IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON WATER'S EDGE ASSOCIATES, a Washington general partnership; KEY PROPERTY SERVICES, INC., a Washington corporation, WATER'S EDGE HOMEOWNERS' ASSOCATION, a Washington non-profit corporation, Appellants,

FARMERS INSURANCE EXCHANGE, 

### a foreign corporation; MID-CENTURY INSURANCE COMPANY, a foreign corporation; and TRUCK INSURANCE EXCHANGE, a foreign corporation, Respondents. No. 71066-4- DIVISION ONE

UNPUBLISHED OPINION FILED: March 3, 2014 o K too 22 -hc:

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Becker, J. — A homeowners' association appeals from the dismissal on summaryjudgment ofan assigned bad faith claim against Farmers Insurance. We affirm. The background facts are setforth inthe opinion inthe previous case. Water's Edge Homeowners Ass'n v. Water's Edge Assocs., 152 Wn. App. 572, 216P.3d 1110(2009), review denied, 168Wn.2d 1019 (2010). We will not repeat them here.No. 71066-4-1/2 

### This court reviews an ordergranting summaryjudgmentde novo, performing the same inquiry as the trial court. Wilson Court Ltd. P'ship v. Tony 

### Maroni's, Inc., 134 Wn.2d 692, 698, 952 P.2d 590 (1998). Summaryjudgmentis properly granted when the pleadings, affidavits, depositions, and admissions on 

### filedemonstrate thatthere is no genuine issue ofmaterial fact. CR 56(c). The party opposing summaryjudgment may not rely on speculation or argumentative 

### assertions that unresolved factual issues remain—the nonmoving party must set forth specific facts that show a genuine issue as to a material fact exists. Herman v. Safeco Ins. Co. of Am.. 104 Wn. App. 783, 787-88, 17 P.3d 631 (2001).Bad faith is a tort—plaintiffs must prove duty, breach, causation, and 

### damages. Mut. ofEnumclaw Ins. Co. v. Dan Paulson Constr., Inc., 161 Wn.2d 903, 916, 169 P.3d 1 (2007). A liability insurer has two principal duties to its 

### insured: the duty to defend and the duty to indemnify. Mut. ofEnumclaw, 161 Wn.2d at 914. Inorderto establish liability for bad faith, an insured or the 

### insured's assignee is required to showthatthe insurerbreached one ofthese duties and thatthe breach was unreasonable, frivolous, or unfounded. Kirk v. Mt. Airy Ins. Co., 134 Wn.2d 558, 560, 951 P.2d 1124 (1998). Where an insurer's conduct is reasonable, the insurer does not act in bad faith. Transcon. Ins. Co. v. Wash. Pub. Utils. Dists.' Util. Svs., 111 Wn.2d 452, 470, 760 P.2d 337 (1988). Here, the plaintiff is the Water's Edge Homeowners' Association, as 

### assignee ofbad faith claims by the former owner ofthe condominium complex, 

### Water's EdgeAssociates, and the companythey hired to perform maintenanceNo. 71066-4-1/3 

### and repairs, Key Property Services. The Association claims that Farmers breached its duty infourways: 

### Issue 1: Did Farmers' failure to reserve rights for 10 to 12 months after appointment ofcounsel to represent its insured constitute bad faith as a matter of law? Issue 2: Did Farmers' failure to disclose several-liability 

### defenses under RCW 4.22.070, and 9-month delay inappointing separate legal counsel for WEA and KPS constitute bad faith in breach of its duty to defend? Issue 3: Did Farmers' failure to provide coverage updates, 

### and failure to disclose the amountofindemnity available to settle, constitute bad faith inbreach of its duty to defend? Issue 4: Did Farmers elevate its own financial interests above potential risks to its insured, inbreach of its duty to defend? BriefofAppellant at 2. Farmers responds thatthe bad faith claim mustfail because, regardless of 

### the four allegations, (1) it is undisputed that Farmers fullydefended and indemnified both insureds inthe underlying suit and (2) the insureds cannot prove damages. 

### Farmers assigned counsel to defend its insureds. First Tom Heinrich, then BruceWhite represented them up through December2006. Atthat point, 

### the Association had begun to collude withthe insureds to set Farmers up for a bad faith claim. As a result ofthe collusion, the two insureds insisted thatWhite 

### had a conflict because he was representing both ofthem. White withdrew, and Farmers appointed separate defense counsel foreach insured. The collusive parties excluded Farmers and White from the negotiation ofthe stipulated 

### settlement agreement. Bythe terms of this agreement, the insureds were released inexchangefortheir contribution of$215,000. Farmers paid the $215,000.No. 71066-4-1/4 

### This case is simple. Farmers provided defense counsel to its insureds. At the first mention of a possible conflict created by joint representation, Farmers appointed separate counsel for each insured. When presented with a settlement 

### contractthatwould unconditionally release the insureds from all liability in exchange for a cash payment of$215,000, Farmers paid $215,000. The record is insufficientto establish breach ofduty by Farmers. 

### TheAssociation claims $90,000 inattorneyfees incurred to hire outside counsel as the only damages caused by the alleged bad faith of Farmers. Even assuming that Farmers breached a duty to defend inone ofthe ways alleged by 

### the Association, the record is insufficientto prove thatthe conduct by Farmers caused the insureds to hire outside counsel. Rather, the hiring of outside counsel was a choice the insureds made as part ofdeliberate strategy developed in collusion with the Association. Because the plaintiffs do not establish breach ordamages, summary dismissal was appropriate. Affirmed.

WE CONCUR: 

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