Opinion
No. 63429-1-I.
Filed: August 30, 2010. UNPUBLISHED OPINION.
Appeal from a judgment of the Superior Court for King County, No. 07-2-11183-2, Michael J. Trickey, J., entered April 1, 2009.
Affirmed in part, reversed in part, and remanded by unpublished opinion per Spearman, J., concurred in by Leach, A.C. J., and Cox, J.
This appeal follows a jury trial stemming from an incident involving a flooding toilet in Jane Reardon's residence and the response of Farmers Insurance Company of Washington (Farmers) to the resulting damage. Reardon appeals the trial court's dismissal of her Consumer Protection Act (CPA) claim on summary judgment and its handling of the damages award for her bad faith and breach of contract claims. Farmers cross-appeals the trial court's denial of its motions for summary judgment and directed verdict on the bad faith and breach of contract claims and the trial court's ruling that Reardon was the "prevailing party" for purposes of CR 68. We affirm the trial court's denial of Farmers' motions for summary judgment and directed verdict and the trial court's handling of the damages award. We reverse the trial court's dismissal of Reardon's CPA claim and remand for trial. We also vacate and remand the trial court's determination that Reardon was the "prevailing party" for purposes of CR 68.
FACTS
While Jane Reardon was on vacation on April 7, 2006, her daughter Lisa went to her mother's home and discovered that the toilet had flooded the residence. On April 11, 2006, Lisa contacted her mother's home insurance carrier, Farmers, to make a claim on her mother's behalf. Soon thereafter, ServiceMaster and other companies began remediation and repair efforts. Farmers approved coverage of certain expenses, submitting payment to Reardon or to the companies involved in remediation or repair. In a letter dated April 14, 2006, Farmers notified Reardon that the policy provided only $5,000 for mold and mold damage.
Eventually, Farmers paid a total of $64,729.43 toward Reardon's claims.
On April 4, 2007, Reardon filed a lawsuit against Farmers. She alleged that in the course of handling her claim, Farmers breached the insurance contract, acted in bad faith, and violated the Consumer Protection Act. She claimed that Farmers failed to conduct a thorough investigation of the damage to her home, refused to authorize work for the water damage in a timely manner, and declared the property restored and in stable condition when in fact moisture remained. Reardon further alleged that Farmers' actions delayed the mitigation of water damage, eventually leading to mold damage — coverage of which was limited to $5,000 under her policy. She asserted that during an inspection of her home, she showed representatives from Farmers and ServiceMaster the remaining water, but they insisted that the water had been cleaned up properly. Furthermore, Reardon requested ServiceMaster to take certain actions to mitigate water damage, but the company refused, claiming that Farmers did not authorize the work. Reardon also claimed that ServiceMaster, acting on Farmers' instructions, put wet and dry personal property into the same storage pod, causing all items to become wet, moldy, and ruined. Reardon further alleged that Farmers insisted the house was habitable when it was not and improperly denied her claims for additional living expenses.
ServiceMaster was also named as a defendant, but settled Reardon's claims separately, and is not a party to this appeal.
On October 6, 2008, Farmers filed a motion for summary judgment, requesting, in part, that the trial court rule as a matter of law that Reardon failed to meet her burden of proof as to causation and damages on all three causes of action. On October 17, Farmers submitted an offer of judgment pursuant to CR 68 in the amount of $85,000. Reardon did not accept the offer. At oral argument on the motion for summary judgment, counsel for Farmers contended that because Reardon's response to the motion did not put forth evidence proving each element of a CPA claim, the CPA claim should be dismissed. The court asked Reardon's counsel why her response to the motion for summary judgment did not include briefing about each of the CPA elements, to which counsel responded, "Because [Farmer's] didn't address the elements."
The trial court denied Farmers' motion as to causation and damages but granted the motion as to the CPA claim. Regarding the CPA claim, the trial court stated, "[B]ecause the elements have to be addressed, a couple of conclusionary statements in the [expert's] affidavit just isn't enough to survive summary judgment." Reardon filed a motion for reconsideration, arguing that Farmers misrepresented at oral argument that its written motion challenged every element of the CPA claim, when in fact it challenged only the causation and damages elements, to which the court found there were disputed material facts. The court denied the motion.
