St. Paul Fire & Marine Insurance v. Updegrave

Roe, C.J.

(concurring in part, dissenting in part)—A further elaboration of the facts is necessary to explain my partial dissent. I believe it is an oversimplification by the majority to state the question is whether actual monetary damages are a prerequisite to an award of attorney's fees *661under the Consumer Protection Act. RCW 19.86.

This case involves plaintiff insurer St. Paul's suit for 1 year's premium alleged to be due on a policy of insurance from November 1, 1977, to November 1, 1978. For reasons which will appear, the policy was not issued until March 7, 1978, though it was effective as of the previous November.

As stated in the majority, the previous policy was for 3 years. Premiums were to be paid on a composite rate basis, which was based on the insured's sales. The insured had a duty to report its monthly sales, which it did not. Thus, it was difficult for St. Paul to determine the rate. A dispute arose whether the correct rate for the previous year was to be at .317, as provided in the policy, or .370, as claimed by St. Paul. The insurance company sent its billing in excess of the previous year's. The insured did not agree with it but, as the trial court stated in its memorandum opinion, they ultimately settled on an amount which was a composite rate of .370.

In 1977 a new term began, and a binder was issued by the carrier. Again, there was difficulty in getting monthly reports upon which to base a composite rate factor, and St. Paul projected a figure subject to audit. Having received no payment by 1978, St. Paul sued for $30,834, which would be based on a factor of 1.035. The trial court made two significant findings, relying on Continental Ins. Co. v. Paccar, Inc., 26 Wn. App. 850, 614 P.2d 675 (1980), rev'd in part, 96 Wn.2d 160, 634 P.2d 291 (1981), which held that premiums could be increased only on the anniversary date of the policy. Thus, the increases for the previous years by St. Paul from .317 to .370 were in fact improper and were an overcharge. The court did not grant judgment in defendant's favor because of the overcharge, finding that the parties had settled. Following the same principle, the court held that St. Paul could not recover on the basis of a factor of 1.035 but was bound by the terms of the previous policy of .370, because the new 1977 policy did not have a premium rate stated. Since the defendants were delinquent in their premiums, even at the lower rate, judgment was *662entered against them in favor of the plaintiff for $11,022.80, a little less than 36 percent of the $30,834 prayed for in the complaint. There was a judgment offset of a premium deposit of $3,592, leaving $7,430.80, which defendants owed plaintiff.

The court then found that as a result of the overcharge, the defendants were damaged by the actual premium due and were required to bring a counterclaim in order to establish the overcharge; that they were entitled to a recovery of the amount overcharged to offset the claims of the plaintiff. Although that was a finding, actually it was not followed because that would have given the defendants a recovery of some $19,811.20. Instead, the trial court found violation of the Consumer Protection Act and awarded damages of $1,000 plus $5,000 attorney's fees and costs.

The plaintiff sued to recover its premium. It did not recover the amount sued for. This is true of probably the majority of plaintiffs' cases, but I do not see why that subjects them to the Consumer Protection Act, which would chill many meritorious plaintiffs' claims. Actually, I fail to see how defendants suffered any damages or were required to bring a counterclaim. They could merely deny the claim of the plaintiff, which the plaintiff would have to prove. They had not paid the premium and refused to do so; the plaintiff had no alternative but to resort to court action. Defendants answered plaintiff's interrogatory 18 regarding the amount owed: "Nothing is owed", and in answer to interrogatory 175 that the plaintiff simply applied the wrong rates. Defendants further allege that rather than being indebted to the plaintiff, the plaintiff was indebted to them because of overcharges presently unknown. The trial court held against the defendants in those three matters.

The Consumer Protection Act, RCW 19.86.090, states that "Any person who is injured in his business or property *663by a violation of RCW 19.86.020 . . . may bring a civil action in the superior court to enjoin further violations, to recover the actual damages sustained by him ..." (Italics mine.) No injunction was sought and none was granted.

As stated in Dempsey v. Joe Pignataro Chevrolet, Inc., 22 Wn. App. 384, 393, 589 P.2d 1265 (1979), to recover for a per se violation of the Consumer Protection Act, a party must prove:

(1) the existence of a pertinent statute; (2) its violation; (3) that such violation was the proximate cause of damages sustained; and (4) that they were within the class of people the statute sought to protect.

It is odd that since the plaintiff won and defendants were ordered to pay the money they owed, that merely because of a successful reduction in the amount claimed and prior problems over rates which were settled, the court finds they have suffered damages. This case is unlike Salois v. Mutual of Omaha Ins. Co., 90 Wn.2d 355, 581 P.2d 1349 (1978), where the insurance company refused to pay its claim. Here, the plaintiff paid claims even when the premiums had not been paid on the policy as provided by the terms. St. Paul did not deny the defendants insurance coverage as did the insurance company in Salois.

The majority relies on Tallmadge v. Aurora Chrysler Plymouth, Inc., 25 Wn. App. 90, 605 P.2d 1275 (1979). There, the defendant sold plaintiff a used automobile though it was advertised as brand new. The plaintiff was found to have suffered damages for the purpose of the Consumer Protection Act in that he was inconvenienced, deprived of the use and enjoyment of the property and received an automobile with defects, needing repair. I cannot escape the elements of a per se violation as found in Wilkinson v. Smith, 31 Wn. App. 1, 9, 639 P.2d 768 (1982), which repeats the requirements of Dempsey that to recover on a per se violation of a statute in a consumer protection case, one of the elements is that such violation, if there was one, was a proximate cause of damages sustained.

St. Paul strenuously argued that the contract was subject *664to negotiations for a new rate to be done by endorsement. It presented evidence which, if believed, would have shown there was a new rate and that the policy was modified. Unfortunately a Mr. Coyle, the plaintiff's agent, was unhealthy and unable to testify. In its memorandum opinion, the court stated as to Mr. Coyle's absence:

[T]hat's unfortunate because he had very crucial information that might make a decision in this case a lot easier, be that as it may, the fact of the matter is the parties didn't renegotiate a new premium. They fell into a dispute, just as in the Paccar case and legally the insurance was extending their [síc] coverage at the previous rate until a new rate was determined.

I believe this merely reflected an honest difference of opinion and a failure of proof. The effect of the trial court's decision, affirmed by the majority, is that because of failure of proof, the plaintiff and the defendants, even though they had settled the previous dispute over the amount of the premium, such dispute may be used as a pogo stick to justify application of the Consumer Protection Act in litigation involving only a subsequent 1-year suit for premium, which suit was successful. The application of the $1,000 damages and $5,000 attorney's fees left the plaintiff with a judgment of approximately $1,234.55.

The great danger in the majority's position is that a trial court may look to some previous dealings between the parties, which were settled without a judgment, and use them as a basis to deprive a meritorious party of the fruits of the litigation. Admittedly, the defendant owed at least $7,430.80 in premiums. The record is bare of any evidence that the overcharge from .317 to .370, which the court found occurred in the previous years, equaled any specific sum of money. The court simply trebled an unknown figure or a nonfigure and reached $1,000, and then added attorney's fees, and subtracted that amount from the plaintiff's judgment.

Accordingly, I would affirm the trial court as to the *665award to the plaintiff, but reverse as to the violation of the Consumer Protection Act.

Reconsideration denied February 23, 1983.

"17. Is it your position that any late billing or request for payment from Plaintiff in any way reduced the amount owed, and if so, please state in what manner this reduced the amount owed and the authority upon which you rely."