IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON 

DIVISION ONE 

MUTUAL OF ENUMCLAW ) No. 75633-8-1 

INSURANCE COMPANY, ) 

) 

Appellant/Cross Respondent, ) 

) 

v. ) 

) 

MYONG SUK DAY, ) PUBLISHED OPINION 

) 

Respondent/Cross Appellant. ) FILED: December 12, 2016 

) 

47) 

(I) CD 

7.1 

ri 

—n 

• —1.21A 

• rn 

cr) 

VERELLEN, C.J. — Instead of a more traditional covenant judgment, Myong Suk 

Day gave agreed judgments to tort victims William Lee and Dawn Smith but retained 

her claims against her insurer, Mutual of Enumclaw (MOE). Day assigned only her 

claims against an independent agent. Lee and Smith agreed not to execute against any 

of Day's assets except her claims against the agent. Lee and Smith also agreed to fully 

satisfy their agreed judgments against Day once the assigned claim against the agent 

was resolved. 

In a more traditional covenant judgment, the insured gives the tort victim an 

agreed judgment and assigns her claims against her own insurer in exchange for the 

tort victim's covenant not to execute on any asset of the insured except the insured's 

claims against her insurer. If the insurer has engaged in bad faith while defending the 

tort victim's personal injury claim under a reservation of rights, then the tort victim 
No. 75633-8-1/2 

pursuing the assigned bad faith claim against the insurer is entitled to a rebuttable 

presumption of harm and coverage by estoppel. If the settlement is reasonable, then 

the amount of the agreed judgment is the tort victim's presumptive recovery on the 

assigned bad faith claim. The covenant judgment is not a release of the tort victim's 

claims against the insured. But if the insured is legally insulated from any exposure to 

the tort victim, then the presumption of harm is rebutted, precluding any coverage by 

estoppel. 

Here, the trial court concluded that a presumption of harm supported coverage 

by estoppel, resulting in a judgment for Day against MOE in the amount of the tort 

victims' agreed judgments against Day. 

Because Day's right to full satisfaction of the agreed judgments is unrelated to 

the resolution of any claims (retained or assigned) against Day's insurer, Day is legally 

insulated from any exposure on the agreed judgments. Even assuming a presumption 

of harm applies, the presumption would be rebutted by Day's absolute right to a full 

satisfaction of the agreed judgments. There is no coverage by estoppel. We reverse 

the judgment in favor of Day based on coverage by estoppel. 

We also affirm the trial court's denial of Day's claim to reform the insurance 

contract. 

We affirm the judgment in favor of Day for the $300,000 emotional distress 

damages awarded by the jury, together with the IFCA1 multiplier and attorney fees 

awarded by the trial court. We also award Day her reasonable attorney fees on appeal 

on the issues she has prevailed upon. 

1 Insurance Fair Conduct Act, ch. 48.30 RCW. 

2 
No. 75633-8-1/3 

FACTS 

In May 2008, a teenager purchased alcohol at Day's grocery store and shared it 

with his underage friends. The teenagers raced through Point Defiance Park and 

injured two pedestrians, William Lee and Dawn Smith, who sued Day in 2009. 

Day contacted her independent insurance agent, Michael Huh. Day met Huh 

when she purchased the grocery store in 2003. Although Day and Huh have different 

versions of their November 2003 meeting and whether Day asked for liquor liability 

coverage, it is undisputed that the insurance contract did not provide for liquor liability 

coverage. Subsequent automatic annual policy renewals occurred without any 

coverage review. All renewed policies lacked liquor liability coverage. 

Day claims Huh told her she had insurance that covered the lawsuit and that she 

should contact her insurer, MOE. Huh tendered the claim to MOE for Day. MOE 

instructed Day "to contact her personal attorney."2The MOE claims adjustor had no 

explanation why MOE did not interview Day about the coverage issue or ask Day what 

she had discussed with Huh or why she thought she had liquor liability coverage. MOE 

did not tell Day that Huh claimed she had declined liquor liability coverage. 