Trial began on January 14, 2009 on the breach of contract and bad faith claims. At the close of Reardon's case-in-chief, Farmers moved for a directed verdict. The court reserved ruling until after the case had been submitted to a jury. Among the court's instructions to the jury was an instruction on the amount that Farmers had paid on Reardon's claims. During deliberations, the jury sent a questionnaire to the court asking, "Should the total damage amount we provide in answer to Question 4 include amounts already paid by Farmers?" Over Reardon's objection, the court responded "yes." The jury returned a verdict in favor of Reardon on both claims. The jury found that the amount of Reardon's damages was $156,500 and that, of the combined negligence that caused damage to Reardon, 60 percent was attributable to Farmers. The following day, the court orally denied Farmers' motion for a directed verdict. The court calculated the final judgment of $28,881.98 by taking 60 percent of Reardon's damages of $156,500 ($93,900) and subtracting the amounts Farmers previously paid to Reardon under the policy ($64,729.43). The court also determined that, for purposes of CR 68, Reardon was the prevailing party and denied Farmers' request for costs and statutory attorney fees.
ANALYSIS
Reardon argues that the trial court erred in dismissing her CPA claim because Farmers' summary judgment motion contested only the elements of causation and damages and the trial court found that there were genuine issues of material fact as to both of them. Reardon also argues that the trial court erred in its response to the jury's question about calculating the amount of damages and in deducting the amounts paid by Farmers on her claims from the jury's damages award. Farmers argues on cross-appeal that the trial court erred in denying its motions for summary judgment and directed verdict on the bad faith and breach of contract claims because Reardon failed to present evidence that her alleged damages were caused by the flooding toilet or by any acts or omissions of Farmers. Farmers also argues that the trial court erred in declining to award costs and statutory attorney fees to Farmers as the "prevailing party" under CR 68, where Farmers submitted an offer of judgment that was more than the final judgment entered against Farmers.
We agree with Reardon regarding her CPA claim and, accordingly, reverse and remand. We affirm the trial court's denial of Farmers' motion for summary judgment on the bad faith and breach of contract claims because a trial court's denial of a summary judgment motion based on disputed material facts is not a final judgment and is therefore generally not appealable. We affirm the trial court's denial of Farmers' motion for a directed verdict because Farmers failed to provide this court with the complete verbatim report of proceedings, precluding our review of the evidence presented at trial. We affirm the trial court's handling of issues related to the jury's damages award. Finally, we vacate the trial court's determination that Reardon was the prevailing party and remand for further proceedings consistent with this opinion.
Summary Judgment Dismissal of CPA Claim
This court reviews summary judgment decisions de novo. Michak v. Transnation Title Ins. Co., 148 Wn.2d 788, 794, 64 P.3d 22 (2003). A burden-shifting scheme applies to summary judgment proceedings. Michael v. Mosquera-Lacy, 165 Wn.2d 595, 601, 200 P.3d 695 (2009). The burden is initially "on the party moving for summary judgment to demonstrate there is no genuine dispute as to any material fact." Folsom v. Burger King, 135 Wn.2d 658, 663, 958 P.2d 301 (1998). The moving party must raise in its motion all of the issues on which it believes it is entitled to summary judgment. White v. Kent Medical Center, Inc., P.S., 61 Wn. App. 163, 168, 810 P.2d 4 (1991). "After the moving party submits adequate affidavits, the nonmoving party must set forth specific facts which sufficiently rebut the moving party's contentions and disclose the existence of a genuine issue as to a material fact." Michael, 165 Wn.2d at 601 (internal citation omitted). Summary judgment is proper if the nonmoving party fails to come forward with evidence sufficient to establish each of the elements that are put into issue by the moving party. White v. Solaegui, 62 Wn. App. 632, 636, 815 P.2d 784 (1991). But if the moving party does not sustain its burden to offer factual evidence showing it is entitled to judgment as a matter of law, "summary judgment should not be entered, irrespective of whether the nonmoving party has submitted affidavits or other materials." Graves v. P.J. Taggares Co., 94 Wn.2d 298, 302, 616 P.2d 1223 (1980) (internal citation omitted).
