Estate of Susan Hunter v. Allstate Insurance Company ( 2016 )

FILED
APRIL 7, 2016
In the Office of the Clerk of Court
WA State Court of Appeals, Division III
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION THREE
ESTATE OF SUSAN HUNTER, )
) No. 32745-1-111
Appellant, )
)
v. )
)
ALLSTATE INSURANCE COMPANY, ) UNPUBLISHED OPINION
)
Respondent. )
SIDDOWAY, J. -The Estate of Susan Hunter appeals the dismissal of an action
against Allstate Insurance Company alleging violations of the Insurance Fair Conduct
Act, RCW 48.30.015 (IFCA), violations of Washington's Consumer Protection Act,
chapter 19.86 RCW (CPA), and breach of contract. The superior court was persuaded by
Allstate that the claims were already pending in an earlier filed complaint in the same
county, and were either barred by res judicata or constituted claim splitting. Allstate
cross appeals the trial court's denial of its request for sanctions.
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Estate of Hunter v. Allstate Ins. Co.
We affirm dismissal of the complaint based on our determination that, by virtue of
Allstate's continuous representations that it viewed the estate's 2012 claims as presented
by its earlier filed action, the trial court's dismissal of this action was equivalent to the
consolidation that was being requested by the estate. We find no abuse of discretion in
the trial court's denial of Allstate's request for sanctions. Accordingly, we affirm.
FACTS AND PROCEDURAL BACKGROUND
In May 2006, after a home in Naches owned by Susan Hunter was destroyed by an
electrical fire, she filed a claim with Allstate, which denied coverage.
Ms. Hunter had secured a landlord insurance policy for the home two years earlier
and paid the required premium, only to be notified that the policy would be cancelled
based on Allstate's mistaken belief-a result of inspecting the wrong home-that the
residence was a mobile home. It was, in fact, a brick structure. Ms. Hunter's insurance
agent, Gregory Schlagel, promptly responded to Allstate's cancellation notice, pointing
out that it had apparently inspected the wrong residence. While Allstate mailed Ms.
Hunter both a check reimbursing her premium payment and notice of cancellation
effective August 7, 2004, stating "[y]our mobile home does not qualify for an Allstate
Landlord Package policy," Mr. Schlagel told Ms. Hunter he would resolve the mix-up,
and asked her to provide a second check to cover the premium. Clerk's Papers (CP) at
1204. She did, and Mr. Schlagel contacted Allstate and requested a second inspection for
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the landlord policy.
The inspection of the proper home was performed and this time revealed the home
was uninsurable because of a roof condition. But no notice that the roof was a problem
was sent to Ms. Hunter. Mr. Schlagel retained the second check she had provided in his
files, never returning it or cashing it. Without further notice, Allstate cancelled Ms.
Hunter's policy on August 7, 2004, just as the June 12 notice of cancellation indicated it
would.
After Ms. Hunter submitted the claim for her fire loss to Allstate and learned she
was uninsured, she sued Mr. Schlagel in January 2007, alleging negligence and breach of
contract.
Ms. Hunter passed away in January 2008, and her estate was substituted as the
plaintiff.
In June 2008, the complaint was amended to add Allstate as a defendant and to
assert claims against it for breach of contract and the duty of good faith and fair dealing,
bad faith, and violations of the CPA.
In March 2009, the estate moved to amend its complaint to add a claim under the
IFCA, which had been enacted after the January 2007 commencement of Ms. Hunter's
action. 1 Leave was granted and the amended complaint was filed in October 2009,
1
The Washington legislature passed IF.CA in 2007. LA ws OF 2007, ch. 498, § 3.
IFCA was subsequently submitted to Washington voters for approval as a referendum
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alleging the estate was entitled to treble damages because Allstate had unreasonably
denied its claim.
For legal reasons that we need not detail in this appeal, the trial court initially
granted summary judgment dismissing the estate's IFCA claim and denied summary
judgment based on undisputed evidence that Allstate, although mistaken, had based its
cancellation of the policy on a sincere belief that the home was a mobile home and
therefore uninsurable in light of underwriting criteria for its landlord policy. The court's
order granting summary judgment included its ruling that Allstate's June 2004
cancellation notice was an effective cancellation of Ms. Hunter's policy as a matter of
law.
