Court allows oral testimony in interpreting real estate contracts

By Rebecca S. Izsak

Oral testimony, which the parol evidence rule ordinarily prohibits, was admissible to interpret a fully integrated written agreement for the purchase of real property, the Washington Supreme Court recently held.

In Brogan & Anensen v. Lamphiear, no. 81825-8 (Mar. 12, 2009), Kenny Brogan and Garry Anensen offered to buy acreage from Wayne Lamphiear for later development. The parties signed a real estate purchase and sale agreement, and the sale closed. Brogan and Anensen were not able to rezone the property for their desired development and listed the property for sale. Lamphiear was still living on the property, and Brogan and Anensen filed an action to enforce possession under the agreement.

Lamphiear claimed that Brogan and Anensen had agreed during their negotiations to let him stay on the property for up to one year after the closing of the sale to give Lamphiear time to move his manufactured home to another location. Lamphiear offered several people as witnesses to the negotiation of the agreement, all of whom supposedly overheard the parties’ negotiations at a local diner, in support of this defense.

Brogan and Anensen moved for summary judgment and argued that such oral testimony is not admissible, where the written, signed agreement recites that it is fully integrated. Both the trial court and the Court of Appeals agreed, excluding the testimony of these witnesses. Those courts held that the agreement was a fully integrated contract, because it provided that it constituted the entire understanding between the parties. The agreement provided that Lamphiear was to deliver the keys to Brogan and Anensen “on the closing date or the possession date,” whichever occurred first. The trial court and Court of Appeals held that witness testimony was inadmissible under the parol evidence rule, which prohibits extrinsic evidence to add to, subtract from, modify, or contradict the terms of a fully integrated written contract.

The Washington Supreme Court reversed. It held that the parol evidence rule did not apply, and extrinsic evidence was admissible, because the written agreement was ambiguous as to when Brogan and Anensen could take possession of the property. The contract stated that the keys were to be delivered on the closing date or the possession date, whichever was first. It provided for three possibilities in defining “possession date” with boxes next to each so that the parties could check off their desired choice. But the parties failed to check any of the three boxes.

Therefore, the Brogan & Anensen Court found that the term “possession date” was undefined. Because the parol evidence rule allows for extrinsic evidence that would assist in defining an undefined contract term, the Supreme Court concluded that the testimony of the defendant's witnesses should have been admissible and raised material questions of fact that precluded summary judgment.

Brogan & Anensen v. Lamphiear arises from unusual facts, so that its application might be limited. But it is a rare real estate case that permits evidence outside the four corners of the signed agreement. This decision could afford future litigants an opportunity to avoid the terms of a written contract.

Why consumers complain to the Insurance Commissioner

By Jeffrey P. Downer

Insurance consumers’ biggest complaints about insurers last year were delays in claims handling, denials of claims, and low settlement offers, according to a new study by the National Association of Insurance Commissioners.

NAIC is a voluntary organization of the chief insurance regulatory officials of the 50 states. States submit data to NAIC on closed files that those regulatory officials have handled, and NAIC compiles the data and releases annual reports on its findings.

For 2008, NAIC analyzed nearly 196,000 consumer complaints. Of those, 19 percent were for delays in handling claims, more than 18 percent were for denials of coverage claims, and 14 percent were for unsatisfactory settlement offers from insurers. Other types of complaints included disputes over premiums and ratings and cancellation of insurance policies. The results of NAIC’s study of 2008 complaints matched a three-year trend. In 2006 and 2007, as well as 2009, delays were the leading type of consumer complaint.

According to the NAIC study, about 38,000 of the 196,000 complaints in 2008 were resolved by providing the consumer with additional information. Most of the rest were resolved amicably. In surprisingly few cases, just 656, did the consumer retain a lawyer or file suit.

In the state of Washington, the top three complaints of consumers against insurance companies were the same as the national trend, although in different order. The leading complaints in Washington are unsatisfactory settlement offers, denials of claims, and delays.

As to all three of these types of complaints, the Washington Insurance Commissioner's claims-handling regulations impose specific requirements on insurers. For example, to prevent delays in payment of claims and “lowball” settlement offers, Washington’s regulations require insurers to attempt “in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear.” WAC 284-30-330(6). This regulation also requires prompt settlement of property-damage claims and prohibits an insurer’s delaying payment where another insurer might owe part of the loss.

Other Washington regulations prohibit delays in processing claims. An insurer generally must acknowledge receipt of a claim within 10 working days. WAC 284-30-360(1). The insurer is required to make “an appropriate reply” to communications from a claimant within 10 working days where that communication reasonably suggests that a reply is expected.

Insurers also are required to complete their investigations of claims within 30 days after first notice of the claim “unless such investigation cannot reasonably be completed within such time.” WAC 284-30-370.

As to first-party coverage claims, the requirements are more stringent. If the insurer needs more time to decide a first-party claim should be accepted or denied, it must notify the claimant within 15 working days why more time is needed. If the investigation remains incomplete, the insurer has 45 days from the date of the initial notification and at least every 30 days thereafter, to set forth in writing to the claimant the reasons it needs more time to complete its investigation.

