IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
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APPELWICK, J. - Trinity defended and settled a personal injury claim made
against Ohio's insured. Trinity then sued Ohio for subrogation, equitable contribution,
and insurer bad faith under the CPA1 and IFCA. 2 When Ohio failed to appear, Trinity
obtained a default order and judgment for defense and indemnification costs, as well as
treble damages under the CPA and IFCA. Trinity claims that under the principle of
equitable subrogation, it was entitled to assert the insured's CPA and IFCA claims
against Ohio, even without express agreement. We reverse the portions of the
judgment based upon the CPA and IFCA claims. We affirm the judgment for defense
and indemnification costs.
FACTS
In September 2007, Philip Riley was injured when he fell off scaffolding at a
construction site in Kitsap County. Riley was employed by a subcontractor, Cascade
Construction Company. Riley sued the worksite's general contractor, Millennium
1
Washington Consumer Protection Act, ch. 19.86 RCW.
2
Insurance Fair Conduct Act, ch. 48.30 RCW
No. 67832-9-1/2
Building Company Inc. Trinity Universal Insurance Company of Kansas insured
Cascade, while Ohio Casualty Insurance Company insured Millennium.
Millennium tendered defense of the lawsuit to Ohio. Ohio initially accepted
tender and appointed an attorney to represent Millennium. But, Ohio then tendered
Millennium's defense to Trinity, claiming that Millennium was an additional insured
under the policy Trinity issued to Cascade. Though Riley's complaint alleged only
Millennium's acts or omissions, Trinity acknowledged it was conceivable that some act
or omission by Cascade could have played a role in Riley's injury. Therefore, in
January 2009, Trinity accepted tender and took over defense of the lawsuit without a
reservation of rights.
In August 2009, Trinity attempted to tender Millennium's defense back to Ohio.
Trinity contended that, under the circumstances of complaint, Trinity and Ohio were at
least co-primary insurers. Trinity reminded Ohio that, under Washington law, an
insurer's duty to defend is triggered if the insurance policy conceivably covers
allegations in the complaint. 3 Trinity pointed out that the complaint alleged only
Millennium's acts or omissions, triggering Ohio's duty to defend. In other words, if
Millennium's acts or omissions were found to be the cause of the accident, Ohio would
be entirely responsible for defense and indemnification.
But, Ohio refused to accept the retender. Ohio cited an '"other insurance"'
provision in Millennium's policy, which stated that Ohio's insurance is primary except if
"'any other primary insurance [is] available to you covering liability for damages arising
3
Am. Best Food. Inc. v. Alea London. Ltd., 168 Wn.2d 398, 404, 229 P.3d 693
(2010).
2
No. 67832-9-1/3
out of the premises or operations."' Based on this provision, Ohio insisted that its
coverage was excess to Trinity's.
In December 2009, Trinity notified Ohio and the Washington State Insurance
Commissioner that it planned to sue unless Ohio agreed to participate in Millennium's
defense. Trinity explained that it would be asserting its equitable contribution rights as
Cascade's insurer, as well as the direct, subrogated rights of Millennium. Ohio again
refused.
Trinity continued defense and ultimately settled Riley's claims for $225,000 in
January 2010. Millennium and Cascade received a full and complete release of all
Riley's claims.
Trinity served the insurance commissioner on May 12, 2010, 4 with a summons
and complaint against Ohio for subrogation, equitable contribution, and insurer bad
faith. On May 13, 2010, the commissioner forwarded the summons and complaint by
certified mail to Ohio's registered agent for service, Corporation Service Company
(CSC). The commissioner received a return receipt stamped and dated by CSC. CSC
has no record of receiving Trinity's summons and complaint. The parties do not dispute
that Trinity did not provide notice of the lawsuit to Ohio's claims representative or its
outside counsel.
Trinity filed its complaint with the court on July 7, 2010. Trinity alleged that Ohio
improperly relied on its "other insurance" exclusion to deny defense, because Riley's
complaint did not specify the cause of the accident. Trinity asserted five causes of
4
Ohio is a foreign insurer, so service on the insurance commissioner constitutes
service on the insurer. RCW 48.05.200(1 ).
