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Washington Insurance Guaranty Ass'n., v. Ramsey (8/16/96), 922 P 2d 237
<![CDATA[
NOTICE: This opinion is subject to correction before publication in
the Pacific Reporter. Readers are requested to bring errors to the
attention of the Clerk of the Appellate Courts, 303 K Street,
Anchorage, Alaska 99501; phone (907) 264-0607; fax (907) 264-0878.
THE SUPREME COURT OF THE STATE OF ALASKA
WASHINGTON INSURANCE GUARANTY )
ASSOCIATION, ) Supreme Court No. S-6272
)
Appellant, ) Superior Court No.
) 1JU-91-1569 CI
v. )
) O P I N I O N
MICHELE RAMSEY, )
) [No. 4390 - August 16, 1996]
Appellee. )
______________________________)
Appeal from the Superior Court of the State of
Alaska, First Judicial District, Juneau,
Larry C. Zervos, Judge.
Appearances: Andrew W. Torrance, Lundberg,
Kristof, Klug & Torrance, Seattle, Washington,
and Arnold J. Barer, Seattle, Washington, for
Appellant. Paul F. Cronin, Juneau, for
Appellee.
Before: Rabinowitz, Matthews, and Compton,
Justices. [Moore, Chief Justice, and Eastaugh,
Justice, not participating.]
RABINOWITZ, Justice.
I. INTRODUCTION
This appeal arises out of an action brought by Michele
Ramsey against the Washington Insurance Guaranty Association
(WIGA). A jury awarded Ramsey $200,000 after finding that WIGA had
violated its duty to reasonably settle an underlying personal
injury action. In this appeal, WIGA argues that the superior court
improperly determined that it had personal jurisdiction over WIGA.
WIGA also contends that it is statutorily immune from an action for
refusal to settle. WIGA further contends that because it did not
violate any duty it owed to its insureds, and because there was no
adverse judgment, as a matter of law WIGA was not liable under the
covenant settlement which Ramsey entered into with the insureds.
Finally, WIGA argues that the superior court erred in denying its
motions for a directed verdict and judgment n.o.v. because there
was no reasonable evidentiary basis for determining that the claim
was worth $200,000. We affirm the superior court on all counts.
II. FACTS & PROCEEDINGS
The underlying action in this case was a negligence claim
filed by Michele Ramsey against Paul Ursino and his employer Frank
Coluccio Construction Company (Coluccio). Ramsey was working as a
flag person at a construction site in Juneau. Ursino, who was
working as a foreman on an unrelated construction project, drove to
the Juneau site in a pickup truck owned by Coluccio to borrow some
equipment. As Ursino approached, Ramsey tried to stop him. A
dispute ensued during the course of which Ursino slowly drove into
Ramsey, bumping her several times. Ramsey alleged that as a result
she sustained knee injuries and emotional distress. Ramsey's claim
against Coluccio was based on a theory of respondeat superior as
well as independent negligence. (EN1) Ramsey sought both
compensatory and punitive damages.
Coluccio was insured by Pacific Marine Insurance Co.
(PACMAR), a Washington insurance company. On June 7, 1989, PACMAR
was adjudged insolvent and WIGA stepped in to handle all claims
against PACMAR. WIGA is a nonprofit unincorporated statutory
entity established to "avoid financial loss to claimants or
policyholders because of the insolvency of an insurer[.]"(EN2)
WIGA functions to pool the risk of an insurer's insolvency by
requiring each insurer licensed in the State of Washington to
contribute to a fund an amount proportionate to its share of the
total insurance premiums written in Washington during the preceding
calendar year. (EN3) WIGA is authorized to handle any claims filed
against insolvent insurers, up to the statutory limit of $300,000.
(EN4) In carrying out this function WIGA is given broad authority
to defend any action on a claim brought against the association,
(EN5) as well as to "adjust, compromise, settle, and pay covered
claims to the extent of the association's obligation[.]"(EN6)
WIGA is governed by a Board of Directors, selected by the
association members. (EN7) However, its claims processing is
generally handled through designated claims servicing facilities.
Robert Lander, an independent contractor, was retained by WIGA as
a "claims manager"and eventually oversaw the Ramsey claim.
WIGA undertook defense of the action, replacing the
attorneys hired by Coluccio. Lander retained Tom Findley as
counsel for Ursino and Charles Drennan as counsel for Coluccio.
The case proceeded to trial in the superior court in
Juneau. Immediately before and throughout the course of the trial
the various parties attempted to settle the action. During this
period Ramsey offered to settle the case for $200,000. (EN8) In
the midst of the trial, on November 9, Ramsey asked Superior Court
Judge Carpeneti to intercede in the settlement negotiations. The
parties' attorneys conferred with Judge Carpeneti. Both Drennan
and Findley advised Lander to take the offer. Judge Carpeneti's
assessment was that the case could end in a wide range of results
but that as an estimate he would value the case at $175,000. At
the close of the conference Lander deferred making any decision on
the offer.