Reardon argues that it was error for the trial court to dismiss her CPA claim on the ground that she failed to address each element of the claim because Farmers contested only causation and damages in its opening brief and the trial court found disputed issues of material fact as to those elements. Reardon further argues that under Ledcor Industries (USA), Inc. v. Mutual of Enumclaw Ins. Co., 150 Wn. App. 1, 12, 206 P.3d 1255 (2009), bad faith constitutes a per se violation of the CPA. Therefore, if her bad faith claim survived summary judgment, her CPA claim likewise should not have been dismissed.
Farmers argues that the trial court properly dismissed the CPA claim. It contends that its summary judgment motion placed each element of Reardon's CPA claim in issue and that Reardon failed to come forward with sufficient evidence to establish the existence of disputed material facts as to each of those elements.
Farmers also argues that even if the trial court erred in dismissing the CPA claim, such error was harmless because Reardon was fully compensated for any potential CPA claim through the damages she received for her bad faith claim. Moreover, Farmers contends that the trial court's dismissal of the CPA claim should be affirmed because otherwise "this Court would have to speculate that there is some distinct injury or damage to business or property which was not part of the bad faith or contractual claim. . . . In addition, reversal would allow Reardon to seek a potential double-recovery." Finally, Farmers disputes that bad faith constitutes a per se violation of the CPA.
It is well settled in Washington that the burden is on the party moving for summary judgment to prove by uncontroverted facts that there is no genuine issue of material fact. If the moving party does not sustain that burden, summary judgment should not be entered irrespective of whether the nonmoving party has submitted affidavits or other materials. Jacobsen v. State, 89 Wn.2d 104, 108, 569 P.2d 1152 (1977). Moreover, the moving party must raise all of the issues on which it believes it is entitled to summary judgment in its opening brief because the court will not consider issues raised for the first time in a reply brief. White, 61 Wn. App. at 168-69.
Our review of the record confirms that Farmers' briefing on its motion for summary judgment put into issue only the causation and damages elements of Reardon's three claims, and did not contest the remaining elements of her CPA claim. In its motion, Farmers requested, in relevant part, the following relief: "Causation and Damages — Farmers asks that the Court rule as a matter of law that Plaintiff has failed to meet her burden of proof as to these essential elements of each of her causes of action against Farmers." Farmers' reply brief explicitly stated that its motion for summary judgment was "based on the causation element." Although Farmers cited Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wn.2d 778, 719 P.2d 531 (1986) in its motion and set out the necessary elements of a CPA claim, it only discussed the elements of causation and damages. It was not until oral argument that Farmers claimed for the first time that Reardon had failed to establish a genuine issue of material fact as to the other elements.
Under Hangman Ridge, a plaintiff must prove five elements to establish a violation of the CPA: (1) an unfair or deceptive act or practice, (2) the act or practice occurred in the conduct of trade or commerce, (3) the act or practice impacted the public interest, (4) an injury to the plaintiff's business or property, and (5) a causal link between the unfair or deceptive act or practice and the injury. Hangman Ridge, 105 Wn.2d at 784-93.
Thus, Farmers' arguments regarding the elements of Reardon's CPA claim other than causation and damages were untimely and the trial court erred when it considered them. White, 61 Wn. App. at 170. Moreover, because Farmers failed to raise any issue regarding the remaining elements in its summary judgment motion, the burden never shifted to Reardon and, regardless of her response or lack thereof, Farmers was not entitled to summary judgment. Jacobsen, 89 Wn.2d at 108. Accordingly, we hold that the trial court erred when it dismissed Reardon's CPA claim on summary judgment.
Farmers' contention that the trial court's dismissal of the CPA claim was based on Reardon's failure to meet her burden on the causation and damages elements is not well taken. In its oral ruling, the trial court explicitly found that as to those elements there were disputed facts sufficient to deny summary judgment. It stated: "As to the Consumer Protection claim, because the elements have to be addressed, a couple of conclusionary statements in the affidavit just isn't enough to survive summary judgment. But the causation and damages issues, there is barely enough of an issue to deny it. I will deny it as to those." The written order also stated that the motion for summary judgment was "denied as to causation."
