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American Alternative Insurance Corp. v. Goodwill of Olympics and Rainier Region

United States District Court, W.D. Washington, Tacoma

January 15, 2020

AMERICAN ALTERNATIVE INSURANCE CORPORATION, Plaintiff,
v.
GOODWILL OF THE OLYMPICS AND RAINIER REGION, et al., Defendants.

          ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENT RE COVENANT JUDGMENT

          BENJAMIN H. SETTLE, UNITED STATES DISTRICT JUDGE

         This matter comes before the Court on Defendants Sun Theresa Choe (“Choe”) and Goodwill of the Olympics and Rainier Region's (“Goodwill”) motion for partial summary judgment re covenant judgment, Dkt. 65. The Court has considered the pleadings filed in support of and in opposition to the motion and the remainder of the file and grants the motion in part and denies the motion in part for the reasons stated herein.

         I. PROCEDURAL HISTORY

         On November 22, 2017, Plaintiff American Alternative Insurance Corporation (“American”) filed a declaratory judgment action against Defendants Goodwill, Choe, Enrique Hernandez Franco (“Franco”), Jane Doe Hernandez Franco, and Non Profit Insurance Program (“Risk Pool”) seeking a declaration that there is no duty to defend, indemnify, or reimburse Goodwill or the Risk Pool based on allegations in an underlying complaint. Dkt. 1.

         On May 23, 2019, Goodwill and Choe answered and asserted counterclaims against American for breach of the duty to defend, breach of the duty to settle, breach of the duty to indemnify, common law bad faith, violations of Washington's Consumer Protection Act, and violations of Washington's Insurance Fair Conduct Act. Dkt. 43.

         On July 18, 2019 American filed a motion for summary judgment seeking a declaration that its policy does not obligate American to defend or indemnify. Dkt. 49. On January 15, 2020, the Court granted American's motion as to the duty to defend and denied the motion as to the duty to indemnify. Dkt. 83.

         On October 31, 2019, Goodwill and Choe filed a motion for partial summary judgment re: covenant judgment. Dkt. 65. On November 18, 2019, the Risk Pool responded, Dkt. 69, and American responded, Dkt. 71. On November 22, 2019, Goodwill and Choe replied. Dkt. 72.

         II. FACTUAL BACKGROUND

         On September 20, 2014, Choe and Franco were customers at Goodwill. Franco had purchased furniture at the store, and Goodwill employees instructed him to back his truck up a loading ramp so that the furniture could be loaded into the vehicle. While backing up the ramp, Franco ran over Choe causing severe injuries. On January 6, 2016, Choe filed suit against Goodwill in state court

         On June 26, 2017, Choe moved for entry of default judgment because Goodwill had failed to appear or defend. Goodwill immediately moved to set aside the default arguing that it had not been served with the complaint. Ultimately, the court granted the motion with conditions. Goodwill also notified the Risk Pool of the suit, which notified American. The Risk Pool does not issue insurance itself. Instead, the Risk Pool negotiates and obtains insurance of behalf of its non-profit members such as Goodwill. Relevant to the instant matter, Goodwill obtained insurance with American through the Risk Pool.

         In September 2017, Choe moved to reinstate the default based on evidence that Goodwill had been timely served in early 2016. The court denied the request to reinstate the default and instead imposed sanctions of 1% liability for Goodwill's failure to timely submit the evidence in question.

         In December 2017, Choe and Goodwill entered into a settlement agreement. Goodwill agreed to pay $300, 000 of a stipulated judgment of $1, 750, 000 and assigned its claims against the Rick Pool and American over to Choe.[1] In March 2018, the state court concluded that the settlement was reasonable.

         III. DISCUSSION

         Goodwill moves for partial judgment that the settlement “amount establishes the floor or the minimum amount that the insurer is liable to [Choe] should [she] prevail at trial” and that American “is estopped from relitigating the issue of bad faith, collusion, or fraud in this case.” Dkt. 65 at 15. Choe concedes that nothing in this motion applies to her claims ...


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