Court Opinion

ID: 4712226
Source: CourtListenerOpinion
Date Created: 2021-08-12 00:37:58.140588+00
Date Added: 2024-06-11T08:07:12.598334
License: Public Domain

Madsen, J.
(dissenting) — In my view, the claims adjuster in this case owes a duty to the third party claimants, and that duty is straightforward: The claims adjuster should be required to explain that she is not acting as the third party claimants’ attorney, and she should be required to advise the third party claimants that if they have any questions about the legal ramifications of the settlement transaction, they should consult with an attorney. Significantly, the duty owed here is to third parties in an adversarial position.
Unfortunately, the majority’s analysis is apt to cause confusion in this area because it is unclear about whether the parties are adversarial and whether this makes any difference in the duty owed. The majority states in its first sentence that the claims adjuster developed a nonadversarial relationship with the third party claimants, but later it acknowledges that the claims adjuster’s interest was adversarial to the third party claimants. Majority at 294. This uncertainty is reflected in the majority’s incomplete explanation of the significance of this court’s modification of Bohn v. Cody, 119 Wn.2d 357, 832 P.2d 71 (1992) by Trask *317v. Butler, 123 Wn.2d 835, 872 P.2d 1080 (1994) as to whether a duty is owed in the first place, and the majority’s incorrect application of Trask in this case. The majority also remands for a determination of damages although material questions of fact remain as to proximate cause. The majority fails to address an issue raised by Allstate, whether the trial court erred in granting summary judgment on the grounds that Allstate breached a fiduciary duty to the Joneses. In addition, the majority claims that it does not reach the question whether the claims adjuster’s conduct here constituted the unauthorized practice of law. The majority is clearly authorizing the practice to continue, however, and thus its actual holding is, despite its disclaimer, that the claims adjuster’s activity constitutes the authorized practice of law.
Finally, I am unwilling to accept that as a matter of law Allstate acted in bad faith when it tendered a settlement check containing language stating the check was in full satisfaction of the claims arising from the Jones/France automobile accident. Instead, I would hold that the trial court erred in granting summary judgment precluding Jeremy France’s affirmative defense of release accord and satisfaction.
I would reverse the trial court’s grant of partial summary judgment, and remand for further proceedings.
I
If this court is going to permit insurance claims adjusters to engage in activities constituting the practice of law, it is appropriate that the court require the claims adjusters to adhere to the standard of care of an attorney. This is particularly true because a claims adjuster may be perceived as representing the interests of the third party.
As the majority notes, the court has adopted a six-part inquiry for determining whether a duty is owed to a nonclient. The alteration by Trask of Bohn’s statement of the first part of the inquiry is especially important because *318this modification reflects the rule that usually an attorney owes no duty to third party adversaries. In Bohn, the court held that an attorney who was acting on behalf of the borrower in a lending transaction had a duty to the lender. The attorney met with the unrepresented lender and advised her as to some, but not all, of the legal ramifications of the loan transaction. In determining that a duty of care to the lender existed, the court utilized the six-part inquiry that the majority quotes. Majority at 307. The first of the factors used in Bohn to evaluate whether a duty was owed to a nonclient was “ ‘the extent to which the transaction was intended to affect the plaintiff.’ ” Bohn, 119 Wn.2d at 365 (emphasis added) (quoting Stangland v. Brock, 109 Wn.2d 675, 680, 747 P.2d 464 (1987)). Given this formulation of the inquiry, the court in Bohn found a duty owed the client-borrower’s lender, i.e., a duty to someone in a position adversarial to the client.
The holding in Bohn, with its analysis that can readily lead to a duty to a nonclient adversary, was short-lived. In Trask, as the majority notes, the court modified the analysis for determining when a duty to a third party is owed. Instead of an initial inquiry into the extent the transaction is intended to affect the third party, the court held that the threshold inquiry is “[t]he extent to which the transaction was intended to benefit the plaintiff.” Trask, 123 Wn.2d at 843 (emphasis added). Trask thus significantly altered the analysis, and dictates that a duty will generally not be found to an adversarial third party. Only if, as a threshold inquiry, an intent to benefit the third party is found can a duty arise. Moreover, the court was quite explicit that the duty is not owed to incidental beneficiaries of the transaction—only to intended beneficiaries. Id. at 845.
