Opinion ID: 2514038
Heading Depth: 1
Heading Rank: 2

Heading: winters

Text: Sara Winters purchased an automobile insurance policy from State Farm. The single policy contained five separate coverages; each was optional and for each she paid a separate premium. These five separate coverages were: liability coverage to indemnify her for any damages she might cause to others; underinsured motorist coverage (UIM) to protect her for damages she might suffer from an underinsured motorist; personal injury protection coverage (PIP) to pay for medical expenses and other out of pocket expenses she might incur arising out of the use of her vehicle; property damage coverage for damage to her own property; and emergency road service coverage. In January 1994, Sarah Winters was injured in a car accident after she was hit head-on by Anna Cunningham and then rear-ended by James Edalgo. Cunningham was insured by Leader National Insurance Company (Leader National), and Edalgo was uninsured. After the accident, State Farm paid Winters $8,271.86 under her PIP coverage for the medical expenses and loss of earnings that she incurred. In addition, Winters sued Cunningham. As a result Cunningham's insurer, Leader National, paid Winters $25,000, representing Cunningham's full policy limits. Because Winters did not pursue legal action against Edalgo, State Farm assigned its rights to subrogation for payments made to Winters to an attorney. State Farm's attorney sued and obtained a default judgment against Edalgo for $8,271.86. [1] Meanwhile, believing that she had not been fully compensated for her injuries, Winters presented a UIM claim to State Farm. The claim was assigned for arbitration. Winters and State Farm agreed that Cunningham and Edalgo were at-fault and that Winters was fault-free. The arbitrator awarded total damages of $40,271, including special medical and wage loss damages of $8,271 and general damages of $32,000. The parties agreed that under the terms of the UIM policy, State Farm could deduct the $25,000 that had been paid by Cunningham's insurance as a set off against the UIM award. They disagreed on whether State Farm could deduct $8,271 to offset its earlier PIP payments. State Farm unilaterally offset its PIP payments by paying only $7,000 on the UIM award ($40,271 award, less $25,000 liability limits and $8,271 previous PIP payments). Winters subsequently sued State Farm for an additional $8,271.86, arguing that State Farm was not entitled to offset the PIP benefits it had paid previously by deducting those payments from her UIM award. Alternatively, she requested that State Farm should be entitled to the offset only if it paid a share of the legal expenses incurred in obtaining the settlement and arbitration award. The parties filed cross motions for summary judgment. The trial court granted State Farm's motion for summary judgment and ordered Winters to pay $2,500 of State Farm's attorney fees. Winters appealed. The Court of Appeals held that State Farm had the right to reduce the underinsured motorist award by the amount it paid in PIP benefits, but under Mahler v. Szucs, 135 Wash.2d 398, 957 P.2d 632 (1998), that State Farm must pay a pro rata share of the costs and fees incurred by Winters to recover full compensation for her damages. Winters v. State Farm Mut. Auto. Ins. Co., 99 Wash.App. 602, 616, 994 P.2d 881 (2000). We granted review on the issue of costs and fees.