MOE notified Day that it would appoint an attorney to defend her, but because 

she did not have liquor liability coverage in her contract, MOE would defend under a 

reservation of rights. MOE also informed Day that it might bring a declaratory judgment 

action to determine its obligations under the policy.3 

2Report of Proceedings (RP) (Nov. 19, 2014) at 88. 

3See Clerk's Papers (CP) at 144 ("This reservation of rights includes the right to 

file an action for declaratory relief in a Washington court seeking a determination of 

Mutual of Enumclaw's obligations under the policy with respect to plaintiffs' claims.") 

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No. 75633-8-1/4 

MOE filed a declaratory judgment action (the coverage case) to determine its 

obligation to defend or indemnify Day for Lee and Smith's personal injury claims. In her 

answer, Day sought reformation of the contract to include liquor liability coverage or to 

otherwise provide Day coverage. 

Day amended her answer to allege bad faith, CPA4and IFCA violations, and 

coverage by estoppe1.5The amended answer also added Huh as a third-party 

defendant. 

The parties in the personal injury lawsuit reached a settlement in June 2011. 

MOE paid Lee and Smith $125,000 on Day's behalf. Day agreed to entry of judgments 

for Lee and Smith against Day totaling $7,986,222. Lee and Smith agreed not to 

execute on the agreed judgments, except as to Day's claims against Huh. Day 

assigned Lee and Smith all rights, privileges, claims, and causes of action that she may 

have against Huh, but retained her claims against MOE. The 2011 settlement included 

an obligation to fully satisfy the judgments against Day once the claims against Huh 

were concluded: 

In consideration for the assignment and cooperation as described 

herein, Plaintiffs do hereby covenant not to execute or attempt to enforce 

any judgment obtained against any assets of Day other than Day's rights, 

privileges, claims, and causes of action assigned. Plaintiffs' sole remedy 

is to pursue the assigned claims against others. As soon as the assigned 

claims have concluded (whether by settlement, final judgment, or 

exhaustion of all appeals and the time for further action has expired), Day 

may enter a full satisfaction of judgment signed by Plaintiffs in favor of 

Day, which full satisfaction shall be signed by Plaintiffs when this 

4 Consumer Protection Act, ch. 19.86 RCW. 

5 See CP at 198 ("MOE failed to advise Day of all developments relevant to 

coverage, failed to advise her of all developments relevant to her defense, failed to 

properly handle settlement of the claims against Day, and failed to ascertain the best 

terms on which the claims against her could be settled."). 

4 
No. 75633-8-1/5 

settlement is executed. The full satisfaction is to be entered regardless of 

the amount of any judgment awarded or settlement accepted and 

regardless whether the result is less than the judgment agreed in this 

settlement.[8] 

The agreement also contemplated a hearing to determine the reasonableness of the 

settlement. 

The trial court dismissed the personal injury lawsuit with prejudice as "fully settled 

and compromised" including all claims against Day.7But the agreed judgments were 

not entered, there was no reasonableness hearing, and the plaintiffs did not sign and 

deliver a satisfaction of the agreed judgments to be filed when claims against Huh were 

resolved. 

Lee and Smith, as assignees of Day, later reached a settlement with Huh in the 

coverage lawsuit. Huh paid Lee and Smith $600,000, and the court dismissed all claims 

against Huh with prejudice. 

Almost a year later, the trial court granted an agreed motion in the personal injury 

action to reopen "for the limited purpose of permitting the Court to conduct a hearing to 

determine the reasonableness of the Stipulated Settlements and Judgment amounts in 

favor of Plaintiffs, William R. Lee and Dawn Smith, against [Day], as was agreed in the 

Stipulated Settlement among Plaintiffs Lee and Smith and Defendant Day."8The trial 

court also consolidated the personal injury action with the coverage case. The trial 

court entered an order on June 27, 2014 finding the settlement reasonable and entered 

the agreed judgments in favor of Lewis and Smith against Day. 

6CP at 305. 

7CP at 622-24. 

8CP at 704 (emphasis omitted). 

5 
No. 75633-8-1/6 

The remaining claims in the coverage case were scheduled for trial. Before trial, 

the court ruled the jury would determine whether MOE breached its duty of good faith 

and would assess any damages for Day's emotional distress; the trial judge would 

decide whether to impose the remedy of coverage by estoppel and whether to reform 

the insurance contract. 

