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Keodalah v. Allstate Insurance Co.

Supreme Court of Washington, En Banc

October 3, 2019

MOUN KEODALAH and AUNG KEODALAH, husband and wife, Plaintiffs-Respondents,
v.
ALLSTATE INSURANCE COMPANY, a corporation, and TRACEY SMITH and JOHN DOE SMITH, husband and wife, Defendants-Petitioners.

          MADSEN, J.

         At issue in this underinsured motorist case is whether RCW 48.01.030 provides a basis for an insured's bad faith and Consumer Protection Act (CPA), chapter 19.86 RCW, claims against an employee claims adjuster. For the reasons discussed below, we hold that such claims are not available and reverse the Court of Appeals.

         FACTS

         While driving his truck, Moun Keodalah and an uninsured motorcyclist collided in April 2007. After Keodalah stopped at a stop sign and began to cross the street, the motorcyclist struck Keodalah's truck. The collision killed the motorcyclist and injured Keodalah. Keodalah carried auto insurance with Allstate Insurance Company that included underinsured motorist (UIM) coverage.

         The Seattle Police Department (SPD) investigated the collision and determined that the motorcyclist was traveling between 70 and 74 m.p.h. in a 30 m.p.h. zone. SPD also reviewed Keodalah's cell phone records, which showed that Keodalah was not using his cell phone at the time of the collision.

         Allstate also investigated the collision, interviewing several witnesses who said the motorcyclist was traveling faster than the speed limit, had proceeded between cars in both lanes, and had sped into the intersection. Allstate hired an accident reconstruction firm, Traffic Collision Analysis Inc. (TCA), to analyze the collision. TCA found that Keodalah stopped at the stop sign, the motorcyclist was traveling at a minimum of 60 m.p.h., and the motorcyclist's excessive speed caused the collision.

         Keodalah asked Allstate to pay him his UIM policy limit of $25, 000. Allstate refused, offering $1, 600 to settle the claim based on its assessment that Keodalah was 70 percent at fault. After Keodalah asked Allstate to explain its evaluation, Allstate increased its offer to $5, 000.

         Keodalah sued Allstate, asserting a UIM claim. Allstate designated claims adjuster Tracey Smith as its CR 30(b)(6) representative.[1] Although Allstate possessed both the SPD report and TCA analysis, Smith claimed that Keodalah had run the stop sign and had been on his cell phone. Smith later admitted, however, that Keodalah had not run the stop sign and had not been on his cell phone. Before trial, Allstate offered Keodalah $15, 000 to settle the claim. Keodalah again requested the $25, 000 policy limit, and the case proceeded to a jury trial.

         At trial, Allstate contended that Keodalah was 70 percent at fault. The jury determined the motorcyclist to be 100 percent at fault and awarded Keodalah $108, 868.20 for his injuries, lost wages, and medical expenses. The trial court entered judgment against Allstate for $25, 302.95.

         Keodalah filed a second lawsuit against Allstate and included claims against Smith. These included alleged violations of the Washington Insurance Fair Conduct Act (IFCA), chapter 48.30 RCW; insurance bad faith; and CPA violations. Allstate and Smith moved to dismiss the complaint under CR 12(b)(6) ("failure ... to state a claim upon which relief can be granted"). The trial court granted the motion in part, dismissing Keodalah's claims against Smith and certifying the partial dismissal for discretionary review under RAP 2.3(b)(4).[2]

         The Court of Appeals granted discretionary review of three issues: (1) whether IFCA creates a private cause of action for violation of a regulation, (2) whether an individual insurance adjuster may be liable for bad faith, and (3) whether an individual insurance adjuster may be liable for violation of the CPA. The Court of Appeals held that this court's decision in Perez-Crisantos v. State Farm Fire & Casualty Co., 187 Wn.2d 669, 672, 389 P.3d 476 (2017), which held that the IFCA does not create an independent private cause of action for violation of a regulation, foreclosed Keodalah's IFCA claim.[3]

         The Court of Appeals reversed the trial court's CR 12(b)(6) dismissal, holding that the statutory duty of good faith imposed by RCW 48.01.030 applied to individual insurance adjusters and breach of that statutory duty could serve as a basis for Keodalah's bad faith and CPA claims against Smith. Smith filed a petition for review, which this court granted. 191 Wn.2d 1004 (2018).

         ANALYSIS

         Standard of Review

         This court applies de novo review to questions concerning statutory interpretation and dismissal under CR 12(b)(6). State v. Evergreen Freedom Found., 192 Wn.2d 782, 789-90, 432 P.3d 805 (2019), cert, denied, 139 S.Ct. 2647 (2019); Tenore v. AT&T Wireless Servs., 136 Wn.2d 322, 329-30, 962 P.2d 104 (1998). In construing a statute, the fundamental objective is to ascertain and carry out the legislature's intent. Evergreen Freedom Found., 192 Wn.2d at 789. We look to "the entire 'context of the statute in which the provision is found, [as well as] related provisions, amendments to the provision, and the statutory scheme as a whole.'" Id. (alteration in original) (internal quotation marks omitted) (quoting State v. Conover, 183 Wn.2d 706, 711, 355 P.3d 1093 (2015); see also G-P Gypsum Corp. v. Dep't of Revenue, 169 Wn.2d 304, 310, 237 P.3d 256 (2010) ("enacted statement of legislative purpose is included in a plain reading of a statute"). As this court opined in Evergreen Freedom Foundation,

"The meaning of words in a statute is not gleaned from [the] words alone but from all the terms and provisions of the act in relation to the subject of the legislation, the nature of the act, the general object to be accomplished and consequences that would result from construing the particular statute in one way or another."

