Tori Kruger-willis v. Heather Hoffenburg

393 P.3d 844, 198 Wash. App. 408

• Court: Court of Appeals of Washington
• Decided: March 28, 2017
• Docket: 48375-1-II
• Status: Published

Opinion

Sutton, J.

¶1 This is the third time this case has been before us on appeal. This appeal addresses whether defense counsel for Heather Hofferbert 1 had authority to appear and act on her behalf regarding a vehicle damage claim filed against her by Tori Kruger-Willis. Kruger-Willis appeals the trial court’s decision denying her RCW 2.44.030 motion and ruling that defense counsel had the authority to represent Hofferbert, entering judgment against Kruger-Willis, and denying her motion to reconsider. In the published portion of this opinion, we hold that the trial court did not err in holding that defense counsel had authority to represent Hofferbert, and we affirm the trial court’s decision. In the unpublished portion, we hold that the trial court did not err in its entry of judgment and affirming its order. We also hold that Kruger-Willis was not denied the right to a fair hearing and that Hofferbert is entitled to attorney fees as the prevailing party in this appeal.

FACTS

¶2 This action arose out of a motor vehicle collision that occurred in 2008. Hofferbert drove a truck that struck and damaged Kruger-Willis’s parked vehicle. GEICO, Hoffer-bert’s insurance company, paid to repair Kruger-Willis’s vehicle. Kruger-Willis then sued Hofferbert to recover the diminished value of her repaired vehicle. GEICO hired defense counsel and paid the costs of Hofferbert’s defense pursuant to its contractual duty to defend her. 2

¶3 The insurance contract required that GEICO “will defend any suit for damages payable under the terms of this policy.” Clerk’s Papers (CP) at 694. The contract further specified that GEICO will pay “damages which an insured becomes legally obligated to pay because of... [d]amage to or destruction of property,” so long as the damage arose from the ownership, maintenance, or use of a covered vehicle. CP at 693-94. The contract defined an “insured” to include “[a]ny other person using the auto with your permission.” CP at 695.

¶4 Following a three-day trial, the jury rendered a verdict in Hofferbert’s favor. 3 The trial court awarded Hof-ferbert $11,490 in costs and attorney fees. 4 Kruger-Willis appealed the trial court’s award of attorney fees and costs. In an unpublished opinion, we held that Hofferbert had standing to recover fees and costs as the aggrieved party in the underlying action and was the prevailing party entitled to fees and costs, regardless of the fact that GEICO was defending her. Kruger-Willis v. Hoffenburg, noted at 173 Wn. App. 1024, slip op. at 5 (2013).

¶5 Following our decision, Kruger-Willis’s counsel executed a check for $11,490 payable to Hofferbert, despite defense counsel’s request that the check be made payable to Hofferbert’s insurer, GEICO. Defense counsel asked Kruger-Willis’s counsel to reissue the check payable to GEICO, but Kruger-Willis’s counsel refused because GEICO was not a party to the suit. Defense counsel filed a motion to enforce the trial court’s award of costs and attorney fees. In support of his motion, defense counsel stated that Hofferbert had never been involved in the defense of the case against her and that he (defense counsel) worked for GEICO. The trial court granted this motion, but named Hofferbert and not GEICO as the judgment creditor.

¶6 Kruger-Willis then filed a motion for defense counsel to produce or prove the authority under which he appeared and to stay all proceedings until such authority was produced or provided. See RCW 2.44.030. During argument on this motion, defense counsel admitted that he had “not had contact with the named defendant in this lawsuit.” CP at 640. However, defense counsel asserted that he had authority to appear for Hofferbert under the terms of the insurance contract. The trial court denied Kruger-Willis’s motion. Kruger-Willis appealed.

¶7 In that appeal, we held that where civil defense counsel admitted that he never had any contact with his client, the trial court abused its discretion by denying opposing counsel’s motion to require counsel to prove the authority under which he appears. Kruger-Willis v. Hoffenburg, No. 45593-5-II, slip op. at 4 (Wash. Ct. App. Apr. 21, 2015) (unpublished), http://www.courts.wa.gov/opinions /pdf7D2%2045593-5-II%20%20Unpublished%200pinion.pdf CKruger-Willis II). We reversed and remanded to the trial court to determine whether defense counsel had the authority to appear for Hofferbert in this case. Kruger-Willis II, slip op. at 5.

¶8 On remand, Kruger-Willis renewed her motion under RCW 2.44.030. After a hearing, the trial court ruled that defense counsel had authority to represent Hofferbert under the omnibus clause in the insurance policy, an omnibus clause was required to be present in the policy under RCW 46.29.490(2)(b), defense counsel did not surrender any of Hofferbert’s substantial rights, and Hofferbert ratified defense counsel’s actions after the fact. Kruger-Willis moved to reconsider, and the trial court denied the motion. Kruger-Willis appeals the trial court’s ruling.