The jury found that MOE's bad faith caused Day emotional distress damages in 

the amount of $300,000. Based on the IFCA multiplier, the trial court awarded Day an 

additional $600,000 in damages. The court also awarded attorney fees to Day. 

The trial court denied Day's claim to reform the insurance contract,9but applied 

coverage by estoppel to award Day a judgment against MOE in the amount of the 

agreed judgments for Lee and Smith, with interest, totaling $10,460,366.14. 

MOE appeals. Day cross appeals. 

ANALYSIS 

I. Presumption of Harm and Coverage by Estoppel 

MOE argues Day was not entitled to a presumption of harm and coverage by 

estoppel. For the reasons set forth below, we conclude that even if a presumption of 

harm applies here, such presumption is rebutted because of the settlement provision to 

fully satisfy the agreed judgments once the claims against Huh were resolved in any 

9 The trial court concluded: "In this case, considering all of the evidence admitted 

at trial, and in light of the parties extensive briefing on the subject, this Court is 

persuaded that Ms. Day probably did, at least indirectly, request liquor liability coverage 

by asking Mr. Huh to write the same policy for her as he had done for Mr. Kim. 

However, when applying the higher clear, cogent and convincing standard of proof, the 

Court does not believe the evidence supports reformation. In particular, there is not 

clear, cogent and convincing evidence of a clear mutual mistake in coverage terms, as 

opposed to a unilateral mistake on the part of Ms. Day, or potentially no mistake at all if 

Mr. Huh's version of events is accepted." CP at 2381 (Conclusion of Law 7). 

6 
No. 75633-8-1/7 

manner. We need not define the exact limits for the presumption of harm and coverage 

by estoppel in bad faith cases. 

An insurer has an "enhanced obligation of fairness toward its insured."10That 

enhanced obligation imposes a duty beyond that of the standard contractual duty of 

good faith.11 Tank v. State Farm Fire & Casualty Co. recognized the two forms of bad 

faith at issue here: "the company must thoroughly investigate the cause of the insured's 

accident and the nature and severity of the plaintiffs injuries," and "the company has the 

responsibility for fully informing the insured not only of the reservation of rights defense 

itself, but of all developments relevant to his policy coverage and the progress of his 

lawsuit."12 

In a more traditional covenant judgment, the tort victim takes an agreed judgment 

against the insured in exchange for a covenant by the tort victim not to execute on any 

of the insured's assets except the insured's claims against its own insurer, and the 

insured assigns those claims to the tort victim.13Such covenant judgments do not 

release the insured from liability; rather, they limit recovery to "a specific asset—the 

proceeds of the insurance policy and the rights owed by the insurer to the insured.'"14 

10Safeco Ins. Co. of Am. v. Butler, 118 Wn.2d 383, 393, 823 P.2d 499 (1992) 

(quoting Tank v. State Farm Fire & Cas. Co., 105 Wn.2d 381, 383-85, 715 P.2d 1133 

(1986)). 

11 Tank, 105 Wn.2d at 387. 

12105 Wn.2d 381, 387, 715 P.2d 1133 (1986) (emphasis omitted). 

13 Uniqard Ins. Co. v. Mut. of Enumclaw Ins. Co., 160 Wn. App. 912, 919, 250 

P.3d 121 (2011). 

14Besel v. Viking Ins. Co. of Wis., 146 Wn.2d 730, 737, 49 P.3d 887 (2002) 

(quoting Butler, 118 Wn.2d at 399). 

7 
No. 75633-8-1/8 

Several cases hold that if the insurer has engaged in bad faith while defending 

the tort victim's personal injury claim under a reservation of rights, then the tort victim 

pursuing the assigned bad faith claim against the insurer is entitled to a presumption of 

harm and coverage by estoppel. 