The court explained that policy considerations militating against finding a duty are strongest where such a duty would detract from the attorney’s obligations to his or her client by creating a risk of divided loyalties because of conflicts of interest or breaches of confidence. Id. at 844. The court noted that ‘‘in no instance has a court found *319liability to a third party adversary.” Id. (citing Bowman v. John Doe, 104 Wn.2d 181, 188-89, 704 P.2d 140 (1985)).25
Although the majority acknowledges that Trask modified Bohn, the majority then reverts to the Bohn analysis instead of adhering to Trask. The proper inquiry is whether the claims adjuster intended to benefit the Joneses. While the majority concludes such intent existed, it also states that the claims adjuster “acted with the intent to influence the Joneses’ decisions.” Majority at 307. Further, it says that the claims adjuster’s “actions directly impacted the Joneses with the certainty that they could be harmed.” Id. The majority thus includes in the analysis the question of the claims adjuster’s intent to affect the Joneses—an inquiry this court abrogated in Trask. Thus, the majority revives an analysis that is likely to lead to frequent findings of duty owed in adversarial situations. As this court has recognized, a duty to an adversarial third party should be the rare exception, not the rule.
This case is, nevertheless, that rare exception. The claims adjuster’s activity was intended to benefit the Joneses because she facilitated a settlement and sent a check for the full policy limits to them, although, objectively speaking, her primary obligation clearly ran to Allstate and its insured. I would conclude, therefore, that there was sufficient intended benefit to the Joneses to pass the threshold inquiry. The Joneses were clearly not incidental beneficiaries. Applying the remaining factors from Trask, I agree that a duty to the Joneses arose.
However, even though this is the exceptional case where a duty to a third party in an adversarial position is owed, that should not undercut the general rule underlying Trask’s modification of Bohn: generally a duty is not owed to *320a third party adversary. As explained, and it bears repeating, this court noted in Trask that policy considerations generally disfavor finding a duty to a nonclient where an adversarial relationship exists because finding a duty may detract from an attorney’s obligation to his or her own client.
At this point, I return to the majority’s confusion about the adversarial nature of the parties’ relationship. Although the majority states in its opening that in this case the relationship was nonadversarial, the majority evidently means that statement in the sense that the claims adjuster was friendly and helpful, among other things. However, the question of whether a duty is owed, and the nature of the duty owed, should not turn in any degree on whether the claims adjuster is pleasant, courteous, and helpful. The relationship between the adjuster and the third party claimant is not rendered nonadversarial by such conduct, nor does it become adversarial in the event the adjuster is abrupt, mechanical, or hostile in demeanor. Indeed, the question here—involving the practice of law by adjusters, led to an agreement in 1938 between the American Bar Association (ABA) Committee on the Unauthorized Practice of Law and the Committee on Lay Adjusters of the Insurance Section of the ABA, in conference with a special committee representing various insurance interests, that laypersons have a role in adjusting insurance claims. 7 Eric M. Holmes, Holmes’Appleman on Insurance 2d § 49:23, at 653 (2d ed. 1998). Among the comments set forth by the Conference Committee on Adjusters26 is the following:
“The Committee believes that anyone who has, or thinks he has, a claim against a company is entitled at all times to courteous, fair and just treatment from the representatives of that company.”
*321Id. at 654 (emphasis added) (quoting Committee’s statement). Not only is it appropriate for adjusters to act in a courteous manner, it is also good business practice, and this court should encourage it.
The adversarial nature of the relationship arises, instead, as a result of the adverse interests of the claims adjusters and the claimant. Here, the claims adjuster for Allstate, just as Allstate itself, owed its own insured a duty to act in the insured’s interest. No representations of helpfulness, assistance, or holding oneself out as serving the third party claimant’s interests can alter the fact that Allstate and the Joneses were legally and factually in an adversarial relationship.
