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Forston-Kemmerer v. Allstate Insurance Co.

Court of Appeals of Washington, Division 3

March 28, 2017


          SIDDOWAY, J.

         Anastasia Fortson-Kemmerer filed this lawsuit against her insurer, Allstate Insurance Company, alleging Allstate violated the Insurance Fair Conduct Act (IFCA), RCW 48.30.015, and acted in bad faith in investigating her claim for underinsured motorist (UIM) coverage. That claim was resolved in an earlier action by an award of $44, 151.11 following mandatory arbitration.

         The trial court granted summary judgment dismissing this second action on the basis that Ms. Fortson-Kemmerer's action to enforce the UIM provision of her policy was res judicata as to her bad faith and IFCA claims. Whether final judgment resolving a UIM claim precludes a later claim for insurer bad faith is a question of first impression for a Washington court.

         A single lawsuit that combines UIM and bad faith claims places the insurer, both pretrial and at trial, in two different legal postures with prejudicial consequences. There is no dispute that Allstate prefers to resolve such claims separately and would have sought bifurcation and a stay of the bad faith claim had it been asserted earlier. Because of this difference in the insurer's quality as a party in the two types of actions, the UIM action was not res judicata as to this action. We reverse and remand.


         In December 2005, Anastasia Fortson-Kemmerer was in a collision with a motorist who fled the scene, was never identified, and is presumed uninsured. Ms. Fortson-Kemmerer was insured by Allstate Insurance Company. She eventually sent a demand letter to Allstate requesting $75, 000 in UIM benefits for injuries and damages she incurred as a result of the collision. She stated in her letter that if Allstate did not pay the amount requested, she would bring a lawsuit to enforce payment of her benefits under the policy and for the remedies and penalties provided by IFCA.

         Shortly thereafter, Allstate made a counteroffer of $9, 978, which Ms. Fortson-Kemmerer rejected. Allstate then requested and obtained a medical examination of Ms. Fortson-Kemmerer, after which it renewed its offer of $9, 978. Ms. Fortson-Kemmerer rejected it again.

         In 2011, Ms. Fortson-Kemmerer sued Allstate, which had been reporting monthly that it was continuing to investigate her claim. She still sought $75, 000.00 in UIM benefits. Following mandatory arbitration, she was awarded $44, 151.11. Allstate made a post-award offer of $25, 000.00 that she rejected, after which Allstate paid the award.

         Ms. Fortson-Kemmerer then filed this action against Allstate, alleging it had acted in bad faith and violated IFCA by failing to conduct a reasonable investigation into her claim, constructively denying her claim, and compelling her to bring a lawsuit to recover what she was owed under her insurance policy.

         Allstate raised the affirmative defense that her action to enforce the UIM provision of her policy operated as res judicata and barred her bad faith claim. It then moved for summary judgment on that basis.

         Ms. Fortson-Kemmerer responded with evidence that in other cases in which insureds combine UIM claims with what we will refer to hereafter, generically, as bad faith claims, [1] Allstate and other insurers often persuade courts to bifurcate not only trial, but also discovery. The insurers advance arguments such as the following:

■ That "[a] claim for breach of contract against an insurance company is significantly different than a claim that in breaching the insurance contract the insurance company somehow acted in bad faith";[2]
■ That "[i]t is judicially recognized that... the evidence necessary to support a bad faith claim is 'very different from that necessary to support a claim for UIM benefits, '" since "[t]he focus of discovery and trial of the UIM claims relates solely to the plaintiff's bodily injuries and medical treatment, " while "[c]onversely, the focus of discovery and trial on the bad faith claims is on Allstate's conduct";[3]
■ That until the fact finder has determined the dollar value of the UIM claim, "there is no way to know whether a bad faith claim based upon an alleged failure to properly evaluate, negotiate and settle a UIM claim is even colorable";[4]
■ That "[n]one" of the "eyewitnesses, investigating officers, medical providers, and experts" who will testify to the accident related claims "has a remote scintilla of evidence relevant to the insurance claims, " and "evidence about Allstate's evaluation and handling of the claim is not at all relevant to the accident-related claims";[5] and
■ That without bifurcation and a stay of discovery as to the bad. faith claim, an insurer's defense "will be prejudiced, " since it will be "required to produce its UIM file and internal privileged documents to plaintiff before the UIM claim is resolved."[6]