Farmers next argues that even if the trial court erred in dismissing the CPA claim, the error was harmless. The argument fails for several reasons. First, Farmers contends that because Reardon was awarded damages on her bad faith claim, "she was fully compensated on any potential CPA claim." But Farmers failed to provide a complete verbatim report of the trial proceedings below. Thus, Farmers is unable to support this argument with any citation to the record and we are unable to determine what evidence the jury may have relied upon in assessing Reardon's damages on the bad faith claim. Second, additional relief is available to Reardon if she prevails on her CPA claim. The trial court may, in its discretion, award treble damages of up to $25,000, and under RCW 19.86.090 Reardon may seek to recover the costs of her CPA suit, including a reasonable attorney's fee. Finally, while Farmers contends that reversing the CPA claim would require this court to speculate that Reardon suffered a distinct injury that was not compensated through her bad faith claim, we note that Farmers' position likewise requires us to speculate that there are definitively no such injuries. This is an issue for the trier of fact, and resolution of any issues regarding duplicative damages is the province of the trial court on remand.
The trial court denied Reardon's petition for attorney fees, costs, and fees.
We reverse and remand the trial court's dismissal of Reardon's CPA claim. We agree with the trial court that genuine issues of material fact exist regarding the elements of causation and damages. However, dismissal of the CPA claim based on Reardon's failure to submit argument on the remaining elements was error. Farmers never established that there were no disputed material issues of fact as to them, and the burden never shifted to Reardon to demonstrate otherwise. In view of our disposition of this matter, we need not reach Reardon's argument that bad faith constitutes a per se violation of the CPA.
Denial of Farmers' Motions for Summary Judgment and Directed Verdict
We next address Farmers' cross-appeal of the trial court's denial of its motion for summary judgment on the bad faith and breach of contract claims. It is well settled that when a trial court denies a motion for summary judgment due to factual disputes and a trial is held, "the losing party must appeal from the sufficiency of the evidence presented at trial, not from the denial of summary judgment." Adcox v. Children's Orthopedic Hosp. Med. Ctr., 123 Wn.2d 15, 35 n. 9, 864 P.2d 921 (1993). See also Johnson v. Rothstein, 52 Wn. App. 303, 305, 759 P.2d 471 (1988).
Farmers argued in its summary judgment motion that Reardon failed to present evidence on the causation and damages elements of all three claims. Reardon argued that she did present such evidence. The trial court found that there was enough evidence showing the existence of a genuine issue of material fact as to causation and damages to deny summary judgment. Where the trial court's decision was based on disputed issues of fact, we will not consider the denial of Farmers' motion for summary judgment, and instead will consider only the denial of its motion for a directed verdict.
An appellate court reviewing a motion for a directed verdict employs the same standard as the trial court. Pederson's Fryer Farms, Inc. v. Transamerica Ins. Co., 83 Wn. App. 432, 437, 922 P.2d 126 (1996) (citing Peterson v. Littlejohn, 56 Wn. App. 1, 781 P.2d 1329 (1989)). A directed verdict "is appropriate if, when viewing the material evidence most favorable to the nonmoving party, the court can say, as a matter of law, that there is no substantial evidence or reasonable inferences to sustain a verdict for the nonmoving party." Pederson's, 83 Wn. App. at 437 (internal citation omitted). Substantial evidence is that which would convince an unprejudiced, thinking mind of the truth of the declared premise. Cowsert v. Crowley Maritime Corp., 101 Wn.2d 402, 405, 680 P.2d 46 (1984) (internal citation omitted). The inquiry on appeal is limited to whether the evidence presented was sufficient to sustain the jury's verdict. Pederson's, 83 Wn. App. at 437.
However, because Farmers did not submit the full verbatim report of trial proceedings to this court, we are unable to conduct an inquiry into whether the evidence presented at trial was sufficient to sustain the verdicts in Reardon's favor. Under RAP 9.2(b), "[a] party should arrange for the transcription of all those portions of the verbatim report of proceedings necessary to present the issues raised on review. . . . If the party seeking review intends to urge that a verdict or finding of fact is not supported by the evidence, the party should include in the record all evidence relevant to the disputed verdict or finding." Where Farmers, as the party appealing this issue, failed to arrange for the transcription of the relevant portions of trial and file it with this court, we affirm the trial court's denial of Farmers' motion for a directed verdict.
