Lexine Otey v. Group Health Cooperative ( 2017 )

IL ED
COURT OF AN'EAL`', WV 1
STATE OF
2017 I:( 15 Al 8:18
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
LEXINE OTEY, individually and on
)
behalf of the class of similarly situated
) DIVISION ONE
insureds, )
) No. 74448-8-1
Appellant, )
) UNPUBLISHED OPINION
v. )
)
GROUP HEALTH COOPERATIVE, a )
corporation, )
)
Respondent.) FILED: May 15, 2017
)
TRICKEY, J. — Lexine Otey, a member of the Group Health Cooperative
(GHC), appeals the trial court's grant of GHC's motion for summary judgment and
dismissal of her claims. Otey claims that GHC breached its contract by
overcharging its insureds for prescription drugs, and violated the Consumer
Protection Actl (CPA). Specifically, Otey claims that the contract is ambiguous
and cannot be reasonably interpreted to allow GHC to charge its members more
than the wholesale cost it paid for prescription drugs. Otey's offered interpretation
is not reasonable when read in the context of the entire contract. Because nearly
all of Otey's arguments rely on her breach of contract argument, and her other
arguments are similarly without merit, we affirm.
1 Ch. 19.86 RCW.
No. 74448-8-1/2
FACTS
Otey is a Member of GHC, meaning she is insured under GHC's health
insurance plan. She is covered by GHC's Group Medical Coverage Agreement
(the Agreement). Under the Agreement, Members pay at most a $15 copayment
for preferred generic drugs (Tier 1), a $30 copayment for preferred brand name
drugs (Tier 2), and 100 percent of all charges for nonpreferred generic and brand
name drugs (Tier 3). The Agreement defines the terms "Copayment" and "Cost
Share" in its Definitions section.2
Otey claims that GHC overcharged her for prescription drugs. For example,
she was prescribed Methocarbamol and was charged a $13.60 copayment for 28
tablets; the wholesale cost to GHC was between $3.00 and $5.00.
Otey filed a complaint against GHC individually and on behalf of similarly
situated Members. She alleged that GHC breached the Agreement by failing to
contribute to the payment for prescription drugs despite the terms "Copayment"
and "Cost Share" appearing in the Agreement. Otey also claimed that GHC
violated the CPA by acting in bad faith when it failed to make copayments or share
in the cost of drugs, and did not disclose information that would be material to an
objectively reasonable person.
GHC moved for summary judgment. The trial court granted GHC's motion
and dismissed Otey's claims. The trial court found that GHC did not breach the
Agreement because the challenged definitions were not ambiguous, and did not
require GHC to share in the cost of any particular service. The trial court dismissed
2 Clerk's Papers(CP)at 138, 190.
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No. 74448-8-1/3
Otey's CPA claim because the Agreement was not ambiguous and GHC followed
its terms.
Otey appeals.
ANALYSIS
Otey maintains that the trial court erred by granting summary judgment to
GHC. She first argues that the trial court erred because GHC breached the
Agreement because it required GHC to share in the cost of Tier 1 and Tier 2
prescription drugs, and GHC wrongfully overcharged its Members when it failed to
do so. Otey next contends that GHC violated the CPA by acting in bad faith when
it overcharged its Members and did not disclose its wholesale costs. We consider
each of her claims in turn.
"Appellate review of summary judgment is de novo; the reviewing court
engages in the same inquiry as the trial court and views the facts and the
reasonable inferences from those facts in the light most favorable to the
nonmoving party." Michak v. Transnation Title Ins. Co., 148 Wn.2d 788, 794, 64
P.3d 22(2003). Summary judgment is proper where there is no genuine issue of
material fact and the moving party is entitled to judgment as a matter of law. Intl
Marine Underwriters v. ABCD Marine, LLC, 179 Wn.2d 274, 281, 313 P.3d 395(2013); CR 56(c).
