Court Opinion

ID: 4159463
Source: CourtListenerOpinion
Date Created: 2017-04-11 16:17:31.98913+00
Date Added: 2024-06-11T13:55:32.514401
License: Public Domain

FILED
                                                                       APRIL 11, 2017
                                                                In the Office of the Clerk of Court
                                                               WA State Court of Appeals, Division III

            IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
                               DIVISION THREE

WILLIAM MERRIMAN AND                          )
COLLEEN MERRIMAN, husband and                 )         No. 33929-7-111
~~                                            )
                                              )
                     Appellants,              )
                                              )
       V.                                     )        · PUBLISHED OPINION
                                              )
AMERICAN GUARANTEE &                          )
LIABILITY INSURANCE COMPANY;                  )
PARTNERS CLAIM SERVICES, INC.;                )
BERND MOVING SYSTEMS, INC., a                 )
Washington corporation; DOUGLAS A.            )
BERND and JANE DOE BERND; JOHN                )
DOES 1-5,                                     )
                                              )
                     Defendants,              )
                                              )
YORK RISK SERVICES GROUP, INC.,               )
                                              )
                     Respondent.              )

       SIDDOWAY, J. -William and Colleen Merriman brought a negligence action

against Bernd Moving Systems after a fire at Bernd's storage warehouse destroyed over

$300,000 worth of the Merrimans' property. When the Merrimans learned through

litigation that Bernd had substantial insurance protecting its storage customers against

property loss that had never been disclosed by Bernd's insurer, its adjuster, or the

adjuster's local agent, they amended their complaint to assert claims against all three

companies. They also moved, successfully, for certification of a class action.
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    No. 33929-7-111
    Merriman v. Am. Guar. & Liab. Ins. Co., et al.

    Settlements were reached between the class and Bernd, the insurer, and the adjuster's

    local agent.

           No settlement was reached with the adjuster, York Risk Services Group (York),

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    and the trial court eventually decertified the class and granted summary judgment

    dismissal of the Merrimans' claims against it. We reverse the dismissal of the
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    Merrimans' claims against York for insurance bad faith, negligent misrepresentation, and

    non per se violations of Washington's Consumer Protection Act (CPA). 1 We also reverse

    dismissal of the Merrimans' negligence claim in light of York's broad contractual claims

    administration undertakings, which were intended in part to benefit insureds. Finally,

    having reinstated two claims that were never decertified as class actions, we direct the

    trial court to reexamine its decertification of the negligent misrepresentation, negligence,

    and non per se CPA claims.

                        FACTS 2 AND PROCEDURAL BACKGROUND

           On August 5, 2012, a storage warehouse in Yakima owned and operated by Bernd

    Moving Systems burned to the ground. In addition to destroying the warehouse itself, the

    fire destroyed Bernd's personal property and the property of 38 of its customers who

    stored property in the warehouse-among them, the Merrimans.

           Over $300,000 worth of the Merrimans' property was destroyed in the fire.

           1 Chapter 19.86 RCW, whose violation can support a civil action as provided by
    RCW 19.86.090.
           2 As with all appeals from a summary judgment, we review the evidence and

    inferences in the light most favorable to the nonmoving party.
                                                 2
No. 33929-7-111
Merriman v. Am. Guar. & Liab. Ins. Co., et al.

Before placing property in storage at the Bernd warehouse, the Merrimans had been told

by Doug Bernd that their property would be fully insured. Following the fire, they spoke

with a representative of Bernd who told them they would be contacted by insurance

representatives.

       Bernd was insured by American Guarantee & Liability Insurance Company

(American Guarantee). Its commercial insurance policy provided many types of property

and liability coverage. American Guarantee engaged York to not only adjust claims for

the Bernd warehouse fire, but to more broadly administer the entire review, adjustment,

settlement, and payment process under a preexisting third party administrator agreement

between its parent company and York.

       York, in tum, engaged Partners Claim Services, Inc. (Partners) to serve as its

'"boots on the ground"' for the Bernd claims administration engagement. Br. ofResp't

at 1. It was Partners whose representatives communicated with the Merrimans and other

insurance claimants.

       Within two days of the fire, York's field adjuster had reviewed Bemd's insurance

policy with American Guarantee and seen that property provisions of the policy insured

not only Bemd's business personal property from loss or damage but also covered

"Personal property of others in your care, custody and control." Clerk's Papers (CP) at

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     2037, 1881. 3 The policy form went on to provide, "[O]ur payment for loss of or damage

     to personal property of others will only be for the account of the owner of the property."
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l    Id. Blanket limits ofBernd's business and personal property coverage were $777,500,
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     and $435,000 of coverage for property loss was available under a commercial inland

     marine policy if Bernd were found liable for the loss.

