Reply to State Farm's arguments
a. The insured's claim against the tortfeasor is unitary; parts of the claim do not transfer bit by bit to the insurance company with each PIP payment.
A key dispute emerges from a comparison of Fishers' and State Farm's appellate briefs. Fisher contends that her claim against the underlying tortfeasor is indivisible and that she has the primary right to pursue the claim, including State Farm's subrogated interest. State Farm views the claim as divisible, with pieces of the claim carved from Fisher to State Farm with each PIP payment. For example, State Farm argues, "State Farm's subrogation rights commenced to accrue incrementally from the time of its first payment on March 3, 1992 through its last payment on January 22, 1993." RB 38. To State Farm, Fisher's claim is like a hunk of cheese, and State Farm carves off a slice of cheese each time it makes a payment.
This key dispute lies at the core of most of the disagreements expressed in the briefs:
- Fisher recovered a single claim from the tortfeasor, incurred attorney fees on that claim, and seeks pro rata payment of her fee from State Farm. State Farm argues that Fisher only recovered her part of the claim from the tortfeasor and that it has an independent right to recover its own subrogated part of the claim from the tortfeasor.
- Fisher's settlement of the single claim with the tortfeasor bars State Farm from pursuing its part of that claim under principles of res judicata. State Farm argues that Fisher settled only her part of the claim and that its own subrogated share of the claim from the tortfeasor's insurer.
- Fisher hired Pat LePley to recover the entire claim. State Farm thinks it owned the subrogated part of the claim and that it had the right to collect its subrogated share without an attorney.
- LePley protected State Farm's subrogated share of Fisher's recovery. State Farm argues that LePley "intercepted" State Farm's subrogated interest.
The facts and law uniformly support the conclusion that Fisher had a unitary claim and the right to pursue recovery of the entire claim.
State Farm's own policy language recognizes that Fisher has the right to pursue recovery of her entire claim. State Farm's policy states:
b. Under personal injury protection and underinsured motor vehicle coverages, we are subrogated to the extent of our payments to the proceeds of any settlement the injured person recovers from any party liabile for the bodily injury or property damage.
If the person to or for whom we have made payment has not recovered our payment from the party at fault, he or she shall:
(1) keep these rights in trust for us and do nothing to impair them.
(2) execute any legal papers we need: and
(3) when we ask, take action through our representative to recover our payments.
We are to be repaid our payments costs and fees of collection out of any recovery.
c. Under all other coverages the right of recovery of any party we pay passes to us.
Sub. 61:4 at p. 26 (emphasis supplied). This policy language clearly means several things. First, Fisher has the right to recover the entire claim, not just the non-subrogated portion of the claim. Second, State Farm has the right to recover its subrogated interest only if Fisher has not recovered the subrogated interest from the party at fault. Third, in contrast to PIP subrogation under clause b, the policy asserts under clause c that "under all other coverages the right of recovery . . . passes to us." Reading this language together, it is clear that State Farm has no right to recover its subrogated claim unless Fisher fails to do so.
State Farm claims that the policy language reveals an "abundantly clear" intention that subrogation claims "are to be removed from the judicial litigation process" and that the language "reserves to the insurer its right to recover subrogation interests through arbitration." BR 37 (emphasis in original). Not at all. If anything is clear about the policy, it is that the insured can recover her damages--this is so because State Farm is subrogated to any settlement and State Farm will share in the cost of recovery unless those amounts are "recovered or recoverable" in arbitration. The policy only gives State Farm the right to pursue recovery if the insured has not recovered its subrogated interest.
State Farm's own actions also compel the conclusion that Fisher had the right to seek to recover a unitary claim for both the subrogated and non-subrogated portions of her damages. State Farm advised Fisher by letter, "[i]f you should recover our interest from the responsible party or their insurance carrier, you must protect our reimbursement rights." Sub. 61:1-A. Clearly, State Farm believed that Fisher had the right to bring this action.
The law clearly gives Fisher the right to pursue recovery of her entire unitary claim where State Farm paid a part, but not all, of her damages. This Court made this point clear in Thiringer in analyzing a similar PIP policy provision:
the policy quite reasonably contemplates that the insured may pursue his remedy against a third party, and the only restriction is that he must not do any act to prejudice the rights of the insurer. Since the losses covered by the PIP provision may represent only a minor portion of an insured's total damage, it would be patently unfair to require him to surrender his right of action against a third party in order to receive this payment. Also, it is unrealistic to expect that a third party will accept only a partial release when he settles a claim, under circumstances such as those presented here.