Farmers states that the trial lasted for five weeks. The only verbatim reports of proceedings between the time of opening and closing arguments that were submitted to this court are for the days of January 22 and January 26. These volumes contain the testimony of Reardon's witness Troy Griffith.
Jury's Damage Award
Reardon makes two arguments related to her claim of error regarding the jury's damage award. First, she argues that the trial court erred in its response to the jury's question whether the total damage amount should include amounts already paid by Farmers. Second, she argues that the trial court erred in deducting the amounts Farmers already paid to her from the jury's damage award because those amounts were benefits properly due under the policy. We consider these in turn.
A trial court's response to a question received from the jury during deliberations is analogous to a ruling on a special verdict form or jury instruction. Whether a jury instruction correctly states the applicable law is a legal question that we review de novo. State v. Linehan, 147 Wn.2d 638, 643, 56 P.3d 542 (2002). Instructions are sufficient "when they allow counsel to argue their theory of the case, are not misleading, and when read as a whole properly inform the trier of fact of the applicable law." Bodin v. City of Stanwood, 130 Wn.2d 726, 732, 927 P.2d 240 (1996). An error is harmless if the outcome of the trial would not have been different had the error not occurred. Caruso v. Local Union No. 690, 107 Wn.2d 524, 529-30, 730 P.2d 1299 (1987).
Reardon contends that when the jury asked, "Should the total damage amount we provide in answer to Question 4 include amounts already paid by Farmers?", it was asking whether it was to reduce (i.e., include against) the damage award by the amounts already paid by Farmers. She argues that "[i]n common language, when a payment is included against an obligation owing, it is a reduction towards the obligation." Therefore, the trial court should have concluded that the jury had already reduced the amount of damages it awarded by the amount Farmers paid. Thus, according to Reardon, it was error for the trial court to deduct those amounts a second time. Reardon argues that the court should have declined to answer the question or made clear that it intended to deduct the amount of benefits previously paid from the amount of the jury award.
Farmers argues that Reardon's argument is speculative and contradicts the plain language of the verdict form, and that it must be presumed that the jury followed the instructions of the trial court. Farmers points out that when the jury posed its question, the court conducted a conference with counsel to discuss the appropriate response, and indicated it would respond "yes" so there would be no ambiguity.
The parties' disagreement turns on the meaning of the word "include" in the jury's inquiry, "Should the total damage amount we provide in answer to Question 4 include amounts already paid by Farmers?" The dictionary provides the following relevant definition of "include": "to place, list, or rate as a part or component of a whole or of a larger group, class, or aggregate." Webster's Third New International Dictionary 1143 (1993). Reardon essentially argues that the jury meant "account for" when it used the word "include." But it is apparent from common usage of the word that the jury was asking whether it should "place" the amounts already paid by Farmers "as a part or component of . . . a larger aggregate" damage award in response to Question 4. The trial court did not err in its response to the jury question or in concluding that the jury added the amounts that Farmers paid to its award.
We next consider Reardon's second argument regarding damages. The trial court's determination that the damage award for breach of contract and bad faith should be reduced by the amount that Farmers had paid in claims presents a mixed question of fact and law. When reviewing a mixed question of fact and law, this court makes a de novo interpretation of the law and applies it to the facts of the case, deferring to the trier of fact's factual determinations, if supported by substantial evidence. Wright v. Mead Sch. Dist. No. 354, 87 Wn. App. 624, 628, 944 P.2d 1 (1997). See also Clayton v. Wilson, 168 Wn.2d 57, 62-63, 227 P.3d 278 (2010).
Reardon argues that the trial court erred in including the amount previously paid by Farmers in damages for lack of good faith and breach of contract because the amounts paid were not "damages" but instead were paid correctly and in good faith under the contract. Stated differently, "[b]y instructing the jury to include the amount contained in the jury instructions and further instructing the jury that Farmers had paid $65,018.02 in benefits the Court erred in mixing benefits with damages." Farmers argues that it has consistently maintained an affirmative defense of offset and that offset was appropriate to place Reardon in her pre-loss condition. It argues that the trial court "correctly concluded that the Jury's Verdict was to be calculated into a Judgment by first allocating Reardon's total damage suffered amongst Farmers and several empty chairs, and then reducing the amount owed by Farmers by amounts previously paid." It contends that the jury found that total damages were $156,500 and that "[w]hen looking to the amount previously paid by Farmers ($64,729.43), plus the amount of the Judgment ($28,881.98), plus the settlement with ServiceMaster ($100,000), Reardon was placed in her pre-loss condition."