Although this case involves the unusual situation where a duty is owed to an adversarial third party claimant, the analysis in Trask properly encompasses this result where its factors are satisfied. Significantly, finding a duty owed does not depend on whether the claims adjuster has created a “trust-based relationship,” or held herself out as representing the third party claimant’s interests. Nor is it necessary to assess whether the adjuster has been simply courteous, friendly, and helpful, or instead has gone so far as to conduct herself in a way that deceives the claimant into thinking she represents his or her interests.
The next question is what duty is owed. The claims adjuster and the claimant are, objectively in fact, in an adversarial position. For this reason, I question whether RPC 1.8(g) applies here. See majority at 311. That rule pertains to an attorney’s representation of two or more clients in a settlement transaction. While, as noted, the transaction here can be said to benefit the Joneses in certain respects, and while the adjuster may have held herself out as representing the Joneses, the indisputable fact is that she did not represent them—she represented Allstate and its insured. Moreover, permitting the claims adjuster to disclose, as the rule requires, “the existence and nature of all the claims or pleas involved and the participation of each person in the settlement” would authorize *322her to give legal advice that she is not qualified to give. RPC 1.8(g). The claims adjuster is not an attorney.
I would require the claims adjuster to explain that she is not acting as the claimant’s attorney, and to advise the third party claimant that if he or she has any questions regarding the legal ramifications of the transaction, the claimant should consult an attorney. The court’s analysis in Bowers v. Transamerica Title Insurance Co., 100 Wn.2d 581, 675 P.2d 193 (1983), is, as the majority says, helpful by analogy. There, in connection with a sale of real property, a layperson selected and drafted an earnest money agreement, escrow instructions, a promissory note, a statutory warranty deed, and a modification of the promissory note. The seller was later unable to execute against the property sold upon the buyer’s default because the escrow agent had prepared an unsecured promissory note.
The court concluded that the layperson acting as escrow agent engaged in the unauthorized practice of law, and was liable in negligence. Id. at 586-87. The court reasoned that “[t]he duties of an attorney practicing law are also the duties of one who without a license attempts to practice law.” Id. at 587 (citing Burien Motors, Inc. v. Balch, 9 Wn. App. 573, 513 P.2d 582 (1973)). The court then reasoned that in the real estate transaction involved, the buyer’s and seller’s interests were adverse, and therefore an attorney who acted as escrow agent would be required to provide each client the opportunity to evaluate his or her need for representation free of any conflict and to obtain other counsel if desired. Bowers, 100 Wn.2d at 590 (citing former CPR EC 5-16 (Code of Professional Responsibility, Ethical Consideration 5-16)). Importantly, the court said that this duty would extend to each party and would not compromise the escrow agent’s duty of impartiality. Id. The court held that the layperson breached this duty by failing to inform plaintiffs of the advisability of obtaining legal representation. Id.
Here, the claims adjuster is not in an impartial position, unlike the escrow agent in Bowers. However, the claims *323adjuster’s duty to her client must not be compromised, just as the escrow agent’s impartiality in Bowers was not to be compromised. Accordingly, Bowers suggests that a duty to advise the third party claimant that the claims adjuster is not an attorney and that the claimant should consult an attorney if he or she has any questions about the legal ramifications of a transaction is appropriate in this case. Should the third party claimant retain an attorney, of course, WAC 284-30-330(19) would prevent the claims adjuster from negotiating or settling the claim without that attorneys knowledge and consent.
There appears to be no dispute here that the claims adjuster did not advise the Joneses to seek legal counsel if they had any questions about the legal effect of the documents. Accordingly, she breached the duty owed.