A five-day jury trial was scheduled to begin on February 7, 2012. A pretrial
motion that Allstate filed in January 2012 appended previously undisclosed documents
revealing that Allstate was in fact aware of its mistake about the residence type in 2004
and even made a policy change internally. The trial court granted a motion by the estate
to strike the trial date.
The estate filed this action in March 2012, alleging that Allstate violated the IFCA
a second time when it misled the court that it had sincerely and "subjectively believed"
measure in November 2007 and was approved by a 56.7 percent to 43.3 percent margin.
See George H. Ahrend, Legislative History of the Insurance Fair Conduct Act, 49 Gonz.
L. Rev. 431, 435 (2014).
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that the property was a mobile home. CP at 8. Counsel for the estate would later explain
that he felt compelled to file the new action because Allstate's representation of a
sincerely held belief was made in February 2009, the Grant County court administrator
indicated that the next available court hearing would be in 13 months, and the new claims
would be time barred by the time a motion to amend the complaint could be heard.
While the estate filed a motion to consolidate, it concluded that prior rulings in the 2007
action would defeat its new IFCA claim and therefore focused first on having the
problematic orders rescinded.
Allstate moved to dismiss this action as barred by claim and issue preclusion. It
also moved the court to impose CR 11 sanctions against the estate for filing the action,
which it alleged had "no purpose other than to harass" Allstate and increase its expenses.
CP at 37.
Eventually, the trial court rescinded its order in the 2007 action that had found the
June 12 cancellation notice effective as a matter of law. It later ruled as a matter oflaw
that the June 12 cancellation was not effective. Later still, it rescinded its order granting
summary judgment dismissing the first IFCA claim.
Allstate's motion to dismiss this action and the estate's motion to consolidate this
action with the 2007 action remained pending for many months. Allstate continually
contended that all of the estate's claims asserted in this action were already before the
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court in the 2007 action. For instance, in a reply brief submitted in support of its motion
for summary judgment, Allstate argued:
The First Suit and the Second Suit are identical. The Second Suit
serves no purpose other than to harass defendant and to attempt to
circumvent rulings already made in the First Suit. The filing of the Second
Suit is grossly improper, a waste of judicial time and resources, and
sanctionable misconduct under CR 11.
CP at 234; accord, CP at 428 ("This lawsuit is duplicative of the current law suit entitled
Hunter v. Schlagel, et al. under Cause No. 07-2-00020-4.:'); CP at 608 ("it is the position
of Allstate that this suit is duplicative in its entirety"); CP at 64 7 (characterizing the 2012
complaint as "wholly duplicative" of the previously pending action); CP at 971
(characterizing the 2012 complaint as "completely duplicative").
The estate's principal concern was that it had pleaded two distinct IFCA claims in
the first and second actions based on two distinct allegations of misconduct, and that it
had spelled out its second IFCA claim only in its complaint in this action. Allstate
discounted the estate's concern that its second articulation of an IFCA claim might not be
able to proceed in the 2007 action under the then-existing pleadings and could be time
barred otherwise, representing to the court at the hearing on the estate's motion to
reconsider dismissal of this action:
[ALLSTATE'S COUNSEL]: Well I'd like to state first of all, I
don't think it's correct that what we're calling IFCA 2 hasn't been pled in
the 2007 case. We've briefed that issue. I think I personally have briefed
that issue at least six times between these two matters. It's been discussed
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very heavily. I think it's very much under the eye of Judge Antosz, as well
as-
THE COURT: All right, but what I'm stating is all these issues that
you're talking about here, and I'm sorry to cut you off because I know this
is-this is very interesting-but all these issues that you're talking about,
my understanding is that they're being worked through in the other-in the
first lawsuit, in the '07 lawsuit.
[ALLSTATE'S COUNSEL]: Absolutely. I absolutely agree with
th~t, and that all the same claims are present in the 2007 lawsuit. They are
with the change, reversal of that Order, the IFCA claim is even back in the
2007 lawsuit. There is no reason to have a second lawsuit. . . . I think this
further complicates matters. I don't think it adds anything for the Plaintiff.
