Opinion ID: 1161092
Heading Depth: 2
Heading Rank: 1

Heading: Finney was correctly decided

Text: The first issue is whether Finney should be overruled. The Finneys' daughter died in an automobile accident. Finney v. Farmers Ins. Co., 21 Wash.App. at 603, 586 P.2d 519. The Finneys sought recovery from Farmers Insurance Company under the uninsured motorist (UM) provision of their insurance policy. They also brought a wrongful death action against the driver and alleged owner of the car in which their daughter was riding. Id. at 604, 586 P.2d 519. The Finneys settled their claim against the driver. The remainder of the action went to trial and resulted in a judgment against the car owner. Id. at 605, 586 P.2d 519. The car owner's insurer denied coverage and the Finneys were unable to collect the judgment. Id. The Finneys then brought an action against their own insurer to recover damages under the UM provisions. Id. Among other defenses Farmers contended it was not bound by the judgment because (1) it was not a party to that action and collateral estoppel [did] not apply, and (2) provisions of its policy required any judgment regarding liability and damages between the insurer and insured be resolved by arbitration. Id. at 616, 586 P.2d 519. Farmers conceded it had a right to intervene in the action between the insured and the tortfeasor but argued its failure to do so did not render it bound by the findings, conclusions, or judgment. Id. at 617, 586 P.2d 519. Division III of the Court of Appeals bound Farmers by the resulting judgment. The court reasoned that Farmers had to know that this determination [of liability and damages between its insured and the tortfeasor] might be crucial to their liability.... Id. at 618, 586 P.2d 519. The court also found Farmers was not entitled to utilize the arbitration provision because it had notice and an opportunity to participate in the action. Id. at 619, 586 P.2d 519. We unanimously affirmed Finney, 92 Wash.2d 748, 600 P.2d 1272. Although we did not explicitly address whether an insurer was bound by a previous judgment, we noted the issue had been either thoroughly and adequately addressed by the comprehensive opinion of the Court of Appeals or [had] been abandoned by petitioner for lack of citation to authority. 92 Wash.2d at 750, 600 P.2d 1272. This issue was diligently briefed by both parties before this court as well as the Court of Appeals and was specifically raised in the petition for review. Finney established a rule of law which binds this court under stare decisis. We thus affirm an insurer will be bound by the findings, conclusions and judgment entered in the action against the tortfeasor when it has notice and an opportunity to intervene in the underlying action against the tortfeasor, id. at 618, 586 P.2d 519, and see no compelling reason to depart from this precedent. Moreover our holding articulates the rule applied in a majority of jurisdictions in both the UM and UIM contexts. [2] Id. at 617, 586 P.2d 519 (citing State Farm Mut. Auto. Ins. Co. v. Christensen, 88 Nev. 160, 494 P.2d 552 (1972) (default judgment); Dominici v. State Farm Mut. Auto. Ins. Co., 143 Mont. 406, 390 P.2d 806 (1964) (default judgment); Wells v. Hartford Accident & Indem. Co., 459 S.W.2d 253 (Mo.1970); State ex rel. State Farm Mut. Auto. Ins. Co. v. Craig, 364 S.W.2d 343, 95 A.L.R.2d 1321' (Mo.App.1963); Heisner v. Jones, 184 Neb. 602, 169 N.W.2d 606 (1969); Terzian v. California Cas. Indem. Exch., 42 Cal.App.3d 942, 117 Cal.Rptr. 284 (1974)). The rule is further supported by the UIM statute itself. RCW 48.22.030(2) requires all new and renewed policies to provide UIM coverage to those who are legally entitled to recover damages from owners or operators of underinsured motor vehicles.... RCW 48.22.030(2) (emphasis added). The typical underinsured insurance contract parallels the statutory language, providing: `We will pay damages which an insured is legally entitled to recover from the owner or operator of an [underinsured motor vehicle].' Employers Mut. Cos. v. Nordstrom, 495 N.W.2d 855, 858 (Minn.1993) (alterations in original). As the Minnesota Supreme Court noted, a tort judgment against the tortfeasor establishes conclusively the damages to which the insured is legally entitled. Not only must the UIM insurer ordinarily pay because of its contractual obligations, but such a duty arises from statutory law as