Gordon Woodley v. Usaa Casualty Ins. Company ( 2013 )

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IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
GORDON WOODLEY, NO. 68342-0-1
Appellant, DIVISION ONE
USAA CASUALTY INSURANCE
COMPANY, UNPUBLISHED OPINION
Respondent. FILED: July 8, 2013
Lau, J. —Attorney Gordon Woodley represented Tara Hanoch on a contingent
fee basis in a personal injury action stemming from a three-car accident on I-5 in
Seattle. Woodley received one-third of Hanoch's $110,000 settlement award as
payment for his fees. Nearly six years later, Woodley sued Hanoch's insurer, USAA
Casualty Insurance Company, alleging fees it owed to him for defense services he
provided to Hanoch. The trial court dismissed Woodley's suit as time barred by the
three-year statute of limitations governing his claims. Because Woodley failed to
preserve his account receivable claim and to establish a third party contract, the trial
court properly dismissed his claims on summary judgment as time barred.
FACTS
The material facts are undisputed. On September 11, 2002, Tara Hanoch was
driving southbound on I-5 when her car collided with a semitruck owned by Western
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Ports Transportation Inc. The collision forced Hanoch's car into another lane where it
was struck by a car driven by Herman and Laurie Carver. Hanoch and the Carvers
were injured in the accident. The parties disputed liability.
USAA insured Hanoch. The day after the accident, USAA received the loss
report and assigned claims representative Arlys Reynolds to the case. Reynolds met
with Hanoch on September 13 to investigate the accident. Around September 25,
Hanoch hired attorney Gordon Woodley on a contingent fee basis to represent her on
liability and to recover damages for injuries she sustained in the accident.1
Reynolds' detailed case notes describe USAA's case investigation and
interactions with Woodley. Reynolds' first contact with Woodley occurred on
September 25, 2002, when Woodley told her he wanted USAA to hire an accident
reconstruction expert. In October 2002, Reynolds told Woodley that USAA planned to
obtain witness statements before it retained an accident reconstruction expert. She
also told Woodley that USAA would hold Hanoch's car in case he wanted to have an
accident reconstruction expert examine it. Reynolds continued her investigation. She
interviewed Western Ports' truck driver and obtained several witness statements. On
October 10, Reynolds informed Woodley that the truck driver blamed Hanoch for the
accident. Woodley told Reynolds that Hanoch denied fault.
1 No written representation agreement between Woodley and Hanoch appears in
the record. In his answers to USAA's first interrogatories and requests for production,
Woodley stated, in response to USAA's request for copies of all contracts for the
representation of any party in the underlying lawsuit, "There is no written contract for the
defense of David and Tara Hanoch." However, as discussed below, Woodley's
declaration testimony establishes that Hanoch's personal injury action ultimately settled
for $110,000 and Hanoch paid Woodley his attorney fees "on a one third contingent
basis . . . from the settlement proceeds."
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On October 18, Reynolds spoke with USAA's accident reconstruction expert
John O'Callaghan. She briefed Woodley and gave him copies of all recorded witness
statements. On October 22, Reynolds told the truck driver that USAA declined to
accept liability for the accident. The truck driver referred the matter to his attorney. The
Carvers also retained an attorney. Reynolds' case notes indicate that she discussed
the case with USAA's legal department and concluded a "good possibility suit will be
filed if semi co. does not step forward."
In November 2002, Reynolds obtained and reviewed the Washington State
Patrol accident report. She concluded Hanoch was fault free. Reynolds also met with
O'Callaghan and concluded that he "does not think anything to be gained by inspecting
the [vehicles] personally . . . ." The next day, Woodley informed Reynolds that he had
hired accident reconstruction expert John Hunter to examine Hanoch's car and to hold it
until then. From December 2002 to March 2003, Reynolds' contacts with Woodley dealt
with storage of Hanoch's car. Woodley approved the car's release after Hunter
examined it. Woodley approved its release on March 27, 2003. According to Hunter,
Western Ports' truck driver caused the accident.
Meanwhile, on January 13, 2003, Western Ports' insurer informed USAA that it
denied fault and blamed Hanoch as the cause of the accident. In April 2003, Woodley
informed Reynolds that the Carvers' attorney planned to file suit against Hanoch and
Western Ports. Woodley suggested to Reynolds that he wanted to defend Hanoch for
USAA. Reynolds said she would pass this on to their litigation department but USAA
worked with certain law firms. USAA never hired Woodley. Reynolds understood that
Woodley "was representing [Hanoch] on the liability and the damage issues against
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Western Ports Transportation, Inc." Woodley informed Reynolds that he would accept
service on Hanoch's behalf.
