149 Wash. 2d 135 | Wash. | 2003
This case involves the issue of who carries the burden of establishing the extent of an offset for payments received by an insured from settling insurers— the insured or the nonsettling insurers. Large costs associated with multiple environmental cleanup sites triggered this litigation between the insured, Puget Sound Energy, Inc. (PSE), and the nonsettling insurers (Insurers). PSE contends the Court of Appeals erroneously assigned them the initial burden of proof regarding offsets of proceeds from the other settling insurers. At issue is whether the Court of Appeals decision on remand of this case is still in conflict with our decision in Weyerhaeuser Co. v. Commercial Union Insurance Co., 142 Wn.2d 654, 15 P.3d 115 (2000).
FACTS
This is an environmental insurance coverage action involving the disposition of insurance settlement proceeds received by the petitioner, PSE. In November 1997, PSE filed suit against a number of first-party and third-party insurance companies seeking a declaratory judgment and money damages with respect to environmental liabilities at six sites in Washington.
In its first decision, the Court of Appeals affirmed the dismissal of all first-party insurers and reversed the dismissal with respect to the third-party insurers. Puget Sound Energy, Inc. v. ALBA Gen. Ins. Co., 102 Wn. App. 729, 10 P.3d 445 (2000). When evaluating PSE’s claim against its third-party insurers, the court noted PSE may be able to show some of the money received has been, or will be, allocated to other sites. The court held, “[if] it can do so, it may also be able to prove that it has not yet been made whole and is entitled to recover from the third-party insurers who are parties to this appeal.” Puget Sound Energy, 102 Wn. App. at 738.
The court went on to discuss at length which party would have the burden of proof with respect to offsets of settlement proceeds. Relying on Pederson’s Fryer Farms, Inc. v. Transamerica Insurance Co., 83 Wn. App. 432, 922 P.2d 126 (1996), PSE argued that the nonsettling insurers had the burden of proving that offsets are necessary to prevent a double recovery. Puget Sound Energy, 102 Wn. App. at 738-39. The Insurers, citing Litho Color, Inc. v. Pacific
[H]aving survived summary judgment by producing evidence that the settlement proceeds it has received may not be allocable solely to the sites at issue in this appeal, PSE must demonstrate how it intends to or has allocated the funds it has received from the settling insurers.
Puget Sound Energy, 102 Wn. App. at 741. The court further stated when PSE shows the allocation, “[a]t that point, the burden shifts to the insurers to prove that PSE has received adequate compensation.” Puget Sound Energy, 102 Wn. App. at 741.
PSE sought review of the Court of Appeals ruling challenging both the burden of proof and the affirmance of the dismissal of the first-party insurers. Before review was considered, this court released its opinion in Weyerhaeuser Co., 142 Wn.2d 654. Soon after, PSE filed a motion for accelerated review, claiming the Court of Appeals holding on the burden of proof directly conflicted with Weyerhaeuser. At that time, PSE stated that if this court were to grant the motion, it would drop its challenge to the dismissal of the first-party insurers. This court at 143 Wn.2d 1008 (2001), granted review solely on the issue of settlement offsets and remanded to the Court of Appeals for reconsideration in light of Weyerhaeuser. On remand, the Court of Appeals added a single sentence to its original opinion: “As the Supreme Court held in Weyerhaeuser Co. v. Commercial Union Insurance Co., the ultimate burden of establishing that PSE will receive a double recovery is on the insurers.” Puget Sound Energy Inc. v. ALBA Gen. Ins. Co., 109 Wn. App. 683, 695, 10 P.3d 445, 36 P.3d 1072 (2000) (citation omitted). The Court of Appeals did not reverse its position, but held PSE must first show how it has, or will, allocate
ANALYSIS
The sole issue before this court is whether the Court of Appeals holding is consistent with Weyerhaeuser regarding who has the burden of proof.
The Insurers would have us adopt a rule contrary to our holding in Weyerhaeuser. Weyerhaeuser establishes that the insurer carries the burden. The Court of Appeals rule, while placing the final burden on the insurer, adds an additional prong which places a threshold burden on the insured. This burden forces the insured, in this case PSE, to make an additional showing which contradicts and is inconsistent with the Weyerhaeuser (and Pederson’s) rule. In Weyerhaeuser we did not require the policyholder/insured to break down its costs among released sites or claims, or infer that Weyerhaeuser did anything other than defend against the insurer’s motion. We reasoned that when an insurance company settles a claim, it receives a release that is greater than the original claim. The release is for an unquantifiable basket of risks and consideration, not simply payment for the insured’s costs. If the insured were forced to disclose how every dollar was spent, there would be no incentive for any insurance company to settle claims of this magnitude. That is why the burden is placed squarely on the shoulders of the nonsettling insurers; if they wish to avoid paying on a claim, they must show the insured has been made whole.
Thus far, the third-party insurers have failed to establish their offset claim in order to warrant summary judgment. Like Pederson’s and Weyerhaeuser, the insurers have not made an affirmative showing that PSE has been made whole. PSE has established that the settlement proceeds at issue were secured by releasing risks broader than those at issue in this case.
CONCLUSION
We therefore affirm and remand to the trial court based on the presence of issues of fact as to whether PSE has been made whole with respect to the third-party insurers. In resolving these issues, consistent with Weyerhaeuser and Pederson’s, the Insurers bear the burden of establishing the
Alexander, C.J., Madsen, Sanders, Ireland, Bridge, Chambers, and Owens, JJ., and Smith, J. Pro Tem., concur.
This is the second appeal to this court arising out of the present case. In the first appeal this court, at 143 Wn.2d 1008 (2001), granted review and remanded the case for reconsideration in light of Weyerhaeuser. On remand, the Court of Appeals made a one sentence amendment to its decision, stating under Weyerhaeuser the insurers had the ultimate burden of showing that the settlement proceeds made PSE whole. The remainder of the decision was unchanged. Puget Sound Energy, Inc. v. ALBA Gen. Ins. Co., 109 Wn. App. 683, 10 P.3d 445, 36 P.3d 1072 (2000).
The sites have been referred to as: (1) Chehalis, (2) Everett, (3) 22nd and A Street in Tacoma, (4) Thea Foss Waterway in Tacoma, (5) Gas Works Park, and (6) Quendall Terminals. Puget Sound Energy, 109 Wn. App. at 686.
Any issue relating to PSE’s claims against its first-party insurers was dismissed by this court in PSE’s first appeal. In its second appeal, PSE did not renew its challenge to the dismissal of its claims against its first-party insurers. Therefore, under RAP 13.7(b) the issue was not raised and will not be considered by this court.
For example, American Home contributed $9 million in settlement proceeds. The agreement between PSE and American Home reflects that the amount paid was at least in part for the present and future cost associated with the Commencement Bay, Mercer Street Headquarters, and Georgetown warehouse sites, none of which is at issue in this action. PSE admitted as much in the insurers’ request for admissions by stating that it received money in connection with actions relating to environmental contamination at sites which included the sites in the present action.