3
No. 67832-9-1/4
action against Ohio. First, Trinity argued that by withdrawing from and refusing to
contribute to Millennium's defense, Ohio breached its contractual duty to defend
Millennium. Second, Trinity claimed that Ohio breached its duty of good faith and fair
dealing by unreasonably refusing to defend Millennium, in violation of IFCA. Third,
Trinity claimed that Ohio failed to respond to pertinent communications from a claimant
within 10 days, as required by WAC 284-30-360(3). Fourth, Trinity argued that the
same conduct constituted per se violations of the CPA. Lastly, Trinity claimed it was
entitled to equitable contribution for Ohio's share of Millennium's defense, because both
Trinity and Ohio had obligations to defend.
When Ohio failed to appear or answer, Trinity moved ex parte for a default order
and judgment. Trinity requested the full cost of defending and indemnifying Millennium,
attorney fees, and treble damages under IFCA and the CPA, totaling $764,271. Trinity
provided declarations and other exhibits supporting its request for damages. On July
14, 2010, a court commissioner granted the motion and entered judgment in the full
amount.
Trinity waited a year and five days before collecting on the judgment. Trinity
admitted that it purposefully waited a year to collect in order to gain a procedural
advantage over Ohio. On August 24, 2011, Ohio filed a motion to vacate the default
order and set aside the judgment. Ohio argued the default judgment should be
overturned, because (1) Ohio was not served; (2) Trinity had no standing to bring the
claims; (3) the court commissioner failed to enter findings of fact and conclusions of law
necessary to support the judgment; (4) Ohio's failure to appear was inadvertent,
because it was unaware of the lawsuit; and (5) Ohio could assert prima facie defenses
4
No. 67832-9-115
to liability and damages. The court denied Ohio's motion to vacate and this appeal
followed.
DISCUSSION
Ohio makes several arguments on appeal. Ohio argues that the default
judgment should be vacated under CR 60(b)(1), because its failure to appear was due
to inadvertence or excusable neglect and it can assert prima facie defenses. Ohio
contends that Trinity either waived or is estopped from asserting the one year time
limitation for CR 60(b)(1) motions, because Trinity purposefully delayed in collecting the
default judgment.
Ohio argues that the default order and judgment are void due to lack of subject
matter jurisdiction, because Trinity did not have standing to bring statutory insurer bad
faith claims against Ohio. Ohio maintains that Trinity lacked standing to assert the IFCA
and CPA claims, because those claims belong to Millennium and Trinity never received
express assignment from Millennium.
Ohio also argues that Trinity improperly obtained the default judgment through
misrepresentation or misconduct, so the judgment should be vacated under CR
60(b)(4). Ohio asserts that Trinity's alleged damages were uncertain and speculative,
so the trial court erred by entering default without holding an evidentiary hearing and
making findings. Lastly, Ohio argues that the trial court should not have granted
Trinity's supplemental attorney fees, because Trinity had no legal right to them.
Default judgments are generally disfavored in Washington. Griggs v. Averbeck
Realty. Inc., 92 Wn.2d 576, 581, 599 P.2d 1289 (1979). Courts prefer to determine
cases on their merits rather than by default. kl In reviewing an entry of default, the
5
No. 67832-9-1/6
court's principle inquiry should be whether the default judgment is just and equitable.
lit. at 581-82. A default judgment may be set aside in accordance with CR 60(b). CR
55(c)(1). Resolution of a motion to vacate a default judgment is within trial court's
sound discretion. Hwang v. McMahill, 103 Wn. App. 945, 949, 15 P.3d 172, 949 (2000).
As such, we review a trial court's decision on a motion to vacate a default judgment for
abuse of discretion. Morin v. Burris, 160 Wn.2d 745, 753, 161 P.3d 956 (2007). A trial
court abuses its discretion when it is exercised on untenable grounds or for untenable
reasons. lit_ On the other hand, whether a judgment is void is a question of law that we
review de novo. Dobbins v. Mendoza, 88 Wn. App. 862, 871, 947 P.2d 1229 (1997).
