. 2d 747, 845 P.2d 334 (1993), this court reversed the trial courts' and Court of Appeals' decisions. We held that a health care service contract provision denying coverage to the extent benefits are available to the beneficiary under an underinsured motorist policy violates public policy insofar as the provision denies coverage for medical expenses before the beneficiary is fully compensated for all general and special damages. We concluded that such a provision may be enforced, but only to the extent that it bars double recovery for medical expenses. Brown, 120 Wash. 2d at 758. In Brown, this court weighed the public policy of full compensation for auto accident victims with the policy favoring low cost health care coverage and concluded that the strong public policy favoring full compensation of victims cannot be abrogated simply because the cost of health care service contracts may go up to some degree. Brown, 120 Wash. 2d at 758. We therefore reversed Brown and Hogsett, 63 Wash. App. 788, and overruled Snohomish County Physicians Corp. v. Jungaro, 58 Wash. App. 579, 794 P.2d 76 (1990) to the extent it was inconsistent.
In light of this court's decision in Brown, PCM and Mr. Leingang stipulated that their case should be reversed by the Court of Appeals and remanded to the trial court. The Court of Appeals therefore reversed and remanded to the superior court with directions to disburse the funds on deposit there to Mr. Leingang and to resolve the remaining issues.
At the trial court, Mr. Leingang sought attorney fees incurred in the declaratory judgment action under the authority of Olympic Steamship, 117 Wash. 2d 37, 811 P.2d 673. The trial court awarded Mr. Leingang his costs and attorney fees at the trial court and on appeal for the portion of the case which involved the declaratory judgment action.
Mr. Leingang then moved for partial summary judgment on the Consumer Protection Act cause of action. PCM filed a cross motion for summary judgment on the Consumer Protection Act claim and motions for summary judgment on all of the other claims. The trial court granted Mr. Leingang summary judgment on the Consumer Protection Act cause of action and awarded him damages, treble damages and attorney fees. The trial court granted PCM summary judgment on the actions for outrage, tortious interference with a contract, and infliction of emotional distress. The court found there was no action for "wrongful attachment" but said if anyone was saying there was such a claim, PCM was granted summary judgment. *fn3
PCM sought direct review in this court, arguing that (1) the trial court erred in granting attorney fees to Mr. Leingang for the declaratory judgment action, and (2) the trial court erred in granting summary judgment to Mr. Leingang on the Consumer Protection Act cause of action. Mr. Leingang cross appealed, arguing the trial court computed the treble damages award under the Consumer Protection Act claim incorrectly and erred in dismissing the claims for emotional distress.
1. Did the trial court properly award attorney fees for the declaratory judgment action under the authority of Olympic Steamship?
2. Did the trial court err in granting summary judgment on the Consumer Protection Act cause of action? If so, did the trial court err in failing to grant summary judgment in favor of PCM?
3. Did the trial court properly dismiss plaintiff's claims for emotional distress?
We conclude the trial court properly awarded attorney fees to Mr. Leingang for the declaratory judgment action regarding the exclusion from coverage. However, we hold that the court erred in granting summary judgment in the Consumer Protection Act cause of action and we grant summary judgment to PCM on that cause of action. We therefore do not reach the issue of the proper amount of damages under the Consumer Protection Act. We hold that the trial court correctly dismissed the actions seeking emotional distress damages. Attorney Fees for Declaratory Judgment Action Washington generally follows the "American rule" on attorney fees, which provides that attorney fees are not recoverable by the prevailing party as costs of litigation unless the recovery is permitted by contract, statute, or some recognized ground of equity. E.g., Dayton v. Farmers Ins. Group, 124 Wash. 2d 277, 280, 876 P.2d 896 (1994). There are, however, many statutes which allow attorney fees to the prevailing party and a number of grounds of equity which allow for the award of fees. See Philip A. Talmadge, The Award of Attorneys' Fees in Civil Litigation in Washington, 16 Gonz. L. Rev. 57 (1980).
In 1991, this court decided Olympic Steamship, 117 Wash. 2d 37, 811 P.2d 673, which held at page 53 that an award of fees is required in any legal action where the insurer compels the insured to assume the burden of legal action, to obtain the full benefit of his insurance contract, regardless of whether the insurer's duty to defend is at issue. Accord Estate of Jordan v. Hartford Accident & Indem. Co., 120 Wash. 2d 490, 508, 844 P.2d 403 (1993); Public Util. Dist. 1 v. International Ins. Co., 124 Wash. 2d 789, 815, 881 P.2d 1020 (1994).