Breach of Contract
Otey argues that the trial court erred by granting GHC's motion for summary
judgement on her breach of contract claim. Otey asserts that GHC breached the
Agreement by overcharging its Members. Otey relies on the Agreement's use of
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No. 74448-8-1/4
the terms "Cost Share" and "Copayment" to claim that GHC was required to share
in the cost of covered drugs. She further contends that GHC should not have
charged her more than the wholesale cost of the drugs because the Agreement
states that a Member's copayment will never exceed the "actual charge" incurred.
Alternatively, she argues that GHC wrongfully excluded coverage of Tier 1 and
Tier 2 drugs under the Agreement.
To prevail on a breach of contract claim, the plaintiff must show the
elements of duty, breach, causation, and damages. Baldwin v. Silver, 165 Wn.
App. 463,473, 269 P.3d 284(2011). To avoid summary judgment, a plaintiff must
produce evidence raising genuine issues of material fact as to each element of the
claim for breach of contract. Baldwin, 165 Wn. App. at 473. If the duty allegedly
breached is not in the contract, the claim of breach of contract cannot be sustained.
Fid. & Deposit Co. of Md. v. Daily, 148 Wn. App. 739, 745-46, 201 P.3d 1040(2009).
Defined Terms "Cost Share"and "Copayment"Ambiguity
Otey argues that the trial court erred in granting summary judgment on her
breach of contract claim because GHC breached the Agreement by overcharging
its Members. Specifically, she argues that the terms "Cost Share" and
"Copayment" may be reasonably interpreted to require GHC to share in the cost
of covered drugs, and by failing to do so GHC overcharged its Members. Because
"Cost Share" and "Copayment" are defined terms in the Agreement with only one
reasonable interpretation, and did not allow GHC to overcharge its Members, we
find no error.
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No. 74448-8-1/5
The court examines the terms of an insurance contract under their plain
language to determine whether there is coverage. Boeing Co. V. Aetna Cas. &
Sur. Co., 113 Wn.2d 869, 877, 784 P.2d 507(1990). "In Washington,. . .'the
[insurance] policy is construed as a whole, and the policy should be given a fair,
reasonable, and sensible construction as would be given to the contract by the
average person purchasing insurance." Kitsap County v. Allstate Ins. Co., 136
Wn.2d 567, 964 P.2d 1173(1998)(internal quotation marks omitted)(quoting
Queen City Farms, Inc. v. Cent. Nat'l Ins. Co., 126 Wn.2d 50, 65, 882 P.2d 703,
891 P.2d 718 (1994)).
"When interpreting insurance contracts, courts use the same interpretive
techniques employed on other commercial contracts." Intl Marine Underwriters,
179 Wn.2d at 282. Defined terms are interpreted in accordance with the definition
provided in the policy. Kitsap County, 136 Wn.2d at 576. If the language of an
insurance policy is clear and unambiguous, a court may not modify the policy or
create an ambiguity. Am. Star Ins. Co. v. Grice, 121 Wn.2d 869, 874, 854 P.2d
622(1993).
Interpretation of a writing is a question of law that is reviewed de novo.
Stewart v. Chevron Chem. Co., 111 Wn.2d 609, 613, 762 P.2d 1143(1988).
Here, the Financial Responsibilities for Covered Services section of the
Agreement states that Members are responsible for costs for a Covered Service
up to the Cost Shares amount. The Agreement defines "Cost Share" as "[t]he
portion of the cost of Covered Services for which the Member is liable. Cost Share
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No. 74448-8-1/6
includes Copayments, coinsurances and Deductibles."3,4 "Copayment" is defined
in the Agreement as "[t]he specific dollar amount a Member is required to pay at
the time of service for certain Covered Services."5 The Copayment amount for
Tier 1 drugs is $15.
When the Agreement is read as a whole, the defined terms Cost Share and
Copayment are not ambiguous. Cost Share includes Copayments within its
definition. Copayments are specific dollar amounts that act as a ceiling on the
amount a Member must pay for Covered Services. Copayments do not require
either party to pay a percentage of the cost of Covered Services.