With WIGA refusing to settle, Coluccio and Ursino
accepted an offer from Ramsey to enter into a consent judgment for
$300,000, the maximum claim allowed under the WIGA statute. The
settlement agreement included a covenant not to enforce the
judgment against the parties personally. In exchange, Ursino and
Coluccio assigned any claim they had against WIGA to Ramsey. This
settlement ended the underlying litigation without a jury verdict
and formed the basis for the present action.
Ramsey then filed a complaint against WIGA seeking
payment of the $300,000 judgment as a covered claim. WIGA first
filed an answer alleging inter alia that the Alaska courts lacked
personal jurisdiction over it. The superior court held a hearing
on this issue and ultimately denied WIGA's motion to dismiss for
lack of personal jurisdiction. WIGA next filed a motion for
summary judgment arguing that it had statutory immunity from any
claim arising from its refusal to settle. The superior court
denied this motion as well. It held that WIGA had a statutory duty
to accept a reasonable settlement offer and therefore that this
action did not fall within the ambit of WIGA's statutory immunity
from all tort or contract actions.
The matter proceeded to trial, at the conclusion of which
the jury found that WIGA had unreasonably refused to settle the
case for $200,000, and therefore had violated its statutory duty.
The superior court denied a motion for judgment notwithstanding the
verdict and entered final judgment. WIGA now appeals.
III. DISCUSSION
A. Did the Superior Court Properly Determine That it Had
Personal Jurisdiction Over WIGA?
In Alaska, personal jurisdiction over a non-resident
defendant is conferred by our long-arm statute. (EN9) "We have
construed this statute to extend Alaska's jurisdiction to the
maximum reach consistent with the guarantees of due process under
the Fourteenth Amendment." Volkswagenwerk, A. G. v. Klippan, GmbH,
611 P.2d 498, 500 (Alaska 1980), cert. denied, 449 U.S. 974 (1980).
Thus, the dispositive question is whether assertion of jurisdiction
under our long-arm statute in the instant case would violate WIGA's
constitutional right to due process. (EN10)
Ramsey makes two arguments that jurisdiction was proper
in this case. First, she argues that WIGA's activities with regard
to the underlying suit established sufficient "minimum contacts"in
Alaska to make it reasonably foreseeable that it would be haled
into court in this state. Second, she argues that WIGA stepped
into the shoes of an insolvent insurance carrier which had
sufficient contacts with Alaska, (EN11) and that therefore
jurisdiction may be conferred on WIGA as a successor in the
litigation.
In order to pass constitutional muster, the acts of the
nonresident defendant must establish sufficient "minimum contacts"
with the forum state, such that maintaining a suit there "does not
offend þtraditional notions of fair play and substantial justice.þ"
International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). As
the superior court correctly noted,
In determining if minimum contacts exist, due
process requires that the defendant have fair
warning that particular activities may
foreseeably subject them to jurisdiction in
that forum. Burger King Corp. v. Rudzewicz,
471 U.S. 462, 472 (1985). "The foreseeability
that is critical in an analysis of minimum
contacts is whether `the defendant's conduct
and connection with the forum State are such
that he could reasonably anticipate being
haled into court there.'" Oliver v. Merritt
Dredging Co., Inc., 954 F.2d 1553, 1558 (11th
Cir. 1992) (citing World-Wide Volkswagen Corp.
v. Woodson, 444 U.S. 286, 297 (1980)). To
reasonably anticipate being haled into court,
the defendant must have purposefully conducted
activities in the forum state. Hanson v.
Denckla, 357 U.S. 235, 253 (1958).
Thus, the inquiry must focus on the nature of the defendant's
contacts with the forum.
A number of other courts have addressed the issue of
whether personal jurisdiction may be established over an out-of-
state guaranty association. These courts are split as to whether
personal jurisdiction may properly be maintained. Those that have
decided that jurisdiction was constitutional have generally focused
on the foreseeability to the guarantor that a covered claim might
arise in the forum jurisdiction, when the insurers which they are
guaranteeing insure risks in the forum state. (EN12)
Alternatively, the South Carolina Supreme Court relied on the idea
that the guaranty association was the "alter-ego"of the insolvent
insurance company. Bell v. Senn Trucking Co., 418 S.E.2d 310, 312
(S.C. 1992). That court focused on specific statutory language in
the Georgia statutes which states that the Georgia Pool is "deemed
to be the insurer for such period with respect [to] and to the
extent of the claims with all the rights, duties, and obligations
of the insolvent insurer . . . ."(EN13)
The courts which have found that jurisdiction would
violate due process, on the other hand, state that jurisdiction
over the guaranty association must be determined independently of
the insurer. (EN14) They note that the obligations of the guaranty
association generally are not coextensive with those of the insurer
because of limitations on the amount and type of claims which are
covered. Thus, these courts conclude that the fund cannot be said
to stand in the insurer's shoes, Pennsylvania Life & Health Ins.
Guar. Ass'n v. Superior Court, 27 Cal. Rptr. 2d 507, 513 (Cal. Ct.