The majority also finds a breach of duty, but then incorrectly affirms the trial court’s holdings that Allstate was liable as a matter of law and that the only remaining question on this negligence claim against Allstate is the amount of damages the Joneses suffered because of the breach. Majority at 295, 316 (remanding for consideration of other claims and awarding of damages). If the duty breached is the duty to advise of the need for independent counsel if there are any questions about the legal effect of signing the settlement check or release, as I propose and the majority advances as an alternate duty owed, summary judgment on liability is improper. Summary judgment in favor of the Joneses is appropriate only if, considering all the facts and reasonable inferences therefrom in the light most favorable to Allstate as the nonmoving party, there are no genuine issues of disputed material fact and the Joneses are entitled to judgment as a matter of law. See CR 56(c); Bulman v. Safeway, Inc., 144 Wn.2d 335, 351, 27 P.3d 1172 (2001). There is a material issue of fact respecting proximate causation. As Allstate points out, there is evidence that the Joneses consulted two attorneys before Mrs. Jones signed the check and it was deposited in their account. In addition, Mr. Jones testified that he “didn’t have a belief or *324an understanding that [the adjuster] was going to represent [him] as an attorney,” that he did not ask her to do legal work for him, and that he did not expect her to give him legal advice. Terry Jones Dep. at 183-84, 186-87; CP at 583-86. Mrs. Jones testified that she understood that Allstate and its adjuster acted as the Frances’ insurance company and that both Allstate and its insured were adversaries in a dispute with her. Janet Jones Dep. at 92-93; CP at 507-08. Given this evidence, there is a disputed question of material fact as to whether the claims adjuster’s failure to advise the Joneses to seek advice from other counsel as to the legal effect of the transaction proximately caused any loss they suffered as a result of Mrs. Jones signing the settlement check.
Even under the majority’s analysis, the same question of material fact exists, i.e., whether any damages were proximately caused by the claims adjuster’s breach of duties given the Joneses’ meetings with two attorneys and the Joneses’ knowledge and understanding of the relationship between themselves and the claims adjuster, and of her role. Thus, insofar as the negligence claim is concerned, remand on damages alone is inappropriate even if one agrees with the duties imposed by the majority.
The majority also neglects to address an issue raised by Allstate. Allstate challenges the trial court’s summary judgment ruling that Allstate breached fiduciary duties to the Joneses in representing the Joneses on their claims against the Frances. I would hold that the trial court’s summary judgment ruling on this point must be reversed. Initially, there was no attorney-client relationship between the adjuster and the Joneses, and a fiduciary obligation cannot be based on such a relationship. Second, an insurer does not owe a true fiduciary duty to its own insured, and I would hold no such duty ordinarily exists as to a third party claimant. Even if a fiduciary relationship might otherwise arise in fact, rather than as a matter of law, see Liebergesell v. Evans, 93 Wn.2d 881, 890, 613 P.2d 1170 (1980), the trial court erred in granting summary judgment on this issue. *325There may be a question here as to whether the claims adjuster led the Joneses to believe she was representing their interests, or whether they reasonably perceived that she was, but, objectively speaking, there is no question that she was representing Allstate and its insured. She was in an adversarial position to the Joneses. The Joneses’ deposition testimony tends to show that they clearly knew this to be the case. Accordingly, there is at the least a disputed question of material fact as to whether any fiduciary relationship existed in fact.
Finally, while the majority purports to leave open the question whether the claims adjuster engaged in the unauthorized practice of law, it has implicitly found the practice to be authorized. The majority expressly decides “to permit the [claims adjusters’] activities to continue provided the adjusters comply with the standard of care of a practicing attorney.” Majority at 305.
II
I also disagree with the majority’s conclusion that Allstate acted in bad faith as a matter of law by tendering the check stating, “FINAL SETTLEMENT OF ANY AND ALL CLAIMS ARISING FROM BODILY INJURY CAUSED BY ACCIDENT ON 11/21/97.” CP at 245. As noted by the majority, article 3 of the Uniform Commercial Code, RCW 62A.3-311, provides for accord and satisfaction:
(a) If a person against whom a claim is asserted proves that (i) that person in good faith tendered an instrument to the claimant as full satisfaction of the claim, (ii) the amount of the claim was unliquidated or subject to a bona fide dispute, and (iii) the claimant obtained payment of the instrument, the following subsections apply.
(b) Unless subsection (c) applies, the claim is discharged if the person against whom the claim is asserted proves that the instrument or an accompanying written communication contained a conspicuous statement to the effect that the instrument was tendered as full satisfaction of the claim.