In Safeco Insurance Co. of America v. Butler, our Supreme Court emphasized 

that harm is an essential element of an action for an insurer's bad faith handling of a 

claim under a reservation of rights.15In order to relieve an insured of the "almost 

impossible burden" of proving he or she is demonstrably worse off because of the 

insurer's bad faith, a rebuttable presumption of harm arises once the insured 

establishes bad faith.16Although requiring the insurer to prove the absence of harm is 

also an "almost impossible burden," the insurer controls whether it acts in good faith; 

therefore, courts presume harm from an act of bad faith.17"[The insurer can rebut the 

presumption by showing by a preponderance of the evidence its acts did not harm or 

prejudice the insured."15If the insurer does not rebut the presumption, the insured is 

entitled to coverage by estoppe1.19And if the settlement has been determined to be 

reasonable, then the amount of the agreed judgment is the presumptive recovery for the 

tort victim on the assigned bad faith claim.20 

15 118 Wn.2d 383, 823 P.2d 499 (1992). 

16 Id. at 390. 

17 Miller v. Kenny, 180 Wn. App. 772, 798-99, 325 P.3d 278 (2014); Mut. of 

Enumclaw Ins. Co. v. Dan Paulson Constr., Inc., 161 Wn.2d 903, 920, 169 P.3d 1 

(2007); Butler, 118 Wn.2d at 390-91. 

18 Butler, 118 Wn.2d at 394. 

19 Id. at 393. 

20 See, e.o., Miller, 180 Wn. App. at 800-01; Dan Paulson Constr., 161 Wn.2d at 

924-25. 

8 
No. 75633-8-1/9 

In Coventry Associates v. American States Insurance Co., our Supreme Court 

held the presumption of harm does not extend to bad faith in first-party coverage 

settings.21 The court reasoned that, unlike third-party coverage claims defended under 

a reservation of rights, there is no potential conflict of interest in first-party scenarios.22 

Ten years later, in St. Paul Fire and Marine Insurance Co. v. Onvia, Inc., our 

Supreme Court extended Coventry to a third-party coverage setting where an insurer 

did not defend under a reservation of rights and bad faith consisted solely of "procedural 

missteps."23Reading Onvia broadly, MOE argues that its failure to promptly investigate 

Day's claim for reformation and promptly communicate with her about that investigation 

"[did] not trigger the policy concerns that have led courts to apply" coverage by 

estoppe1.24 But Onvia rejected a presumption of harm and coverage by estoppel 

because, as in Coventry, neither a failure to defend nor a defense under a reservations 

of rights was at issue.25 The policy concerns the court referred to in Onvia were those 

that attach when an insurer fails to defend or defends under a reservation of rights,26as 

21 136 Wn.2d 269, 281, 961 P.2d 933 (1998). 

22 Id. at 277 ("This issue is one of first impression in the context of a first party 

action. In the context of a third-party reservation of rights case, once an insured meets 

the burden of establishing an insurer's bad faith, a rebuttable presumption of harm 

arises."). 

23 165 Wn.2d 122, 126 & 133, 196 P.3d 664 (2008) ("[N]o rebuttable presumption 

of harm can arise here, and the measure of damages offered in Coventry should apply 

here also. The remedy of coverage by estoppel is not recognized in this context."). 

24Appellant's Br. at 14. 

25Onvia, 165 Wn.2d at 133. 

26 Id. ("As in Coventry, a reservation of rights or failure to defend in any capacity 

is not at issue. Therefore, no rebuttable presumption of harm can arise here, and the 

measure of damages offered in Coventry should apply here also. The remedy of 

coverage by estoppel is not recognized in this context."). 

9 
No. 75633-8-1/10 

announced in Butler27and acknowledged in Coventrv.28Onvia did not eliminate the 

presumption of harm and coverage by estoppel for bad faith claims alleging a failure to 

investigate. Onvia merely acknowledged that the presumption and coverage by 

estoppel were not appropriate when the insurer did not fail to defend nor defend under a 

reservation of rights.29 

Against this backdrop, we analyze the atypical "covenant judgment" used here. 

Smith and Lee took agreed judgments of more than $10,000,000 against Day, but 

unlike a traditional covenant judgment, Day retained her claims against her insurer and 

assigned only her claim against Huh. The covenant precluded any execution on the 

agreed judgments except on Day's claims against Huh. And, most importantly, the 

settlement giving rise to the agreed judgments expressly provided that once the claims 

against Huh were resolved in any manner, the agreed judgments against Day would be 

fully satisfied. 

