Court Opinion

ID: 9789462
Source: CourtListenerOpinion
Date Created: 2023-08-31 01:36:43.904889+00
Date Added: 2024-06-11T15:33:49.008934
License: Public Domain

Scholfield, J.
(dissenting) — Finding myself in disagreement with the result reached by the majority opinion, I respectfully dissent. I concur in the majority's conclusion that AFC was the owner of the pickup truck and that Graydon Smith was not the owner. It follows that Smith could not, as an individual, give permission to Pau to use the truck. I agree with the majority that any control Smith exercised was in his capacity as president of AFC — not as an individual.
*620I part company with the majority in its holding that because United Pacific had no contractual obligation to defend Pau, Pau, in the context of this case, must be treated as an underinsured motorist. I can see no reason why a decision by an automobile liability insurer to voluntarily provide coverage to a motorist for a particular loss should be treated the same, in the underinsured motorist context, as if no coverage was available.
Many occasions can arise where, due to various errors, miscommunications, disputed policy provisions, or unusual fact patterns, the coverage question is honestly debatable. On these occasions, when the insurance company resolves the doubt in favor of coverage, there is no logical basis for not treating that company's policy limits as applicable liability insurance in respect to any underinsured motorist issues. In this case, United Pacific, for reasons not explained, has resolved the issue of coverage against itself and provided to AFC and Pau the full limits of both its primary policy of $500,000 and its umbrella policy providing limits of an additional $1 million. At no time did United Pacific assert a reservation of rights or negotiate with the Kellys using as a bargaining weapon the threat of denial of coverage.
Insofar as the issue of the applicability of PEMCO's underinsured motorist coverage is concerned, the factual situation is identical to what it would be if United Pacific's coverage of AFC and Pau for the Kelly accident was clear and undisputed.
Furthermore, by the time United Pacific made a settlement with Kelly for $500,000, it could not have successfully denied coverage, even had it attempted to do so. When an insurer, without a reservation of the right to deny coverage, assumes exclusive control of the defense of claims against the insured throughout the discovery process, prejudice is conclusively presumed, and the insurer is estopped to deny coverage. Transamerica Ins. Group v. Chubb & Son, Inc., 16 Wn. App. 247, 554 P.2d 1080 (1976).
*621Although there is authority to the contrary, if a liability insurer, with knowledge of a ground of forfeiture or noncover-age under the policy, assumes and conducts the defense of an action brought against the insured, without disclaiming liability and giving notice of its reservation of rights, it is thereafter precluded in an action upon the policy from setting up such ground of forfeiture or noncoverage. In other words, the insurer's unconditional defense of an action brought against its insured constitutes a waiver of the terms of the policy and an estoppel of the insurer to assert such grounds.
(Footnotes omitted.) 44 Am. Jur. 2d Insurance § 1423 (1982).
RCW 48.22.030 defines "underinsured motor vehicle" as one with respect to which no liability insurance "applies" or one where the limits of "applicable" insurance is less than the applicable damages.
The purpose of underinsured motorist coverage is to allow an injured party to recover those damages which would have been recoverable from the tortfeasor had he maintained adequate liability insurance. Britton v. Safeco Ins. Co. of Am., 104 Wn.2d 518, 522, 707 P.2d 125 (1985).
United Pacific made its full insurance coverage of $1,500,000 applicable to the Kelly accident. There was no denial of coverage or reservation of the right to deny coverage at any time. The case was settled by the Kellys for $500,000 with United Pacific. United Pacific, by resolving all coverage doubts against itself, made its full liability coverage applicable to the Kelly accident. Under these circumstances, PEMCO is entitled to credit against its under-insured motorist coverage the full amount of the coverage provided the tortfeasor. Hamilton v. Farmers Ins. Co., 107 Wn.2d 721, 728, 733 P.2d 213 (1987). This result serves the purpose of the underinsured motorist statute and places the loss on the underlying insurer who received the premium for that coverage.
The parties have stipulated that the Kellys' total damages are less than $1,500,000. Under these circumstances, *622the Kellys have been fully compensated under the underlying insurance and underinsured motorist coverage arrangement mandated by statute in this state.
The trial court should be affirmed.
Review denied at 116 Wn.2d 1031 (1991).