Mahler v. Szucs

Alexander, J.

(dissenting) —. In my view, State Farm *439Mutual Automobile Insurance Company should not have to pay a pro rata share of the legal expenses for the recovery of Personal Injury Protection payments in either of these two cases because the payments in both were recoverable through inter-insurer arbitration. Because the majority concludes that these payments were not recoverable through inter-insurer arbitration, I dissent.

At issue in both cases is Paragraph d of the State Farm insurance policy, which provides:

If the insured recovers from the party at fault and we share in the recovery, we will pay our share of the legal expenses. Our share is that percent of the legal expenses that the amount we recover bears to the total recovery. This does not apply to any amounts recovered or recoverable by us from any other insurer under any inter-insurer arbitration agreement.

Mahler Clerk’s Papers at 281.

The majority does not dispute that State Farm is bound by an inter-insurer arbitration agreement. The majority correctly interprets this fact to mean that State Farm does not have to pay legal expenses for its share of PIP payments when those payments were recoverable from “ ‘any other insurer under any inter-insurer arbitration agreement.’ ” Majority at 423.

It goes on to conclude, however, that the provision exempting State Farm from paying a share of expenses does not apply here because State Farm could not recover payments from the tortfeasors’ insurers. This is so, according to the majority, because the injured insureds could not recover from the tortfeasors’ insurers. Therefore, because State Farm can only stand in the shoes of its injured insureds, it would also be precluded from recovering PIP payments from the tortfeasors’ insurer.

The majority decision suffers from a fatal flaw. Its logic is undermined by the majority’s concession that the injured insureds actually recovered their payments from the tortfeasors’ insurers. “The tortfeasors’ insurers did not simply send checks by return mail when Mahler and Fisher’s at*440torneys presented demand letters. In order to obtain settlements, both Mahler and Fisher had to persuade those insurers first that there was liability and second that they incurred significant damages provable at trial.” Majority at 428. Because the injured insureds recovered from the tortfeasors’ insurers, and State Farm can stand in the shoes of its insureds, State Farm could have recovered the payments from the tortfeasors’ insurers through inter-insurer arbitration. Therefore, because the payments were recoverable from the tortfeasors’ insurers, State Farm should not have to pay its share of the legal expenses.

The majority acknowledges an invitation from the appellants and amicus in this case to find that “the equitable rule of pro rata sharing by the insured and the insurer of expenses necessary to secure a recovery against a tortfeasor constitute the public policy of Washington which may not be varied by contract.” Majority at 425 n.16. The majority purports to not reach this issue in light of its interpretation of Paragraph d of the State Farm insurance policy; however, the fact that the majority details this public policy argument at some length, without also sharing countervailing arguments, implies its approval of the equitable mle advanced by appellants and amicus and creates reasonable cause for concern that its strained reading of Paragraph d of the insurance policy is but an acceptance of the invitation to enact new public policy after all. Yet it is not this court’s prerogative to simply read language out of a contract that it finds to be inequitable.

A contract of insurance . . . should be given a practical and reasonable rather than a literal interpretation; it should not be given a strained or forced construction which would lead to an extension or restriction of the policy beyond what is fairly within its terms, or which would lead to an absurd conclusion, or render the policy nonsensical or ineffective.

Morgan v. Prudential Ins. Co., 86 Wn.2d 432, 434-35, 545 P.2d 1193 (1976) (citing Philadelphia Fire & Marine Ins. Co. v. City of Grandview, 42 Wn.2d 357, 255 P2d 540 (1953); 44 C.J.S. Insurance § 296 (1945)).

*441Finally, in light of the foregoing, I would also go a step further than the majority does in reversing the trial court in Mahler for its award of $51,779.93 in attorney fees (for work in obtaining legal expenses amounting to $1,612.59) to Mahler under Olympic S.S. Co. v. Centennial Ins. Co., 117 Wn.2d 37, 811 P.2d 673 (1991). Correctly finding Olympic S.S. inapposite under the circumstances of the case, the majority would instead remand to have the superior court award Mahler attorney fees under MAR 7.3. The rationale for this award is that State Farm appealed an arbitrator’s award to the superior court and failed to improve its position there. Although I welcome the majority’s constructive discussion of the criteria for determining the reasonableness of attorney fees, because I find that the superior court erred in awarding legal expenses to Mahler, it necessarily follows that there should be no award of attorney fees under MAR 7.3 to Mahler for her litigation to pursue those expenses.22

Motions for reconsideration denied September 11, 1998.

The superior court had earlier allowed, without any explanation as to its analysis, an award of attorney fees under MAR 7.3 in the alternative to Olympic S.S. The amount of these fees would have been $32,694.59 for work to obtain legal expenses in the amount of $1,612.59.