Violations of these WAC regulations can trigger severe liability. Washington case law has long held that a single violation of these regulations is deemed an unfair or deceptive act or practice under Washington’s Consumer Protection Act. And Washington’s Insurance Fair Conduct Act, effective December 2007, codified the rule that the insurer is liable to its insured for even a single violation of the regulations. In an action for violation of IFCA, the insured may recover his or her reasonable attorney fees. Even worse for insurers, the Act permits the court in its discretion to award treble damages.

Around The Firm

Michael W. Brown won a defense verdict in Estate of Rosina Snyder v. Giles, a one-week wrongful-death trial. This case involved a pedestrian-versus-automobile accident in which liability was contested. Plaintiff sought $1.2 million in damages. After deliberating for one hour, the jury returned a 11-1 verdict in favor of the defense. … Mike Brown also won a mandatory-arbitration case, Hansen v. Mukhina. The case involved a highly charged liability dispute over the right-of-way merging from a shopping mall onto a main arterial and allegations that defendant drove into oncoming traffic to pass cars that were stopped due to heavy traffic congestion. The arbitrator rejected the claim and found for Mike’s client.

In Something Sweet, LLC v. Nick-N-Willy’s Franchise Co., LLC, Joel E. Wright and Rosemary J. Moore won summary judgment of dismissal of claims for violation of the Franchise Investment Protection Act. Plaintiffs alleged that the defendant area developers had failed to register a franchise offering with the Director of Financial Institutions and had failed to make material disclosures. The court agreed with Joel and Rosemary that there was no evidence of a material nondisclosure and dismissed the action.

Joel E. Wright and Marc Rosenberg won Kehres v. Ursich, a legal-malpractice action. While plaintiffs represented themselves in a dispute regarding the sale of property, several important orders were entered. Plaintiffs then retained the defendant attorneys but soon replaced them. The court agreed that the plaintiffs had shown neither that the attorneys breached the standard of care during their few months of representation nor that the damages that plaintiffs were alleging were proximately caused by any act or omission by the firm. Plaintiffs appealed.

Jeffrey P. Downer and Jennifer R. Porto won summary judgment for a real estate broker in Kennedy v. Sabo v. John L. Scott Tacoma North. Plaintiff home buyer claimed numerous concealed defects in the property and sued the seller. The parties had entered into one purchase and sale agreement that had expired, and later entered into a second purchase and sale agreement. Plaintiff alleged among other things that she had received a completed seller disclosure statement with the first agreement but not with the second. The sellers brought a third-party complaint against Jeff and Jennifer’s clients, alleging that if the sellers were liable, it was the real estate agent’s fault. The court disagreed and granted Jeff and Jennifer’s motion for summary judgment.

In Scollan v. Estate of Pate, Frank A. Cornelius, Jr. won summary judgment of dismissal. The case arose out of a 2005 motor vehicle accident. In 2006, the disfavored driver, Mr. Pate, died. In 2008, plaintiff mistakenly sued Mr. Pate’s roommate, who co-owned the vehicle involved in the accident. Discovery later revealed that plaintiff had named the wrong defendant and that Mr. Pate had died. Plaintiff was allowed to amend her complaint to add the Estate of Pate, but the statute of limitations already had run. Plaintiff failed to seek appointment of a personal representative to accept service of process, but instead attempted alternative means of service, including service by publication, sending the summons and complaint to Mr. Pate’s parents by certified mail, and service on the Secretary of State under the non-resident motorist statute. Plaintiff waited six months before seeking appointment of a personal representative, who later accepted service of process. Frank moved to dismiss plaintiff’s claims because the statute of limitation had expired, and since Mr. Pate died prior to filing of the lawsuit, the alternative methods of service were invalid. The court agreed and dismissed the action.

Washington Law and Politics magazine has named David L. Martin, Joel E. Wright, Jeffrey P. Downer, August G. Cifelli, and Sam B. Franklin as “Superlawyers” in Washington again for 2009. The designation results from their peers’ recognition of the attorneys’ great skill and the highest quality of legal representation they provide to clients.

David L. Martin and Peter E. Sutherland won summary judgment in Estate of Kramer v. Western Wash. Fair Assn. Sue Kramer died when, as a pedestrian, she attempted to cross a newly constructed road while on her way to the Puyallup fairgrounds. She was struck by a vehicle turning left from an adjacent parking lot exit. The road project was a joint effort by the City of Puyallup and the Fair and was then dedicated to the City as a public roadway. The Estate’s expert opined that the project was negligently designed because it tended to route pedestrians to the spot where Ms. Kramer was killed, without placing a sidewalk or adequate warning signs on the public roadway. The Fair knew prior to the accident that pedestrians were crossing at the location and had placed signs directing pedestrians to use crosswalks in either direction of this area. The Estate’s expert opined that the signs were confusing. Dave and Peter moved for summary judgment, arguing that the Fair assumed no duties to protect pedestrians within the public roadway. While the Fair had assumed a duty of care in placing the arguably ambiguous signs, the court agreed that there was no evidence that Ms. Kramer had relied on the sign in her decision to cross where she did, and granted summary judgment.