*326A requirement under this section is that the instrument be tendered in “good faith,” which is defined as “honesty in fact and the observance of reasonable commercial standards of fair dealing.” RCW 62A.3-103(4). An example of the lack of good faith is given in the U.C.C. Comments and quoted by the majority:
“Another example of lack of good faith is found in the practice of some business debtors in routinely printing full satisfaction language on their check stocks so that all or a large part of the debts of the debtor are paid by checks bearing the full satisfaction language, whether or not there is any dispute with the creditor. Under such a practice the claimant cannot be sure whether a tender in full satisfaction is or is not being made. Use of a check on which full satisfaction language was affixed routinely pursuant to such a business practice may prevent an accord and satisfaction on the ground that the check was not tendered in good faith under subsection (a)(i).”
Majority at 313 (quoting U.C.C. § 3-311 cmt. 4). The majority concludes that the computer generated check at issue in this case “falls squarely” within this example. I disagree.
First, Allstate was not a regular business debtor. Allstate settles claims for its insured.
Second, in the example given immediately preceding the majority’s quoted section, the comment states:
The meaning of “fair dealing” will depend upon the facts in the particular case. For example, suppose an insurer tenders a check in settlement of a claim for personal injury in an accident clearly covered by the insurance policy. The claimant is necessitous and the amount of the check is very small in relationship to the extent of the injury and the amount recoverable under the policy. If the trier of fact determines that the insurer was taking unfair advantage of the claimant, an accord and satisfaction would not result from payment of the check because of the absence of good faith by the insurer in making the tender.
U.C.C. § 3-311 cmt. 4.
In this case, unlike the example I quote above, Allstate sent the Joneses a check for the full policy limit of France’s *327policy. It is also not surprising that in sending out this final settlement check Allstate included language of accord and satisfaction in order to effect a release of its insured, Mr. France. Under the particular facts of this case, and because the only issue before this court is whether Mr. France can assert the defense of accord and satisfaction, I would hold that the trial court erred in granting summary judgment on the issue of bad faith by Allstate.
The majority further asserts that accord and satisfaction is inapplicable because Allstate is a “fiduciary,” and thus Allstate must show that the agreement was made upon full revelation. Majority at 315. This conclusion stems from a fundamental misunderstanding regarding the nature of a fiduciary relationship in the insurance context. Initially, this court has made it clear that an insurer is not a true fiduciary even to its insured. Rather, an insurer’s duty is one of good faith. “ ‘[A]n insurer must deal fairly with an insured, giving equal consideration in all matters to the insured’s interests.’ ” Van Noy v. State Farm Mut. Auto. Ins. Co., 142 Wn.2d 784, 794, 16 P.3d 574 (2001) (quoting Tank v. State Farm Fire & Cas. Co., 105 Wn.2d 381, 386, 715 P.2d 1133 (1986)). More obviously, in this case Allstate’s only duty is to its insured, Jeremy France. It owes no insurer’s duty of good faith to the Joneses. See Tank, 105 Wn.2d at 393-94; Van Noy, 142 Wn.2d at 792-94 (detailing the nature of the quasi-fiduciary obligation an insurance company owes to its insured). Therefore, the rules regarding fiduciaries in the accord and satisfaction context are inapplicable to this case.
For the reasons stated, I dissent.
Alexander, C.J., and Johnson and Sanders, JJ., concur with Madsen, J.
Motions for reconsideration denied November 5, 2002.

 Trask involved a question of duty owed by an attorney to a third party. The additional question here, of course, is whether the same analysis applies to laypersons engaging in activities that constitute the practice of law. Because laypersons practicing law are generally held to the same standards as attorneys, Trask states the appropriate test for whether a duty to a third party is owed by a layperson practicing law. See Bowers v. Transamerica Title Ins. Co., 100 Wn.2d 581, 586-87, 675 P.2d 193 (1983).

 The name was later changed to the National Conference of Lawyers, Insurance Companies, and Adjusters by resolution adopted by the House of Delegates at a February 1961 meeting. 7 Eric M. Holmes, Holmes’ Appleman on Insurance 2d § 49:23, at 653 n.813 (2d ed. 1998).