I. CR 60(b)(1) Mistake. Inadvertence. or Excusable Neglect
Grounds for vacating a default judgment under CR 60(b)(1) include mistake,
inadvertence, surprise, and excusable neglect. A defendant moving to vacate under CR
60(b)(1) must show four factors: (1) its failure to timely appear was due to mistake,
inadvertence, surprise, or excusable neglect; (2) there is substantial evidence
supporting a prima facie defense; (3) it acted with due diligence after notice of the
default judgment; and (4) vacating the default judgment would not cause the plaintiff
substantial hardship. Little v. King, 160 Wn.2d 696, 703-04, 161 P.3d 345 (2007).
A CR 60(b) motion must be brought within one year after the default order or
judgment is entered. This one year time limit is strictly enforced and the trial court may
not extend the deadline. See CR 6(b). Here, the court commissioner entered the
default order and judgment against Ohio on July 14, 2010. Ohio filed its motion to
vacate on August 24, 2011, more than a year later.
6
No. 67832-9-1/7
Ohio argues that, because Trinity purposefully delayed executing on the
judgment, Trinity should be barred from asserting the CR 60(b) one year time limitation.
Trinity acknowledged that it deliberately waited a year and five days to collect on the
judgment to gain a procedural advantage. But, Washington courts do not consider it
deceptive or unfair for a plaintiff to wait a year to collect on a default judgment. See.
~. Friebe v. Supancheck, 98 Wn. App. 260, 264, 267, 992 P.2d 1014 (1999) (refusing
to characterize the Friebes' "'legal sleight-of-hand"' in waiting a year and two days to
collect on a default judgment "as unfair or deceptive"); Allison v. Boondock's.
Sundecker's & Greenthumb's, Inc., 36 Wn. App. 280, 285-86, 673 P.2d 634 (1983).
Ohio nonetheless cites Lybbert v. Grant County to argue that Trinity either
waived its time limitation argument or should be estopped from asserting it. 141 Wn.2d
29, 1 P.3d 1124 (2000). But, Lybbert is not on point here. In that case, the Lybberts
attempted to sue Grant County, but mistakenly served process on the county
commissioner's administrative assistant. ~ at 32. Despite defective service, the
county filed a notice of appearance. ~ The county indicated that it was not waiving
objections to improper service, but for the next nine months, it acted like it was
preparing to litigate on the merits. ~ For instance, it served interrogatories and
requests for production on the Lybberts. ~ The Lybberts asked in interrogatories if the
county would be relying on the affirmative defense of insufficient service of process. ~
at 33. The county waited months to respond. ~ When it finally did, the statute of
limitations had run on the Lybberts' claim, so they could no longer achieve proper
service. ~ at 33-34. The county then requested the case be dismissed for that reason.
~
7
No. 67832-9-1/8
The Lybberts argued that the county either waived or should be equitably
estopped from asserting insufficient service of process. ~ at 34-35. The elements of
equitable estoppel are: (1) an admission, statement, or act inconsistent with a claim
afterwards asserted; (2) action by another in reasonable reliance upon that act,
statement, or admission; and (3) injury to the relying party from allowing the first party to
contradict or repudiate the prior act, statement, or admission. ~at 35. The court held
that the Lybberts established the first two elements but failed the third, because they did
not reasonably or justifiably rely on the county's actions. ~ at 35-36. Waiver can occur
in two ways. ~ at 39. First, it can occur if the defendant's assertion of a defense is
inconsistent with previous behavior. ~ Second, if the defendant's counsel is dilatory in
asserting a defense. ~ The Lybbert court held that the county waived its defense of
insufficient service, because it both acted inconsistently and was dilatory. ~at 42.
Here, unlike the county's action in Lybbert, Trinity took no inconsistent action.
Trinity informed Ohio of its intent to sue unless Ohio joined Millennium's defense. 5
When Ohio refused, Trinity brought suit as promised. Trinity sought default when Ohio
failed to appear, then attempted to collect a year later. None of this was inconsistent
with asserting the one year time bar under CR 60(b). Trinity never masked its time
limitation defense by asserting a contrary argument. Moreover, waiting a year to collect
5
In a letter Trinity sent to Ohio months before filing suit, Trinity wrote, "Please be
aware that the purpose of this letter is to give Ohio 20 days to agree to participate in the
defense of Millennium. If Ohio refuses to do so, Trinity will pursue all of its rights
against Ohio in court. This will include a claim for defense costs, whatever payment
may be made by way of indemnification (should a settlement or judgment occur), treble
damages, and coverage related attorney fees permitted under the IFCA and Olympic
Steamship." Olympic S.S. Co .. Inc. v. Centennial Ins. Co., 117 Wn.2d 37, 811 P.2d 673
(1991).