Werlinger v. Clarendon National Insurance Co. is instructive.39Michael Warner 

caused a car collision that killed Dean Werlinger. Warner was protected from personal 

27Butler, 118 Wn.2d at 392 ("In Tank we did not address what remedy is 

available for an insurer's bad faith handling of a claim under a reservation of rights. We 

now hold that where an insurer acts in bad faith in handling a claim under a reservation 

of rights, the insurer is estopped from denying coverage."). 

28Coventry, 136 Wn.2d at 281 ("Because the potential conflict of interest does 

not exist in the first-party context, we do not think a rebuttable presumption of harm is 

warranted."). 

29Onvia, 165 Wn.2d at 133. Day points to Moratti v Farmers Insurance Co. of 

Washington, 162 Wn. App. 495, 254 P.3d 939 (2011) for the proposition that Butler 

applies whenever an insurer acts in bad faith, including a failure to investigate. But the 

significance of Moratti here is limited because, unlike Day's settlement with the tort 

victims, Moratti involved a traditional covenant judgment where the insured assigned its 

claims against its insurer to the tort victim. 

39129 Wn. App. 804, 120 P.3d 593 (2005). 

10 
No. 75633-8-1/11 

liability due to a discharge in bankruptcy, but the bankruptcy court allowed the Werlinger 

estate to sue Warner for the $25,000 limits of his automobile insurance policy with 

Clarendon National Insurance Company.31 Clarendon defended under a reservation of 

rights.32In exchange for Warner settling for $5,000,000, the Werlingers agreed not to 

hold Warner personally liable.33Warner assigned the Werlingers their bad faith claims 

against Clarendon. The Werlingers, as Warner's assignees, filed a bad faith lawsuit 

against Clarendon, and on motions for summary judgment, the court ruled in favor of 

Clarendon because "there was no injury to Mike Warner or his marital community."34 

On appeal, this court recognized that the discharge in bankruptcy insulated Warner from 

any personal liability, rebutting the presumption of harm: 

Werlingers argue that there is a presumption of harm once an insured 

establishes that the insurer acted in bad faith. Although this is true, the 

presumption of harm is rebuttable. Clarendon established that there was 

no harm.1351 

Day attempts to distinguish Werlinqer because, unlike here, the insured in 

Werlinger had filed for bankruptcy before the auto collision and was insulated from 

liability before the claim had been tendered to the insurer. But that distinction is not 

compelling. Day's insulation from liability is equivalent to the insured's bankruptcy in 

Werlinqer. When the judgments were entered against Day in 2014, the claim against 

Huh had been resolved. Under the 2011 settlement agreement, Day was entitled to a 

full satisfaction of those judgments. 

31 Id. 

32Id. at 807. 

33Id. 

34Id. at 807-08. 

35Id. at 809-10. 

11 
No. 75633-8-1/12 

Day also argues that this is just another variation on lack of harm arguments 

rejected in covenant judgment decisions for decades. But unlike the rights created in a 

traditional covenant judgment, Day's right to full satisfaction of the agreed judgment is 

unrelated to the resolution of any claims (retained or assigned) against Day's insurer. 

As a consequence, Day was legally insulated from any exposure based on the agreed 

judgments. 

Other issues are presented, but even assuming that a presumption of harm 

applies here, such a presumption is rebutted, precluding any application of coverage by 

estoppe1.36We reverse the $10,460,366.14 judgment in favor of Day against MOE 

based on coverage by estoppel. 

Because we reverse the judgment based on coverage by estoppel, we need not 

address MOE's additional arguments related to coverage by estoppel. 

II. Jury Instructions 

The coverage trial addressed whether MOE engaged in bad faith by failing to 

adequately investigate Day's claim and by failing to keep Day advised about that 

claim.37MOE challenges the trial court's refusal to give its proposed instructions on the 

legal standards related to policy reformation. 

