City owes no duty to provide enough water to suppress fire

By Eric L. Lewis

A city owes no legal duty to provide water service to owners of a recreational vehicle that caught fire, the Washington Supreme Court has held.

In Fisk v. City of Kirkland, no. 79573-8 (Oct. 23, 2008), Calvin and Gloria Fisk were driving their RV on Interstate 405 near Kirkland. They smelled something burning, pulled over, and discovered that the RV was on fire. They called 911. The Kirkland Fire Department responded and tried to connect to a nearby fire hydrant, but the hydrant did not have adequate water pressure. The inadequate water pressure delayed the suppression of the fire, and the Fisks sustained more than $146,000 in property damage.

The City of Kirkland provided water to fire hydrants within the City. The Fisks sued the City, alleging that it had negligently failed to ensure that the fire hydrant was capable of providing enough water to suppress the fire and thus caused their damages. The City answered that it had no legal duty to provide the water. The trial court agreed with the City and dismissed the action.

The Fisks petitioned for direct review to the Washington Supreme Court, which accepted review.

The Fisks argued that RCW 80.28.010(2) requires a water company to furnish service that is “safe, adequate and efficient.” Another section of the statute states that if the company fails to do so, it is liable for damages that result from that failure.

The City responded that it is not a water company, because the statute does not regulate municipal corporations. The Supreme Court, citing the statute’s plain language, disagreed. The Court then considered whether the City therefore owed a legal duty to the Fisks. The Court noted that if a statute imposes a duty on municipalities for the general public welfare rather than to an identifiable class of persons, there is no legal duty to an individual unless a specific exception applies. No exception applied to the City.

Here, the City argued that the statute imposed duties only on water companies that provide service “for hire.” The Court agreed that the statute’s language so provided. The Court noted, “The legislature intended to regulate water systems engaged in the marketplace with consumers. Water provided for fire suppression is normally not provided for hire.” The Court held that the statute does not explicitly create a duty of the City to provide water for fire suppression and thus owed no duty to the Fisks. The Court found nothing in the legislative intent of the statute that suggested that the legislature meant to create a new cause of action for failure to provide water for fire suppression.

The Court looked at cases from appellate courts of other states that involved similar facts, including cases from Alaska, California, Illinois, Indiana, Kansas, Massachusetts, Missouri, New York, and Texas. Most states’ appellate courts held that a municipality owes no such duty. The Court noted that any other decision “could lead to catastrophic liability for a municipality.”

The Court concluded, “A municipal water company does not owe a duty to those whose fire damage is increased because of insufficient water for fire suppression purposes.”

Bad-faith claim can exist against liability insurer even absent coverage

By Stefanie L. Peppard

A policyholder has a right to sue its liability insurer for violation of the Consumer Protection Act even if the insurer has no duty to defend or indemnify, the Washington Supreme Court recently held.

In St. Paul Fire & Marine Ins. Co. v. Onvia, Inc., no. 80359-5 (Nov. 26, 2008), Onvia sold a service that provided businesses with notices of opportunities to bid for government contracts. St. Paul provided liability insurance to Onvia. In February 2005, Responsive Management Systems (RMS) sued Onvia in a class action, alleging that Onvia had engaged in “fax blasting,” the mass faxing of junk advertisements, in violation of state and federal laws.

In February 2005, Onvia’s insurance broker allegedly tendered the defense of RMS’s lawsuit to St. Paul. St. Paul later denied receiving the February 2005 tender. The complaint was re-submitted to St. Paul in August 2005, and after RMS amended its complaint, St. Paul received the amended complaint also. In a November 2005 letter and in oral discussions in March 2006, St. Paul refused to defend or indemnify Onvia. Beginning in February 2005, Onvia defended itself. In April 2006, Onvia and RMS settled. They stipulated to certification of the proposed class and to a judgment of more than $17.5 million. Onvia assigned to RMS all rights of action that Onvia had against St. Paul. RMS covenanted to execute the judgment only against St. Paul, and not against Onvia’s own assets. In November 2006, the King County Superior Court found the settlement to be reasonable.
In the meantime, in July 2006, St. Paul brought a declaratory-judgment action against RMS in federal court and alleged that it had no duty to defend, settle, or indemnify the RMS suit against Onvia. RMS counterclaimed for violation of the contractual duties to defend, indemnify, and settle, for bad faith, and for “procedural bad faith” and violation of the Consumer Protection Act (CPA). The parties filed cross-motions for summary judgment. The federal district court granted St. Paul’s motion, holding that it had no duty to defend, settle, or indemnify RMS’s action and did not commit bad faith in refusing to defend Onvia.

In response to RMS’s counterclaim that St. Paul had committed procedural bad faith and violated the CPA, St. Paul argued that in the absence of any duty to defend, it could not be liable for mere procedural mishandling of Onvia’s coverage claim. The federal court certified that question to the Washington Supreme Court.

The Supreme Court noted that Washington’s law of bad faith derives from statutory and regulatory provisions and from the common law. Washington’s insurance code recognizes that the business of insurance is affected by the public interest. The Washington Insurance Commissioner therefore promulgated regulations that govern the claims-handling process. Under Washington law, a single violation of those claims-handling regulations constitutes an unfair practice under the CPA. In a previous case, the Supreme Court had held that a first-party insurer therefore could commit bad faith and violate the CPA in mishandling its investigation of a claim even if it ultimately correctly denied the claim. Coventry Assocs. v. Am. States Ins. Co., 136 Wn.2d 269 (1998).