8
No. 67832-9-1/9
is not characterized as unfair or deceptive, so we do not construe it as dilatory. Trinity
violated no deadline or court rule in waiting a year to collect. Characterizing such an
action as dilatory would encompass a myriad of other strategic decisions attorneys are
permitted to make. And, Trinity had no obligation to give Ohio notice of the default
judgment, so Ohio could not have reasonably relied on any act or statement by Trinity.
See CR 55(a)(3). Rather, it was Ohio's responsibility to make a CR 60(b)(1) motion
within one year of the default order. We hold that neither equitable estoppel nor waiver
are applicable here.
Trinity was entitled under Washington law to wait a year to collect on the default
judgment. Therefore, Ohio's CR 60(b)(1) arguments are time barred and cannot
provide a proper basis to vacate. Ohio's prima facie defenses are irrelevant, because
the time bar is absolute. 6
II. CR 60(b)(5) Lack of Subject Matter Jurisdiction
Ohio argues that Trinity lacked standing to bring Millennium's statutory claims
under IFCA and the CPA. Lack of standing, Ohio posits, means the trial court lacked
6
Even if we were to consider Ohio's claim of inadvertence or excusable neglect,
we find it unavailing. Ohio attributes its failure to appear to two possible reasons: (1)
the insurance commissioner's service on esc was faulty or failed, or (2) esc itself
failed to notify Ohio of the lawsuit. The first excuse is unconvincing, because the record
shows that the insurance commissioner took all statutorily required steps to achieve
service on CSC. See RCW 48.05.200 (requiring service on foreign insurer to be on
insurance commissioner); 48.02.200(2) (requiring commissioner to send a copy of the
process by mail or other means reasonably calculated to give notice). And, the
commissioner received a return receipt dated and stamped by CSC. The second
excuse is similarly unpersuasive. We have repeatedly held that when a company's
failure to respond to a properly served summons and complaint was due to a
breakdown of internal office procedure, it is not excusable under CR 60(b). TMT Bear
Creek Shopping Ctr.. Inc. v. PETCO Animal Supplies. Inc., 140 Wn. App. 191, 212-13,
165 P.3d 1271 (2007).
9
No. 67832-9-1/10
subject matter jurisdiction over Trinity's claims, so the default order is void under CR
60(b)(5). A court enters a void order only when it lacks personal jurisdiction or subject
matter jurisdiction over a claim. Marley v. Dep't of Labor & Indus., 125 Wn.2d 533, 540,
886 P.2d 189 (1994). We use caution in characterizing an issue as jurisdictional or a
judgment as void, because the consequences of a court acting without subject matter
jurisdiction "are draconian and absolute." Cole v. Harveyland, LLC, 163 Wn. App. 199,
205, 258 P.3d 70 (2011).
In federal courts, a plaintiff's lack of standing deprives the court of subject matter
jurisdiction, making it impossible to enter a judgment on the merits. Fleck & Assocs.,
Inc. v. City of Phoenix., 471 F.3d 1100, 1102 (9th Cir. 2006). By contrast, the
Washington Constitution places few constraints on superior court jurisdiction. See
CaNST. art. IV, § 6 ("The superior court shall also have original jurisdiction in all cases
and of all proceedings in which jurisdiction shall not have been by law vested
exclusively in some other court."); see also Ullery v. Fulleton, 162 Wn. App. 596, 604,
256 P.3d 406, review denied, 173 Wn.2d 1103, 271 P.3d 248 (2011). Accordingly, if a
defendant waives the defense that a plaintiff lacks standing, a Washington court can
reach the merits. Ullery, 162 Wn. App. at 604. Therefore, in Washington, a plaintiff's
lack of standing is not a matter of subject matter jurisdiction? kl
7
Ohio cites a footnote from a 2002 Washington Supreme Court opinion that
says, "[S]tanding is a jurisdictional issue that can be raised for the first time on appeal."
lnt'l Ass'n of Firefighters. Local 1789 v. Spokane Airports, 146 Wn.2d 207, 212-13 n.3,
45 P.3d 186, 50 P.3d 618 (2002). This is the type of '"drive-by jurisdictional ruling"' we
recently declined to rely on in Cole. 163 Wn. App. at 208 (quoting Arbaugh v. Y&H
Corp., 546 U.S. 500, 510-11, 126 S. Ct. 1235, 163 L. Ed. 2d 1097 (2006)).