            American Guarantee would ultimately concede that Bernd' s policy covered the

     Merrimans' and other storage customers' property loss but it never disclosed the

     coverage to the Merrimans. It claimed it relied on York to perform its "contractual job

     duties," including to make required disclosures of coverage to potential insureds. CP at

     2760-61, 2848-49.

            York agreed that covered business personal property included customer property

     stored at the warehouse, but it did not provide a copy of the policy to Partners nor inform

     Partners of coverage for those property owners. Instead, York instructed Partners to tell

     property owners that Partners did not know what Bernd's coverages were, or whether its

     policy would apply to their loss. It further instructed Partners to tell property owners they

     should file a claim under their own homeowner' s insurance, which might expedite

     payment for their loss. During discovery, York's CR 30(b)(6) designee admitted that in

     light of the limited information it provided to Partners, no property owner could expect to

I1          3
              Multiple copies of portions of the policy are in the record. We rely on what is
     represented to be a complete, 288-page copy, ordered to correspond with the schedule of
     forms and endorsements in the policy itself, which is attached to a declaration of
     plaintiffs' counsel. See CP at 174-461.
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    No. 33929-7-111
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    get a full explanation of the coverage provisions in Bernd's policy.

           Mr. Merriman's communications about Bernd's policy's coverage for the
I   Merrimans' property loss began with a call from Liz Bowers, a Partners employee, 12
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I   days after the fire. In contacting property owners, Ms. Bowers informed them she was

    calling on behalf of York, who was managing claims on behalf of the insurance company.

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    She told Mr. Merriman she would be handling the Merrimans' claim for their property

    loss. She initially told him she would send him forms for preparing an inventory and

J   hoped to meet with all of the property owners and take them through the claim process.

    Shortly thereafter, however, she told Mr. Merriman not to bother with the inventory

    because there would most likely be no coverage under Bernd's policy. In another, later

    call, she repeated it would be a waste of time to put together an inventory because there

    would likely be no coverage for the Merrimans' goods under Bernd's policy. She left

    Mr. Merriman with the impression that the couple's only source of recovery would be

    through their own homeowner's policy. Their homeowner's policy covered only $15,000

    of their loss.

           After learning that the warehouse fire was likely caused by a cigarette left burning

    by a Bernd employee, the Merrimans sued Bernd for negligence. Through discovery, the

    Merrimans obtained a copy ofBernd's policy. They learned it included a $3 million limit

    on liability coverage. But they also learned for the first time of the earlier undisclosed

    property coverage, which applied whether or not Bernd was at fault. They amended their

                                                  5
No. 33929-7-III
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complaint to address the failure to disclose the coverage, naming American Guarantee,

York, and Partners as additional defendants and framing a later complaint as a class

action. The trial court granted the Merrimans' motion to certify a class action.

       Partners settled a couple of months after entry of the order certifying the class

action. The fairness and reasonableness of its settlement was approved by the court.

       While American Guarantee conceded that Bernd's policy covered the Merrimans'

and other storage customers' property, it, and York, have always contended that Bernd's

customers were not insureds with first party claims, but were instead third party

claimants, and that only Bernd could have made a claim for their property losses. York

also contended that as an adjuster rather than an insurer, it could not be sued for

insurance bad faith and did not owe any of an insurer's statutory or regulatory duties to

insureds.

       After motions for summary judgment resulted in the dismissal of some of the

claims asserted against York-those characterized as "insurance" claims-York moved

to decertify the class as to the remaining claims against it, arguing that liability for those

claims (negligent misrepresentation, constructive fraud, and non per se CPA claims) were

individualized. The trial court granted the motion. York then moved again for summary

judgment of the three remaining claims, and the court granted the motion.

       American Guarantee never sought decertification. Instead, it reached a settlement

with the class that the court found to be fair and reasonable in November 2015.

                                               6
No. 33929-7-111
Merriman v. Am. Guar. & Liab. Ins. Co., et al.

         The Merrimans appeal.

                                         ANALYSIS

         The Merrimans appeal dismissal of their claims against York for insurance bad

faith, negligent misrepresentation, negligence, and violation of the CPA. They also

appeal decertification of the class.

         We first address a threshold issue of whether the Merrimans' claim under the

property provisions of the policy is a first party claim by an insured or a third party claim.

We then address the dismissal of their claims for insurance bad faith, negligent

misrepresentation, negligent claims handling, and violation (per se and non per se) of the

CPA, in the order stated. We conclude with their challenge to the decertification of the

class.

                 I. The Merrimans' claim is. a first party claim, as an insured

                    Standards ofreview, interpretation, and construction

         When resolving issues involving the interpretation of an insurance contract,

summary judgment is appropriate unless relevant terms of the contract are ambiguous and

the parties introduce conflicting evidence to clarify the ambiguity. Nat'! Gen. Ins. Co. v.

Sherouse, 76 Wash. App. 159, 162, 882 P.2d 1207 (1995). The parties did not offer

conflicting evidence to resolve an ambiguity below; both agreed there and agree on

appeal that Bemd's policy may be interpreted and construed as a matter of law. We

                                               7
No. 33929-7-III
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review an order denying summary judgment de novo, engaging in the same inquiry as the

. trial court. Ruvalcaba v. Kwang Ho Baek, 175 Wash. 2d 1, 6,282 P.3d 1083 (2012).

       A contract of insurance should be given a fair, reasonable and sensible

construction, consonant with the apparent object and intent of the parties, a construction

such as would be given the contract by the average person purchasing insurance. Morgan

v. Prudential Ins. Co. ofAm., 86 Wn.2d 432,434, 545 P.2d 1193 (1976). If the policy

language is clear and unambiguous, the court may not modify the contract or create an

ambiguity where none exists. Id. at 435. However, where the clause in the policy is

ambiguous, a meaning and construction most favorable to the insured must be applied,

even though the insurer may have intended another meaning. Id. (citing Glen Falls Ins.

Co. v. Vietzke, 82 Wash. 2d 122, 508 P.2d 608 (1973)).

       "The 'insured' under a contract of insurance is the person or entity that will

receive a certain sum upon the happening of a specified contingency or event." 3

STEVEN PLITT ET AL., COUCH ON INSURANCE 3D § 40:1, at 40-3 (2016). Black's similarly

defines "insured" as "[s]omeone who is covered or protected by an insurance policy."

BLACK'S LAW DICTIONARY 928 (10th ed. 2014).

       "The insured may be named within the policy or may be identified by description

such as 'employee,' 'dependent,' 'resident,' or 'member' of a household, 'owner,' or

'eligible debtor."' PLITT, supra,§ 40:3, at 40-6 (footnotes omitted). If the identification

of who is insured requires interpretation and is susceptible of different conclusions, "' the

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I    one will be adopted most favorable to the insured; and will be liberally construed in favor

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     of the object to be accomplished."' Dennis v. Great Am. Ins. Co., 8 Wash. App. 71, 74,

     503 P.2d 1114 (1972) (quoting Jack v. Standard Marine Ins. Co., 33 Wn.2d 265,271,

     205 P.2d 351 (1949). Careful consideration of any definition of"insured" in the policy

     must be made. PLITT, supra, §40:1, at 40-4.

            "Insured" is undefined by Bernd's policy for the personal property coverage that

     remains at issue in this case. Bernd' s policy consists of a number of policy forms, each

     addressing a particular type of coverage. Only one of the forms, the commercial general

     liability coverage form, contains a "Who is an Insured" section. See CP at 278-296,

     specifically at 286.

            By contrast, the coverage form relevant here, the building and personal property

     coverage form, speaks of"Covered Property" rather than addressing who is an "Insured."

     E.g., CP at 224. Section 5 of the form, "Coverage Extensions," provides at subsection (b)

     that Bernd "may extend the insurance that applies to Your Business Personal Property to

     apply to ... (2) Personal property of others in your care, custody or control," and further

     states, "Our payment for loss of or damage to personal property of others will only be for

     the account of the owner of the property." CP at 230. Bernd secured such an extension

     of coverage, addressed by a property basket coverage endorsement, which amended the

     building and personal property coverage form as follows:

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    Merriman v. Am. Guar. & Liab. Ins. Co., et al.

           The following paragraph is added to b. Your Business Personal Property
           of paragraph 1. Covered Property of section A. Coverage:

           Personal property of others in your care, custody and control. However,
           our payment for loss of or damage to personal property of others will only
           be for the account of the owner of the property.

    CP at 198.

           This language clearly and unambiguously includes as covered property personal

    property of the Merrimans and other customers that was in Bemd's care, custody and
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I   control at the time of the covered loss.