Reynolds' July 16 case notes indicate that "[Hanoch] has not been served to
date. [Litigation] unit declined file until suit actually filed. [Woodley] assures me he will
call immediately upon service." The Carvers filed a negligence lawsuit against Hanoch
and Western Ports on September 15, 2003. Woodley accepted service of process on
Hanoch's behalf, sent USAA copies of the summons and complaint, and filed a notice of
appearance in the case.
On September 23, USAA assigned one of its contract attorneys, Alan Peizer, to
defend Hanoch under her USAA insurance policy. Peizer and Woodley signed a
"Notice of Association of Counsel" on September 25. The notice stated, "[T]he
undersigned attorneys will hereby associate with the Woodley Law Offices in the
defense of Tara Hanoch and 'John Doe' Hanoch." In his "Initial Case Analysis and
Legal Fee Estimate," Peizer stated, "We are defending defendants Hanoch while they
are also being represented by their own personal counsel for Tara Hanoch's personal
injury claim." Woodley actively participated in the case as Hanoch's personal counsel.
2Woodley's work on the case included bringing Peizer up to speed on the details
when Peizer joined the case, drafting Hanoch's "Answer, Cross-Claim and
Counterclaim," drafting answers to interrogatories, preparing the Hanochs for their
depositions and defending them, preparing Hunter for his deposition, filing an arbitration
brief on Hanoch's behalf, and participating in the arbitration, including examining Hunter
and Hanoch and assisting in cross-examination ofother witnesses at the hearing.
Woodley also claims, "Western Ports attempted to introduce a damaging video [at the
arbitration hearing], which Isuccessfully defended against and had excluded from
evidence."
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The parties in the negligence lawsuit agreed to binding arbitration on the liability
issues only. The arbitrator determined that Western Ports was 100 percent liable for the
accident. The arbitrator explained in part:
The significance of the physical evidence was the subject of dispute
amongst the respective experts called by the defendants. Ms. Hanoch's expert,
John Hunter, was more persuasive. Not only was the extent of his experience
more compelling, his position that the physical evidence was not conclusive in
and of itself, but was consistent with the truck having crossed into the Volvo was
explained and made sense.
USAA paid Hanoch's arbitration costs and Hunter's witness fee.
In a December 28, 2004 letter, Peizer explained the arbitration outcome to USAA
regional counsel Lisa Giertz. Peizer concluded, "We should ... be able to conclude our
involvement in this case shortly having successfully defended Hanoch, with the able
assistance of Hanoch's personal counsel." On January 25, 2005, the trial court entered
final judgment dismissing all claims against Hanoch. USAA's involvement in the case
ended when Peizer filed a motion to withdraw on February 11, 2005. Hanoch settled
her personal injury case against Western Ports for $110,000 and paid Woodley a one-
third contingency fee.
On January 31, 2005, after entry of final judgment regarding liability, Woodley
sent USAA an invoice for his defense services. He claimed USAA owed him total fees
and costs of $53,886.19 for "Liability Only." Woodley requested USAA "to pay for these
defense services which were necessary to protect [the Hanochs] and their carrier from
liability and which services were instrumental in shielding them and USAA from liability
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for serious damages claims."3 Woodley claimed no work after January 31, 2005. On
March 9, 2005, he sent USAA a second letter to demand payment and additional
interest accrued. USAA refused to pay Woodley.
On January 7, 2011, nearly six years after he worked on Hanoch's case,
Woodley sued USAA for fees he alleged USAA owed him in defending Hanoch.
Woodley's amended complaint alleged four claims: an account stated, statutory
violation of the duty of good faith and fair dealing,4 unjust enrichment, and quantum
meruit.
USAA moved for summary judgment, arguing that Woodley failed to state a claim
upon which relief could be granted and the three year statute of limitations barred his
claims. About a month later, Woodley cross moved for summary judgment, arguing for
the first time that his January 2005 billing invoice to USAA created an account
receivable, subject to the six-year statute of limitations under RCW 4.16.040(2). He
also argued for the first time on summary judgment that he was an intended third party
beneficiary of the insurance contract between Hanoch and USAA. Therefore, a six-year
statute of limitations period applied to his action. The trial court considered both
motions at the summary judgment hearing. It granted USAA's summary judgment
motion of dismissal and denied Woodley's motion.