None of the cases cited by the parties are particularly instructive on whether an insurer is entitled to an offset in circumstances such as those involved here. Moreover, problematically, it is not apparent what percentage of the jury's damage award was for breach of contract and what percentage was for bad faith. Regardless, we need not resolve this issue because any error in reducing the damage award was harmless. The jury, in determining the amount of damages, was instructed to include the amount that Farmers already paid. Thus, the jury's award included the amount it determined that Reardon was entitled in damages to plus the amount that Farmers had already paid her. Therefore, the amount of Reardon's damages was unaffected by the reduction.
Prevailing Party Under CR 68
Issues involving construction of an offer of judgment are reviewed de novo, while disputed factual findings concerning the circumstances under which the offer was made are usually reviewed for clear error. Seaborn Pile Driving Co., Inc. v. Glew, 132 Wn. App. 261, 131 P.3d 910 (2006).
Farmers argues that the trial court erred in ruling that Reardon was the "prevailing party" for purposes of Farmers' CR 68 offer of judgment, because the judgment entered against Farmers in the amount of $28,881.98 was less than Farmers' $85,000 CR 68 offer of judgment. "The trial court erred in basing its decision on the amount of the verdict as opposed to the actual judgment." Farmers argues that under RCW 4.84.030, CR 68, and the case law interpreting the relevant provisions, the amount of the final judgment is determinative. Farmers requests this court to remand for entry of an award of costs and statutory fees.
According to Farmers, its costs after submitting the offer of judgment on October 17, 2008 amounted to $3,324.86.
Reardon argues that the trial court correctly determined that the CR 68 offer of judgment was less than the amount for which Farmers was found to be liable by the jury. She points out that the court did not base its decision on the verdict, but on the portion of the verdict for which Farmers was liable, and then applied payments made by Farmers.
Because Reardon's CPA claim is remanded for further proceedings, we are unable to determine whether the judgment Reardon finally obtains will be in excess of Farmers' offer. Accordingly, we vacate the trial court's ruling on this issue. Once the CPA claim is resolved, the trial court may revisit the issue if necessary.
Because the issue will likely arise on remand, we note that CR 68 provides that the amount of "the judgment finally obtained" is the amount to be measured against the settlement offer for purposes of determining the prevailing party. We have not found, nor has Reardon cited, any case that construes the plain language of CR 68 to refer to the amount of a jury verdict as opposed to the amount of the final judgment.
Attorney Fees on Appeal
Reardon requests attorney fees and costs on appeal under RCW 19.86.090, and requests this court to rule that should she prevail on her CPA claim upon remand, the fees and costs associated with this appeal should be included in any award of attorney fees and costs under RCW 19.86.090 at such time. Farmers states that Reardon's appeal is frivolous and requests costs and fees incurred on appeal under RAP 18.9. We decline to award attorney fees or costs on either ground.
RCW 19.86.090 provides for an award of costs and attorney fees to a party injured under the CPA:
Any person who is injured in his or her business or property by a violation of RCW 19.86.020, 19.86.030, 19.86.040, 19.86.050, or 19.86.060 . . . may bring a civil action in superior court to enjoin further violations, to recover the actual damages sustained by him or her, or both, together with the costs of the suit, including a reasonable attorney's fee.
Reardon may seek the costs of appealing the CPA claim if she prevails on her CPA claim on remand. See Washington State Physicians Ins. Exch. Ass'n v. Fisons Corp., 122 Wn.2d 299, 336, 858 P.2d 1054 (1993) ("Attorneys' fees on appeal are recoverable under the Consumer Protection Act."). But the award of costs and attorney fees under RCW 19.86.090 is within the discretion of the trial court, and we decline Reardon's request. Farmers argues that Reardon's appeal is frivolous and that it should be awarded costs and fees on appeal under RAP 18.9. We reject this argument.
We reverse in part, affirm in part, and remand for further proceedings consistent with this opinion.
WE CONCUR: