Court Opinion

ID: 9538600
Source: CourtListenerOpinion
Date Created: 2023-08-07 07:38:08.629288+00
Date Added: 2024-06-11T14:57:59.717201
License: Public Domain

Dolliver, J.
(dissenting) — I find the majority's opinion problematic for several reasons. First, the majority presumes harm — an essential element of a bad faith claim — and then fails to explain the nature of that harm. In the absence of a settlement like the one Butler and Zenker reached, the supposed harm to an insured stems from the fact of liability and the danger of an excess judgment at trial. See, e.g., R.A. Hanson Co. v. Aetna Cas. & Sur. Co., 15 Wn. App. 608, 611, 550 P.2d 701 (1976). Where, as here, the injured party has settled with the insured and agreed not to execute against him, I see néither harm nor any justification for presuming it.
Is the harm economic loss, such as attorney fees and costs incurred by Butler in settling with Zenker? If so, do we need to presume those losses when they are so easy to prove and document? Or is the harm at issue an insured's emotional distress associated with the anxiety of an unset-*407tied claim? If so, is that the kind of harm that, as a matter of policy, we should ever presume? Or is the harm, as the majority suggests, the whole penumbra of loss, including an unfavorable credit rating and damage to reputation, which emanates from the fact of liability? If so, then it is unreasonable to presume that harm because Safeco can never rebut it.
Here, Butler admitted liability when he settled with Zenker; Safeco had no control over that admission or the time at which Butler made it. Yet there will never be a trial on the issue of Butler's liability to Zenker. Safeco will not have an opportunity to negate the harm that presumably flowed from the fact of liability because it can never show its defense of Butler would have resulted in a finding of no liability or in a more favorable settlement than the one Butler reached with Zenker.
That is the second, and most troublesome, aspect of the majority's decision — it ignores the effect of the Butler/ Zenker settlement agreement by measuring Butler's "harm" at the time he settled with and assigned his rights to Zenker. At that time, the majority says, Butler was facing a risk of liability which the settlement agreement does not negate. Majority, at 398; see also Steinmetz v. Hall-Conway-Jackson, Inc., 49 Wn. App. 223, 226-28, 741 P.2d 1054 (1987), review denied, 110 Wn.2d 1006 (1988). However, unless it can rely on the settlement agreement and covenant not to execute, Safeco has no proof to rebut the presumption of harm to Butler. The effect is an irrebuttable presumption in Butler's favor. Therefore, where there is alleged bad faith by an insurer, followed by a settlement and assignment of the bad faith claim between an insured and an injured party, the issue of harm will always be decided in favor of the insured.
The majority fails to recognize this is a policy decision in favor of insured parties and makes no attempt to explore the ramifications or desirability of that policy. In fact, it will probably result in more trials on the issue of bad faith, because insurers will not be able to point to the existence of *408a favorable settlement agreement as a nullification of harm. Furthermore, the majority opinion does not provide insur- - anee companies with any extra incentive to handle claims differently, or better. Allowing Safeco to rely on the Butler/ Zenker settlement to show there was no harm to Butler will not motivate Safeco (or any insurance company) to mishandle claims or act in bad faith in the future. An insurer would still face a bad faith claim if its mishandling of a claim resulted in a failure to settle or in an unfavorable settlement. Where, as in this case, there is an allegation of bad faith but a favorable settlement, e.g., a covenant not to execute against an insured, then there is no harm to be prevented.
Even if Butler could prove Safeco's conduct prejudiced him in some way, or exposed him to a risk of liability, the settlement agreement effectively nullified that prejudice and obviated that risk. As a result of the settlement, Butler was completely released from civil liability for the Zenker shooting; Zenker agreed not to enforce any judgment against Butler and to seek relief only from Safeco. I fail to see, in light of such a covenant not to execute, how Butler has been harmed. Because I see no genuine issue of material fact with regard to whether Safeco's alleged bad faith acts harmed Butler, I would find the Butler/Zenker settlement agreement, as a matter of law, can be used to show the absence of harm to Butler. A bad faith claim to be pursued against Safeco at this point is, I think, punitive in nature and should not be allowed. See Barr v. Interbay Citizens Bank, 96 Wn.2d 692, 699-700, 635 P.2d 441, 649 P.2d 827 (1981).
Durham and Smith, JJ., concur with Dolliver, J.
Reconsideration denied May 8, 1992.