From the Desk of Kyle Riley: In this case, the United States District Court for the Western District of Washington found that when a court has issued a judgment on a claim for breach of contract under a UIM policy, the UIM plaintiff cannot bring the same action under a theory of bad faith.
Claims Pointer:The doctrine of res judicata, which bars a plaintiff from relitigating the same claim, now applies to IFCA and CPA claims, when an insured has already filed a breach of contract claim against a UIM insurer that resulted in a judgment. If the extracontractual claim was brought or could have been brought in the underlying action, the insured’s claim is barred.
Smith v. State Farm Mut. Auto. Ins. Co., C12-1505-JCC, 2013 WL 1499265 (W.D. Wash. Apr. 11, 2013)
In 2007, Valerie Smith, a State Farm insured, was injured in a car accident when she was struck by a Farmers’ insured, Bilas. At the time of the accident, Smith’s auto policy with State Farm included underinsured motorist (“UIM”) coverage with a $100,000 limit. In 2010, Smith sued Bilas in King County Superior Court. It quickly became apparent that Bilas’ own insurance would be insufficient to cover Smith’s injuries. Therefore, State Farm moved to intervene, because it would likely be bound by any judgment rendered against Bilas.
After settling with Bilas, Smith sued State Farm, alleging that State Farm breached its insurance contract with her by failing to fairly evaluate her UIM claim. Smith obtained a jury verdict for her $100,000 UIM policy limits in addition to costs. After the verdict, Smith moved to add Consumer Protection Act (“CPA”), bad faith, negligence, and Insurance Fair Conduct Act (“IFCA”) claims to her complaint against State Farm. The trial court denied Smith’s motion, leading Smith to file a new lawsuit against State Farm, alleging the same claims she tried to make by amendment. The IFCA claims were dismissed and State Farm filed for summary judgment on Smith’s remaining claims on grounds that the claims are barred by the doctrine of res judicata, because Smith brought or could have brought the claims in the underlying litigation.
In Washington, filing two separate lawsuits arising from the same event, so-called “claim splitting,” is not allowed. The doctrine of res judicata bars repeat claims on the theory that doing so assures individuals of their rights and gives respect to judicial proceedings. In reviewing State Farm’s motion for summary judgment, the court relied heavily on these principles. While noting that Washington courts had not previously applied res judicata when a plaintiff attempts to bring a bad faith suit against an insurer after already bringing a UIM breach of contract claim, the court noted that other courts had barred such claims under the doctrine.
Adopting such an approach, the district court found that Smith’s lawsuit against State Farm alleged similar facts as her previous lawsuit, and sought redress for the same wrong: State Farm’s unwillingness to pay the full amount of Smith’s UIM policy. Her instant claims could have and should have been brought in the first lawsuit, and, therefore were barred under res judicata.
Case updates are intended to inform our clients and others about legal matters of current interest. They are not intended as legal advice. Readers should not act upon the information contained in this article without seeking professional counsel.