The disputed terms in the Agreement are contained in the Financial
Responsibilities section. This section does not mention any responsibility of GHC
to contribute to the payment of Covered Services that cost less than the
Copayment value. Rather, it states that "[t]he Subscriber is liable for payment of
the following Cost Shares for Covered Services."6 For the purposes of Tier 1
3 CP at 138, 190.
4 GHC cites the Washington Administrative Code (WAC) as additional support that the
definitions in the Agreement are valid, although the Agreement does not incorporate them.
The WAC provisions cited by GHC closely match those in the Agreement, thereby lending
support to its offered interpretation. GHC is a health maintenance organization, which is
responsible for providing "comprehensive health care services to enrolled participants of
such organization on a group practice per capita prepayment basis or on a prepaid
individual practice plan, except for an enrolled participant's responsibility for copayments
and/or deductibles." RCW 48.46.020(13); WAC XXX-XX-XXXX(15). "Cost-sharing" is
defined as "amounts paid to health carriers directly providing services, health care
providers, or health care facilities by enrollees and may include copayments, coinsurance,
or deductibles." WAC XXX-XX-XXXX(9). Cost-sharing in the context of prescription drugs
means "amounts paid directly to a provider or pharmacy by an enrollee for services
received under the health benefit plan, and includes copayment, coinsurance, or
deductible amounts." WAC XXX-XX-XXXX(1).
5 CP at 138, 190.
6 CP at 100, 153.
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No. 74448-8-1/7
prescription drugs, the Agreement shows that Members are liable for up to $15,
which would not affect GHC's responsibility to pay. But any amount for a Covered
Service exceeding the Cost Shares value would be paid by GHC under the
Agreement. Therefore, when the definitions of the challenged terms are read in
the context of the Agreement as a whole, they are not ambiguous.
Otey argues that the term Cost Share is ambiguous for two reasons. First,
she alleges that the average person would interpret it to mean that GHC would be
responsible for paying a portion of the cost of drugs, rather than shifting the entire
cost to the Member. Otey next cites the undefined phrase "portion of the cost"
contained in the definition of Cost Share to argue that, due to the use of this term
in the Agreement's Financial Responsibilities section, GHC was required to share
in the cost of prescription drugs with the insured Member.7
Otey's arguments are unpersuasive for three reasons. First, Cost Share
explicitly includes Copayments in its definition, which in turn are set amounts listed
in the Agreement that act as a ceiling on the price Members will be required to pay
for certain Covered Services. Second, GHC will pay a portion of the cost of Tier 1
drugs, but only if the actual charge incurred by the Member for the drugs is greater
than the $15 Copayment value. Third, after a Member reaches her "Out-of-pocket
Limit" for the year, GHC is solely responsible for paying any further Cost Shares.8
The Agreement does not make GHC responsible for the costs Otey incurred simply
because the Copayment threshold was not reached.
7 CP at 138, 190.
8 CP at 102, 140.
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No. 74448-8-1/8
In the alternative, Otey argues that the Agreement does not adequately
define the term Cost Share, and that this court should use dictionary definitions to
determine its common meaning. Courts give undefined terms in a policy their
"'plain, ordinary, and popular' meaning." Boeinp Co., 113 Wn.2d at 877 (quoting
Farmers Ins. Co. v. Miller, 87 Wn.2d 70, 73, 549 P.2d 9(1976)). Courts may look
to standard English dictionaries to determine the ordinary meaning of undefined
terms. Kitsap County, 136 Wn.2d at 576. But the Agreement defines both Cost
Share and Copayment. Therefore, neither term is undefined. We decline to adopt
Otey's proposed dictionary definitions.
"Actual Charge"
Otey argues that summary judgment on her breach of contract claim was
improper because GHC overcharged its Members when it charged them more than
its wholesale cost of purchasing drugs. Specifically, Otey argues that the
undefined term "actual charge" in the Agreement can be reasonably interpreted to
require GHC to charge Otey only the amount it paid for a drug. Otey contends that
the term is ambiguous and should be interpreted in favor of Otey, as the
policyholder. Although "actual charge" is undefined, it can only have one
reasonable interpretation when read in the context of the Agreement as a whole.
Therefore, we find no error.
