LAZURI DANIELS, individually, and on behalf of all those similarly situated Appellant,
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Respondent.
interpreting a term or phrase in an insurance contract, we
view the term or phrase in the context of the entire contract
and not in isolation. We consider the insurance policy as a
whole, giving the policy a fair, reasonable, and sensible
construction as would be given to the contract by the average
person purchasing insurance. Where possible, we harmonize
provisions of the contract that appear to be in conflict to
give effect to all of the contract's provisions. But we
avoid a literal, strained or forced interpretation which
could lead to absurd results. In this case, Lazuri Daniels
purchased an automobile insurance policy from State Farm
Mutual Automobile Insurance Company (State Farm). Under the
terms of the policy, State Farm has the right to recover
payments it is obligated to make, but it may only exercise
that right after Daniels has been fully compensated for
damage or loss. The policy also provides that Daniels pay a
deductible to cover the first $500 of the loss.
Daniels' vehicle was damaged in a collision, she paid the
deductible and State Farm paid the remaining amount of the
cost to repair her car. When State Farm recovered 70 percent
of the amount it paid for the repair from the
tortfeasor's insurance company, it also recovered 70
percent of Daniels' deductible payment and paid it to
her. Daniels contends State Farm violated the policy because
it did not pay her the full amount of the deductible. She
claims that before State Farm could exercise its right to
recover the payments it made, the policy requires that she be
"fully compensated" for her loss which she argues
includes the full amount of the deductible. State Farm
contends that it satisfied the policy's terms because
Daniels was fully compensated when it paid the cost to repair
her car. It disputes that, as that term is used in the
policy, "fully compensated" includes Daniels'
deductible. The trial court agreed with State Farm and
dismissed Daniels' claims.
that State Farm fully compensated Daniels for her loss when
it paid for the repairs of the car and properly exercised its
right to recover that payment. We affirm.
Daniels car was damaged in a three car accident. State Farm
insured her vehicle for collision coverage with a $500
deductible. Daniels paid the deductible and State Farm paid
the remaining cost to repair the car.
subrogation, State Farm sought payment for the repairs from
Geico, which insured one of the other drivers. Attributing 70
percent fault to its client, Geico agreed to pay.70 percent
of the cost to repair Daniels' car. Pursuant to insurance
regulation, State Farm also sought reimbursement for
Daniels' deductible. It returned $350, or 70 percent, of
her deductible to Daniels.
filed a complaint asserting that State Farm violated the
insurance policy by failing to fully reimburse her deductible
with funds obtained in its subrogation effort against Geico.
She pleaded claims for breach of contract, tort of bad faith,
and conversion, and she requested class action certification.
Farm moved to dismiss the complaint. Meanwhile, not satisfied
with the reimbursement amount from Geico, State Farm sought
arbitration. The arbitrator determined that Geico's
client was 100 percent at fault for the accident. State Farm
recovered and gave Daniels the remaining $150 of her
trial court granted State Farm's motion to dismiss.
argues that the trial court erred in dismissing her
complaint. She contends that State Farm did not comply with
the terms of its policy when it failed to return her full
deductible before retaining money it received in subrogation.
review a CR 12(b)(6) dismissal de novo. FutureSelect
Portfolio Mgmt., Inc. v. Tremont Grp. Holdings.
Inc., 180 Wn.2d 954, 962, 331 P.3d 29 (2014). Dismissal
is warranted if the court concludes beyond a doubt that
"the plaintiff cannot prove any set of facts which would
justify recovery." Tenore v. AT&T Wireless
Services, 136 Wn.2d 322, 330, 962 P.2d 104 (1998).
of an insurance contract is a question of law that we also
review de novo. Averill v. Farmers Ins. Co. of
Wash., 155 Wn.App. 106, 118, 229 P.3d 830 (2010).
Because they are generally contracts of adhesion, courts look
at insurance contracts in a light most favorable to the
insured. Id. (Citing Panorama Vill. Condo.
Owners Ass'n Bd. of Dir. v. Allstate Ins. Co.,
144Wn.2d 130, 141, 26 P.3d 910 (2001)). A contract of
insurance should be given a fair, reasonable and sensible
construction, consonant with the apparent object and intent
of the parties, a construction such as would be given the
contract by the average person purchasing insurance.
Morgan v. Prudential Ins. Co. of Am., 86 Wn.2d 432,
545 P.2d 1193 (1976) (citing Ames v. Baker, 68 Wn.2d
713, 415 P.2d 74 (1966)). "Where possible, we harmonize
clauses that seem to conflict in order to give effect to all
of the contract's provisions." Kut Suen Lui v.
Essex Ins., Co., 185 Wn.2d 703, 710, 375 P.3d 596
(2016). We also give the contract a practical and reasonable
rather than a literal, strained or forced interpretation
which would lead to an absurd conclusion. Morgan at
434. "The insurance contract must be viewed in its
entirety; a phrase cannot be interpreted in isolation."
Allstate Ins. Co. v. Peasley, 131 Wn.2d 420, 424,
932 P.2d 1244 (1997).
policy language at issue here states:
12. Our Right to Recover Our Payments
c. Underinsured Motor Vehicle Property Damage Coverage and
Physical Damage Coverages
If we are obligated under this policy to make
payment to or for a party who has a legal right to collect
from another, then the right of recovery of such party passes
to us. Such party must help us recover
our payments by:
(1) keeping our right to recover our
payment in trust for us and doing nothing to impair
that legal right;
(2) executing any documents we may need to assert
that legal right; and
(3) taking legal action through our representatives
when we ask.
Our right to recover our payments applies only after the
insured has been fully compensated for the bodily injury.
property damage, or loss.