         Ms. Forston-Kemmerer's evidence included seven bifurcation and stay orders that Allstate or other insurers obtained in Washington courts, state and federal, between 2009 and 2013, in cases in which plaintiff-insureds asserted UIM and bad faith claims in the same lawsuit. Six of the orders not only bifurcated trial of the UIM and bad faith claims, but also bifurcated discovery and stayed discovery addressing bad faith until after the UIM claim was resolved. The following language from one order is representative of orders contemplating what are not back-to-back trials, but, in essence, one lawsuit turned into two:

Plaintiffs' UIM claim is hereby bifurcated from plaintiffs' "bad faith claims" for purpose of both discovery and trial, and all discovery in the trial of plaintiffs "bad faith claims" are hereby stayed until after plaintiffs' claim for Underinsured Motorist (UIM) benefits has been fully resolved.

Clerk's Papers (CP) at 76.

         In addition to opposing Allstate's summary judgment motion, Ms. Forston-Kemmerer sought a continuance under CR 56(f), arguing that discovery could yield even more evidence that when Allstate's insureds join UIM and bad faith claims, Allstate regularly seeks what are in effect separate lawsuits, citing prejudice and significant differences between UIM and bad faith claims. She argued information of Allstate's prior practice was relevant to res judicata and to whether Allstate should be judicially estopped from asserting claim preclusion as an affirmative defense.

         The trial court denied Ms. Fortson-Kemmerer's motion to continue and granted summary judgment dismissal of her claim. Ms. Fortson-Kemmerer appeals.


         Res judicata or modernly, claim preclusion, [7] "acts to prevent relitigation of claims that were or should have been decided among the parties in an earlier proceeding." Norris v. Norris, 95 Wn.2d 124, 130, 622 P.2d 816 (1980). For almost a century, Washington cases have held that for a judgment to operate as res judicata in a subsequent action "there must be a concurrence of identity in four respects: (1) of subject-matter; (2) of cause of action; (3) of persons and parties; and (4) in the quality of the persons for or against whom the claim is made." N. Pac. Ry. Co. v. Snohomish County, 101 Wash. 686, 688, 172 P. 878 (1918); Hisle v. Todd Pac. Shipyards Corp., 151 Wn.2d 853, 865-66, 93 P.3d 108, aff'd, 151 Wn.2d 853, 93 P.3d 108 (2004); Philip A. Trautman, Claim and Issue Preclusion in Civil Litigation in Washington, 60 WASH. L. REV. 805, 812 & n.48 (1985) (observing in 1985 that "scores" of Washington cases had "stated for almost seven decades" that a judgment has preclusive effect only if the successive proceedings are identical in the four respects). "Res judicata is an issue of law, subject to de novo review on appeal." Berschauer Phillips Const. Co. v. Mut. of Enumclaw Ins. Co., 175 Wn.App. 222, 227, 308 P.3d 681 (2013). Allstate, as the party asserting claim preclusion, bears the burden of proof. Hisle, 151 Wn.2d at 865.

         Allstate relies on language from a number of cases to the effect that claim preclusion prohibits the relitigation of cases that "could have" or "might have" been asserted in earlier litigation, as if that simpler criterion can substitute for the four required identities. Since Ms. Fortson-Kemmerer's first demand letter threatened to sue for IFCA remedies and penalties, Allstate argues that of course she "could have" advanced IFCA and bad faith claims in her first lawsuit. But none of the cases cited by Allstate has ever retreated from the four identities required to establish claim preclusion. And Allstate's argument was directly rejected in Seattle-First National Bank v. Kawachi, 91 Wn.2d 223, 225-28, 588 P.2d 725 (1978), in which a plaintiffs claims had not been adjudicated in a prior action, but the defendants maintained that "the claims should be barred because they could have been decided in that suit." Id. at 226 (emphasis added). As the court explained:

While it is often said that a judgment is res judicata of every matter which could and should have been litigated in the action, this statement must not be understood to mean that a plaintiff must join every cause of action which is joinable when he brings a suit against a given defendant. CR 18(a) permits joinder of claims. It does not require such joinder. And the rule is universal that a judgment upon one cause of action does not bar suit upon another cause which is independent of the cause which was adjudicated. 50 C.J.S. Judgments § 668 (1947); 46 Am. Jur. 2d Judgments § 404 (1969). A judgment is res judicata as to every question which was properly a part of the matter in controversy, but it does not bar litigation of claims which were not in fact adjudicated.

Id. (emphasis added). Essentially, it is the four required identities that enable us to determine whether a question was "properly a part" of an earlier matter ...

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