36No reported Washington decision has applied the presumption of harm and 

coverage by estoppel to award the amount of an agreed judgment between the insured 

and the tort victim to an insured as damages for a bad faith claim retained by the 

insured. Because any presumption of harm is rebutted, we need not address that 

question. 

37Even without a presumption of harm and coverage by estoppel, an insured is 

entitled to those damages personal to the insured that resulted from the insurer's bad 

faith, such as emotional distress damages. Miller, 180 Wn. App. at 787-88. 

12 
No. 75633-8-1/13 

It appears MOE's challenge is limited to four proposed instructions.38Two recite 

legal standards governing an agent's authority to issue a binder for insurance and the 

expiration of a binder.39One states a written agreement is required to modify the terms 

of a policy.49The last one is based on a Kansas case which provides there is no duty to 

investigate a claim that a policy should mean something other than its written terms.'" 

Jury instructions are sufficient when they allow parties to argue their theory of the 

case, are not misleading, and when taken as a whole, inform the jury of the applicable 

law.42We review the trial court's decision whether to give a particular jury instruction for 

an abuse of discretion.43If the trial court's jury instructions are otherwise sufficient, the 

court does not need to give a party's proposed instruction, though that instruction may 

be an accurate statement of the law.44The trial court may decide which instructions are 

necessary to "guard against misleading the jury."45 

MOE focuses on Day's expert testimony regarding when coverage extends 

beyond a written policy, when an agent has "binding authority," and whether MOE 

should have reformed the contract to conclude the claim was covered.48 

38 MOE did not take formal exception to the refusal to give instructions and did 

not identify specific proposed instructions in its assignments of error. RAP 10.3(g). 

39See CP at 1715 & 1731. 

49See CP at 1716. 

41 See CP at 1719 (citing Jones v. Reliable Sec. Incorporation, Inc., 29 Kan. App. 

2d 617, 28 P.3d 1051 (2001)). 

42 City of Bellevue v. Raum, 171 Wn. App. 124, 142, 286 P.3d 695 (2012). 

43 Clark County v. McManus, 185 Wn.2d 466, 470, 372 P.3d 764 (2016). 

44 City of Seattle v. Pearson, 192 Wn. App. 802, 821, 369 P.3d 194 (2016). 

48 Gammon v. Clark Equip. Co., 104 Wn.2d 613, 617, 707 P.2d 685 (1985). 

46 Appellant's Br. at 46. 

13 
No. 75633-8-1/14 

When arguing the instructions, the parties presented very different versions of 

the issues before the jury. For example, Day's counsel argued, "We're not trying 

reformation to the jury. . . . so it would be completely misleading to give them an 

instruction on reformation that they're not deciding."47MOE's counsel asserted that 

reformation is "the basis of the bad faith claim."48The court concluded, "I see the case 

as being a tort claim related to bad faith, not a contract claim related to reformation," 

and noted the reformation of the contract was a theory reserved to the trial court.49 

We agree that the issue whether to reform the contract was reserved to the trial 

court. It was within the discretion of the trial court to conclude the jury may be misled or 

confused by instructions focusing on the legal standards governing binders, limits on 

modifying insurance policies, and no duty to investigate any claim that the policy means 

something other than its written terms. To the extent MOE suggests a theory that there 

was no bad faith failure to investigate or advise because, as a matter of law, there could 

be no reformation of the contract, that was not an issue for the jury. 

MOE's arguments are not persuasive. The trial court adequately instructed the 

jury on the requirements for a showing of bad faith and the elements Day was required 

to prove to establish bad faith. The trial court focused on the instructions necessary to 

argue the theories presented.5° MOE does not establish that the court's instructions 

were inadequate or that the trial court abused its discretion. 

47 RP (Dec. 3, 2014) at 14. 

48 Id. at 16. 

49 Id. at 16-18. 

89 For example, regarding the proposed instruction based on a Kansas case, the 

court stated, "I'm not willing to add to our growing body of law by importing Kansas law 

when I believe that the instructions already provide you with an opportunity to argue 

14 
No. 75633-8-1/15 

We affirm the jury award of emotional distress damages resulting from MOE's 

bad faith. 