¶9 While the second appeal was pending, Hofferbert made a motion in the trial court for a judgment on sum certain based on the trial court’s 2011 order. After a hearing, the trial court found that the 2011 order contained a scrivener’s error stating that payment shall be made to Hofferbert’s attorney, Mary E. Owen & Associates, rather than to Hofferbert. The trial court also found that Kruger-Willis’s tender of the check in 2013, payable to Heather Hofferbert and delivered to Mary E. Owen & Associates, did not constitute an accord and satisfaction. Finally, the trial court held that judgment would be entered in favor of Hofferbert against Kruger-Willis in the amount of $11,490 with interest accruing from the date of the 2011 order. The next day, Kruger-Willis filed a bond supersedeas with the county clerk to cover the judgment and costs on appeal, including interest. Kruger-Willis amended her pending appeal and now also appeals the judgment.

ANALYSIS

I. Standards of Review

¶10 Following a mandate for further proceedings, a trial court must comply with that mandate, and we review the trial court’s compliance for an abuse of discretion. See Bank of Am., NA v. Owens, 177 Wn. App. 181, 189, 311 P.3d 594 (2013). A trial court abuses its discretion when its decision is manifestly unreasonable or based on untenable grounds or reasons. Yousoufian v. Office of Ron Sims, 168 Wn.2d 444, 458, 229 P.3d 735 (2010). A court’s decision is manifestly unreasonable if it is outside the range of acceptable choices, given the facts and the applicable legal standard; it is based on untenable grounds if the factual findings are unsupported by the record; and it is based on untenable reasons if it is based on an incorrect standard or the facts do not meet the requirements of the correct standard. Mayer v. Sto Indus., Inc., 156 Wn.2d 677, 684, 132 P.3d 115 (2006).

¶ 11 We uphold a trial court’s findings of fact if those findings are supported by substantial evidence. Hegwine v. Longview Fibre Co., 132 Wn. App. 546, 555, 132 P.3d 789 (2006), aff’d, 162 Wn.2d 340, 172 P.3d 688 (2007). “Substantial evidence” is that sufficient to persuade a fair-minded individual of the truth of the matter asserted. Hegwine, 132 Wn. App. at 555-56.

II. Authority To Appear

¶12 Kruger-Willis argues that the trial court erred in finding that GEICO’s retained defense counsel had the authority to represent Hofferbert. Kruger-Willis claims that defense counsel lacked the authority to represent Hof-ferbert because counsel had no contact with her throughout the course of the litigation and, therefore, Hofferbert could not have provided such authority. 5 We hold that when an insurer has a contractual obligation to defend its insured, that insurer has the implied right to authorize defense counsel to represent its insured even in the absence of the insured’s express authority.

A. Duty To Defend

¶13 GEICO’s policy stated, “We will defend any suit for damages payable under the terms of this policy.” CP at 694. In Washington, an insurer’s contractual duty to defend its insured is extremely broad. See, e.g., Nat’l Sur. Corp. v. Immunex Corp., 176 Wn.2d 872, 878-79, 297 P.3d 688 (2013). An insurer must defend a lawsuit against its insured not only for claims that are actually covered but also for claims that are potentially covered. Immunex, 176 Wn.2d at 879. An insurer must provide a defense whenever the applicable insurance policy “conceivably covers” the allegations in a complaint against the insured. Woo v. Fireman’s Fund Ins. Co., 161 Wn.2d 43, 53, 164 P.3d 454 (2007). And the duty to defend arises as soon as the complaint is filed. Immunex, 176 Wn.2d at 889.

¶14 Once the insurer’s duty to defend is triggered, the consequences of failing to provide a defense are severe. An insurer that wrongfully breaches its duty to defend is liable for breach of contract and may also be liable for bad faith and violation of the Consumer Protection Act (CPA). 6 See Tank v. State Farm Fire & Cas. Co., 105 Wn.2d 381, 394, 715 P.2d 1133 (1986). In addition to being liable for contract damages, the insurer may be estopped from denying coverage for any judgment or settlement. United Servs. Auto. Ass’n v. Speed, 179 Wn. App. 184, 203, 317 P.3d 532 (2014).