"The insurance contract must be viewed in its entirety; a phrase cannot be
interpreted in isolation." Allstate Ins. Co. v. Peaslev, 131 Wn.2d 420, 424, 932
P.2d 1244 (1997). If the language of an insurance policy is clear and
unambiguous, the court must enforce it as written. Transcontinental Ins. Co. v.
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No. 74448-8-1/9
Wash. Pub. Utils. Dists.' Util. Sys., 111 Wn.2d 452, 456, 760 P.2d 337 (1988).
Language of an insurance contract is ambiguous if it is fairly susceptible to two
different reasonable interpretations. Am. Star, 121 Wn.2d at 874. Any ambiguity
is resolved in favor of the policyholder. Eurick v. Pemco Ins. Co., 108 Wn.2d 338,
340, 738 P.2d 251 (1987).
Undefined terms in an insurance policy are given their ordinary and
common meaning. Peasley, 131 Wn.2d at 424. To determine the ordinary
meaning of undefined terms, courts may look to standard English dictionaries.
Kitsap County, 136 Wn.2d at 576. The contract must be read as an average
person would read it, and given a practical and reasonable interpretation. Moeller
v. Farmers Ins. Co. of Wash., 173 Wn.2d 264, 272, 267 P.3d 998 (2011).
Interpretation of the language of an insurance policy is a matter of law that
this court reviews de novo. Peasley, 131 Wn.2d at 423-24.
Here, the phrase "actual charge" appears in the Financial Responsibilities
section of the Agreement:
The Subscriber is liable for payment of the following Cost Shares for
Covered Services provided to the Subscriber and his/her
Dependents. Payment of an amount billed must be received within
30 days of the billing date. Charges will be for the lesser of the Cost
Shares for the Covered Service or the actual charge for that service.
Cost Shares will not exceed the actual charge for that service.[°]
"Covered Services" are "services for which a Member is entitled to coverage
in the Benefits Booklet."1° As explained above,"Cost Share" is the "portion of the
cost of Covered Services for which the Member is liable," and includes
9 CP at 100, 153.
10 CP at 138, 190.
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No. 74448-8-1/10
Copayments." "Copayment" is the specific dollar amount a Member must pay at
the time of service.12
Cost Shares act as a ceiling on the cost a Member can incur for a Covered
Service. If the actual charge billed to a Member for a given Covered Service is
lower than the Cost Share assigned to that service, the Member is responsible for
only the actual charge incurred when the Member receives the Covered Service.
The Agreement further states that Cost Shares will not exceed the actual charge
for that service. If the actual charge incurred by the Member is lower than the
Copayment value, the Member is responsible for paying the actual charge
incurred. If the actual charge incurred is greater than the Copayment,the Member
is responsible for the Copayment only.
The Financial Responsibilities for Covered Services section of the
Agreement lays out the costs the Member is responsible for paying. It does not
contain formulas or qualifiers that use the costs incurred by GHC in procuring
drugs or services as a reference point for determining the cost charged to the
Member. As written, and when viewed in the context of the preceding language
referring only to the payment of the amount billed to the Member, "actual charge"
may only be reasonably interpreted as comparing the actual amount billed to a
Member upon receiving a service to the Copayment value assigned to that service.
Although the word "actual" could mean wholesale cost or otherwise limit the costs
"CP at 138, 190.
12 CP at 138, 190.
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No. 74448-8-1/11
GHC may charge Members in a different type of contract, here there is no language
in the Agreement that can support this interpretation.
Otey's offered definition of "actual charge" as the wholesale cost imposed
on GHC attempts to reach beyond the scope of the contract as written and
incorporate terms and values that are not contained within the Agreement. The
Agreement does not incorporate any third party costs into its listed Copayment
values. The complete absence of such values means that the phrase "actual
charge" cannot be reasonably interpreted to mean GHC's wholesale cost to
purchase the drugs. The Agreement's scope is confined to the costs Members are
responsible for while under GHC's insurance coverage.