III. IFCA Treble Damage Award 

For the first time on appeal, MOE argues that emotional distress damages are 

not "actual damages" subject to trebling under 1FCA.51 "Failure to raise an issue before 

the trial court generally precludes a party from raising it on appeal. . . . The reason for 

this rule is to afford the trial court an opportunity to correct any error, thereby avoiding 

unnecessary appeals and retrials."52Because this issue was not preserved for appeal, 

we decline to address it.53 

III. Contract Reformation 

On cross appeal, Day challenges the denial of her claim to reform the insurance 

contract. She argues the trial court erred as a matter of law and should have inquired 

"whether clear and convincing evidence of inequitable conduct by the insurer deprived 

the insured of the full benefits of the policy to which she believed she was entitled."54 

Mutual mistake supporting reformation of a contract must be proved by clear, 

cogent and convincing evidence, "and if doubts exist as the parties' intent, reformation 

that: 'We did our investigation. We found that the policy as written was excluding liquor 

liability coverage. Mr. Huh said it was specifically excluded.' You can make your case 

without this instruction." RP (Dec. 3, 2014) at 62. 

51 MOE acknowledges it did not raise this argument to the trial court, but asks 

this court to reach this issue because Schreib v. Am. Family Mut. Ins. Co., 129 F. Supp. 

3d 1129 (W.D. Wash. 2015) had not been decided when judgment was entered. 

However, the Washington authority the court relied on in Schreib was in existence when 

MOE brought its motion opposing the treble damage award. 

52Smith v. Shannon, 100 Wn.2d 26, 37, 666 P.2d 351 (1983). 

53RAP 2.5(a). 

54Respondent's Br. at 48 (emphasis added). 

15 
No. 75633-8-1/16 

is not appropriate."55"Reformation is an equitable remedy employed to bring a writing 

that is materially at variance with the parties' agreement into conformity with that 

agreement."56In matters of equity, the trial court has broad discretionary power to 

fashion an equitable remedy.57 

Here, the trial court reserved the equitable remedy of contract reformation for the 

court, not the jury. The parties presented conflicting testimony about Day's intent or 

desire to purchase liquor liability coverage. The trial court's decision that Day failed to 

meet the burden of clear, cogent, and convincing evidence was largely a credibility 

determination. 

Our review of the record does not reveal that Day offered a separate theory of 

reformation based on "inequitable conduct." We decline to consider this theory raised 

for the first time on appeal. 

We conclude the trial court did not commit an error of law, rely on insufficient 

evidence, or abuse its discretion when it concluded that Day had not met her burden of 

clear, cogent, and convincing evidence. 

55 Denny's Rests., Inc. v. Security Union Title Ins. Co., 71 Wn. App. 194, 212, 

859 P.2d 619 (1993). 

56 Denaxas v. Sandstone Court of Bellevue, LLC, 148 Wn.2d 654, 669, 63 P.3d 

125 (2003). 

57 Arzola v. Name Intelligence, Inc., 188 Wn. App. 588, 596, 355 P.3d 286 

(2015). 

16 
WE CONCUR: 

No. 75633-8-1/17 

IV. Attorney Fees 

IFCA authorizes an award of "reasonable attorneys' fees and actual and statutory 

litigation costs" to the prevailing insured.58We affirm the trial court award of attorney 

fees. 

We also award Day her reasonable attorney fees on appeal on the issue she 

prevailed upon. 

CONCLUSION 

We affirm the judgment in favor of Day for $300,000 for emotional distress 

damages, the $600,000 of multiplied damages under IFCA, and the attorney fees 

awarded by the trial court. 

We affirm the trial court's denial of Day's claim for contract reformation. 

We reverse the judgment in favor of Day against MOE based on coverage by 

estoppel. 

Finally, we award Day her reasonable attorney fees on appeal on the issues she 

prevailed upon. 

58 RCW 48.30.015(2), (3); Trinity Universal Ins. Co. of Kan. v. Ohio Cas. Ins. Co., 

176 Wn. App. 185, 201, 312 P.3d 976 (2013); Olympic Steamship Co., Inc. v. 

Centennial Ins. Co. 117 Wn.2d 37, 52-53, 811 P.2d 673 (1991). 

17