App. 1994), and that any obligation which arises in the forum state
is solely a result of the guaranty association's statutory duty,
rather than any action which it took in the forum state. Nor can
the association be said to have derived an economic benefit from
its connections with the forum state. Therefore there is no
independent basis for establishing jurisdiction. See Pennsylvania
Life, 27 Cal. Rptr. 2d at 513. Finally, these courts also reason
that these funds have an important social purpose which might be
undermined if they are required to bear the expense of litigating
in multiple jurisdictions. Id. at 515; Brewer, 602 So. 2d at 1269.
In ruling on this issue, the superior court determined
that this case did not "require[] the type of close analysis other
courts have had to perform." The superior court distinguished the
present case because WIGA had taken numerous actions in Alaska with
regard to the underlying action. The superior court explained:
WIGA wrote letters and telephoned Ramsey's
attorney about her claim and the pending
lawsuit; WIGA hired attorneys to defend the
Ramsey claim and to represent the insureds;
WIGA authorized offers of judgment to settle
Ramsey's claim; WIGA maintained contact with
the insureds attorneys and it advised the
attorneys on aspects of the settlement
negotiations; WIGA took part in the settlement
conference, moved to intervene and stated its
objections to the proposed settlement on the
record. These contacts are not "minimum".
WIGA came to this jurisdiction to defend a
claim and it would be unreasonable to think
that it would not be called back into court
concerning the Ramsey judgment.
In contrast, in each of the other cases cited by the parties, the
guaranty association raised the personal jurisdiction issue at the
outset of their proceedings in the forum state.
WIGA responds to this line of reasoning by arguing that
it was required by statute to engage in these activities and thus
it did not undertake "deliberate and purposeful acts by which the
defendant is considered to have availed itself of the forum state's
law." WIGA cites Northpark Nat'l Bank v. Bankers Trust Co., 572 F.
Supp. 520 (S.D.N.Y. 1983), where a federal court held that check
clearing activities performed by the Federal Reserve Bank of
Chicago for New York banks could not be used to establish personal
jurisdiction in New York. Despite the fact that the FRBC derived
more than $1.2 million in fees from performing this activity, it
was statutorily required to perform this function, and the fees
which were charged were intended solely to cover the costs of this
service. The court therefore concluded that it was not the type of
"affirmative and voluntary act"which was necessary to establish
jurisdiction. Id. at 522-23. Similarly, in the present case,
although the actions taken by WIGA in Alaska may have been
sufficient quantitatively, WIGA argues that they are not of the
character necessary to establish minimum contacts. WIGA was merely
engaging in its statutory duty to defend the underlying suit
brought by Ramsey, and it derived no economic benefit from its
actions in the forum.
We conclude that the superior court properly exercised
personal jurisdiction over WIGA. Numerous courts have held that
the act of guaranteeing an obligation in the forum state alone is
a sufficient contact to establish jurisdiction. (EN15) Further,
study of the Washington statute persuades us that this was a
"covered claim,"(EN16) and that the premium paid by Coluccio on
his insurance policy -- which covered out-of-state risks -- was
included in determining PACMAR's contribution to the guaranty fund.
(EN17) It is therefore foreseeable that these contacts could
result in an actionable claim arising in another state. Although
WIGA's obligations are statutorily created, where the statute
commands that contacts be established with the forum state, and
those contacts result in an actionable claim, personal jurisdiction
is proper. (EN18)
Nor did the superior court err in determining that the
establishment of jurisdiction comports with "fair play and
substantial justice." We have stated that
[i]n making this determination, we are called
upon to evaluate the burden on the defendant,
the forum state's interest in adjudicating the
dispute, the plaintiff's interest in obtaining
convenient and effective relief, the
interstate judicial system's interest in
obtaining the most efficient resolution of
controversies, and the shared interest of the
states in furthering fundamental substantive
social policies.
American Nat'l Bank v. International Seafoods, 735 P.2d 747 (Alaska
1987). WIGA argues that assertion of jurisdiction by the courts of
Alaska would unnecessarily tax WIGA's resources and would therefore
undermine the statutory purpose of protecting insureds and
claimants in the State of Washington. We think this argument is
unpersuasive. First, if there were no personal jurisdiction in
Alaska, nothing would prevent Ramsey from bringing a similar claim
in Washington. Thus, WIGA would bear the expense of litigation
anyway. Second, WIGA presented no evidence that its potential
exposure in other jurisdictions is excessively large, or that its
purpose is in any way threatened by being forced to litigate in
other jurisdictions. Finally, as the superior court noted, any
additional costs could be effectively passed on to the insurance
companies and their consumers through increased assessments. We
conclude that the superior court of Alaska's exercise of personal
jurisdiction over WIGA does not violate WIGA's due process rights.
B. Was WIGA Immune From Suit for Failure to Settle Ramsey's
Claim? (EN19)
The Washington Insurance Guaranty Association Act has a
general immunity provision, RCW 48.32.150, which states:
There shall be no liability on the part of and
no cause of action of any nature shall arise
against any member insurer, the association or
its agents or employees, the board of
directors, or the commissioner or his
representatives for any action taken by them
in the performance of their powers and duties
under this chapter.