I don't think it gives the Plaintiff any benefit. I think all it really does is
create more work for the Defendants. It creates more briefing to do, more
times to see the court. It uses court resources but there is absolutely no
reason that all of the things that the Plaintiff is concerned about can't be
addressed in the suit that has already been before the court since 2007, and
is still open.
Report of Proceedings (RP) (Aug. 8, 2014) at 9-12.
The trial court filed a letter opinion on January 27, 2014, denying the estate's
motion to consolidate, granting Allstate's motion to dismiss, and denying Allstate's
motion seeking CR 11 sanctions. The estate moved for reconsideration, which was
denied. The estate appeals and Allstate cross appeals.
ANALYSIS
Estate 's appeal
The estate argues that the trial court erred when it dismissed this action as claim
splitting. It argues that the court should instead have consolidated this action with the
2007 action.
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I "Washington does not allow a plaintiff to bring multiple lawsuits ... as the result
II of a single occurrence-a practice commonly known as 'claim splitting."' 14 KARL B.
TEGLAND, WASHINGTON PRACTICE: CIVIL PROCEDURE: JOINDER OF CLAIMS-CLAIM
I
l SPLITTING PROHIBITED §12.4, at 474 (2d ed. 2009) (citing Landry V. Luscher, 95 Wn.
j App. 779, 976 P.2d 1274 (1999) (where the court determined that a plaintiff cannot file
I
I one suit to recover for property damage resulting from an accident and a second suit to
recover for personal injury damages resulting from the same accident)). A single tort
must be the subject of a single lawsuit. Sprague v. Adams, 139 Wash. 510, 520-21, 247
P. 960 (1926).
In addition to preventing a plaintiff from bringing multiple suits based on the same
tort, claim splitting also encompasses the notions of merger and bar as applied in res
judicata and collateral estoppel-doctrines that limit a plaintiffs ability to bring
duplicitous suits. Landry, 95 Wn. App. at 782-83.
The Restatement (Second) ofJudgments identifies a number of circumstances in
which the doctrine of "claim splitting" should not preclude a plaintiff from filing a
second suit. Among the circumstances under which a claim may serve as a basis for a
second action are where,
[f]or reasons of substantive policy in a case involving a continuing or
recurrent wrong, the plaintiff is given an option to sue once for the total
harm, both past and prospective, or to sue from time to time for the
damages incurred to the date of suit, and chooses the latter course.
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RESTATEMENT (SECOND) OF JUDGMENTS§ 26(e) (1982).
While this case arguably falls within the exception, we need not decide whether
this action constituted claim splitting. While the estate might have had a legitimate
concern that its 2012 complaint raised supplemental matters, including an IFCA claim
that had not been spelled out previously, Allstate clearly stipulated over the course of the
parties' presentation of their arguments on claim splitting that all of the claims asserted
by the estate in this action could proceed in the 2007 action based on the then existing
pleadings.
CR 2A provides:
No agreement or consent between parties or attorneys in respect to
the proceedings in a cause, the purport of which is disputed, will be
regarded by the court unless the same shall have been made and assented to
in open court on the record, or entered in the minutes, or unless the
evidence thereof shall be in writing and subscribed by the attorneys
denying the same.
Where a stipulation is made and recorded in a manner recognized by the court rule, it is
binding on the parties. Cookv. Vennigerholz, 44 Wn.2d 612, 615, 269 P.2d 824 (1954).
The doctrine of judicial estoppel also prohibits a party who has stipulated or otherwise
asserted a legal position in one proceeding from taking a contrary position in a different,
future proceeding. In re Marriage of Rostrom, 184 Wn. App. 744, 763, 339 P.3d 185(2014).
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We can sustain a trial court's judgment dismissing a complaint on any theory
established by the pleadings and supported by the record, even if the trial court did not
consider it. LaMon v. Butler, 112 Wn.2d 193, 200-01, 770 P.2d 1027 (1989). Rather
than resolve the disputed assertion of claim splitting, we hold that the complaint in this
action was properly dismissed on a different but related basis: by virtue of Allstate's
representations to the court, all claims asserted by the estate in its complaint in this action
may proceed in the 2007 action under the existing pleadings, without need for
amendment. The estate will suffer no prejudice from trying its claims, which are deemed
to have been asserted as of March 6, 2012, in the 2007 action. In essence, the remedy of
dismissal is equivalent to the remedy of consolidation requested by the estate. 2
Allstate's cross appeal
Allstate cross appeals the trial court's denial of its motion for CR 11 sanctions for
the estate's filing of a complaint that Allstate argues was duplicative and frivolous.