Thiringer v. American Motors Ins., 91 Wn.2d 215, 219, 588 P.2d 191 (1978).
Other jurisdictions similarly hold that the insured retains the right to pursue the entire claim where the insurance carrier has paid only part of the claim. In a leading case discussed in Fisher's opening brief, the Nebraska Supreme Court stated:
When the indemnity paid by the insurer covers only part of the loss, as in this case, leaving a residue to be made good to the insured by the wrongdoer, the right of action remains in the insured for the entire loss.
Krause v. State Farm Mutual Automobile Ins. Co., 184 Neb. 588, 169 N.W.2d 601, 604 (1969). See also Amica Mutual Ins. Co. v. Maloney, 120 N.M. 523, 903 P.2d 834, 838 (1995); R. Anderson, Couch on Insurance Law e 61.29 at p. 109-11 (2d Ed. 1981) ("Likewise when the insurer is partially subrogated to the claim of the insured, the latter may still assert his claim against the wrongdoer for the full amount, although any amount which he recovers in excess of his own claim and costs and expenses of litigation is held for the benefit of the insurer.") In light of these uniform authorities, State Farm is simply wrong when it says, "whether some but not all of Mahler's and Fisher's medical expenses and wage loss were paid is irrelevant." BR 13.
The Restatement of Suretyship and Guaranty (1996) explains why an insured is entitled to continue to pursue the underlying claim after only partial payment by the PIP carrier:
Necessity of complete discharge of underlying obligation. The purpose of subrogation is to reallocate the cost of performance from the secondary obligor [State Farm] to the principal obligor [the tortfeasors and their insurer]. The mechanism by which this reallocation is accomplished should not cause any disadvantage to the obligee [Fisher]. The obligee would be disadvantaged, however, if the secondary obligor were subrogated to rights of the obligee before complete satisfaction of the underlying obligation. In such a case, the rights obtained by the secondary obligor through subrogation would compete with the remaining rights of the obligee pursuant to the underlying obligation, with the result that the remaining recovery of the obligee on account of the underlying obligation could be diminished. Moreover, because both the secondary obligor and the obligee would be asserting rights arising from the same undivided claim, conflicting enforcement efforts could easily result. Thus, the secondary obligor is not entitled to subrogation to the rights of the obligee until the underlying obligation is completely discharged.
Restatement, supra, at e 27 comment b.
State Farm's policy language, State Farm's practice, and the law are all in accord--Fisher's claim against the underlying tortfeasors is not a like a piece of cheese that is sliced off a hunk at a time as State Farm pays PIP payments. It is a unitary claim. Fisher has the right to bring the entire claim. State Farm only has the right to seek to recover its subrogated claim if it pays Fisher's entire damages--which it did not pay the entire damages--or if Fisher fails to seek to recover the entire claim--and she did not fail. State Farm is entitled to reimbursement from Fisher, it is not entitled to pursue an independent action against the tortfeasors and their insurer.
b. State Farm again concedes in its Brief of Respondent that it cannot pursue its subrogated claim independently before the insured/subrogor recovers the entire claim.
Fisher argued in her Brief of Appellant that State Farm had conceded in the trial court that it could not pursue its subrogated claim independently before the insured recovered the entire claim. BA 22-24. State Farm again concedes this fact in this Court. BR 13-14.
Consider the consequences of State Farm's concession. State Farm acknowledges that it cannot proceed with intercompany arbitration until the liability carrier has settled with the insured (or the case has proceeded to trial) before State Farm can proceed. BR 14. But if the liability carrier has already settled and the insured's attorney is holding the subrogated interest to reimburse State Farm, as required by State Farm's policy, what is the point of intercompany arbitration? State Farm might win the arbitration, in which case it would be entitled to recover the money already collected in the settlement and held by the insured's attorney, or it might lose the arbitration, in which case it would presumably turn around and seek reimbursement out of the settlement. The arbitration is at best a useless act. At worst, it is simply a sham intended to create an argument that the subrogated interest is "recoverable" and that State Farm is not obligated to pay a share of the insured's attorney fee.