WIGA argues that this language immunizes it from a claim for
refusal to settle. (EN20)
RCW 48.32 is based on the Post-Assessment Property and
Liability Insurance Guaranty Association Model Act, which was
drafted by the National Association of Insurance Commissioners, and
adopted in the vast majority of states. (EN21) Washington adopted
the statute in 1971. RCW 48.32.010. The operative language of
section 48.32.150 is identical to the language in the model act.
In our view, the plain meanings of the immunity provision
of the statute and other provisions of the statute refute WIGA's
argument. The immunity provision states in relevant part:
There shall be no liability on the part of and
no cause of action of any nature shall arise
against . . . the association . . . for any
action taken . . . in the performance of [its]
powers and duties under this chapter.
This language simply states that WIGA can not be held liable for
any actions it takes in accordance with its duties. The language
necessarily implies that WIGA can be held liable for actions it
takes which are not within its duties. It follows that if it is
within WIGA's duties to reasonably settle claims, and WIGA refuses
to reasonably settle a claim, such a refusal is not in accordance
with WIGA's statutory duties, and therefore WIGA cannot claim
immunity from liability based on that refusal.
Furthermore, in our opinion, the Washington Insurance
Guaranty Association Act does impose a statutory duty on WIGA to
reasonably settle claims. The act states that "[t]he association
shall . . . [b]e obligated to the extent of the covered claims
. . . ." RCW 48.32.060(1)(a). The act defines a "covered claim"
as
an unpaid claim, including one for unearned
premiums, which arises out of and is within
the coverage of an insurance policy to which
this chapter applies issued by an insurer
. . . .
RCW 48.32.030(4). It is well established in Washington that
insurers do have the duty to accept reasonable settlements. Tank
v. State Farm Fire & Casualty Co., 715 P.2d 1133, 1136-37 (Wash.
1986); Murray v. Mossman, 355 P.2d 985, 987 (Wash. 1960); Evans v.
Continental Casualty Co., 245 P.2d 470, 478-80 (Wash. 1952);
Burnham v. Commercial Casualty Ins. Co., 117 P.2d 644, 648 (Wash.
1944). It follows that such a duty "arises out of and is within
the coverage of an insurance policy"within the meaning of RCW
48.32.030(4), and that WIGA has a duty to reasonably settle covered
claims. (EN22)
WIGA claimed at oral argument that it would undeniably
have an obligation to indemnify and defend covered claims, and that
it could be sued, in spite of the immunity provision, if it
abdicated those obligations, but that this does not apply to the
duty to reasonably settle claims. We cannot discern any meaningful
distinction between these two duties and the duty to reasonably
settle claims. Each of the duties "arises out of and is within the
coverage of an insurance policy"within the terms of RCW
48.32.030(4). Any action taken by WIGA in violation of those
duties is not an action taken pursuant to statutory authority, and
therefore does not warrant immunity.
This conclusion is supported by the Washington Supreme
Court's decision in Seattle First Nat'l Bank v. Washington Ins.
Guar. Assoc., 804 P.2d 1263 (Wash. 1991). There, the insured
bought a novel form of insurance from an insurer that subsequently
was declared insolvent. When the insured attempted to recover from
WIGA, WIGA claimed that RCW 48.32 prohibited recovery for the type
of insurance in question. The Washington Supreme Court disagreed,
and ordered WIGA to pay for the claim, as well as some attorney
fees and costs. Thus, the resolution of the Seattle First National
Bank case clearly indicates that WIGA does not enjoy total immunity
from suits by insureds. (EN23) Interestingly, the Washington
Supreme Court did not address the immunity provision in resolving
that case. Thus, whatever the reach of the immunity provision of
the statute, its scope did not preclude the claim asserted in
Seattle First National Bank.
Seattle First National Bank, at its core, involved an
insured suing WIGA for recovery on an insurance policy. The same
can be said for the instant case. Therefore, just as the immunity
provision did not preclude the insured from recovering in Seattle
First National Bank, it would seem that the immunity provision
should not preclude the plaintiff in the case at bar from asserting
a claim for relief against WIGA.
WIGA attempts to distinguish Seattle First National Bank.
It claims that, in that case, "the insureds commenced the action
but no claim of immunity was raised since it was a pure statutory
construction." To the extent that the sentence can be
comprehended, it seems that WIGA is arguing that Seattle First
National Bank is distinguishable because the issue there involved
whether a certain form of insurance was, in substance, equivalent
to a form of insurance for which the statute precluded coverage.
It is true that the identical issue is not disputed here. However,
the difference is irrelevant. Even WIGA admits that Seattle First
National Bank "involve[d] particular constructions of the Act which
were determinable as a matter of law." The same can be said of the
case at bar: whether WIGA has a duty to reasonably settle is a
question of law.