In 1994, this court decided Dayton v. Farmers Ins. Group, 124 Wash. 2d 277, 876 P.2d 896, in which we clarified the Olympic Steamship rule on attorney fees. The Dayton case presented the issue whether an insured was entitled to attorney fees incurred in a UIM arbitration proceeding to determine the amount of damages due under an insurance policy. The insurer had conceded coverage but disputed the value of the particular claim. We held that the trial court exceeded its authority in awarding attorney fees to the insured pursuant to the rule established in Olympic Steamship and explained:
This case presents an entirely different set of circumstances. Coverage is not an issue; Farmers accepted coverage. Unlike the insured in Olympic Steamship, Mr. Dayton has not compelled Farmers to honor its commitment to provide coverage. Instead, this case presents a dispute over the value of the claim presented under the policy. Such disputes are not properly governed by the rule in Olympic Steamship.
Dayton, 124 Wash. 2d at 280. See also Nordstrom, Inc. v. Chubb & Son, Inc., 54 F.3d 1424 (9th Cir. 1995) (the Olympic Steamship rule has been read broadly by Washington courts even to include cases in which there is no contractual basis for the awarding of fees; the only articulated limitation to the rule is that no fees are awarded when the insurer does not dispute coverage but merely disputes the value of the claim); Barney v. Safeco Ins. Co., 73 Wash. App. 426, 869 P.2d 1093 (1994) (attorney fees awarded when the insurer litigated the issue whether it could offset against a UIM recovery the amount paid to the insured under the medical payments coverage); Kroeger v. First Nat'l Ins. Co., 80 Wash. App. 207, 211, 908 P.2d 371 (1995) (coverage concerns whether the insurer has a duty to pay while a claim issue concerns how extensive damages were), review denied, 129 Wash. 2d 1002, 913 P.2d 66 (1996).
PCM argues that, under Dayton, attorney fees are not awardable in this case because PCM did not deny coverage but merely maintained that it was entitled to recover the amount it paid from Mr. Leingang's UIM carrier. We disagree.
In the present case, PCM argued throughout the case that Mr. Leingang did not have coverage for any medical bills which his own UIM carrier would ultimately pay. The entire case concerned the validity of an exclusion from coverage. PCM did agree to pay the medical bills because the UIM carrier had not yet paid, but it always maintained that the coverage under the contract was excluded to the extent UIM insurance subsequently paid any of the bills. PCM told the trial court that "PCM contracts exclude benefits which are ultimately paid by their subscriber's automobile uninsured or underinsured carrier. . . . PCM [is] seeking reimbursement of the funds it paid out, based upon a specific exclusion in its contract . . . for benefits paid by an underinsured carrier." Clerk's Papers at 50 (emphasis added). PCM also argued to the trial court:
PCM's right to reimbursement is based upon the exclusion provisions of the Contract providing benefits to Plaintiff. . . . The monthly rates charged by PCM to its subscribers are premised on exclusion provisions such as this. PCM has paid the claims to assist Plaintiff during the period prior to the UIM recovery.
The exclusion provision does not address subrogation, which is a separate provision of the Contract relating to recoveries from responsible third parties. In fact, PCM's entitlement is by virtue of the exclusion pertaining to first party recovery only. Simply put, Plaintiff's claims are not covered under the Contract where he is paid or will be paid by a UIM carrier. Clerk's Papers at 53 (emphasis added). PCM repeatedly argued that there was no coverage under its contract for any medical bills it paid that would be paid by a UIM policy. We cannot accept PCM's current argument to this court that this case did not involve a coverage dispute.
The medical insurance policy itself also supports the insured's position that the issue litigated was a coverage issue. The insurer relied on a provision in the policy which is in the "exclusion" section of the contract.
Previous case law also indicates that the declaratory judgment action here was a case concerning insurance coverage and not just involving the value of a claim. In Brown, the exclusions at issue were in all relevant ways the same as the exclusions at issue in the present case. This court in Brown explained that:
There is a question in this case whether the provisions are in fact "exclusions". Resolution of the question of the precise nature of the clauses is not necessary to our Disposition of these cases. Regardless of how they are characterized, they act to limit coverage contrary to public policy.
Brown, 120 Wash. 2d at 759 n.2 (emphasis added). Since the exclusions to coverage here are the same as the exclusions in the Brown case, it follows that this case also is a case which involves an issue of the limit of coverage and hence comes under the rule of Olympic Steamship.
Recently, this court decided McGreevy v. Oregon Mut. Ins. Co., 128 Wash. 2d 26, 904 P.2d 731 (1995), in which we considered whether the Olympic Steamship rule on attorney fees should be overruled. We ...