Fisher incorporated in her opening brief, page 23, Elaine Mahler's argument that a PIP carrier which tried to recover its subrogated interest simultaneously with its insured's action against the underlying tortfeasor "is inherently placing its own interests ahead of those of its insured, contrary to the rule that 'an insurer must deal fairly with an insured, giving equal consideration in all matters to the insured's interests.'" Mahler RB 23, quoting McGreevy v. Oregon Mut. Ins. Co., 128 Wn.2d 26, 36, 904 P.2d 731 (1995), which quoted Tank v. State Farm Fire & Casualty Co., 105 Wn.2d 381, 385-86, 715 P.2d 1133 (1986).
State Farm argues incorrectly that it has no duty to give to Fisher's interests "equal consideration in all matters", claiming that it only owes a duty of good faith and fair dealing. BR 17. State Farm's assertion flies in the face of this Court's statement in Tank v. State Farm that, "an insurance company's duty of good faith rises to an even higher level than that of honesty and lawfulness of purpose toward its policyholders: an insurer must deal fairly with an insured, giving equal consideration in all matters to the insured's interests." 105 Wn.2d at 385-86. State Farm's assertion also flies in the face of this Court's statement in McGreevy, in which State Farm appeared as amicus:
In Tank, we noted also that in the context of controversies involving insurance coverage, the enhanced fiduciary obligation springing from an insurer-insured relationship requires that "an insurance company must refrain from engaging in any action which would demonstrate a greater concern for the insurer's monetary interest than for the insured's financial risk."
128 Wn.2d at 36.
The insurer's duty to give to its insured "equal consideration in all matters" is not limited to defenses under a reservation of rights, as State Farm argued below. CP 107-08. It is not limited to UIM coverage, as State Farm seems to argue in this Court. BR 18. It extends to all insurers, and it precludes State Farm or any other PIP carrier from proceeding with an independent action against the underlying tortfeasor before its insured can recover her damages.
c. State Farm shared in Fisher's recovery from the party at fault and must pay its share of the legal expenses under State Farm's policy language that "if the insured recovers from the party at fault and we share in the recovery, we will pay our share of the legal expenses."
Fisher pointed out in her opening brief that State Farm in fact recovered its subrogated interest from the proceeds of Fisher's settlement with the underlying tortfeasor and must pay a share of her legal expenses. BA 25. State Farm responds by quoting the policy exception that its contractual undertaking to pay a share of expenses does not apply "to any amounts recovered or recoverable . . . under any inter-insurer arbitration agreement." BR 18. State Farm cannot deny, however, that it did not recover through arbitration and that having been paid, its interest is no longer "recoverable." Under its own policy, State Farm must pay a share of Fisher's legal fees.
D. Res judicata precludes a subrogated insurance carrier from re-litigating in inter-company arbitration the liability of the underlying tortfeasor where the insured has already settled with and released the tortfeasor from all claims.
State Farm's primary response to Fisher's res judicata argument is the incorrect claim that Fisher never invoked res judicata in the trial court. BR 18-19, 21-22. To the contrary, Fisher argued that State Farm cannot bring an independent action against Federated because a party "is not permitted to split the cause of action." Sub. 65 at p. 17. The prohibition against "splitting a cause of action" is another term for res judicata. Sanwick v. Puget Sound Title Ins. Co., 70 Wn.2d 438, 441, 423 P.2d 624, (1967). Federated similarly invoked principles of res judicata in its answer to State Farm's demand for arbitration when it asserted that the case had been settled, absolving it of any further responsibility. Sub. 65:22 (quoted at BA 32).
State Farm argues that res judicata has no application because AFI's agents say that res judicata does not apply to intercompany arbitration. BR 19. State Farm is wrong for several reasons. First, as pointed out in Fisher's brief, RCW 7.04.010 authorizes the use of arbitration for "any controversy." BA 29. But after Fisher settled her entire claim with the tortfeasors, there was no longer "any controversy." State Farm has no response to this argument so it ignores the arbitration statute. Second, as this Court has pointed out, litigants cannot circumvent the provisions of the arbitration statute by agreement, but can only arbitrate according to the statute. Barnett v. Hicks, 119 Wn.2d 151, 161, 829 P.2d 1087, (1992) (parties to an arbitration agreement cannot create their own rules for judicial review of the arbitration award, but are limited to the statutory grounds). Third, as discussed in Fisher's opening brief, the court, not the arbitrators, determines whether res judicata applies. BA 30-32. Unable to respond to these cases, State Farm just ignores them.