Seattle First National Bank is significant for another
reason. There, the Washington Supreme Court held that, for the
purpose of applying a contractual attorney's fees provision, the
insured's suit against WIGA was based on contract. Specifically,
the Washington Supreme Court stated:
[A]n action is on a contract if the action
arose out of the contract and if the contract
is central to the dispute. Here, the
[insurance] agreements are the source of this
action and central to the dispute. . . . We
thus conclude that this is an action on the
contract . . . .
Seattle First National Bank, 804 P.2d at 1270. (EN24) At the very
least, this language implies that WIGA's statutory duties are
derived from the contractual duties assumed by the insurer. The
opinion's language concluding that "this is an action on the
contract"also makes it likely that the insured can actually sue
WIGA in contract. However, since the appellee in the case at bar
specifically noted that her claim was to enforce WIGA's "statutory
obligations", we need not address whether appellee might have also
asserted a claim in contract for relief against WIGA. (EN25)
We also find it telling that in Pennsylvania, which has
an immunity provision substantially identical to Washington's, a
federal district court has held that the Pennsylvania Insurance
Guaranty Association (PIGA) has a statutory duty to settle claims.
T & N PLC v. Pennsylvania Ins. Guar. Assoc., 800 F. Supp. 1259
(E.D. Penn. 1992). There, the court stated:
[The insured] alleges that PIGA has failed to
investigate, pay, or settle, an alleged
covered claim, and has failed to advise [the
insured] of purported claims procedures.
Taken together, however, these allegations are
undeniably part of PIGA's statutory powers and
duties to adjust, handle, and pay covered
claims while denying all others. . . . To the
extent that we may ultimately find that [the
insured's] claims are in fact covered claims,
PIGA may lose its statutory immunity to the
extent that it then fails to assume, at such
later date, its payment obligations in a
timely manner.
Id. at 1265. We read this language as holding that PIGA is immune
only from allegations of wrongdoing for claims which are not
"covered claims,"but that PIGA has a statutory obligation to
settle claims. We think that the same reasoning applies to WIGA.
WIGA also relies on three cases from other states for the
proposition that guaranty associations have no duty to reasonably
settle claims. WIGA first relies on Schreffler v. Pennsylvania
Ins. Guar. Assoc., 586 A.2d 983 (Pa. Super. 1991). Interestingly,
that case involved facts virtually identical to the facts in the
case at hand. However, Schreffler supports our conclusion that
WIGA has a statutory duty to accept reasonable settlements. The
case states only that a "bad faith"claim cannot arise against
PIGA. We take this to mean a common-law claim. However,
Schreffler specifically states that, "settlement is a power
conferred upon PIGA under the terms of the Act." Id. at 985.
Therefore, Schreffler merely states that an insured cannot sue the
guaranty association in tort or contract. It makes no mention of
whether the insured can sue the guaranty association for its
statutory obligation of settlement. (EN26)
Next, WIGA relies on Fernandez v. Florida Ins. Guar.
Assoc., 383 So. 2d 974 (Fla. App. 1980). In that case, the insured
sued the Florida Insurance Guaranty Association (FIGA) after FIGA
refused to settle a claim within the policy limit, and a jury
subsequently returned a jury verdict in excess of the policy
limits. The court ruled that the immunity provision, virtually
identical to Washington's, precluded the suit. It is unclear from
the opinion whether the suit was brought in contract, in tort, or
as a statutory action. If the suit was brought in tort or
contract, it does not speak to whether WIGA can be sued for its
statutory obligations. And if the suit was brought to enforce
FIGA's statutory obligations, we think that the Florida court
misinterpreted the immunity provision by ruling that FIGA was
immune from the suit. The same criticism applies to Veillon v.
Louisiana Ins. Guar. Assoc., 608 So. 2d 670 (La. App. 1992), the
last case on which WIGA relies.
We hold that WIGA had no immunity for a claim to enforce
its statutory duties.
C. Was the Covenant Settlement Enforceable in Light of the
Fact that WIGA Did Not Breach Its Duty to Defend?
WIGA's third argument is somewhat confused. We believe
that WIGA is arguing as follows: WIGA concedes that where an
insurer or insurance guaranty association refuses to defend an
action, the insured is free to settle the action and then seek
recovery from the insurer. (EN27) However, where, as here, the
insurer provides a defense but merely refuses to settle the action,
no action may be brought against the insurer so long as the insured
faces no actual risk of loss. Because Ramsey covenanted not to
enforce the judgment against the insured, WIGA claims it cannot
subsequently be held liable.
In support of this argument, WIGA argues that the cap
provision on the total amount of covered claims contemplates that
the insured will be exposed to excess judgments. WIGA reasons from
this that because the Act mandates that the cooperation provision
in the policy is applicable, (EN28) the drafters of the Act must
have intended that the risk of the insured and the risk of the pool
should be linked. Thus, the insureds may not retain their coverage
after settling in such a way as to eliminate the risk of an excess
judgment.