Otey argues that other parts of the Agreement beyond the Financial
Responsibilities section demonstrate that "actual charge" also could mean either
costs incurred by Members or by GHC. The Agreement states that "[i]n the event
the Member elects to purchase a brand-name drug instead of the generic
equivalent (if available), the Member is responsible for paying the difference in cost
in addition to the prescription drug Cost Share."13 Otey argues that this language
could be reasonably interpreted to mean either the charge incurred by GHC to
purchase the drugs or the price charged by GHC to the Member. As discussed
above, the Agreement concerns only the financial responsibilities between the
Members and GHC, and never mentions GHC's own costs. The additional
language cited by Otey does not support her argument that "actual charge" means
the cost incurred by GHC.
13 CP at 109, 161.
No. 74448-8-1/12
Otey's claim that GHC breached the Agreement by charging its Members
more than the wholesale costs of the drugs under the "actual charge" language is
not a reasonable interpretation of the Agreement, and was properly dismissed.
Relying on federal cases that have held that "actual charge" is ambiguous
in the context of supplemental cancer insurance contracts, Otey argues that"actual
charge" is always ambiguous when used in health insurance contracts. See, e.g.,
Pedicini v. Life Ins. Co. of Ala., 686 F.Supp.2d 692 (W.D. Ky. 2010), ("actual
charge" in context of supplemental cancer insurance contract could reasonably
mean either the amount charged by the medical provider to the patient or a
different amount accepted by the medical provider from a third party as payment
in full), rev'd in part on other grounds, 682 F.3d 522(6th Cir. 2012).
In supplemental cancer insurance contracts, direct payments are made to
the policyholder when an insured patient undergoes covered cancer treatments.
Pedicini, 686 F.Supp.2d at 694. These benefits are paid regardless of whether the
patient has other insurance sufficient to cover all medical expenses. Pedicini, 686
F.Supp.2d at 694. When the patient has other insurance covering cancer
treatments, the policyholder is able to retain the money as a result of the
supplemental coverage. Pedicini, 686 F.Supp.2d at 694. This arrangement
renders "actual charge" ambiguous because the insured patient may have to pay
either (1) the total amount billed, or (2) the amount a health care provider would
be willing to accept as payment in full. Pedicini, 686 F.Supp.2d at 696.
The cases cited by Otey are distinguishable from the present case. The
section of the Agreement at issue here concerns Members' responsibility to pay
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No. 74448-8-1/13
the Cost Shares listed under the Agreement. The only cost that could be incurred
by the Member under the Agreement for Covered Services would be the lesser of
the Copayment listed or the "actual charge." This is distinguishable from insurance
contracts under which there could be both a total amount billed to the insured and
an amount that the provider would accept as payment in full. Because "actual
charge" can only be reasonably interpreted to mean one amount in the context of
the Agreement, it does not create the ambiguity found in the federal cases relied
on by Otey.
Coverage of Tier 1 and Tier 2 Drugs
Otey argues that Tier 1 and Tier 2 prescription drug benefits are within the
scope of the Agreement's coverage, but GHC wrongfully claims that it has no duty
to pay any portion of their cost. Otey contends that GHC wrongfully made
Members pay the entire cost of drugs, as well as any profit GHC decided to add to
the price. Otey calls this a "phantom exclusion." Because GHC is responsible for
costs of Covered Services that exceed the assigned Cost Shares value and
becomes responsible for the entire cost of Covered Services after a Member
reaches his or her Out-of-pocket Limit, we find no error.
Courts interpret insurance policies liberally in order to provide coverage
wherever possible. Patriot Gen. Ins. Co. v. Gutierrez, 186 Wn. App. 103, 110, 344
P.3d 1277 (2015); Bordeaux, Inc. v. Am. Safety Ins. Co., 145 VVn. App. 687, 694,
186 P.3d 1188(2008). Exclusionary terms from insurance coverage are construed
narrowly because they are contrary to the protective purpose of insurance. Vision
One, LLC v. Phila. Indem. Ins. Co., 174 Wn.2d 501, 507, 512, 276 P.3d 300(2012)
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No. 74448-8-1/14
(exclusion of losses "caused by or resulting" from deficient design or faulty
workmanship). Insurers have the burden of drafting exclusions in clear and
unequivocal terms. Intl Marine Underwriters, 179 Wn.2d at 288 (policy containing
exclusion for contractually assumed liability with an exception for "insured
contracts").
