Hall v. Encompass Insurance Company of America
2:15-cv-00594
| W.D. Wash. | Sep 21, 2015Background
- On December 16, 2011 a fire destroyed personal property in the Halls' garage; they had an Encompass homeowners policy covering much personal property but not two collectible cars.
- Encompass adjusted the claim, initially offered $62,651.62 ACV, later increased its valuation and by April 2015 had paid $263,577.09 in ACV; replacement-cost (RCV) holdback procedure applied (180-day rule from date of loss) and Encompass repeatedly extended the deadline, finally to April 10, 2015.
- The Halls and Encompass each sued/settled with Harper Electric (the alleged tortfeasor); Encompass recovered $182,500 and the Halls recovered $132,500; Harper’s insurer had $2 million policy limits remaining.
- The Halls sued Encompass seeking (1) declaratory relief to recover Encompass’s subrogation proceeds unless Halls were made whole and (2) a declaration that the policy’s 180‑day RCV requirement is satisfied by a timely statement of intent to replace (not actual replacement). They also alleged IFCA and bad‑faith claims.
- Key procedural disputes: whether the made‑whole doctrine limits Encompass’s recovery from its own subrogation, whether “make claim” within 180 days requires actual replacement or only notice of intent, whether Encompass waived appraisal, and whether factual disputes preclude summary judgment on IFCA and bad‑faith claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether insurer may keep subrogation recovery before insured is made whole | Halls: insurer may not retain subrogation funds until insured is made whole for all damages (including uninsured losses) | Encompass: made‑whole doctrine does not bar insurer subrogation recoveries in this context; presumption Halls were made whole by their settlement | Court: Made‑whole doctrine applies here (insurer’s subrogation cannot defeat insured’s right to be made whole where insurer sued knowing insured was pursuing recovery); whether Halls were made whole is a jury question (presumption from settlement shifts burden to Halls to prove damages exceed settlement) |
| Meaning of policy phrase “make claim” for 180‑day RCV holdback | Halls: “make claim” means give timely notice/intent to replace within 180 days; actual replacement can occur later within a reasonable time | Encompass: “make claim” requires actual replacement within the 180‑day window | Court: Ambiguous; apply contra‑proferentem —i.e., reasonable interpretation favoring insured—so timely notice suffices, but replacement must occur within a reasonable time; reasonableness is for factfinder |
| Whether Encompass may invoke contractual appraisal now | Encompass: appraisal clause should resolve valuation disputes; stay and compel appraisal | Halls: Encompass waived appraisal by years of negotiation and late invocation, causing prejudice | Court: Encompass waived appraisal by waiting ~3.5 years and litigating/negotiating instead; appraisal denied and stay denied |
| Summary judgment on IFCA and bad‑faith claims | Halls: insurer’s valuation practices, limited site inspection, unreasonable depreciation and delays show IFCA violation and bad faith | Encompass: no IFCA/bad faith as RCV was paid where applicable and any dispute does not amount to unreasonable denial; insurer’s interpretation of 180‑day meant denials were not unreasonable | Court: Genuine disputes of material fact preclude summary judgment for Encompass on IFCA and bad‑faith; but Encompass is entitled to judgment to the limited extent that its contrary interpretation of the 180‑day clause cannot, by itself, constitute an IFCA violation |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard)
- Scott v. Harris, 550 U.S. 372 (viewing facts in light most favorable to nonmovant when assessing disputes of fact)
- Thiringer v. Am. Motors Ins. Co., 588 P.2d 191 (Wash.) (made‑whole doctrine: insurer recovers only excess after insured fully compensated)
- Mahler v. Szucs, 957 P.2d 632 (Wash.) (subrogation described and allocation of payment responsibility)
- Averill v. Farmers Ins. Co. of Wash., 229 P.3d 830 (Wash. Ct. App.) (limits on made‑whole rule in context of deductibles; contractual allocation issues)
- Peterson v. Safeco Ins. Co. of Ill., 976 P.2d 632 (Wash. Ct. App.) (settlement for less than policy limits is evidence the insured was made whole)
- Am. Mfrs. Mut. Ins. Co. v. Osborn, 17 P.3d 1229 (Wash. Ct. App.) (discrepancy between pre‑appraisal payment and appraisal award not alone dispositive of bad‑faith)