This conclusion simply does not follow from WIGA's stated
premise. WIGA's brief seems to imply that the Act, by virtue of
setting a $300,000 cap on awards, contemplates that the insured
will be forced to bear the risk of an excess judgment in some
cases. However, to the extent that insureds will sometimes need to
bear the burden of excess judgments, this burden seems to be merely
the result of practical exigencies, rather than the result of an
intent to couple the risk of the insured with the risk of liability
by the pool. As noted by WIGA in its brief, the cap on recovery by
any single claimant is aimed at assuring that funds are available
at an acceptable cost to guaranty at least a minimum payment to all
deserving claimants. WIGA cites no authority suggesting that there
is any other purpose for this provision.
We also note two other factors that militate against
WIGA's argument. First, Washington law does allow assignments of
claims against insurance companies. Planet Ins. Co. v. Wong, 877
P.2d 198, 201 (Wash. App. 1994); Chaussee v. Maryland Casualty Co.,
803 P.2d 1339, 1342-43 (Wash. App. 1991), modified, 812 P.2d 487
(1991). This is so even when the insured has not "fronted"the
judgment money, and allows a third party to proceed against the
insurer. Greer, 743 P.2d at 1244 (insurer breached duty to
defend); Chaussee, 803 P.2d at 1343 (insurer breached duty to
settle). Second, to the extent that there might be collusion
between an insured and a third party who enter a settlement such as
the one which was reached here, that risk was eliminated in the
case at hand, since a jury independently ascertained that a
$200,000 settlement was reasonable. Therefore, we reject WIGA's
argument that the consent settlement bars Ramsey's claim as a
matter of law.
D. Could a Reasonable Jury Have Determined the Claim was
Worth $200,000?
The final issue (EN29) raised by WIGA is whether the
superior court improperly denied its motion for a judgment not
withstanding the verdict. (EN30) WIGA makes two arguments in this
regard. First, it argues that under Isaacson v. California Ins.
Guar. Ass'n, 750 P.2d 297 (Cal. 1988), (EN31) before awarding
damages, the jury had to find that "a judgment against the insured
in excess of [CIGA's] statutory limit of liability is likely."
Isaacson, 750 P.2d at 309. Thus, in the instant case, Ramsey would
have had to show that a verdict of more than $300,000 was likely.
Second, WIGA argues that no reasonable jury could have accepted
Ramsey's $200,000 settlement.
As to WIGA's first argument, it is correct that the
California Supreme Court formulated the test in Isaacson in this
manner. However, this is not the only permissible formulation of
WIGA's statutory duty. Because the insureds must demonstrate that
they were harmed by the guaranty association's violation of its
statutory duty, the inquiry must include consideration of the
potential harm to the insured which was caused by the failure of
the association to settle (i.e. an excess verdict). In the present
case, the jury was instructed, "[W]hen making a decision about a
settlement offer, WIGA is required to consider the personal
financial interests of Coluccio and Mr. Ursino equally with its own
financial interests." Additionally, when considering the
reasonableness of any particular settlement offer, the jury was
instructed to consider "[t]he risks and the expense of continuing
the trial between Ms. Ramsey and Coluccio and Mr. Ursino"and
"[t]he ability of Coluccio and Mr. Ursino to pay any adverse
judgment." We think that the issue of the extent of WIGA's
statutory duty was sufficiently encompassed in these jury
instructions.
Furthermore, Isaacson is a California case. It seems to
us that the relevant standard as to whether the settlement was
reasonable is found in Chaussee v. Maryland Casualty Co., 803 P.2d
1339, 1343 (Wash. App. 1991). There, the court stated that, when
evaluating the reasonableness of a settlement combined with a
covenant not to execute against the insured, trial courts should
adopt the test first stated in Glover v. Tacoma Gen. Hosp., 658
P.2d 1230 (Wash. 1983). The Glover factors are
[t]he releasing person's damages; the merits
of the releasing person's liability theory;
the merits of the released person's defense
theory; the released person's relative faults;
the risks and expenses of continued
litigation; the released person's ability to
pay; any evidence of bad faith, collusion, or
fraud; the extent of the releasing person's
investigation and preparation of the case; and
the interests of the parties not being
released.
Id. at 1236. However, since WIGA nowhere asked this court to
consider whether the Glover factors were satisfied, we do not
address the issue.
As to WIGA's second argument, there is ample evidence in
the record which could form the basis of a finding that the claim
should have been reasonably settled for $200,000. Even if none of
the witnesses had testified that the claim was worth $200,000, the
jury was given sufficient details concerning the underlying events
and the proceedings in the earlier trial to make its own assessment
of the value of the claim. The evidence introduced included
Ramsey's initial settlement brochure which estimated damages, not
including punitives, at almost $250,000. Also, the judge in the
underlying case estimated that the award could be anywhere between
zero and $500,000, and should probably be valued at $175,000.
Additionally, the attorneys which WIGA appointed to represent
Ursino and Coluccio recommended that WIGA accept Ramsey's offer to
settle for $200,000. (EN32) Finally, there was a good deal of
evidence regarding how the trial was progressing. Based on these
details a reasonable jury could find that the claim should
reasonably have been settled for $200,000.
