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Pacheco v. Oregon Mutual Insurance Co.

Court of Appeals of Washington, Division 1

August 19, 2019

CARLOS PACHECO, Appellant,
v.
OREGON MUTUAL INSURANCE COMPANY, a foreign insurance company, Respondent.

          Appelwick, C.J.

         Pacheco filed a claim under the underinsured motorist insurance coverage under a policy provided by Oregon Mutual. The policy expressly excluded coverage for diminished value and loss of use. Pacheco sought discretionary review from denial of his motion to determine that both exclusions are contrary to RCW 48.22.030 and violate public policy. We hold that the exclusion for diminished value violates the language of the statute, but that the exclusion for loss of use does not violate either the language of the statute or public policy. We affirm in part, reverse in part, and remand for further proceedings.

         FACTS

         On May 15, 2016, an uninsured driver damaged Carlos Pacheco's 2014 Audi. Pacheco made a claim to Oregon Mutual Insurance Company under the policy's underinsured motorist coverage. Oregon Mutual accepted coverage, and made $16, 115 in payments on the claim, including the $1, 050 limit for rental car expenses. Oregon Mutual did not pay for alleged diminished value damages, nor did it pay for loss of use damages beyond the amount provided for rental car coverage. Oregon Mutual informed Pacheco, "The uninsured motorist property damage provisions of the policy . . . unambiguously exclude such coverage" for loss of use and diminished value.

         Pacheco filed suit against Oregon Mutual in King County District Court. The complaint sought payment of the excluded damages for "diminished value and loss of use," attorney fees, and interest. Pacheco then filed a motion for partial summary judgment, requesting a determination that, "while the plain language of the policy excludes those damages from the benefits recoverable, said exclusion is void as contrary to public policy."[1] The district court granted the motion as to the diminished value exclusion where the diminished value is caused by "unrepairable continuing physical damage." But, the court ruled that there was no basis to void an exclusion for loss of use damages.

         Both parties filed motions for reconsideration. The district court denied both motions, leaving its original decision in place. Oregon Mutual filed a notice of appeal to the King County Superior Court, and Pacheco filed a notice of cross-appeal.

         The superior court reversed the district court's order as to the finding that exclusions for diminished value damages are void, and affirmed the finding as to loss of use damages. Pursuant to CR 54(b), the trial court certified that its order is eligible for discretionary review. Pacheco sought review, which this court granted.

         DISCUSSION

         I. Standard of Review

         An appellate court reviews de novo a grant of summary judgment. Bostain v. Food Exp. Inc., 159 Wn.2d 700, 708, 153 P.3d 846 (2007). Summary judgment is proper if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Id. Facts and reasonable inferences therefrom are viewed most favorably to the nonmoving party, Id.

         When interpreting a statute, the court first looks to its plain language. Homestreet. Inc. v. Dep't. of Revenue, 166 Wn.2d 444, 451, 210 P.3d 297 (2009). Our function is to give effect to the object and intent of the Legislature. Hoa Doan v. Dep't of Labor & Indus., 143 Wn.App. 596, 601, 178 P.3d 1074 (2008).

         II. Underinsured Motorist Statute

         Washington law requires mandatory minimum liability automobile insurance. RCW 46.60.020. Washington law also requires that all insurers make . UIM coverage available to Washington automobile liability policyholders. Clements v. Travelers Indem. Co., 121 Wn.2d 243, 250, 850 P.2d 1298 (1993); RCW 48.22.030(2). The purpose of the UIM statute is "to protect innocent victims of motorists of underinsured motor vehicles." RCW 48.22.030(12). UIM coverage is not mandated, and policyholders can waive all or part of that coverage. RCW 48.22.030(4).

         The relevant text of the UIM statute is RCW 48.22.030:

(1)"Underinsured motor vehicle" means a motor vehicle with respect to the ownership, maintenance, or use of which either no bodily injury or property damage liability bond or insurance policy applies at the time of an accident, or with respect to which the sum of the limits of liability under all bodily injury or property damage liability bonds and insurance policies applicable to a covered person after an accident is less than the applicable damages which the covered person is legally entitled to recover.
(2) No new policy or renewal of an existing policy insuring against loss resulting from liability imposed by law for bodily injury, death, or property damage, suffered by any person arising out of the ownership, maintenance, or use of a motor vehicle shall be issued with respect to any motor vehicle registered or principally garaged in this state unless coverage is provided therein or supplemental thereto for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of underinsured motor vehicles, hit-and-run motor vehicles, and phantom vehicles because of bodily injury, death, or property damage, resulting therefrom, except while operating or occupying a motorcycle or motor-driven cycle, and except while operating or occupying a motor vehicle owned or available for the regular use by the named insured or any family member, and which is not insured under the liability coverage of the policy. The coverage required to be offered under this chapter is not applicable to general liability policies, commonly known as umbrella policies, or other policies which apply only as excess to the insurance directly applicable to the vehicle insured.
(3) Except as to property damage, coverage required under subsection (2) of this section shall be in the same amount as the insured's third party liability coverage unless the insured rejects all or part of the coverage as provided in subsection (4) of this section. Coverage for property damage need only be issued in conjunction with coverage for bodily injury or death. Property damage coverage required under subsection (2) of this section shall mean physical damage to the insured motor vehicle unless the policy specifically provides coverage for the contents thereof or other forms of property damage.
(4) A named insured or spouse may reject, in writing, underinsured coverage for bodily injury or death, or property damage, and the requirements of subsections (2) and (3) of this section shall not apply. If a named insured or spouse has rejected underinsured coverage, such coverage shall not be included in any supplemental or renewal policy unless a named insured or spouse subsequently requests such coverage in writing. The requirement of a written rejection under this subsection shall apply only to the original issuance of policies issued after July 24, 1983, and not to any renewal or replacement policy. When a named insured or spouse chooses a property damage coverage that is less than the insured's third party liability coverage for property damage, a written rejection is not required.
(5) The limit of liability under the policy coverage may be defined as the maximum limits of liability for all damages resulting from any one accident regardless of the number of covered persons, claims made, or vehicles or premiums shown on the policy, or premiums paid, or vehicles involved in an accident.
(6) The policy may provide that if an injured person has other similar insurance available to him or her under other policies, the total limits of liability of all coverages shall not exceed the higher of the applicable limits of the respective coverages.
(7)(a) The policy may provide for a deductible of not more than three hundred dollars for payment for property damage when the damage is caused by a hit-and-run driver or a phantom vehicle.
(b) In all other cases of underinsured property damage coverage, the policy may provide for a deductible of not more than one hundred dollars.
(8) For the purposes of this chapter, a "phantom vehicle" shall mean a motor vehicle which causes bodily injury, death, or property damage to an insured and has no physical contact with the insured or the vehicle which the insured is occupying at the time of the accident if:
(a) The facts of the accident can be corroborated by competent evidence other than the testimony of the insured or any person having an underinsured motorist claim resulting from the accident; and
(b) The accident has been reported to the appropriate law enforcement agency within seventy-two ...

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