10
No. 67832-9-1/11
Rather, the critical concept in determining whether a court has subject matter
jurisdiction is the type of controversy. Cole, 163 Wn. App. at 209. Washington superior
courts have subject matter jurisdiction over tort actions. Williams v. Leone & Keeble.
Inc., 171 Wn.2d 726, 730, 254 P.3d 818 (2011). Indeed, both IFCA and the CPA allow
claimants to bring suit in superior court. RCW 48.30.015(1 ); RCW 19.86.090. Because
Trinity's action against Ohio was well within the superior court's subject matter
jurisdiction, all other defects or errors go to something other than subject matter
jurisdiction. Cole, 163 Wn. App. at 209.
Ill. Standing to Assert an Insured's Statutory Rights
Though the doctrine of standing does not implicate subject matter jurisdiction, it
does prohibit a plaintiff from asserting another's legal rights. Walker v. Munro, 124
Wn.2d 402, 419, 879 P.2d 920 (1994). The claims of a plaintiff who lacks standing
cannot be resolved on the merits and must fail. Ullery, 162 Wn. App. at 604-05.
Whether a party has standing to sue is a question of law reviewed de novo. Spokane
Airports v. RMA, Inc., 149 Wn. App. 930, 939, 206 P.3d 364 (2009).
Ohio argues that Trinity lacked standing to bring Millennium's IFCA and CPA
claims, because such claims belong to the insured, not the insurance company.
Without express assignment, Ohio argues, Trinity remained a third party claimant with
no standing to assert Millennium's statutory claims against Ohio. Trinity claimed that
"assignment was automatic via the policy." However, Trinity never produced any policy
language or express assignment showing that Millennium agreed to transfer its IFCA
and CPA claims to Trinity.
11
No. 67832-9-1/12
An insured may assign its bad faith claims to a third party. Safeco Ins. Co. of
America v. Butler, 118 Wn.2d 383, 397, 399, 823 P.2d 499 (1992). An assignee steps
into the shoes of the assignor, and has all the rights of the assignor. Mut. of Enumclaw
Ins. Co. v. USF Ins. Co., 164 Wn.2d 411, 424, 191 P.3d 866 (2008). The assignee's
cause of action is then direct, not derivative. Estate of Jordan v. Hartford Accident &
lndem. Co., 120 Wn.2d 490, 495, 844 P.2d 403 (1993). But, without assignment, a third
party claimant has no right of action against an insurance company for breach of the
duty of good faith. Tank v. State Farm Fire & Cas. Co., 105 Wn.2d 381, 393, 715 P.2d
1133 (1986). In Tank, the Washington Supreme Court rejected CPA claims brought by
third parties against insurance companies. kL. The court found nothing in the CPA's
statutory or regulatory language that gave third party claimants the right to sue. kL.
Similarly, IFCA provides that "[a]ny first party claimant to a policy of insurance
who is unreasonably denied a claim for coverage or payment of benefits by an insurer
may bring an action in the superior court of this state to recover the actual damages
sustained." RCW 48.30.015(1 ). The statute defines "first party claimant" as "an
individual, corporation, association, partnership, or other legal entity asserting a right to
payment as a covered person under an insurance policy or insurance contract." RCW
48.30.015(4). IFCA allows the superior court to award reasonable attorney's fees,
litigation costs, and unlimited trebling of actual damages. RCW 48.30.015(2), (3).
Millennium meets the first party definition.
IFCA clearly vests a cause of action with first party claimants. RCW
48.30.015(1). That is, individuals and businesses who own an insurance policy may
bring suit against their insurer for unreasonably denying a claim of coverage. The
12
No. 67832-9-1/13
purpose of IFCA is to protect individual policy holders from unfair practices by their
insurers. S.B. REP. on Engrossed Substitute S.B. 5726, at 2, 60th Leg., Reg Sess.