3 Peizer's declaration testimony established that Woodley's bill came as a
surprise. Peizer testified that Woodley "never discussed this or any billing of his fees
with me prior to that." Peizer assumed Woodley would be paid from contingent fees
received upon resolving Hanoch's personal injury suit. Reynolds similarly testified that
Woodley never told her he was representing USAA or USAA's interests, and "never
made any mention of charging] us for any of his services."
4Woodley's summary judgment reply brief states, "Woodley is not bringing a bad
faith action." Because he abandoned this claim below, we decline to address it.
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ANALYSIS
Standard of Review
We review a summary judgment order de novo, performing the same inquiry as
the trial court and considering facts and reasonable inferences in the light most
favorable to the nonmoving party. Jones v. Allstate Ins. Co., 146 Wn.2d 291, 300, 45
P.3d 1068 (2002). Summary judgment is proper if no genuine issue of material fact
remains and the moving party is entitled to judgment as a matter of law. CR 56(c). A
genuine issue of material fact exists where reasonable minds could differ regarding the
facts controlling the outcome of the litigation. Wilson v. Steinbach, 98 Wn.2d 434, 437,
656 P.2d 1030 (1982). The nonmoving party may not rely on mere allegations, denials,
opinions, or conclusory statements but must set forth specific admissible facts indicating
a genuine issue for trial. CR 56(e); Int'l Ultimate. Inc. v. St. Paul Fire & Marine Ins. Co.,
122 Wn. App. 736, 744, 87 P.3d 774 (2004).
Account Receivable
Woodley contends that his January 2005 billing invoice to USAA demanding
payment constitutes an account receivable. He asserts that RCW 4.16.040's5 six year
statute of limitations for accounts receivable applies and the trial court erred in granting
summary judgment dismissal based on a three-year statute of limitations. USAA
responds that Woodley cannot unilaterally create an account receivable by sending a
5 RCW 4.16.040(2) provides in relevant part:
The following actions shall be commenced within six years:
(2) An action upon an account receivable. For purposes of this section, an
account receivable is any obligation for payment incurred in the ordinary course
of the claimant's business or profession, whether arising from one or more
transactions and whether or not earned by performance.
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bill to a company he admits never employed him and his complaint alleges no account
receivable claim.
Woodley never pleaded his "account receivable" claim in his original or amended
complaint. His amended complaint asserted claims for "account stated, for violation of
[RCW 48.01.030], for unjust enrichment, and for quantum meruit based recovery of
insurance defense legal fees and costs." (Capitalization omitted.) Specifically, his
complaint alleged that the invoice he sent USAA in January 2005 was "evidence of an
account stated." He argued account receivable for the first time in his cross motion for
summary judgment.6
A civil complaint must "'apprise the defendant of the nature of the plaintiffs
claims and the legal grounds upon which the claims rest.'" Kirbv v. Citv of Tacoma, 124
Wn. App. 454, 469-70, 98 P.3d 827 (2004) (quoting Mollov v. Citv of Bellevue, 71 Wn.
App. 382, 385, 859 P.2d 613 (1993)). "While inexpert pleadings may survive a
summary judgment motion, insufficient pleadings cannot." Pac. Nw. Shooting Park
Ass'nv.CitvofSeauim, 158 Wn.2d 342, 352, 144 P.3d 276 (2006). Washington is a
notice pleading state, meaning that a simple concise statement of the claim and the
relief sought is sufficient. Pac. Nw., 158 Wn.2d at 352; CR 8(a). Pleadings are liberally
construed; their purpose is to facilitate a proper decision on the merits, "not to erect
formal and burdensome impediments to the litigation process." State v. Adams, 107
6Woodley submitted no opposition brief to USAA's opening summary judgment
brief. Instead, he filed a "Declaration of Gordon Woodley in Opposition to USAA's
Motion for Summary Judgment and in Support of Woodley's Motion for Summary
Judgment." (Capitalization omitted.) His declaration mentions account receivable in
only one sentence: "The only payment made by USAA on this account receivable has
been to pay the cost of the accident reconstruction expert John Hunter who I retained
and who testified in the case."