IV. CONCLUSION
The decision of the superior court is AFFIRMED.
ENDNOTES:
1. According to the complaint, Coluccio negligently entrusted its
motor vehicle to Ursino, allowing him to drive when it knew or
reasonably should have known he was under a great deal of stress.
2. Wash. Rev. Code (RCW)  48.32.010 (1994).
3. RCW 48.32.060(1)(c).
4. RCW 48.32.060(1)(a)-(b).
5. RCW 48.32.060(2)(a).
6. RCW 48.32.060(1)(d).
7. RCW 48.32.050.
8. WIGA apparently authorized Lander to settle the case for up to
$100,000.
9. AS 09.05.015.
10. The determination of whether the exercise of personal
jurisdiction over a defendant violates the defendant's right to due
process is a constitutional question which we review employing an
independent judgment standard of review. See ARCO Alaska, Inc. v.
State, 824 P.2d 708, 710 (Alaska 1992).
11. The United States Supreme Court held in McGee v. International
Life Ins. Co., 355 U.S. 220, 223 (1957), that the assumption of
insurance obligations in the forum state was sufficient to
establish personal jurisdiction.
12. See Olivier v. Merritt Dredging Co., 979 F.2d 827, 832 (11th
Cir. 1992), cert. denied sub nom. South Carolina Prop. and Casualty
Ins. Guar. Ass'n v. Olivier, 507 U.S. 983 (1993) and Louisiana Ins.
Guar. Ass'n v. Olivier, 508 U.S. 910 (1993).
13. Ga. Code. Ann.  33-36-9 (1990) (quoted in Bell, 418 S.E.2d at
312).
14. See Georgia Insurers Insolvency Pool v. Brewer, 602 So. 2d
1264, 1267 (Fla. 1992).
15. See National Can Corp. v. K Beverage Co., 674 F.2d 1134, 1137
(6th Cir. 1982); Marathon Metallic Bldg. Co. v. Mountain Empire
Constr. Co., 653 F.2d 921, 923 (5th Cir. 1981); Forsthe v.
Overmyer, 576 F.2d 779, 784 (9th Cir. 1978), cert. denied 439 U.S.
864 (1978).
16. RCW 48.32.030(4) defines a "covered claim"as "an unpaid claim
. . . which arises out of and is within the coverage of an
insurance policy to which this chapter applies by an insurer, if
such insurer becomes an insolvent insurer . . . and . . . the
claimant or insured is a resident of this state at the time of the
insured event . . . ." (Emphasis added.)
17. RCW 48.32.060(1)(c). Although WIGA did not benefit in the
sense that it earned a greater profit due to its assessment on out-
of-state risks, the fund nonetheless increases due to the out-of-
state activities of its member insurers.
18. We distinguish cases such as Northpark National Bank where the
statutory conduct which is relied upon to attempt to establish
jurisdiction is unrelated to the conduct which causes the injury.
19. Resolution of this issue requires us to interpret the
Washington Insurance Guaranty Association Act. Statutory interpre-
tation is a question of law to which we apply our independent
judgment. Borg-Warner Corp. v. Avco Corp., 850 P.2d 628, 631 n.8
(Alaska 1993). Normally when considering questions of law, we are
"not bound by the lower court's decision"and will "adopt the rule
of law that is most persuasive in light of precedent, reason, and
policy." Guin v. Ha, 591 P.2d 1281, 1284 n.6 (Alaska 1979).
However, since we are interpreting the law of another state, we
look to that state's precedent before we turn to reason and policy.
We also note that the Washington Supreme Court applies de novo
review to questions of statutory interpretation. Stuckey v.
Department of Labor and Indus., 916 P.2d 399 (Wash. 1996).
20. Professor Keeton has articulated the insurer's duty to settle
as follows:
With respect to the decision whether to settle
or try the case, the insurance company must in
good faith view the situation as it would if
there were no policy limit applicable to the
claim. . . . The insurer is negligent in
failing to settle if, but only if, such
ordinarily prudent insurer would consider that
choosing to try the case (rather than to
settle on the terms by which the claim could
be settled) would be taking an unreasonable
risk - that is, trial would involve chances of
unfavorable results out of reasonable
proportion to the chances of favorable
results.
Robert E. Keeton, Basic Text on Insurance Law 511 (1971).
21. Paul G. Roberts, Insurance Company Insolvencies and Insurance
Guaranty Funds: A Look at the Nonduplication of Recovery Clause, 74
Iowa L. Rev. 927, 934 (1989); Bernard E. Epton and Roger A. Bixby,
Insurance Guaranty Funds: A Reassessment, 25 DePaul L. Rev. 227,
230 (1976).
22. WIGA does not assert that the claim in the case at bar is
uncovered.