(Wash. 2007); H.B. REP. on Engrossed Substitute S.B. 5726, at 1, 60th Leg., Reg Sess.
(Wash. 2007). Just like the CPA, nothing in the language of IFCA gives third party
claimants the right to sue. And, nowhere does IFCA create an independent right for
insurers to bring a claim on their own behalf. While an insured may be able to assign its
IFCA claims to a third party, without express assignment, an insurer may not
independently assert its insured's IFCA claims.
Nevertheless, Trinity argues that it owned Millennium's IFCA and CPA claims
under the principle of equitable subrogation. Trinity contends that by virtue of
completely defending and indemnifying Millennium, Millennium's claims against Ohio
automatically transferred to Trinity by operation of law. "Subrogation" is the principle in
which an insurer that has paid a loss under an insurance policy is entitled to all the
rights and remedies belonging to the insured against a third party with respect to any
loss covered by the policy. Mut. of Enumclaw, 164 Wn.2d at 423. Subrogation enables
an insurer to recoup payment from the party responsible for the loss. Mahler v. Szucs,
135 Wn.2d 398, 413, 957 P.2d 632, 966 P.2d 305 (1998). It is essentially the right of
reimbursement. kL at 412.
There are two types of subrogation: conventional subrogation, which arises by
contract, and equitable subrogation, which arises by operation of law. Mut. of
Enumclaw, 164 Wn.2d at 423. Because conventional subrogation can arise only by
agreement, some jurisdictions have found it to be synonymous with assignment. kl. at
424. An insurer entitled to conventional subrogation "stands in the shoes" of the insured
13
No. 67832-9-1/14
and is entitled to the same rights and subject to the same defenses as the insured . .!Q.,_
Therefore, the effect of assignment and conventional subrogation under Washington
law is substantially the same. .!Q.,_ But, the Mutual of Enumclaw court emphasized that
this analysis only applies to conventional subrogation, not equitable subrogation. .!Q.,_ at
417 n.1. Mutual of Enumclaw does not support Trinity's argument that equitable
subrogation is equivalent to assignment.
Trinity cites two additional cases to argue that equitable subrogation entitled it to
assert Millennium's IFCA and CPA claims. But, we find those cases inapposite here,
because they deal with excess insurers, a unique class of insurers. See. e.g., First
State Ins. Co. v. Kemper Nat. Ins. Co., 94 Wn. App. 602, 971 P.2d 953 (1999); Truck
Ins. Exch. of Farmers Ins. Grp. v. Century lndem. Co., 76 Wn. App. 527, 529, 887 P.2d
455 (1995). The First State court held that an excess insurer may assert CPA claims
that its insured could have brought against the primary insurer, because the excess
insurer is equitably subrogated to the rights of its insured. 94 Wn. App. at 609. When
there is no excess insurer, the insured is his own excess insurer. .!Q.,_ at 611. The
primary insurer owes him a duty of good faith to protect him from excess judgment and
personal liability. .!Q.,_ But, if the insured purchases excess insurance, he in effect
substitutes an excess insurer for himself. .!Q.,_ Therefore, the excess insurer steps into
the shoes of the insured. See id. at 610. It then follows that the excess insurer
assumes the rights and obligations of the insured . .!Q.,_
Therefore, the duty a primary insurer owes to an excess insurer is identical to
that owed the insured . .!Q.,_ at 610-11. So, First State, as an excess insurer, could bring
a CPA claim against the primary insurer for badly mishandling litigation, which resulted
14
No. 67832-9-1/15
in First State having to pay $1 million out of its excess policy. lit_ at 609. Allowing First
State to bring its insured's CPA claims promoted public policy by encouraging primary
insurers to settle within their policy limits. lit_ at 611.
Trinity is not an excess insurer. Rather, Trinity alleged that it and Ohio were co-
primary insurers. Trinity attempts to stretch the limited application of First State too far
by arguing that a co-primary insurer should be treated like an excess insurer and be
automatically equitably subrogated to the rights of its insured. While co-primary
insurers owe their insured a duty of good faith, Tank, 105 Wn.2d at 386, First State
does not hold that they owe one another that same duty. The policy concerns of First
State are also not at play between co-primary insurers. While both Trinity and Ohio
may have had a duty to Millennium to defend and seek a reasonable settlement, they
did not owe one another that duty.