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Wn.2d 611, 620, 732 P.2d 149 (1987). But a complaint must give sufficient notice of the
claim asserted. Complaints that fail to give the opposing party fair notice of the claim
asserted and the ground upon which it rests are insufficient. Pac. Nw., 158 Wn. 2d at
352; Lewis v. Bell, 45 Wn. App. 192, 197, 724 P.2d 425 (1986).
"'A party who does not plead a cause of action or theory of recovery cannot
finesse the issue by later inserting the theory into trial briefs and contending it was in the
case all along.'" Kirbv, 124 Wn. App. at 472 (quoting Dewey v. Tacoma Sch. Dist. No.
10, 95 Wn. App. 18, 26, 974 P.2d 847 (1999)). CR 15 sets forth the proper procedure
to amend pleadings to add an additional claim or theory. See Shanahan v. Citv of
Chicago. 82 F.3d 776, 781 (7th Cir.1996) ("A plaintiff may not amend his complaint
through arguments in his brief in opposition to a motion for summary judgment.").
Because Woodley's account receivable claim was improperly pleaded for the first time
in summary judgment proceedings, the trial court properly dismissed that claim.7 See
7Washington v. Boeing Co., 105 Wn. App. 1, 14, 19P.3d 1041 (2000) does not
require a different result. The complaint there was more definitive of the precise nature
of the claim. The complaint here is not. A fair reading of the complaint shows that
Woodley never mentioned an account receivable claim. As discussed above, he raised
it for the first time in response to USAA's time bar summary judgment motion to dismiss.
Account stated and account receivable are distinct claims. An account stated is
a mutual agreement as to the correct amount due from one party to the other as a final
adjustment of their mutual dealings to which the account relates. Sunnvside Valley
Irrigation Dist. v. Roza Irrigation Dist., 124 Wn.2d 312, 315-16, 877 P.2d 1283 (1994).
Additionally, an account stated is an admission by each party of the facts asserted and
a promise by the debtor to pay the sum indicated. Sunnvside Valley, 124 Wn.2d at 315.
Mere rendition of an account by one party to another does not show an account stated.
Sunnvside Valley, 124 Wn.2d at 316. A three-year statute of limitations applies to an
account stated. Tonkon v. Small, 143 Wash. 665, 255 P. 1033 (1927). Woodley does
not dispute that his account stated claim is time barred.
In contrast, actions on accounts receivable are governed by RCW 4.16.040(2).
The term "account receivable" refers to "an amount due a business on account from a
customer who has bought merchandise or received services." Tinoev v. Haisch, 159
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Nast v. Michels, 107 Wn.2d 300, 308, 730 P.2d 54 (1986) ("[A]n appellate court may
sustain a trial court on any correct ground, even though that ground was not considered
by the trial court.").
Our review of Woodley's account receivable claim is also hampered by
Woodley's failure to develop the argument or cite any case authority either below or
on appeal. Woodley argues that because he sent USAA an invoice, his unjust
enrichment and quantum meruit claims8 qualify as accounts receivable subject to
RCW 4.16.040(2)'s six-year statute of limitations. Citing RCW 4.16.040(2)'s definition of
an account receivable as "any obligation for payment incurred in the ordinary course of
Wn.2d 652, 663, 152 P.3d 1020 (2007). Effective July 22, 2007, the legislature
amended the statute to add the following definition of an account receivable: "any
obligation for payment incurred in the ordinary course of the claimant's business or
profession, whether arising from one or more transactions and whether or not earned by
performance." Laws 2007, ch. 124, § 1. An action to enforce an account receivable is
governed by a six-year statute of limitations. RCW 4.16.040(2); Tingev. 159 Wn.2d at
663. Tingev emphasized that its definition of "account receivable" was narrow:
Our definition identifies the parties to the contract (a customer and a business)
and the character of the transaction (a purchase by the customer). It requires the
business to have completed performance (customer has bought or received the
merchandise or services). It specifies the monetary nature of the remaining
obligation (an amount due). Only oral contracts exhibiting all of these
characteristics garner the account receivable six-year limitation.
Tingev, 159 Wn.2d at 659-60.
The mere fact that accounts receivable and accounts stated share some
common attributes does not excuse failure to comply with pleading requirements. As
separate claims, they must both be specifically alleged.
