PIP/UIM insurer must share in claimant’s attorney fees even when repaying itself
By Jeffrey P. Downer

Broadening the Mahler v. Szucs rule, the Washington Supreme Court has held that a PIP insurer that recovers subrogation must pay a share of the claimant’s attorney fees even when the funds come from the insurer’s own UIM policy.

In Winters v. State Farm Mut. Auto. Ins. Co., no. 70267-5 (Oct. 2001), two at-fault drivers injured Sara Winters. One driver, Edalgo, was uninsured, and the other, Cunningham, was underinsured. Winters had both personal-injury protection (PIP) and underinsured-motorists (UIM) coverage with State Farm. She received $8,271 in PIP benefits from State Farm in payment of medical bills and wage loss.

Winters sued Cunningham. Cunningham’s liability insurer, Leader National, paid Winters its $25,000 policy limit. Winters then made a UIM claim against State Farm. The claim went to UIM arbitration. The arbitrator awarded Winters $40,271 in total damages, including the $8,271 in medical bills and wage loss.

Winters and State Farm agreed that State Farm did not owe the $25,000 of the award that Leader National already had paid. But Winters wanted State Farm to share in her attorney fees because the attorney had caused State Farm to receive its PIP reimbursement. State Farm refused and deducted from the UIM award the full $8,271 PIP reimbursement and $25,000 representing Leader National’s prior payment of liability coverage.

Winters sued State Farm for the fees. She based her claim on Mahler v. Szucs, 135 Wn.2d 398 (1998). The Mahler Court required State Farm, which had obtained reimbursement of PIP payments, to pay a proportionate share of the PIP claimant’s attorney fees. Mahler turned on language that was unique to State Farm’s policy. But in dictum, the Mahler Court added that it could reach the same result at common law under the "common fund doctrine," which can require a beneficiary of litigation to share in the attorney fees incurred by another claimant who obtains the recovery. Traditionally, Washington law required the claimant to show that he or she had conferred a benefit on the other party before that party could be required to pay a share of the fees.

The trial court sided with State Farm, but the Court of Appeals reversed. The Supreme Court accepted review. The Supreme Court paid little mind to the language of State Farm’s policy, instead focusing on the common fund doctrine. State Farm contended that Winters had conferred no benefit on it, because the practical effect of State Farm’s UIM coverage reimbursing State Farm’s PIP payments was to move money from one pocket to the other.

The Winters Court disagreed: "When a PIP insured creates a common fund from liability payments and UIM benefits, the common fund combines liability proceeds from the tortfeasor’s insurance carrier and UIM proceeds from the insured’s underinsured motorist carrier. The combination of liability and UIM insurance compensates claimants for those amounts that they are legally entitled to recover from tortfeasors, up to the total of applicable liability and UIM limits."

High court affirms coverage for punitive damages
By Jeffrey P. Downer

A liability insurance policy covers punitive damages, the Washington Supreme Court has held, affirming the Court of Appeals.

In Fluke Corp. v. Hartford Acc. & Indem. Co., no. 70519-4 (2001), Fluke sued a competitor in California and lost. The competitor then sued Fluke for malicious prosecution, claiming punitive damages under California law. Fluke tendered its defense to Hartford. Hartford defended Fluke but notified Fluke it would not pay claims for punitive damages or for intentional conduct. Fluke sued Hartford in Washington, where the policy was issued and whose law therefore governed the coverage issues.

The Court found coverage for punitive damages, noting that the policy agreed to all sums the insured must pay "as damages" without differentiating between compensatory and punitive damages. The Court said that Hartford could have provided in the policy that it covered compensatory damages only, but Hartford failed to do so. The Court followed courts in other states that have so held.

The Fluke Court also found coverage for malicious prosecution even though it is an intentional tort. The policy’s "advertising injury" coverage expressly included coverage for malicious prosecution, which prevails over the intentional-acts exclusion. The Court rejected Hartford’s argument that coverage for intentional torts is against public policy, saying that it rarely invokes public policy to defeat coverage.

Around The Firm

Washington Law & Politics magazine has named Lee Smart associate Tammy L. Williams a 2002 "Rising Star." The magazine bestows the designation on approximately four percent of Washington lawyers under the age of 40 or with less than 10 years of practice. Congratulations, Tammy! … Tammy won summary judgment in McEwan v. Bonney-Watson. Plaintiffs claimed breach of a contract for funeral goods and services. The contract required arbitration within one year of the occurrence of disputes arising from the contract. Plaintiffs instead sued in Superior Court on the eve of the limitation period. The court agreed with Tammy that the contract is valid, that plaintiffs violated the contract terms, and that the contractual limitation period had expired. … Tammy also won the arbitration of Riggins v. Group Health. Plaintiff alleged that he fell on a recently mopped floor while attending a community meeting at Group Health. Group Health’s maintenance employee testified that he placed "wet floor" warning boards at both ends of the hallway, and the arbitrator found that Group Health exercised reasonable care in its warnings.