The St. Paul Court observed that the two main benefits of liability coverage are payment and defense. But the duty of good faith is not specific to either of those benefits; it permeates the insurance agreement. The Court held that “there is no appreciable difference between this case and Coventry with respect to whether bad faith claim mishandling remains actionable in the absence of coverage.” The same was true of RMS’s counterclaim under the CPA.

RMS nevertheless must prove damages. The St. Paul Court rejected its arguments that harm is presumed. RMS must prove actual harm, including the amounts it incurred as a result of the bad faith and any general tort damages.

Around The Firm

This holiday season, Lee Smart lawyers and staff participated in a food drive to benefit the Northwest Harvest food bank. The firm divided into four teams and competed to see who would collect the most non-perishable items to donate to this worthy cause. The firm collected 2,300 pounds of food, which will provide meals to roughly 750 families.

David L. Martin won a defense jury verdict in Vandervort v. Agtarap, a one-week medical-malpractice case. The defendant orthopedic surgeon performed a knee replacement that later failed. Plaintiff had unequal leg lengths that she alleged resulted from or contributed to her continuing problems. Her expert orthopedist testified that the defendant physician should have shortened the longer leg when operating on the knee. Plaintiff alleged $300,000 in medical bills and wage loss, and her counsel asked the jury to award $700,000. After deliberating for less than an hour, the jury returned a unanimous verdict in favor of the defense.

Sam B. Franklin and William R. Kiendl won summary judgment in Miller v. Eisenhower & Carlson. Plaintiff was a former elected official who also was a land developer. He sued Sam and Bill’s client, a lawyer who made allegedly defamatory statements about plaintiff and his land development. The court agreed with Sam and Bill that under the First Amendment, plaintiff was a public figure, so that he must prove that the defendant committed “actual malice,” which required proof by clear, cogent, and convincing evidence that the defendant made the statements with knowledge that they were false or with reckless disregard of their truth. Because plaintiff could not overcome that high standard of proof, the court granted Sam and Bill’s motion. … Sam Franklin and Rosemary J. Moore won dismissal of all claims in the case of Martin v. Ellis. The plaintiff alleged that the personal representative of an estate was negligent and in breach of statutory and fiduciary duties for failing to pursue claims of misconduct against the former personal representative of the estate and the estate’s attorneys. Among other things, Sam and Rosemary argued that there was no breach of duty. The personal representative was expressly prohibited from pursuing claims by the terms of her appointment, she had a duty not to waste assets pursuing speculative claims, and the court had approved her conduct when the plaintiff had raised his criticisms in the probate court; therefore, the claim was also barred by the principle of collateral estoppel. Plaintiff also could not show that he had suffered damage, in part because he had purchased the estate’s claims against the former administrator and therefore his claim was also barred by judicial estoppel.

Jeffrey P. Downer and Rosemary J. Moore won summary judgment on behalf of a real estate agent and broker in Carlson v. Zorb. Plaintiffs bought a home that had a serious rodent infestation. They sued the sellers, their home inspector, and the real estate agents and brokers. They alleged negligent misrepresentation, fraudulent concealment, negligent infliction of emotional distress, and violation of the Consumer Protection Act against Jeff and Rosemary’s clients. Rosemary deposed plaintiffs and determined that they had no facts to show that the real estate professionals had any reason to know of the problem. Jeff and Rosemary moved for summary judgment, and the court granted the motion.

Jeffrey Downer and Timothy D. Shea won the appeal of Miller v. Costco Wholesale Corp. Plaintiff tripped on a rock in a Costco parking lot, fell, and tore a rotator cuff and broke his hand. Jeff and Tim won summary judgment because the plaintiff actually knew of the condition and could have protected against it. The Court of Appeals affirmed.

… Jeffrey Downer and Allison L. Micheli won summary judgment for a real estate agent and broker in Sadowsky v. Carpenter. Plaintiffs bought a house, were contractually entitled to a walk-through a few days before closing, and had their real estate agent request the walk-through from the sellers’ real estate agent. Sellers and their agent refused. Plaintiffs moved into the house and found it filthy and in need of numerous repairs. They sued the sellers, the sellers’ agent and broker, and their own agent, whom Jeff and Allison represented. Jeff and Allison moved for summary judgment, arguing that the agent had discharged her legal duties, that the economic-loss rule barred plaintiffs’ claims for negligence, fraud, and violation of the Consumer Protection Act, and for an award of attorney fees because the action was frivolous. The economic-loss rule prevents recovery of purely economic damages in tort; they are recoverable only in contract claims. The court agreed and dismissed the claims against Jeff and Allison’s client. Plaintiffs moved for reconsideration, which was denied. … Jeff Downer and Allison Micheli also won a CR 12(b)(6) motion to dismiss for failure to state a claim in Equs v. Hanson, an appraiser-malpractice claim. Plaintiff invested in two mortgages that totaled $500,000, for a house that had sold for $500,000, so that if the property’s value dropped, there was not enough equity in the home to secure the debt to plaintiff. The home buyer defaulted. Plaintiff sued the buyer, the mortgage broker, and the appraiser, whom Jeff and Allison represented. Plaintiff alleged professional negligence and negligent misrepresentation against the appraiser for allegedly overvaluing the property. Jeff and Allison moved to dismiss the claims against the appraiser based on the economic-loss rule. The court agreed and dismissed the case.