8The law recognizes two classes of implied contracts—contracts implied in law
and contracts implied in fact. Quantum meruit is the method of recovering the
reasonable value of services provided under a contract implied in fact. Unjust
enrichment is the method of recovery for the value of the benefit retained absent any
contractual relationship because notions of fairness and justice require it. In this
circumstance, a contract implied in law exists. Young v. Young, 164 Wn.2d 477, 483,
191 P.3d 1258 (2008) ("we take this opportunity to conceptually clarify the distinction
between 'unjust enrichment" and "quantum meruit.").
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the claimant's business or profession, whether arising from one or more transactions
and whether or not earned by performance," Woodley devotes three sentences to make
his point:
By using the words any obligation for payment, the Legislature abolished
any need for direct contract privity. As long as an account receivable is created
on any basis, the six-year limitation applies. This would include an unjust
enrichment claim since USAA received the benefit of Woodley's work for which it
has not paid.
Appellant's Br. at 19-20. His reply brief merely repeats this statement. See Appellant's
Reply Br. at 13. The question of whether the three-year statute of limitations applicable
to an implied contract can be changed to the six-year statute of limitations by sending
an invoice involves a significant change in the law. To consider such a large step
premised on a few sentences of unsupported argument would be fundamentally unfair
to USAA and impair the orderly development of the law. We decline to address this
issue. See RAP 10.3(a)(6); Cowiche Canyon Conservancy v. Boslev, 118Wn.2d801,
809, 828 P.2d 549 (1992) (declining to consider arguments unsupported by reference to
the record or citation to authority).
Third Party Beneficiary Status
Woodley argues that he is a third party beneficiary of the insurance contract
between Hanoch and USAA. He claims a six-year statute of limitations applies
based on USAA's breach of the duty to defend clause under the insurance agreement.9
This contention is unpersuasive for several reasons. First, Woodley's amended
complaint alleged no breach of contract claim and he argued "breach of duty to defend"
9 Under Lvbeckerv. United Pacific Insurance Co., 67 Wn.2d 11, 18, 406 P.2d
945 (1965), "[w]hen a third-party beneficiary has a right to sue on a written contract
made for his benefit, the 6-year statute of limitations applies."
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and "third party beneficiary" for the first time during summary judgment proceedings.
For the reasons discussed above, we can decline to review these claims. Pac. Nw.,
158 Wn.2d at 352; Kirbv, 124 Wn. App. at 472; Shanahan, 82 F.3d at 781.
Even ifwe reach the merits, Woodley fails to prove he is a third party beneficiary
of the insurance contract. A presumption exists that parties contract for their own
benefit and not for a third party's benefit. Joseph M. Perillo, Calamari & Perillo,
Contracts § 17.3 at 666 (5th ed. 2003). This presumption is rebuttable premised on
proof that the parties entered the agreement to benefit a third party. Lonsdale v.
Chesterfield, 99 Wn.2d 353, 361-63, 662 P.2d 385 (1983). Creation of a third-party
beneficiary contract requires that the contracting parties, "at the time they enter into the
contract, intend that the promisor [here USAA] will assume a direct obligation to the
claimed beneficiary [here Woodley]." Warner v. Design & Build Homes, Inc., 128 Wn.
App. 34, 43, 114 P.3d 664 (2005) (emphasis added). The test of intent is an objective
one—whether performance under the contract necessarily and directly benefits the third
party. Warner, 128 Wn. App. at 43. An incidental, indirect, or inconsequential benefit to
a third party is insufficient to demonstrate intent to create a contract directly obligating
the promisor to perform a duty to a third party. Warner, 128 Wn. App. at 43. "This
requires that the court, 'not examine the minds of the parties, searching for evidence of
their motives or desires. Rather, [it] must look to the terms of the contract to determine
whether performance under the contract would necessarily and directly benefit the
petitioners.'" Burg v. Shannon &Wilson, Inc., 110 Wn. App. 798, 808, 43 P.3d 526(2002) (alteration in original) (quoting Lonsdale, 99 Wn.2d at 362). Generally, the
construction of a contract presents a question of law for the trial court, which may be
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resolved on summary judgment. Marquezv. Univ. ofWash.. 32 Wn. App. 302, 306, 648
P.2d94(1982).