State Farm argues that it is not in privity with Fisher and therefore Fisher's settlement and dismissal of her claim against the tortfeasors has no res judicata effect on State Farm. BR 20, 22. Fisher anticipated this argument when she quoted in her opening brief from this Court's opinion in Touchet Valley v. Opp & Seibold Constr., 119 Wn.2d 334, 341, 831 P.2d 724 (1992): "The insurer, the 'subrogee', has rights equal to, but no greater than, those of the injured party." BA 27. State Farm has never answered this argument or even acknowledged the Touchet case in its brief. The settlement is res judicata as to Fisher and she can no longer seek to recover her damages; State Farm's rights are equal to, but no greater than Fisher's.
State Farm argues incorrectly that res judicata cannot bar its action against the tortfeasors' insurer under the principles discussed by this Court in Leader National Ins. v. Torres, 113 Wn.2d 366, 779 P.2d 722 (1989). BR 20-21. Oddly, State Farm ignores the discussion of Leader National Mahler's brief. BA 29, incorporating Mahler BR 27-32. Mahler pointed out that in Leader National the insured had not collected the subrogated portion of the damages, even expressly disclaiming any intention to collect the subrogated damages, and that under these circumstances, this Court relied on the key principle that the insured is entitled to recover full compensation but cannot recover double compensation. Since the insured had only received one compensation--not double compensation--the Court allowed the insurer to proceed against the underlying tortfeasor. Mahler RB 29-32. Moreover, as Fisher noted in her earlier brief, Leader National never mentions or discusses res judicata, collateral estoppel, or splitting causes of action.
State Farm has never acknowledged or responded to Mahler's and Fisher's analysis of Leader National, neither in this case nor in its Mahler Reply Brief. Instead, State Farm woodenly relies on language wrenched from the factual context of Leader National. But if the Court followed the rule of Leader National in this case, Fisher would theoretically obtain a double recovery of her subrogated damages--once from State Farm's PIP coverage and once from the settlement with the tortfeasor. State Farm's blind reliance on Leader National illustrates the danger of "headnote" law, lifting quotes from cases while ignoring the conceptual foundations and factual settings of the cases.
State Farm relies on a Court of Appeals decision holding that allowing an insurer to bring an independent claim would not violate principles of res judicata. Hardware Deal. Mut. v. Farmers Ins., 4 Wn. App. 49, 480 P.2d 226 (1971). Hardware Dealers has been superseded by this Court's decision in Leader National, which was anchored in the importance of full compensation to the insured, a concept never addressed in Hardware Dealers. Leader National does not even refer to Hardware Dealers, even though both cases consider the identical issue. Moreover, Hardware Dealers was inconsistent with the earlier decision of this Court in Weber v. Biddle, 72 Wn.2d 22, 431 P.2d 705 (1967). Hardware Dealers held that the third party insurance carrier can protect itself against a second lawsuit by the injured person's UIM insurance carrier by moving to join the UIM carrier as a plaintiff in the underlying tort action pursuant to CR 19 and 20. 4 Wn.App. at 51. But this Court rejected that very procedure in Biddle. 72 Wn.2d at 27. These inconsistencies with decisions of this Court both before and after Hardware Dealers destroy any persuasive authority of the case.
e. The plaintiff's attorney represents the plaintiff and not the first-party insurer and therefore has no conflict of interest.
Fisher pointed out in her opening brief that LePley represented only Fisher, not State Farm, and therefore had no conflict of interest, citing several cases from other jurisdictions directly on point. BA 35-36. State Farm has no contrary authority other than the concurring opinion of Judge Forrest in Desmond v. Liberty Northwest Ins., 63 Wn. App. 81, 817 P.2d 872 (1991). BR 25-27. State Farm was not LePley's client and does not become LePley's client just by insisting in its brief that it was LePley's client. A lawyer who represents a client in a personal injury case represents only that client, not an insurance company. Van Dyke v. White, 55 Wn.2d 601, 612, 349 P.2d 430 (1960) ("No man can serve two masters simultaneously. Public policy forbids.")
f. State Farm has no substantive response to Fisher's proposed presumption that a contingent fee of one-third is reasonable in any case in which the party at fault contests liability, causation of damages, or comparative fault.