CR 1 l(a) establishes that when a party or an attorney signs a pleading, motion, or
legal memorandum, he or she is certifying
that to the best of the party's or attorney's knowledge, information, and
belief, formed after an inquiry reasonable under the circumstances: (1) it is
well grounded in fact; (2) it is warranted by existing law or a good faith
2
Allstate argued alternatively that dismissal of the estate's complaint was
warranted on the basis of several affirmative defenses. With our decision that the
complaint was properly dismissed for the reason stated, the alternative arguments are
rendered moot.
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argument for the extension, modification, or reversal of existing law or the
establishment of new law; (3) it is not interposed for any improper purpose,
such as to harass or to cause unnecessary delay or needless increase in the
cost of litigation; and (4) the denials of factual contentions are warranted on
the evidence or, if specifically so identified, are reasonably based on a lack
of information or belief.
The rule goes on to provide that if a pleading, motion, or legal memorandum is signed in
violation of the rule the court "may" impose an appropriate sanction. Id.In Brin v. Stutzman, the court stated, "A trial court's decision to impose or deny
CR 11 sanctions is reviewed for abuse of discretion." 89 Wn. App. 809, 827, 951 P.2d
291 ( 1988) (emphasis added). Brin has been cited with approval for this proposition by
Building Industry Association of Washington v. McCarthy, 152 Wn. App. 720, 745, 218
P.3d 196 (2009), and Parry v. Windermere Real Estate/East, Inc., 102 Wn. App. 920,
930, 10 P.3d 506 (2000). CR 11 does not identify any circumstance in which it is
incumbent on a court to impose a sanction. But case law holds that the purpose of CR 11
is to "deter baseless filings and curb abuses of the judicial system." Bldg. Indus. Ass 'n of
Wash., 152 Wn. App. at 745.
The term "may" generally confers discretion, and where the decision of the trial
court is a matter of discretion, "' it will not be disturbed on review except on a clear
showing of abuse of discretion."' In re Marriage ofFreeman, 169 Wn.2d 664, 671, 239
P.3d 557 (2010) (quoting State ex rel. Carroll v. Junker, 79 Wn.2d 12, 26, 482 P.2d 775( 1971) ). Allstate points to portions of the trial court record in which the estate admits
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that it filed its second IFCA claim in a new action because it had concerns about
procedural problems getting the claim into the 2007 case and admits that there was an
"overlap" between the two cases. E.g., 1 RP (Jan. 25, 2013, Sept. 9, 2013, Jan. 8, 2014,
June 2, 2014) at 60-62, 66. Yet elsewhere in the record, the trial court commented, "I
want to make it real clear, I don't think you acted in bad faith. I think you had a problem
with the statute of limitations. You needed to take some precaution and file this case but
I believe thes.e claims can be raised in the '07 cause and should." RP (Aug. 8, 2014) at
15-16.
No abuse of discretion has been shown.
Attorney fees on appeal
Both parties devote a section of their briefs to a request for an award of attorney
fees under RAP 18.9(a), on the basis that the other party's appeal is frivolous. RAP
18.9(a) provides that we "may order a party or counsel ... who uses these rules for
purpose of delay, files a frivolous appeal, or fails to comply with these rules to pay terms
or compensatory damages to any other party who has been harmed by the delay or the
failure to comply." An 'appeal is frivolous if it presents no debatable issues on which
reasonable minds could differ and is so lacking in merit that there is no possibility of
reversal. In re Marriage ofFoley, 84 Wn. App. 839, 847, 930 P.2d 929 (1997).
We find neither appeal to be frivolous and deny both parties' motions for an award
of fees and costs on appeal.
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Affirmed.
A majority of the panel has determined this opinion will not be printed in the
Washington Appellate Reports, but it will be filed for public record pursuant to RCW
2.06.040.
WE CONCUR:
d~'8 \"-1'
Fearing, C .J.
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