¶15 Here, Hofferbert was entitled to coverage under GEICO’s policy because she was driving the insured’s vehicle with the named insured’s permission. As noted above, GEICO had an obligation to defend Hofferbert for “any suit for damages payable under the terms of this policy.” CP at 694. It is undisputed that Kruger-Willis’s lawsuit against Hofferbert alleged damages payable under the terms of GEICO’s policy. Therefore, GEICO had a contractual, legal duty to defend Hofferbert against Kruger-Willis’s lawsuit. And if GEICO failed to defend Hofferbert, it would be subject to liability for breach of contract, bad faith, and violation of the CPA.

B. Defense Counsel’s Authority

¶16 To fulfill its duty to defend, an insurer generally has the right to select the defense counsel who will represent its insured. See Johnson v. Cont’l Cas. Co., 57 Wn. App. 359, 362-63, 788 P.2d 598 (1990) (holding that an insurer had no obligation to pay for counsel the insured retained). But the law is clear that the insurer-retained defense counsel’s client is the insured, not the insurer. Tank, 105 Wn.2d at 388.

¶17 Rule of Professional Conduct (RPC) 1.2(f) provides for an attorney’s authorization to represent a client:

A lawyer shall not purport to act as a lawyer for any person or organization if the lawyer knows or reasonably should know that the lawyer is acting without the authority of that person or organization, unless the lawyer is authorized or required to so act by law or a court order.

Here, it is undisputed that Hofferbert did not expressly authorize defense counsel retained by GEICO to represent her. Therefore, Kruger-Willis argues that defense counsel had no authority to represent Hofferbert under RPC 1.2(f). 7

¶18 However, RPC 1.2(f) does not always require express authorization from the client. An attorney can represent a client if authorized “by law.” RPC 1.2(f). An insurer necessarily has implicit authority under its contractual duty to defend—to authorize defense counsel to represent its insured. Otherwise, the insurer would have no way of fulfilling its broad duty to defend when the insured cannot be located, is uncooperative, or is temporarily unavailable.

¶19 Under Kruger-Willis’s position, if the insurer or defense counsel could not contact the insured to obtain express authority to represent him or her, the insurer and defense counsel would not even be able to file a notice of appearance and would be forced to allow a default judgment to be entered against the insured. Such a result would be harmful to the insured, the beneficiary of the insurer’s contractual duty to defend. In addition, “insurance contracts are imbued with public policy concerns.” Immunex, 176 Wn.2d at 878. Such a result would be inconsistent with public policy. We hold that under RPC 1.2(f), defense counsel retained by an insurer is authorized by contract law to represent that insurer’s insured. 8 Therefore, we hold that the trial court did not err in holding that defense counsel had authority to represent Hofferbert, and we affirm the trial court’s decision.

¶20 A majority of the panel having determined that only the foregoing portion of this opinion will be published in the Washington Appellate Reports and that the remainder shall be filed for public record pursuant to RCW 2.06.040, it is so ordered.

Maxa, A.C.J., and Worswick, J., concur.

Reconsideration denied April 18, 2017.

Review denied at 189 Wn.2d 1010 (2017).

1 Respondent spells her name “Hofferbert,” although it is spelled incorrectly as “Hoffenburg” throughout the record and in prior opinions. Br. of Appellant at 1 n.1.

2 Although Hofferbert was not the named insured on the insurance contract with GEICO, she is an insured person under the terms of the contract because she drove the insured’s vehicle with permission from the named insured.

3 Prior to trial, GEICO conceded liability, and the trial was on damages only.

4 The trial court awarded Hofferbert costs and reasonable attorney fees because she was the prevailing party under RCW 4.84.250. This award is referred to herein as the “2011 order.’’

5 Kruger-Willis also argues that GEICO’s counsel surrendered a substantial right of Hofferbert by conceding liability. Hofferbert argues that GEICO’s counsel’s decision to concede liability advanced Hofferbert’s interests. We agree with Hofferbert. Kruger-Willis further argues that GEICO’s counsel surrendered a substantial right of Hofferbert when Hofferbert was listed as a judgment debtor on the second appeal, as Kruger-Willis was the prevailing party and entitled to attorney fees under RCW 4.84.250. Kruger-Willis does not cite any authority for this argument, so we decline to reach this issue. RAP 10.3(a)(6).

6 Ch. 19.86 RCW.

7 Kruger-Willis also asserts that our opinion in the second appeal established the law of the case because Kruger-Willis interprets that opinion as holding that the key to authority is some form of communication between attorney and client. In that opinion, we expressly stated that we did not decide the issue of counsel’s authority to appear. Kruger-Willis II, slip op. at 4.

8 Here, there was no indication that Hofferbert objected to defense counsel’s representation of her. We do not address the situation where the insured objects to the representation of insurer-retained counsel or expressly withdraws defense counsel’s authority.