Fisher proposed in her opening brief that subrogated insurance carriers could challege the fee claimed by a plaintiff's lawyer under RCW 4.24.005 and that the Court adopt a presumption in order to simplify and guide such fee disputes: "a contingent fee of one-third is reasonable in any case in which the party at fault contests liability, causation of plaintiff's damages, or comparative fault." BA 37. State Farm has no substantive response, simply labeling Fisher's proposal "completely devoid of merit." BR 28. State Farm rhetorically asks, "whatever happened to the contingent fees of twenty and twenty-five percent?" BR 28. If an injured plaintiff can find a lawyer willing to charge only twenty to twenty-five percent to litigate a relatively modest claim such as Fisher's against a carrier who contests liability even under the clearest of circumstances, forces discovery and a summary judgment motion, and finally insists on a hold harmless that forces the lawyer to fight with the subrogated PIP carrier, well and good--the subrogated carrier will also gain the benefit of the lower contingent fee rate.
State Farm seems to argue that this was not a case of contested liability when it asserts that "Federated did not deny liability to Fisher. (Only Aldi Tire, et al. denied liability.)" BR 29 (emphasis in original). State Farm makes this specious argument even though Federated hired the lawyer who defended the tortfeasors and who eventually settled the case on behalf of Federated and the tortfeasors. Fisher could not sue Federated, she could only sue the tortfeasors, who denied liability.
State Farm argues incorrectly that Federated admitted liability when it paid Fisher's property damage claim. BR 29. A person or insurance company does not admit liability by paying or offering to pay damages. Kubista v. Romaine, 14 Wn. App. 58, 65-66, 538 P.2d 812 (1975), aff'd 87 Wn.2d 62, 549 P.2d 491 (1976). See also ER 409 ("Evidence of furnishing or offering or promising to pay medical, hospital, or similar expenses occasioned by an injury is not admissible to prove liability for the injury.").
g. State Farm concedes by its silence that the issue under the reasonable and necessary test is whether federated would have paid fisher and state farm a total of $40,000 without the efforts of lepley.
Fisher pointed out in her opening brief that State Farm cannot recover any part of its subrogated claim until Fisher has been fully compensated for her loss, citing Thiringer. Therefore, the issue under the reasonable and necessary test adopted by the Court of Appeals is not whether Federated would have paid State Farm's subrogated portion of the claim without LePley's efforts; rather, it is whether Federated would have paid Fisher and State Farm a total of $40,000 without the efforts of LePley. BA 41. It would not have and it did not. Accordingly, LePley's efforts were reasonable and necessary.
State Farm's only response is to argue that Federated never denied liability, BR 29, which is not only wrong but irrelevant. Federated didn't write a check for $40,000 until it had dragged LePley through a complaint, discovery, summary judgment, and settlement negotiations. Clearly, LePley's efforts were necessary.
State Farm's inability to answer this argument, both here and at Mahler BR 39, is a devastating concession by silence. State Farm could not proceed with intercompany arbitration until Fisher had been fully compensated for her loss; Fisher could not be fully compensated until LePley did "everything but hammer at the gates of hell to get this case settled . . ." Sub. 65:12. The logic is inescapable: State Farm could not proceed with arbitration until LePley hammered at the gates of hell--LePley's efforts were reasonable and necessary and State Farm must pay a pro rata share of LePley's fees.
h. Fisher is entitled to an award of attorney fees under Olympic Steamship because State Farm is disputing a specific aspect of its coverage--the obligation to contribute to attorney fees--as opposed to the amount of the fees.
State Farm promised in its policy, "If the insured recovers from the party at fault and we share in the recovery, we will pay our share of the legal expenses." Sub. 61:4 at p. 26. State Farm relies on an exception to this obligation: "This does not apply to any amounts recovered or recoverable by us from any other insurer under any inter-insurer arbitration agreement." Id. But State Farm's reliance is misplaced for all of the reasons discussed above. Thus State Farm has refused to make a payment promised under the policy and must pay fees under Olympic S.S. Co. v. Centennial Ins. Co., 117 Wn.2d 37, 52, 811 P.2d 673 (1991). See also Mahler RB 45-48.