192 Wn.2d at 790 (alteration in original) (internal quotation marks omitted) (quoting Burns v. City of Seattle, 161 Wn.2d 129, 146, 164 P.3d 475 (2007)); see also id. (citing Dep't of Ecology v. Campbell & Gwinn, LLC, 146 Wn.2d 1, 11, 43 P.3d 4 (2002), for the proposition that "plain meaning" is "discerned from all that the Legislature has said in the statute and related statutes which disclose legislative intent about the provision in question").

         Under CR 12(b)(6), dismissal of a complaint for "failure ... to state a claim upon which relief can be granted" involves a question of law, and such dismissal is appropriate "only if it appears beyond doubt that the plaintiff cannot prove any set of facts which would justify recovery." Tenor e, 136 Wn.2d at 330. In such a case, a "plaintiffs allegations are presumed to be true and a court may consider hypothetical facts not included in the record." Id. "CR 12(b)(6) motions should be granted 'sparingly and with care' and 'only in the unusual case in which plaintiff includes allegations that show on the face of the complaint that there is some insuperable bar to relief.'" Id. (quoting Orwick v. City of Seattle, 103 Wn.2d 249, 254, 692 P.2d 793 (1984); Hoffer v. State, 110 Wn.2d 415, 420, 755 P.2d 781 (1988)). As discussed below, in our view, this is such a case.

         The Court of Appeals' decision turned on the statutory duty it found in RCW 48.01.030, which provides:

The business of insurance is one affected by the public interest, requiring that all persons be actuated by good faith, abstain from deception, and practice honesty and equity in all insurance matters. Upon the insurer, the insured, their providers, and their representatives rests the duty of preserving inviolate the integrity of insurance.

         Keodalah echoes the Court of Appeals, arguing that by imposing a duty on "all persons" to act in good faith, the plain language of the statute subjects employee adjusters to bad faith and CPA claims premised on breach of the noted statutory duty.

         Smith argues that not every duty imposed by a statute is an actionable tort, that RCW 48.01.030 does not expressly create a private right of action, and that the Court of Appeals did not employ the three-pronged test articulated in Bennett v. Hardy, 113 Wn.2d 912, 784 P.2d 1258 (1990), for determining whether a statute includes an implied cause of action, to wit: (1) whether the plaintiff is within the class for whose benefit the statute was enacted, (2) whether legislative intent, explicitly or implicitly, supports creating or denying a remedy, and (3) whether implying a remedy is consistent with the underlying purpose of the legislation. See Swank v. Valley Christian Sch., 188 Wn.2d 663, 675-76, 398 P.3d 1108 (2017) (discussing the Bennett test). We agree with Smith.[4]

         Bennett factors

         The first Bennett factor (benefited class) is not met if the statute in question benefits the general public rather than an identifiable class of persons. As this court stated in Fisk v. City of Kirkland, 164 Wn.2d 891, 895, 194 P.3d 984 (2008), "Plaintiffs, basing their claims on a statute, must establish that they fall within the class of persons intended to be protected by that statute." And "if the statute serves the general public welfare instead of an identifiable class of persons, then there is no duty to any individual unless a specific exception applies." Id.; see also Protect the Peninsula's Future v. City of Port Angeles, 175 Wn.App. 201, 210, 304 P.3d 914 (2013) (because the legislature enacted the statute at issue "to protect the general public from risks posed by legend drugs," complainant cannot qualify as a member of a "class for whose especial benefit" the legislation was enacted); see also Cannon v. Univ. of Chi., 441 U.S. 677, 690 n.l3, 99 S.Ct. 1946, 60 L.Ed.2d 560 (1979) (noting that "the Court has been especially reluctant to imply causes of actions under statutes that create duties on the part of persons for the benefit of the public at large").

         Here, the interest addressed in RCW 48.01.030 is expressly stated to be the "public interest," and the statute indicates that its purpose is to protect the "integrity of insurance." Accordingly, it cannot be said that the statute was enacted for the particular benefit of insureds; thus, the first Bennett factor does not support finding an implied cause of action for a violation of RCW 48.01.030.

         The second Bennett factor, regarding legislative intent to create a remedy, also concerns statutory interpretation. If the statute, read in the context of all the legislature has said on the subject, is plain on its face, we will give it that plain meaning. See Campbell & Gwinn, 146 Wn.2d at 11-12. But if after reading the statute in context, it remains susceptible to more than one reasonable meaning, the statute is ambiguous and it is appropriate to resort to aids to construction, including legislative history. Id. at 12. Here, RCW 48.01.030 expressly recognizes a "duty," but it fails to provide an express cause of action based on violations of that duty. Given this seeming ambiguity, we further consider the relevant statutory and historical context.

         As to the statutory context, we find it significant that the insurance code contains several specific enforcement mechanisms. The insurance commissioner has broad authority to make rules and conduct investigations to give effect to the insurance code. RCW 48.02.060(3). The commissioner also has authority to suspend or revoke the licenses of insurers and adjusters, and may subject them to fines. RCW 48.05.130, .140, .185 (insurers); RCW 48.17.530, .560 (adjusters). Criminal liability may attach where service providers make payments to get claimant referrals. RCW 48.30A.015. The insurance code provides generally that "[e]xcept as otherwise provided in this code, any person violating any provision of this code is guilty of a gross misdemeanor." RCW 48.01.080. In our view, the presence of such specific provisions for enforcement of the insurance code suggests that the legislature's omission of a provision creating a private cause of action for violations of RCW 48.01.030's duty of good faith was intentional. See Davenport v. Wash. Educ. Ass'n, 147 Wn.App. 704, 718-19, 197 P.3d 686 (2008) (noting the ease with which the drafters could have expressed a private statutory cause of action, "we think that the omission implies the absence ... of intent to create a private statutory cause of action"); see also ...


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