Woodley fails to rebut the presumption that the parties here contracted for their
own benefit and not for his benefit. Woodley points to no record evidence to establish
that when Hanoch and USAA entered into the insurance agreement, USAA intended to
assume a direct obligation to Woodley or any other personal attorney retained by
Hanoch to defend against liability. No language in the insurance agreement shows that
Woodley is an intended third party beneficiary. The insurance agreement shows
Hanoch is the named insured and USAA the named insurer. No provision mentions
Woodley or obligates USAA to reimburse an insured's personal attorney for defense
services rendered. For example, under the heading "Supplementary Payments," the
provision states in part:
In addition to our limit of liability, we will pay on behalf of a covered person:
6. Other reasonable expenses incurred at our request.
7. All defense costs we incur.
Woodley asserts without citation to authority:
As a practical matter the insurance company contemplates that the insurer will
provide an attorney to the insured and pay for that attorney. Thus, the insurer's
performance under the contract necessarily and directly benefits the attorney
defending the insured, thereby making such defense attorney a third party
beneficiary ofthe insurance contract.1 ]
10 He fails to acknowledge that USAA declined to hire him after he offered his
services. Even assuming a third party beneficiary contract here, under Woodley's
rationale, the benefit inures to the attorney USAA actually hired, not Woodley.
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Appellant's Br. at 29. This unsupported argument merits no consideration. See
Cowiche Canyon, 118 Wn.2d at 809 (declining to consider arguments unsupported by
citation to authority).
Woodley also suggests that he became a third party beneficiary when USAA
breached its duty to defend Hanoch. He argues, "When an insurer breaches its duty to
defend, a lawyer for the insured that performs the defense services is an intended third
party beneficiary of the contract." Appellant's Br. at 27. He cites no authority for this
argument.11 See Cowiche Canyon, 118Wn.2d at 809: State v. Logan, 102Wn. App.
907, 911 n.1, 10 P.3d 504 (2000) ("'Where no authorities are cited in support of a
proposition, the court is not required to search out authorities, but may assume that
counsel, after diligent search, has found none.'") (quoting DeHeer v. Seattle Post-
Intelligencer, 60 Wn.2d 122, 126, 372 P.2d 193 (1962)). Woodley correctly notes that,
as a general rule, "where an insurer wrongfully refuses to defend, itwill be required to
pay the judgment or settlement to the extent of its policy limits and also to reimburse the
insured for his costs reasonably incurred in defense of the action." Waite v. Aetna Cas.
& Sur. Co., 77 Wn.2d 850, 856, 467 P.2d 847 (1970). However, the only entities
entitled to sue for wrongful failure to defend/bad faith are the insured and the insurance
commissioner. Neigel v. Harrell, 82 Wn. App. 782, 784-87, 919 P.2d 630 (1996). The
11 This argument contradicts Woodley's own statement of the law regarding third
party beneficiaries. Woodley contends the parties intended him to be a third party
beneficiary of the insurance contract. Yet he also argues he became a third party
beneficiary because USAA breached its duty to defend. The argument that one can
"become" a third party beneficiary if certain circumstances occur is inconsistent with the
legal requirement that contracting parties must intend to create third party beneficiaries
at the time of contracting. Warner, 128 Wn. App. at 43.
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duty to defend is a duty owed to the insured.12 No evidence in the record indicates that
Hanoch challenged the adequacy of USAA's defense or asked Woodley to bring a
breach ofduty claim on her behalf.13
12 It is unclear, but Woodley appears to collapse a breach of good faith argument
with his breach of duty to defend argument.
13 Woodley cites Mahler v. Szucs, 135 Wn.2d 398, 957 P.2d 632, 966 P.2d 305(1998), impliedly overruled on other grounds in Matsvuk v. State Farm Fire &Cas. Co..
173 Wn.2d 643, 272 P.3d 802 (2012), for the proposition that "an insurer does not get a
'free ride' with respect to services offered by counsel for an insured." Appellant's Reply
Br. at 20. In Mahler, our Supreme Court addressed an insurance company's policy
provisions regarding reimbursement for personal injury protection (PIP) benefits
advanced to insureds and whether the insurance company must share with its insureds
the expenses necessary to secure recoveries from tortfeasors. Mahler, 135 Wn.2d at
411. The policy language at issue established that the insurer had a right to
reimbursement of its PIP payments from its insureds from the proceeds of the insureds'
recovery from their independent suits against the tortfeasor. Mahler, 135 Wn.2d at 420.