Michael A. Patterson won partial summary judgment in Fualaau v. Highline School District, resulting in dismissal of plaintiffs’ claims for the cost of raising two children. The case arises out of a relationship between then-teacher Mary Letourneau and her former student Vili Fualaau, which resulted in the birth of two children. Ms. Letourneau is now serving a seven-year sentence while Vili and his mother Soona Vili are raising the children. Soona and Vili sued the District claiming that it knew or should have known of the relationship and should have intervened. A significant part of their claim for damages is the cost of raising the children. The court agreed with Mike that Washington’s public policy bars such claims and that the Uniform Parentage Act provides the exclusive remedy for child support by providing an avenue of recovery against the biological parents. The court also dismissed Vili Fualaau’s claims of loss of wages and future earning capacity claims as speculative. Patricia K. Buchanan, Jennifer M. Ilenstine, and Michelé M. Haaseth assisted in the motions.

Gregory P. Turner won favorable verdicts in two recent jury trials. In Reese v. Johnson, Greg’s motorist client crossed the centerline, hit plaintiff’s car, and totaled both vehicles. Plaintiff suffered neck and back injuries and incurred $9,000 in medical bills and other out-of-pocket expenses. Plaintiff rejected a $29,000 settlement offer. Despite clear liability, the jury agreed with Greg on damages issues and returned a verdict of only $15,000. … In Sobus v. Costco, plaintiff fell in the food court area of Costco on what she claimed was mustard. She tore her rotator cuff and incurred $20,000 in medical expenses. The court ruled for plaintiff that the food court was within the "self-service exception" so that plaintiff did not have to prove that Costco knew or should have known of the condition. Nevertheless, the jury agreed with Greg that Costco’s inspection and clean-up procedures were reasonable and returned a defense verdict. … In Adam v. Costco, another premises-liability trial, Jeffrey P. Downer defended a claim that a pallet in an aisle caused plaintiff to fall. Costco personnel had placed the pallet in the aisle to stock shelves. It bore a two-foot stack of cases of soap. Plaintiff claimed multiple leg injuries and $8,000 in medical expenses and alleged that the fall ruined her life. The jury deliberated only an hour before agreeing that the pallet was an obvious condition that plaintiff should have seen and returning a defense verdict. … Laurie L. Johnston recently won a favorable jury verdict in Haugstad v. Mount Baker Mushroom Farms. Plaintiff alleged that a low-impact collision caused injuries that required neck surgery five years later. Her medical expenses were $33,000, and she asked the jury for $250,000. Laurie argued that only the treatment immediately after the accident was related to the collision. The jury agreed and returned a verdict for $15,324.

In memoriam: John Patrick Cook, 1934-2001

John Patrick Cook died November 22, 2001, Thanksgiving Day, after a brave struggle with cancer. At the time of his passing he was surrounded by family and loved ones. He was 67.

From 1972 until his death, Pat was a mainstay of Lee Smart, P.S., Inc. When Tom Lee and Fred Smart retired in 1984, Pat became the firm’s senior shareholder. In 2000, he became of counsel to the firm.

A renowned Seattle trial lawyer, Pat was a member of the American Trial Lawyers Association, the Washington State Trial Lawyers Association, Washington Defense Trial Lawyers, and the Phi Delta Phi law fraternity. In March 2001, the American Board of Trial Advocates bestowed on Pat its Lifetime Achievement Award. He is listed in The Best Lawyers in America.

Pat was born on a homestead in Wolf Point, Montana – a fact he never failed to mention to juries. He moved with his family to Seattle at age 6. He attended Seattle Preparatory School and the University of Washington and earned his law degree in 1958. He was commissioned as a Second Lieutenant in the United States Army in 1956. Pat continued to serve his country in the Army Reserves and retired as a full Colonel.

Pat began his law career as a sole practitioner, in a one-room office where he practiced law with a manual typewriter and no secretary. He later co-founded the law firm of Cook & Dunlap. In 1973, Pat and his partner Dick Dunlap merged their firm with the Lee Smart firm. Lee Smart became Lee, Smart, Cook, Dunlap & Biehl, and later Lee Smart, P.S., Inc.

Over his long career, Pat tried more cases than he could remember. They ranged from the simplest rear-ender to the most complex medical-malpractice or product-liability case. He appeared before state and federal appellate courts in several dozen cases. His name appears as counsel of record in many major Washington appellate decisions.

Pat usually defended civil litigation, but he also represented plaintiffs. Over his long career, he earned a well-deserved reputation for fairness and honesty. He also collected close friendships with prominent lawyers who were his adversaries in the courtroom.

Pat is survived by Dorothy, his best friend and wife of 45 years. Pat also is survived by five grown children, one brother, and 12 grandchildren.

A December 2000 profile of Pat in the King County Bar Bulletin aptly noted, "Pat Cook is the trial lawyer we should all become."