well. Id.' at 858-59. Once an insured establishes she is legally entitled to recover from the tortfeasor, the UIM carrier becomes obligated to pay the judgment less the insurance recovery from the tortfeasor. [3] Considerations of fairness and the avoidance of redundant litigation are also served by this holding. Allstate argues Finney should be overruled because privity does not exist between the third-party tortfeasor's carrier and the UIM carrier to justify the application of collateral estoppel. Allstate is correct that the requisites of collateral estoppel are absent; however, while courts recognize technical privity is absent, they nevertheless apply estoppel principles, concluding there is a sufficient identity of interests between the UIM insurer and the tortfeasor. The possibility of anomalous results, redundant litigation, as well as preventing insurers from picking and choosing their judgments justifies application of such principles provided notice and an opportunity to intervene are afforded to the insurer. Likewise, the benefits of joining the UIM insurer and tortfeasor in a single action outweigh any conflict between an insurer and insured as well as the injection of insurance into the trial. Through joinder of the UIM insurer society is benefitted by the efficiency of judicial economy. The insured is benefitted by the elimination of multiple suit costs. The underinsurer is benefitted by the elimination of anomalous results that could occur if the tort and contract actions were split. Last, the underinsurer may reap the additional advantage of a more zealous defense. J. Sue Myatt, Settlement Procedures in Underinsured Motorist Cases: The Underinsurer's Dilemma Between Preserving the Insurer's Subrogation Right and Protecting the Insured's Settlement Right, 14 J. Corp. L. 175, 184 (1988). Forcing the insured to relitigate liability and damages against the UIM carrier only fosters inconsistent judgments and additional delay and expense for the insured. See Vernon Fire & Cas. Ins. Co. v. Matney, 170 Ind.App. 45, 351 N.E.2d 60, 63 (1976); Haas v. Freeman, 236 Kan. 677, 693 P.2d 1199, 1204 (1985); Zirger v. General Accident Ins. Co., 144 N.J. 327, 676 A.2d 1065, 1072 (1996); Heisner v. Jones, 169 N.W.2d at 611-12 (1969); Allstate Ins. Co. v. Pietrosh, 85 Nev. 310, 454 P.2d 106, 111 (1969); Henry A. Hentemann, Underinsured Motorist Coverage; A New Coverage with New Problems, 50 Ins. Couns. J. 365, 372 (1983). Relitigation provides an unwarranted benefit to insurance companies as well. A UIM carrier could deny a claim, wait until litigation between the insured and tortfeasor was complete, and then assert its insured is collaterally estopped if the damage award is low, but avoid the damage award by relitigating if considered too high. Additionally, an inevitable conflict exists between the insurer and insured, whether in the first suit or the second. Such conflict inures in the unique nature of UIM coverage, as the UIM insurer's relationship with its insured is by nature adversarial and at arm's length. It cannot be extinguished by requiring the insured to relitigate. See Westfield Ins. Co. v. Axsom, 684 N.E.2d 241, 243 (Ind. Ct.App.1997) (Conflict is `ultimately unavoidable.' (quoting Matney, 351 N.E.2d at 65). If an insurer were not allowed to intervene, the exact same conflicts of interest would exist in the second suit against the insurer); Heisner, 169 N.W.2d at 611 (no difference exists between this situation and the common situation where a carrier has coverage on two insureds involved in the same accident); Briggs v. American Family Mut. Ins. Co., 833 P.2d 859, 863 (Colo.Ct. App.1992) (many of the same conflicts would exist in the separate action against the insurer as in a consolidated action where the insured and the insurer disagree on the amount of the damages). Widely adopted among state courts the Finney rule binds an insurer to a judgment against the tortfeasor only if the insurer has been afforded notice and an opportunity to intervene in the underlying action. See footnote 2, supra. We acknowledge that this rule is a modification of the technical requirements for privity. However, we are convinced the underlying action adequately protects the UIM carrier's interests to adequately serve the purposes of collateral estoppel. Further, considerations of fairness and avoidance of redundant litigation are likewise advanced.