And, perhaps most importantly, automatic equitable subrogation of primary
insurers to the insureds' statutory rights would take from the insured the statutory
damages to which they are entitled any time the insurer defends and indemnifies its
insured. We find no basis in the statutory language of the CPA and IFCA or case law to
justify doing so. Equitable subrogation entitles a paying primary insurer to seek
reimbursement for losses paid. It does not allow the insurer to assert an insured's
statutory rights without express agreement. Nor does it authorize the insurer to retain
the proceeds of those claims. Trinity has not shown any express agreement by
Millennium-whether by assignment or conventional subrogation-to transfer to Trinity
the right to bring its statutory claims against Ohio, let alone to retain the proceeds of
15
No. 67832-9-1/16
such claims. Trinity remains a third party, without standing to assert Millennium's IFCA
and CPA claims against Ohio.
We therefore reverse the trial court's treble damages award under IFCA and the
CPA However, by virtue of completely defending and indemnifying Millennium, Trinity
was equitably subrogated to Millennium with respect to losses it actually paid.
Accordingly, we affirm the trial court's award for costs Trinity paid in defending and
indemnifying Millennium.
IV. CR 60(b)(4) Misrepresentation in Obtaining Default
A default judgment may be vacated if it resulted from "misrepresentation, or other
misconduct of an adverse party." CR 60(b)(4). Ohio argues that the default order and
judgment should be vacated, because it resulted from Trinity's misrepresentation and/or
misconduct. Trinity's alleged misrepresentation comes from one line in its ex parte
motion for default: "Trinity, as assignee of Millennium, engaged its attorneys in this case
on a contingent fee basis." (Emphasis added.) Ohio argues that Trinity did not show
any evidence of Millennium's assignment of its CPA and IFCA claims and did not
support this assertion anywhere in its motion for default, so it constitutes an affirmative
misrepresentation. We have reversed the portion of the judgment based upon the CPA
and IFCA claims, making this issue moot. Trinity's status as an assignee is not material
to its status as an equitable subrogee. Therefore, we decline to vacate the balance of
the judgment on CR 60(b)(4) grounds.
V. Hearing and Findings
Ohio argues that Trinity's alleged damages were uncertain, so the trial court
erred by entering a default judgment without holding a hearing and making findings.
16
No. 67832-9-1/17
Ohio points out that Trinity alleged damages in its complaint '"in an amount to be proven
at trial."' As a result, Ohio argues, Trinity failed to allege sum certain damages, so the
court should have conducted an evidentiary hearing and was required to make findings.
We agree that the lack of express findings would be troubling in regards to the trial
court's award for treble damages under IFCA and the CPA. But, again, we have
reversed that award.
We are not similarly troubled by the lack of a hearing and express findings as far
as the award for Trinity's defense and indemnification costs. Ohio is correct that a
default judgment must be limited to the amount demanded in the complaint. CR 54( c)
("A judgment by default shall not be different in kind from or exceed in amount that
prayed for in the demand for judgment."). Therefore, if a complaint alleges damages in
an amount to be proven at trial, damages are uncertain and require findings. CR
55(b)(2). However, CR 55(b)(2) specifies that a court "may conduct such hearings as
are deemed necessary." (Emphasis added.) Even where damages are uncertain, the
trial court has considerable discretion in determining the extent of proof needed. Miller
v. Patterson, 45 Wn. App. 450, 460, 725 P.2d 1016 (1986). Presentation of live
testimony is not required. See id. Rather, the court's judgment may be based on
affidavits or declarations. kL.
Moreover, the Washington Supreme Court has held that even where a default
judgment does not contain express findings and conclusions, implied findings may be
sufficient. Little, 160 Wn.2d at 706-07. In Little, the judge did not make express
findings and conclusions in her default judgment. 160 Wn.2d at 706. But, she listed all
the materials she considered and entered a default judgment in specific amounts. kL. at
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707. The Washington Supreme Court agreed with the Court of Appeals that '"[t]his
necessarily implies a finding of fact that Little suffered damages in the given amounts
and the conclusion of law that Little was entitled to recover those sums from King."' ~
(alteration in original). Such implied findings of fact may be sufficient, because CR
55(b)(2) does not define what constitutes adequate findings of fact and conclusions of
law. ~ at 706.