As discussed above, the Cost Share and Copayment terms are not
ambiguous and do not require GHC to share in the cost of each transaction. Under
the Agreement, GHC is responsible for payment of Covered Services costs
exceeding the Copayment value, and also for any costs incurred by the Member
after his or her Out-of-pocket Limit has been reached. GHC does not exclude the
costs of Tier 1 or Tier 2 drugs from its coverage because the amounts paid by a
Member count toward his or her Out-of-pocket Limit. After a Member reaches the
Out-of-pocket Limit, which includes all Cost Shares for Covered Services incurred
by the Member over the calendar year, GHC becomes solely responsible for
additional costs. Further, if the cost of a Tier 1 drug exceeds the $15 Copayment
or a Tier 2 drug exceeds the $30 Copayment, GHC covers the excess. Under the
Agreement, there is no "phantom exclusion" of Tier 1 drugs.
The exclusions in the cases cited by Otey are distinguishable from GHC's
coverage of Tier 1 and Tier 2 drugs. The insurance policies at issue contained
explicit exclusionary clauses that barred coverage for specific events. See, e.q.,
Vision One, LLC, 174 Wn.2d at 507 (term excluding coverage for loss or damage
caused by specified events). These cases do not support Otey's argument that
GHC implicitly excludes Tier 1 and Tier 2 drugs, as there is no exclusionary term
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No. 74448-8-1/15
to construe narrowly. Otey does not challenge GHC's exclusion of Tier 3 drugs
from coverage under these cases.
Otey argues that Tier 1 and Tier 2 drugs are treated practically the same as
Tier 3 drugs, which are explicitly excluded from coverage, because few Tier 1 and
Tier 2 drugs will cost more than their Copayment value. Otey does not offer legal
authority in support of this argument. As discussed above, this ignores that GHC
is responsible for any actual charge exceeding the Copayment value for Tier 1 and
Tier 2 drugs, and that GHC is responsible for any Cost Shares incurred after the
Member reaches their annual Out-of-pocket Limit.
Otey argues that the trial court erred in applying an "aggregate" cost-sharing
theory to the Agreement.14 This argument is inapplicable. Cost-sharing via
copayments and coinsurance assure that both the subscriber and insurance
company share in annual pharmacy expenditures. Reoence Blueshield v. Office
of the Ins. Comm'r, 131 Wn. App. 639, 650, 128 P.3d 640 (2006). Recognized
methods of cost-sharing "create a finite and predictable annual expenditure for the
subscriber (deductible) or they assure that the subscriber and the insurance
company share in all annual pharmacy expenditures (copayments and
14 Otey also argues that the trial court erroneously considered only GHC's unilateral intent
when interpreting the Agreement to require GHC to only share in costs when the "actual
charge" exceeded the Cost Share value or after a Member's Out-of-pocket Limit was
reached, rather than the language of the Agreement. Washington courts determine the
parties' intent by focusing on the objective manifestations in the agreement, rather than
on unexpressed subjective intent of the parties. Hearst Commc'ns v. Seattle Times Co.,
154 Wn.2d 493, 503, 115 P.3d 262 (2005). Here, as discussed above, the language of
the Agreement is not ambiguous. The Financial Responsibilities section requires that
Members pay the lower of the Cost Share or "actual cost" incurred. The trial court did not
impermissibly rely only on GHC's unilateral intent when it interpreted the Agreement, as it
could look to the language of the Agreement to reach its conclusions.
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No. 74448-8-1/16
coinsurance)." Regence Blueshield, 131 Wn. App. at 650. A benefit cap limiting
a provider's liability that exposes insureds to unpredictable and limitless upper
liability is invalid. Regence Blueshield, 131 Wn. App. at 650-51.