State Farm argues that there is no coverage issue and therefore no obligation to pay fees. BR 30. State Farm cites two cases, BR 30, in which the courts held that Olympic Steamship did not justify an award of fees where the insurance carrier "conceded coverage but disputed the value of the particular claim", Leingang v. Pierce County Med., 131 Wn.2d 133, 144, 930 P.2d 288 (1997), describing Dayton v. Farmers Ins. Group, 124 Wn.2d 277, 280, 876 P.2d 896 (1994), and "coverage concerns whether the insurer has a duty to pay while a claim issue concerns how extensive damages were", Leingang, supra, describing Kroeger v. First Nat'l Ins. Co., 80 Wn. App. 207, 211, 908 P.2d 371 (1995), review denied, 129 Wn.2d 1002 (1996). Dayton and Kroeger are of no help to State Farm because State Farm did not concede its obligation to pay some part of LePley's fees and only contest the amount of the fee; instead, State Farm contested any obligation to pay any fee.
In Leingang, this Court also cited with approval Nordstrom, Inc. v. Chubb & Son, Inc., 54 F.3d 1424 (9th Cir. 1995), describing the Ninth Circuit's holding: "the Olympic Steamship rule has been read broadly by Washington courts even to include cases in which there is no contractual basis for the awarding of fees; the only articulated limitation to the rule is that no fees are awarded when the insurer does not dispute coverage but merely disputes the value of the claim . . ." Leingang at 144. Fisher is entitled to fees under this formulation of Olympic Steamship as well.
State Farm argued in its Mahler Reply Brief that Mahler (and presumably therefore Fisher) is not entitled to Olympic Steamship fees under the reasoning of Bierce v. Grubbs, 84 Wn. App. 640, 929 P.2d 1142 (1997). The plaintiff in Bierce took a diametrically opposed position to that taken here by Fisher and Mahler. The Bierce plaintiff argued successfully that her PIP carrier could not be reimbursed out the proceeds of the CR 68 settlement offer she accepted from the tortfeasor, but must seek to recover directly from the tortfeasor under Leader National. 84 Wn.App. at 644. Her PIP carrier took the same position at trial, 84 Wn.App. at 646, and the Court of Appeals agreed. Accordingly, the PIP carrier never recovered anything from the plaintiff's settlement and had no obligation to contribute to the plaintiff's attorney fees. The opposite is true here--State Farm has declined to pay its pro rata share of attorney fees as provided by its policy and demanded by Fisher (and by Mahler). Since State Farm is wrong and must contribute to fees, it should also pay the fees of this proceeding under Olympic Steamship.
i. Fisher never breached any duty to State Farm, but state farm's pursuit of its subrogation claim impaired Fisher's claim against the underlying tortfeasor.
1. State Farm did not advise LePley that it intended to try to collect its subrogated interest until after LePley had forced federated to concede liability and was close to settlement.
State Farm tries to create the misleading impression that LePley knew that State Farm intended to collect the subrogated portion of the claim but that State Farm was ignorant of LePley's efforts to collect the subrogated portion of the claim until March 1994. BR 4, 6, 34.
State Farm knew and expected that Fisher might pursue her own recovery against the tortfeasors. State Farm's initial letter to Monica Fisher recognized that Fisher might pursue her own claim against the tortfeasor and asked her to "protect our reimbursement rights." Sub. 61:1-A. State Farm did not advise LePley of its intention to pursue intercompany arbitration until March 29, 1994, less than two months before trial. Sub. 65:13.
Now on appeal State Farm feigns ignorance that Pat LePley intended to pursue recovery from the tortfeasor until LePley approached State Farm about settlement in March 1994. BR 3, 4, 34. It is impossible to take these protestations seriously. Why did State Farm send "Pat LePley, Attorney at law", a cc of its letter to Monica Fisher? Sub. 61:1-A. Why did State Farm think it was receiving letters from attorney LePley, whose letterhead lists "personal injury" as an area of practice? Sub. 61:1-H, 1-I. To borrow a phrase from the Congressional Iran/Contra hearings, Pat LePley is not "a potted plant" whom State Farm could ignore. State Farm knew that LePley was representing Monica Fisher in connection with her injuries and had to know that he would seek recovery from the tortfeasors.
