William Merriman, et ux v. American Guarantee & Liability Insurance Co.
198 Wash. App. 594
| Wash. Ct. App. | 2017Background
- A 2012 warehouse fire at Bernd Moving Systems destroyed customers’ stored property, including over $300,000 belonging to William and Colleen Merriman.
- Bernd held a commercial policy with American Guarantee that included an endorsement covering “personal property of others in your care, custody and control”; American Guarantee never disclosed that coverage to the storage customers.
- American Guarantee contracted York Risk Services as a third‑party claims administrator; York subcontracted Partners Claim Services to interact with claimants and instructed Partners to tell owners they likely had no coverage under Bernd’s policy and to file under their own homeowners’ policies.
- The Merrimans sued Bernd for negligence, discovered the undisclosed coverage during discovery, amended to add American Guarantee, York, and Partners, and obtained class certification; Partners and American Guarantee later settled with the class.
- The trial court dismissed some claims against York, decertified the class as to other claims, and later granted summary judgment for York on remaining claims; the Merrimans appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether owners’ losses under the “personal property of others” endorsement are first‑party claims (insureds) or third‑party claims | Merrimans: endorsement makes owners insureds/first‑party claimants entitled to payment | York/American Guarantee: customers are third‑party claimants; only Bernd may claim | Court: endorsement reasonably read to make owners first‑party claimants; ambiguous language construed for insureds → first‑party claim |
| Whether York (adjuster/TPA) can be sued for insurance bad faith | Merrimans: RCW 48.01.030 applies to “persons” and “representatives” in the insurance business, including adjusters/TPAs | York: bad faith claim is limited to insurers; regulations apply to insurers not adjusters | Court: statute unambiguously covers persons/representatives in the business of insurance; York can be liable for bad faith |
| Negligent misrepresentation—duty and reliance | Merrimans: York supplied (or caused to be supplied) misleading omissions to guide claimants and had a duty to disclose; claimants reasonably relied | York: no duty owed to claimants; omissions cannot support misrepresentation absent duty | Court: York undertook to provide claims information; duty to disclose arose (WAC/Restatement principles); negligent misrepresentation claim viable |
| Negligent claims handling (negligence) — duty of adjuster to third parties | Merrimans: York’s third‑party administrator agreement assumed broad duties intended in part to benefit insureds, creating a tort duty | York: adjuster owes no general tort duty independent of contract; duties are contractual and nondelegable to insurer | Court: given York’s broad contractual promises, foreseeability, and intent that owners benefit, York owed a duty to exercise reasonable care in performing those promises; negligence claim viable |
| CPA claims — per se based on claims‑handling regs and non per se deceptive/unfair practice | Merrimans: York violated WAC claims‑handling regs → per se CPA; alternatively, withholding coverage information was deceptive/unfair (non per se) | York: WAC regs apply only to “insurers,” not adjusters/TPAs; cannot be per se violations | Court: per se CPA claims dismissed (regs apply to insurers); non per se CPA claim (unfair/deceptive practice) survives |
| Class decertification | Merrimans: class should remain; York’s conduct toward claimants was uniform and common questions predominate | York: individual issues predominate for remaining claims | Court: reversed several dismissals and remanded for trial court to reexamine decertification in light of reinstated claims; trial court best positioned to reassess |
Key Cases Cited
- Tank v. State Farm Fire & Cas. Co., 105 Wn.2d 381 (Wash. 1986) (recognizing insurer duty of good faith and statutory foundation)
- Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wn.2d 778 (Wash. 1986) (elements for private CPA claim)
- Jones v. Allstate Ins. Co., 146 Wn.2d 291 (Wash. 2002) (adjuster/employee can owe a duty to third‑party claimants when they are intended beneficiaries)
- Centurion Props. III, LLC v. Chicago Title Ins. Co., 186 Wn.2d 58 (Wash. 2016) (framework for recognizing professional duties to third parties, including intended‑beneficiary analysis)
- Stewart Title Guaranty Co. v. Sterling Sav. Bank, 178 Wn.2d 561 (Wash. 2013) (Trask factors and intended beneficiary analysis for third‑party professional negligence)
- Aldrich & Hedman, Inc. v. Blakely, 31 Wn. App. 16 (Wash. Ct. App. 1982) (adjuster undertook repairs and was held responsible for negligence in that undertaking)
- First State Ins. Co. v. Kemper Nat’l Ins. Co., 94 Wn. App. 602 (Wash. Ct. App. 1999) (recognizing negligent claims handling distinct from bad faith)