Ohio had reasonable notice that it could be liable for the entire amount of
defense and indemnification costs. In the December 2009 letter to Ohio, Trinity
declared its intent to recover defense and indemnification costs if Ohio did not accept
retender of defense. Trinity argued that Ohio may be entirely responsible for
indemnification and defense of Millennium, depending on whether Millennium and/or
Cascade were determined to be at fault. Trinity did not allege sum certain damages in
its complaint, but from a fair reading of Trinity's complaint, it is apparent that Ohio might
be liable for the entire amount of settlement and defense costs. Trinity repeatedly
discusses Ohio's duty to defend its insured and responsibility for indemnification.
Therefore, the amounts Trinity requested in its complaint and later in its ex parte motion
do not differ substantially.
In its ex parte motion for default, Trinity listed the entire out-of-pocket amount it
paid to defend and indemnify Millennium. And, Trinity explained that these expenses
should have been borne by Ohio alone, based on Ohio's policy with Millennium. Trinity
attached a declaration and detailed payment history verifying these costs. The trial
court was entitled to base its judgment on this evidence. See Miller, 45 Wn. App. at
460. It did not need to conduct a separate hearing with live testimony. See id. The
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court's order of default and judgment explained that its decision was based on the
provided declarations, record, and pleadings. Like in Little, this necessarily implies a
finding of fact that Trinity suffered the damages described and the conclusion of law that
Trinity was entitled to recover those sums from Ohio. The trial court acted within its
discretion in relying on the evidence Trinity provided. Because the trial court made
implied findings and did not need to hold an evidentiary hearing, we decline to reverse
Trinity's award for defense and indemnification costs.
VI. Attorney Fees
Ohio asks this court to vacate the trial court's award of attorney fees in this action
to Trinity. Below, the trial court cited three legal grounds for the $32,400 attorney fees
award: the CPA, IFCA, and the Olympic Steamship doctrine. Olympic S.S. Co .. Inc. v.
Centennial Ins. Co., 117 Wn.2d 37, 52, 811 P.2d 673 (1991). Conversely, Trinity
requests attorney fees on appeal, pursuant to RAP 18.1, for the same reasons it was
awarded fees below.
Trinity does not have standing to assert Millennium's IFCA and CPA claims. The
attorney fee award cannot be sustained on these bases. Nor does Olympic Steamship
provide a basis for the award of fees on these facts.
Under the Olympic Steamship doctrine, courts may award fees to an insured who
successfully sues an insurer to obtain insurance coverage. 117 Wn.2d at 52.
Assignees of the insured may also recover fees if they are compelled to sue an insurer
to secure coverage. McRorv v. N. Ins. Co. of New York, 138 Wn.2d 550, 556, 980 P.2d
736 (1999). Similarly, the Mid-Continent court allowed attorney fees when the insurer
was contractually subrogated to the rights of the insured. Order Granting Def. Titan's
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No. 67832-9-1120
Mot. for Att'y Fees, Mid-Continent Cas. Co. v. Titan Constr. Corp., No. C05-1240MJP,
2009 WL 2391527, at *2 (W.O. Wash. Aug. 3, 2009). There, the insured remained the
real party in interest. kL.
In contrast, in Safeco, we denied an award of Olympic Steamship fees when the
insurer asserted its own equitable contributions rights. Safeco. Ins. Co. of Ill. v. Country
Mut. Ins. Co., 165 Wn. App. 1, 8-9, 267 P.3d 540 (2011). Here, Trinity's claims against
Ohio were not based on an assignment or contractual subrogation of rights by
Millennium. See id. at 8. Having failed to produce evidence of assignment or
contractual right, Trinity lacked standing to assert those claims of the insured. Rather,
Trinity's claim arose from its own equitable subrogation rights as the paying insurer, not
the rights of the insured. Trinity is not entitled to attorney fees under Olympic
Steamship,.
For these reasons, the attorney fees awarded below are reversed, and attorney
fees on appeal are denied.
We affirm in part, reverse in part, and remand to the trial court to correct the
judgment.
WE CONCUR:
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