State Farm states that it did not know that LePley would bring a lawsuit because "many attorneys settle claims without instituting suit." BR 34. This makes absolutely no difference. The fact remains that State Farm knew LePley would seek to recover damages for Fisher but State Farm failed to tell him not to recover its subrogated share of the claim.
2. LePley conducted himself properly and protected State Farm's reimbursement rights.
State Farm inappropriately attacks LePley, claiming that he "interfered" with State Farm's subrogation interest, that he positioned himself to "gain control" of the subrogated portion of the claim, and that he "intercepted" the subrogated portion of the claim. BR 3, 5, 7, 35. Significantly, State Farm never identifies any policy provision breached by LePley. An examination of the policy shows that LePley carefully followed the requirements of the policy by protecting State Farm. The Court should reject State Farm's unfounded ad hominem attacks.
Fisher's and LePley's only obligations to State Farm under the policy were to recognize that State Farm was subrogated to Fisher's recovery. Sub. 61:4 at p. 26, reproduced at BA Appendix A. Nothing in the policy says that the insured cannot seek to recover the subrogated interest directly from the tortfeasor. To the contrary, the policy clearly recognizes that the insured can recover from the tortfeasor when it reserves a subrogated interest in "the payments the injured person recovers from any party liable . . ." and when it states that State Farm will share in legal expenses "if the insured recovers from the party at fault and we share in the recovery . . ."
3. State Farm's pursuit of its subrogation interest interfered with Fisher's claim against the tortfeasor.
Having unfairly attacked Fisher and LePley, State Farm protests its own innocence, proclaiming, "it is fair to assume that [the tortfeasor's] counsel was unaware that State Farm had disputed any of the insured's medical treatment." BR 35. State Farm doth protest too much.
On October 8, 1993, the tortfeasor's counsel wrote to LePley questioning Fisher's claimed wage loss and noting that it is "above State Farm's $4200 claim." Sub. 65:1. He also asserted, "our records indicate Ms. Fisher's care providers released her to work part time as of January 27, 1992." Id. What records? He predicted a jury verdict for medical expenses of $6800 "based on the information obtained to date." Id. What information? The answer is that two weeks earlier State Farm had responded to Federated's request for information by transmitting 31 pages of documents to Federated. Sub. 61:1-K. We do not have those 31 pages, but the record includes a cover sheet showing wage loss of $5400 and medical expenses of $6823.53. Id.
Defense counsel for the tortfeasor turned around and used this information against State Farm's own insured, Monica Fisher. This is exactly the risk described by Fisher at BA 24 and by WSTLA at pages 25-26 of its amicus brief. (LePley wasn't advised at the time of this exchange of information and we failed to note this exchange until State Farm protested its innocence at BR 35.) By blithly sharing this information, State Farm breached its duty not to set its own interests ahead of those of its insured and impacted Fisher's settlement with the tortfeasor.
Conclusion
Monica Fisher's claim against the underlying tortfeasors was a unitary claim. Fisher had the right to bring the claim, she did bring the claim, and LePley forced the tortfeasor's insurer to pay $40,000 to pay all claims. LePley's efforts were clearly reasonable and necessary--Federated refused to pay $40,000 until LePley had done everything "but hammer at the gates of hell." It is irrelevant whether Federated would have paid State Farm's subrogated interest without LePley's efforts, because, as State Farm readily admits, it could not pursue its subrogated interest until Fisher had received full compensation. State Farm's interest has been recovered by Fisher through LePley's efforts--it was not "recovered" through arbitration and it is no longer "recoverable" through arbitration. The Court should reverse and remand for entry of judgment that State Farm must pay its pro rata share of LePley's fees and must pay all of Fisher's fees incurred in forcing State Farm to live up to its obligations.
Respectfully submitted this ___ day of August, 1997.
____________________________
Patrick LePley WSBA # 7071
Bellevue, WA 98006
(425) 641-5353____________________________
Charles K. Wiggins WSBA # 6948
241 Madison Ave. North
Bainbridge Is, WA 98110
(206) 780-5033