23. A similar message is apparent in Agent Budget Corp. v.
Washington Ins. Guar. Assoc., 610 P.2d 361 (Wash. 1980). There,
the Washington Supreme Court considered whether an amendment to RCW
48.32 applied retroactively. While the court ruled that the
amendment could only be applied prospectively, the language that it
used is informative. It stated that, "the 1976 amendment created
a new cause of action [for insureds] and corresponding liability
[for WIGA]." Id. at 366 (emphasis added). In our view this
language contemplates that causes of action can be maintained
against WIGA.
24. This holding differs from California law, since the California
Supreme Court held that the California Insurance Guaranty
Association can be liable for failure to fulfill its statutory
duties, but is immune from common law claims. Isaacson v.
California Ins. Guar. Assoc., 750 P.2d 297, 306 (Cal. 1988).
25. Given the Washington Supreme Court's holding, it would seem
that the insured could have sued WIGA on the insurance contract for
a bad faith handling of the insurance claim. In Safeco Ins. Co. of
America v. Butler, 823 P.2d 499, 503 (Wash. 1992), the court
stated, "An action for bad faith handling of an insurance claim
sounds in tort." However, the case does not imply that an insurer
can be sued only in tort. Additionally, that case contains no
discussion of the origin of the duty of good faith which an insurer
owes to an insured. An earlier Washington Supreme Court decision
does contain such a discussion. However,
[r]egardless of whether a good faith duty in
the realm of insurance is cast in the
affirmative or the negative, the source of the
duty is the same. That source is the
fiduciary relationship existing between the
insurer and insured. Such a relationship
exists not only as a result of the contract
between insurer and insured . . . .
Tank, 715 P.2d at 1136 (emphasis added). Thus, while Safeco allows
an insured to sue in tort, Tank recognizes that the duty of good
faith arises in contract. Therefore, it seems that in Washington,
an insured can sue an insurer in either tort or contract for bad
faith handling of an insurance claim.
A Washington appellate court held in Vaughn v. Vaughn, 597
P.2d 932, 934 (Wash. App. 1979), that bad faith claims sound
exclusively in tort. However, the two Washington Supreme Court
cases on which the Vaughn court relied provide questionable support
for this proposition. First, Vaughn relied on Hamilton v. State
Farm Ins. Co., 523 P.2d 193 (Wash. 1974). However, that case does
not seem to address the issue of whether bad faith claims sound in
tort or in contract. Second, Vaughn relied on Murray, 355 P.2d at
985. However, that case does not state that tort is the exclusive
field of law by which an insured can recover against an insurer.
Furthermore, Murray does not contain the same sort of in-depth
discussion of the issue as does Tank. Finally, we note that an
early Washington Supreme Court case, Evans, 245 P.2d at 480,
explicitly declined to address whether a bad faith claim could
sound in contract. Therefore, we see no obstacle that would
prohibit an insured from suing WIGA in contract for bad faith
handling of a claim.
We note in passing that the appellate court in Vaughn also
held that tort claims for bad faith handling of an insurance claim
could not arise against WIGA. Interestingly, the court did not
consider the immunity provision of the act, but instead reasoned
that such a tort would not be a "covered claim"within the meaning
of RCW 48.32.030(4). Vaughn, 523 P.2d at 934. In any case,
Vaughn's holding concerning tort claims against WIGA does not speak
to the contract claims against WIGA sanctioned by Seattle First
National Bank, or to the statutory claim at issue in this case.
26. However, T & N, 800 F. Supp. at 1259, makes clear that an
insured can sue the guaranty association on such a theory.
27. See Greer v. Northwestern Nat'l Ins. Co., 743 P.2d 1244, 1251
(Wash. 1987).
28. See RCW 48.32.090(1) (requiring insureds to cooperate with
WIGA). Coluccio's policy contained a standard cooperation
provision which required the insured to cooperate in the
investigation, settlement and defense of any claim.
29. In its points on appeal, WIGA also challenged the failure of
the superior court to include a jury instruction stating that WIGA
was immune from suit, and for including several instructions
setting forth the elements of Ramsey's claim. Because we have
concluded that WIGA was not in fact immune from suit, it follows
that WIGA's objections to the court's instructions are without
merit. The other issues which WIGA raised in its points on appeal
are waived, since WIGA failed to argue them in its briefs. See
Wetzler v. Wetzler, 570 P.2d 741, 742-43 (Alaska 1977).
30. In determining whether the superior court erred in denying a
motion for directed verdict or judgment n.o.v., we must decide
whether, after considering the evidence in the light most favorable
to the non-movant, a reasonable jury could reach only one
conclusion on the issue in controversy. Beaumaster v. Crandell,
576 P.2d 988 (Alaska 1978).
31. The superior court relied on Isaacson in its decision that
WIGA was not immune from suit. As our discussion of the immunity
provision makes clear, we do not rely on that case for our
conclusion that WIGA is not immune.
32. This fact is not necessarily probative as to the value of the
claim, since, though the attorneys were appointed and paid by WIGA,
they represented Ursino and Coluccio. The attorneys' advice to
settle within the statutory limits might have been biased, since
such a settlement would relieve their clients of any financial
liability.
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