Clerk's Papers at 80. (Emphasis added).
contends that the policy unambiguously conditions State
Farm's right to recover its payments on Daniel's full
compensation for her property loss, including her full
deductible. Daniels argues that in the absence of a
conflicting policy definition, the term "loss" can
only mean "the total amount of the insured's
damages." Appellant's Reply Br. at 7. Thus, she
contends that State Farm has no right to subrogation until
she receives full compensation for the total amount of her
loss, which would include that part of the loss covered by
Farm argues that "fully compensated" means payment
of the insured's property loss less the deductible. And,
because it paid this amount, State Farm contends that under
the policy, it is entitled to subrogation of her claims. We
agree with State Farm.
reading of the insurance contract is flawed in a number of
respects. First, Daniels asserts that under the contract,
State Farm has no right to seek recovery at all, unless and
until its insured obtains a full refund of his or her
deductible. "Whatever rights State Farm may have to
recover its payments, it does not have those rights until
after its insured has been fully compensated for the
loss." Br. of Appellant at 15. And to the extent State
Farm has a right to seek recovery, it "has no such
rights until its insured receives full compensation."
Id. at 17. But reading the contract to preclude
State Farm's subrogation unless Daniels first obtains a
full refund of her deductible leads to absurd results. Under
Daniels reading of the contract, before State Farm could
assert a subrogation claim against a third party, one of two
things would have to occur. First, State Farm would have to
refund the deductible that Daniels paid, which would make the
provision requiring the payment of the deductible
meaningless. Or, second, Daniels would have to obtain
reimbursement from the third party on her own. And if she
failed to do so for any reason, or simply chose not to, State
Farm would be barred from seeking recovery of the payments it
made from the responsible third party.
addition, Daniels' reading of the contract is
inconsistent with WAC 284- 30-393, which places the burden of
pursuing a refund of the insured's deductible on the
insurer. Under that regulation:
The insurer must include the insured's deductible, if
any, in its subrogation demands. Any recoveries must be
allocated first to the insured for any deductible(s) incurred
in the loss, less applicable comparable fault. Deductions for
expenses must not be made from the deductible recovery unless
an outside attorney is retained to collect the recovery. The
deduction may then be made only as a pro rata share of the
allocated loss adjustment expense... .
regulation recognizes that insureds often lack the resources
or incentive to pursue recovery of what is very often a small
amount of money. It therefore places the burden of collecting
the refund on the insurer. But the regulation assumes that
the insurer's ability to proceed with a subrogation claim
precedes a refund of the deductible to the insured. Daniels
reading of the contract does just the opposite. The logical
result of her interpretation is that State Farm is either
precluded from subrogating its claim and thus its ability to
obtain a refund of Daniels' deductible or Daniels would
have to seek the refund on her own. In either event, the
purpose of the regulation would be frustrated. State Farm
either was or was not entitled to exercise a subrogation
right. If it was, then by Daniels' own definition, she
was "fully compensated." If it wasn't, then the
issue isn't how State Farm allocated the funds it
received, but instead that it was subrogating its claim at
all. Daniels can't have it both ways.
conclude that the only reasonable interpretation of the term
"fully compensated" as used in the insurance
contract at issue in this case, does not include the amount
of deductible paid by the insured. The trial court did not
err in dismissing Daniels' complaint on this
also argues that she stated a claim for recovery under WAC
284-30-393, which requires that a subrogating insurer also
seek recovery of the insured's deductible, less
applicable fault. Daniels argues that State Farm violated
this provision by not reimbursing her full deductible because
it was later determined by an arbitrator that she was not at
Farm complied with WAC 284-30-393. It included Daniels'
deductible with its subrogation demand and originally
reimbursed her 70 percent based on Geico's initial
determination that its insured was 70 percent at fault. It
then fully reimbursed her when an arbitrator concluded that
she was not at fault. Daniels relies on hindsight to argue
that, because she was ultimately found not at fault, she
should have been originally reimbursed her full deductible.
But State Farm's incremental implementation of WAC
284-30-393 was reasonable and complied with the plain
language of the regulation. In addition, because Daniels did
not plead lack of fault in her complaint, the record does not
support her argument that she had no "applicable
comparable fault" at the time she was first reimbursed
her deductible. The trial court did not err in finding that
there was no violation.
argues that the trial court erred by denying her request that
she be granted leave to amend her complaint "to address
any deficiencies found by the trial court." Br. of
Appellant at 27-28. The decision to grant leave to amend the
pleadings is within the discretion of the trial court.
Sprague v. Sumitomo Forestry Co. Ltd., 104 Wn.2d
751, 763, 709 P.2d 1200 (1985).
does not identify in her appellate brief how she might amend
her complaint. Thus, we cannot assess whether permitting
amendment would cause prejudice such as "undue delay,
unfair surprise, and jury confusion." Wilson v.
Horsley, 137 Wn.2d 500, 505-06, 974 P.2d 316 (1999)
(citing Herron v. Tribune Publ'g. Co., Inc, 108
Wn.2d 162, 165-66, 736 P.2d 249 (1987). RAP 10.3(a)(6)
directs each party to supply, in its brief, "argument in
support of the issues presented for review, together with
citations to legal authority and references to relevant parts
of the record." We do not consider conclusory arguments
that are unsupported by citation to authority. Joy v.
Dep't of Labor & Industries, 170 Wn.App. 614,
629, 285 P.3d 187 (2012). Therefore, we decline to consider
this assignment of error.
seeks attorney fees under Olympic Steamship Co. Inc., v.
Centennial Ins. Co., 117 Wn.2d 37, 811 P.2d 673 (1991).
Because Daniels is not the prevailing party, she is not
entitled to fees under Olympic Steamship.