The Agreement uses cost-sharing mechanisms recognized by Washington
courts. The Agreement contains clear Copayment values which limit a Member's
liability for costs of Tier 1 and Tier 2 drugs. In addition, a Member's annual liability
for costs is limited by the Out-of-pocket Limit contained in the Agreement. Both of
these act as limits on a Member's liability, and do not impermissibly limit GHC's
responsibility to cover expenses. The trial court's use of the word "aggregate" to
describe the cost-sharing arrangement in the Agreement is irrelevant.
Otey's CPA Violation Claim
Otey argues that the trial court erred when it dismissed her CPA claim. Otey
argues that GHC breached the Agreement when it overcharged Members by failing
to share in the cost of drugs, and therefore breached the CPA. In the alternative,
Otey argues that her CPA claim is an independent claim with unresolved issues of
fact to be decided by a jury. Neither argument has merit.
Otey first argues that the trial court erred when it dismissed her CPA
violation claim based on its finding that GHC did not breach the Agreement. Otey
argues that this court should reinstate her CPA violation claim if we reverse the
dismissal of her breach of contract claim. Because we find that Otey's breach of
contract claim was properly dismissed, we decline to reinstate her CPA violation
claim on that basis.
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No. 74448-8-1/17
In the alternative, Otey argues that the trial court erred in dismissing her
CPA violation claim because it is independent of the breach of contract claim and
depends on unresolved questions of fact. Specifically, she argues that GHC acted
in bad faith and did not put forward any evidence that its interpretation of the
Agreement was reasonable beyond argument and the Agreement itself. Otey
maintains that this was insufficient for summary judgment, and the question of
GHC's reasonableness should have gone to a jury.
Parties may bring bad faith claims against their insurer because the
insurance company has a quasi-fiduciary duty to its insureds. Cedell v. Farmers
Ins. Co. of Wash., 176 Wn.2d 686,696, 295 P.3d 239(2013). Good faith requires
an insurer to deal fairly with insureds. Mut. of Enumclaw Ins. Co. v. Dan Paulson
Constr., Inc., 161 Wn.2d 903, 915 n. 9, 169 P.3d 1 (2007).
Whether an insurer acted in bad faith remains a question of fact. Smith v.
Safeco Ins. Co., 150 Wn.2d 478,484, 78 P.3d 1274(2003). To succeed on a bad
faith claim against an insurer, a policyholder must show the insurer's breach of an
insurance contract was unreasonable, frivolous, or unfounded. Smith, 150 Wn.2d
at 484.
An insurer is entitled to a directed verdict or a dismissal on summary
judgment only if there are no disputed material facts pertaining to the
reasonableness of the insurer's conduct under the circumstances or the insurer is
entitled to prevail as a matter of law on the facts construed most favorably to the
nonmoving party. Smith, 150 Wn.2d at 484.
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No. 74448-8-1/18
Otey relies primarily on Coventry Associates v. American States Insurance
Co., 136 Wn.2d 269, 961 P.2d 933 (1998). In that case, Coventry submitted a
claim to American States for damages that occurred in one of its construction
projects. Coventry Assocs., 136 Wn.2d at 274. An American States adjuster
briefly investigated the project site and then denied the claim without investigating
the cause of the damage or loss of business coverage, and with minimal review of
Coventry's policy. Coventry Assocs., 136 Wn.2d at 274. The Supreme Court held
that an insured may maintain an action against its insurer for a bad faith
investigation of the insured's claim and for violation of the CPA regardless of
whether the insurer was ultimately correct in determining coverage did not exist.
Coventry Assocs., 136 Wn.2d at 279.
On appeal, Otey asserts only that GHC did not offer evidence beyond
argument and that its interpretation of the Agreement was reasonable. Otey does
not allege any act of bad faith separate from GHC's interpretation of the
Agreement. As discussed above, GHC did not breach Agreement by
overcharging its Members. Because Otey does not allege an act of bad faith
separate from GHC's alleged breach of the Agreement, Coventry Associates is
inapplicable to the present case. Therefore, there is no disputed material fact
pertaining to the reasonableness of GHC's alleged breach of the Agreement, and
Otey's CPA violation claim does not have a basis independent from her breach of
contract claim. We conclude that the trial court did not err in dismissing Otey's
CPA violation claim.
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Affirmed.
WE CONCUR:
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