Through settlement oftheir claims, the insureds in Mahler obtained funds in excess of
the insurer's PIP payments. Mahler, 135 Wn.2d at 421. The insureds argued that the
insurer was entitled to reimbursement of those PIP payments only if it paid a pro rata
share of the costs involved in settling their cases, including attorney fees. Mahler, 135
Wn.2d at 421. Our Supreme Court agreed, based in part on the common fund doctrine:
"[l]f [the insurer] wishes to receive the benefit of the funds [the insureds] recovered, it
must share the expenses of recovering those funds." Mahler, 135 Wn.2d at 427. But
the court was clear that the insurer must share the expenses with the insured, not the
insured's attorney:
To the extent counsel for the insured pursues a recovery for the insured, counsel
is entitled to a single fee from the insured for the work performed. In Mahler, for
example, counsel received a contingent fee from the overall recovery and placed
an amount representing State Farm's PIP payments into Mahler's trust account.
Counsel has already been fully compensated pursuant to the fee agreement.
The money in trust, the settlement proceeds, belongs entirely to Mahler. State
Farm, pursuant to [the insurance policy], has a chose in action against that
money, less Mahler's reasonable expenses in recovering it, as reimbursement for
its PIP payments .... The effort to secure a personal injury recovery, which
involves both the insurer's PIP payments and the insured's other damages, must
inure to the benefit of the insured, not the insured's lawyers.
Mahler, 135 Wn.2d at 429 (emphasis added). The Mahler rule "applies to cases where
litigants preserve or create a common fund for the benefit of others as well as
themselves." Mahler, 135 Wn.2d at 427.
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Attorney Fees
Woodley requests both trial and appellate attorney fees under RAP 18.1 and
Olympic Steamship Co. v. Centennial Insurance Co., 117 Wn.2d 37, 811 P.2d 673(1991). Olympic Steamship extended "the right of an insured to recoup attorney fees
that it incurs because an insurer refuses to defend or pay the justified action or claim of
the insured . . .." Olympic S.S., 117 Wn.2d at 52 (emphasis added). Woodley is not an
insured and his claim for fees depends on his third party beneficiary claim. We decline
to award Woodley attorney fees.
In contrast, the record contains no evidence that USAA made PIP payments to
Hanoch, and USAA is not seeking any reimbursement from Hanoch's recovery against
Western Ports. This is not a common fund case. Woodley, not Hanoch, seeks recovery
of fees against USAA. Mahler does not support Woodley's argument.
Citing Griffin v. Allstate Insurance Co., 108 Wn. App. 133, 142-43, 149, 29 P.3d
777, 36 P.3d 552 (2001) and National Surety Corp. v. Immunex Corp., 162 Wn. App.
762, 779-80, 256 P.3d 439 (2011), affd, 176 Wn.2d 872 (2013), Woodley also claims
that "an insured is entitled to reimbursement of all fees incurred prior to the tender of the
case to the insurer that are necessary to defend the insured." Appellant's Reply Br. at
21. In his statement of additional authorities, Woodley cites Truck Ins. Exch. v. Vanport
Homes, Inc., 147 Wn.2d 751, 58 P.3d 276 (2002) and Arch Ins. Co. v. Scottsdale Ins.
Co., 2010 WL 4365817 (W.D. Wash. 2010) for similar propositions. However, those
cases (1) involved claims for bad faith and breach of duty to defend brought by the
insured (Griffin, Vanport Homes); (2) addressed situations where the primary insurer
denied any duty to defend and a secondary insurer later sought equitable contribution
(Arch Ins. Co.); or (3) addressed whether late tender relieves the insurer of its duty to
defend and whether an insured may recover pre-tender defense costs even after
providing late tender (National Surety Corp.). They do not hold that an insured's
personal counsel is entitled to pre-tender defense fees where the insured makes no
breach of duty to defend claim and does not argue that the insurer failed to defend her
prior to the filing of the lawsuit. Here, USAA began investigating the case the day after
Hanoch's accident and Hanoch made no claim for reimbursement of fees she paid to
Woodley. Woodley has no standing to bring this claim.
-16-
68342-0-1/17
CONCLUSION
Because Woodley fails to establish that a six-year statute of limitations applies to
his claims, we affirm summary judgment dismissal and deny his attorney fees request.
WE CONCUR:
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