398 P.3d 1093
Wash.2017Background
- King County contracted with a joint venture (VPFK) to build tunnel segments and required a performance bond from five sureties. VPFK fell behind schedule and King County declared default and arranged a replacement contractor.
- King County sued VPFK and sureties seeking declaratory relief and damages; the sureties denied coverage and adopted VPFK’s defenses at trial.
- A jury found for King County and awarded nearly $130 million; the trial court, applying Olympic Steamship, awarded about $15 million in attorney fees and refused to segregate fees between claims against VPFK and the sureties.
- The Court of Appeals affirmed; the sureties sought review arguing RCW 39.04.240 (statutory public-works fee scheme) is the exclusive remedy and that fee segregation was required.
- The Washington Supreme Court affirmed: Olympic Steamship applies to surety performance bonds, RCW 39.04.240 does not preempt equitable fee awards, and the trial court did not abuse its discretion in declining to segregate fees because the sureties adopted VPFK’s defenses making claims inseparable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether RCW 39.04.240 is the exclusive fee remedy for public-works disputes (coverage context) | King County: Olympic Steamship equitable fees apply to coverage disputes and are not displaced by RCW 39.04.240 | Sureties: The statute (incorporating RCW 4.84.250-.280) is a comprehensive, exclusive scheme requiring settlement-offer prerequisites and preempts common-law Olympic Steamship fees | RCW 39.04.240 is not exclusive; Olympic Steamship fees remain available for coverage disputes (statute not explicit or repugnant enough to abrogate common law) |
| Whether the trial court erred by refusing to segregate attorney fees between claims against VPFK and the sureties | King County: Segregation unnecessary because the sureties adopted VPFK’s defenses and coverage and breach issues were factually intertwined | Sureties: Fees must be apportioned between coverage-related work (Olympic Steamship) and claims/dispute work (statutory scheme) | No abuse of discretion; segregation was impossible because the sureties adopted VPFK’s defenses, making the claims inseparable |
Key Cases Cited
- Olympic S.S. Co. v. Centennial Ins. Co., 117 Wn.2d 37 (1991) (equitable rule awarding fees where insurer compels insured to litigate coverage and then loses)
- Colorado Structures, Inc. v. Ins. Co. of W., 161 Wn.2d 577 (2007) (plurality addressing application of Olympic Steamship principles to surety bonds)
- Hume v. Am. Disposal Co., 124 Wn.2d 656 (1994) (requirement to segregate fees when some claims do not authorize recovery)
- Durland v. San Juan County, 182 Wn.2d 55 (2014) (standard of review for attorney-fee awards)