In answer to two certified questions, the Supreme Court of Washington has unanimously given us enough material to fill books. This will be the second of two posted articles addressing these answers. The first article was posted here on Tuesday, December 3, 2019.
In Peoples v. Utd. Serv's Auto. Ass'n, ___ Wash. 2d ___, ___ P.3d ___, No. 96931-1, 2019 WL 6336407 (Wash. Nov. 27, 2019), the Supreme Court of Washington was confronted with two questions. Both were certified by a U.S. District Court for answers under Washington State law.
The two questions arose out of the claims of two of the plaintiffs in the District Court, one Krista Peoples and one Joel Stedman. Both of them were physically injured in a motor vehicle accident. Both claimed Personal Injury Protection or PIP benefits to pay for the bills of their medical providers. Both of them were denied PIP benefits.
Besides this common core of facts, their claims presented the same broad question of whether the plaintiffs were injured in their business or property so that they could claim standing to sue under Washington State's Consumer Protection Act.
That is where the questions posed by their separate claims diverged. The first question, the one posed by the claims of Krista Peoples' class, were discussed here on Tuesday, December 3, 2019.
Joel Stedman presented the second question. He alleged that his insurance carrier, Progressive, impermissibly interjected a condition into the statutorily required availability of Personal Injury Protection (PIP) benefits. This issue has reverberations beyond the boundaries of the State of Washington.
In Washington State, as in most States, PIP benefits are required to be provided in policies like Stedman's. The condition challenged in Stedman's action was Progressive's termination of required benefits whenever a claimant reached "Maximum Medical Improvement," or MMI, which it determined. MMI is not a limitation authorized by the PIP Statute on the receipt or payment of PIP benefits.
In Stedman's case, filed as a class action, Stedman alleged "that by terminating benefits on the basis of 'Maximum Medical Improvement,' Progressive routinely fails to pay all reasonable medical expenses for treating an insured’s injuries arising from a covered event, in violation of" Washington State Statutes. Peoples, 2019 WL 6336407, at *1, ¶ 4.
The Federal judge certified the question whether Progressive's reliance on MMI to terminate PIP benefits satisfied the Consumer Protection Act requirement of an injury to business or property, where an insured like Mr. Stedman was physically injured in a motor vehicle accident and whose PIP benefits were terminated.
The Washington Supreme Court's short answer is "yes," such claims satisfy the requirement of an injury to business or property. The Court's reasoning was applied both to the Joel Stedman class claims and to the Krista Peoples class claims discussed in this space on Tuesday, December 3, 2019:
[T]he plaintiffs here do not allege the defendants caused their personal injuries. Their CPA suits do not seek to vindicate their right to be free of bodily harm but, rather, their property interest in the benefits they bargained for in their insurance contracts. When parties enter an insurance contract, the insured obtains a legal right to benefits upon the happening of a particular event. [Citation omitted.] An insurance contract also gives rise to a quasi-fiduciary relationship between the parties, which requires them to deal in good faith. [Citation omitted.] An insured, therefore, has a legally protected property interest in benefits due under the contract and a related right to insurance dealings free from bad faith. Claims mishandling and wrongful denial of benefits invade this property interest, regardless of the type of event that triggers coverage.
Peoples, 2019 WL 6336407, at *4, ¶ 12.
After placing its reasoning in a place where causation of the alleged Consumer Protection Act damages is not a part of the equation at hand, i.e., "regardless of the type of event that triggers coverage," the Court turned its attention to the question of recoverable damages for the alleged injury in fact.
Stedman and his class sought "to recover excess premiums paid for the PIP coverage," together with "the costs of investigating the unfair acts, and/or the time lost complying with the insurer's unauthorized demands[.]" Peoples, 2019 WL 6336407, at *2, ¶ 5. The Washington Supreme Court unanimously spent very little time on the issue of damages recoverable by the Stedman class.
To begin with, the Supreme Court declined to reach "the portion of the question that asks about excess premiums." The Court devoted a footnote to Peoples' -- not Stedman's -- use of the phrase as "an alternative way of characterizing unpaid benefits." Accordingly, in the Court's view, "it is unnecessary to address Peoples' alternative theory about 'excess premiums.'" Peoples, 2019 WL 6336407, at *4, n.2. What was good for the Peoples was good for Stedman, too, as the Court declined to address the issue of recovery of any "excess premiums" for unpaid PIP coverage.
With respect to Stedman's remaining alleged damages, "the costs of investigating the unfair acts" and "the time lost complying with the insurer's unauthorized demands," the Supreme Court answered succinctly that "when a CPA claim is predicated on an insurer’s mishandling of a PIP claim, ordinary CPA principles govern whether investigation costs or time lost are injuries to business or property." Peoples, 2019 WL 6336407, at *4, ¶ 14. In answering the questions certified by the Federal court, the Washington State Supreme Court felt no compulsion to hold further whether the actual damages alleged by the Stedman class would if proven be recoverable under the Consumer Protection Act, but it did offer guidance from Washington State case law.
The Court pointed to its own precedents to note that "we have we have continued to recognize that expenses incurred to investigate a deceptive act or practice are cognizable injuries and damages under the CPA." Peoples, 2019 WL 6336407, at *4, ¶ 14.
The Court then turned to precedent from the Washington lower courts concerning the allegation of lost time as a recoverable item of damage under the CPA. "The Court of Appeals has also held that taking time away from business to respond to unfair practices may satisfy the injury requirement." Peoples, 2019 WL 6336407, at *4, ¶ 14.
The Court was satisfied that this was all the guidance that litigants would need in cases like the present one: "The principles articulated in these cases apply when a CPA claim is predicated on an insurer’s mishandling of a PIP claim." Peoples, 2019 WL 6336407, at *4, ¶ 14.
To summarize what was summarized before, the key issue in the Peoples case was standing to sue. The key to resolving the standing issue, in turn, was that the alleged 'injury to business or property' in both the Peoples' claims and the Stedman claims was "the deprivation of contracted-for insurance benefits." That was their injury. That conferred their standing to sue.
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