           The statement that "our payment for loss of or damage to personal property of

    others will only be for the account of the owner of the property" also appears to clearly

    and unambiguously contemplate that American Guarantee will pay the loss to the owner

    of the property-unlike policy language seen in other cases, such as"' [L]oss shall be

    adjusted with the named insured for the account of the owners of the property,'"

    language used in the policy at issue in Stanley Fine Furniture, Inc. v. North River

    Insurance Co., 411 So. 2d 210,211 (Fla. Dist. Ct. App. 1982) (emphasis added). 4

           York argues, however, that one can infer from the types and limits of coverage

    Bernd purchased that the building and personal property coverage was only intended to

           4
            In Stanley Fine Furniture, the insurer successfully argued in the trial court that
    the named insured was not the real party in interest for purposes of a policy's coverage of
    property of others, leading the trial court to dismiss the named insured's claims without
    prejudice to the other property owners' ability to bring suit. Stanley, 411 So. 2d at 211.
    The appellate court reversed, citing the language that loss for property of others "shall be
    adjusted with the named insured" language.
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    Merriman v. Am. Guar. & Liab. Ins. Co., et al.

    cover the replacement cost ofBernd's building and its own property. But the policy

    covered any loss, not just a total loss, and the endorsement modifying the covered

    property section of the coverage form plainly extends coverage to property of others.

    Policy limits are not required to cover all possible loss, and Washington courts allow an

    insurer to "limit[ ] its liability to a specified dollar amount" even when that limit prevents

    "full compensation for insureds." Certain Underwriters at Lloyd's, London v. Valiant

    Ins. Co., 155 Wn. App. 469,478, 229 P.3d 930 (2010).

           York also argues that if the Merrimans and other storage customers were insureds,

    American Guarantee would owe conflicting duties to Bernd and the other insureds,

    because limits of the coverage fell short of their combined loss. But this is not a rare

    occurrence, and it is addressed by case law. See, e.g., Allstate Ins. Co. v. Ostenson, 105

    Wn.2d 244,246, 713 P.2d 733 (1986) (interpleader was used, and the court was asked to

    determine whether a "per person" limitation under policy would control over the general

    rule of distributing on a pro rata basis in accordance with the amount of damage suffered

    by each claimant).

           York next points to the loss payment section of the building and personal property

    coverage form, which provides, in part, that American Guarantee "may adjust losses with

    the owners of lost or damaged property if other than you," and thereby satisfy "your

    claims against us for the owners' property." CP at 233 (§ 4(e)). (Here, as elsewhere,

    ''you" and "your" mean "Bernd," which we substitute hereafter.) This paragraph of the

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No. 33929-7-III
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loss payment section advances York's argument, but language elsewhere in the section

undercuts its position. Paragraph (e) allows _American Guarantee to pay other owners

"their financial interest in the Covered Property" and paragraph (d) states that the insurer

''will not pay [Bernd] more than [Bernd's] financial interest in the Covered Property"-

contradicting York's contention that American Guarantee could pay Bernd for both its

own financial interest and whatever additional amount (within limits) was needed to

cover the financial interests of its customers. Id. (§ 4(d)).

       York also points to paragraph 4(t) of the loss payment provision, which allows

American Guarantee to defend Bernd "against suits arising from claims of owners of

property." Id. According to York, this language means that other owners must assert

claims for covered property against Bernd. But York has never identified a legal theory

the owners could advance if Bernd was not at fault for their property loss. As the

Merrimans point out, under Bernd's comprehensive general liability coverage, they and

other storage customers asserted viable negligence claims against Bernd, which could be

enforced against any ofBernd's assets, including its rights to payment under other

coverages. Perhaps that is what the paragraph envisions.

       Both American Guarantee and the Merrimans have sometimes analogized the

building and personal property coverage to warehouseman's policies. The Merrimans

have pointed to§ 68:40 of Couch on Insurance, which states:

       Where the bailee or warehouseman has effected insurance in favor of the
       bail or, the latter is entitled to the proceeds to the extent of his or her
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     No. 33929-7-111
     Merriman v. Am. Guar. & Liab. Ins. Co., et al.

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            insurable interest, without regard to whether the bailee or warehouseman
            procured the policy voluntarily, or pursuant to an agreement, express or
            implied, to carry insurance. . . . A person having possession of goods of
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            another may insure for the benefit of the latter without authority, and the
            latter may adopt the policy so as to recover insurance collected, in
            proportion to the value of the owner's goods lost.

     Reply Br. at 6 & n.5; 5 PLITT, supra,§ 68:40, at 68-63. The Merrimans cite cases from

     other jurisdictions supporting a bail or's right to sue the insurer for coverage. See id.; cf

     Clausen v. Columbia Nat. Ins. Co., 1 Neb. Ct. App. 808, 816, 510 N.W.2d 399, (1993)

     (insurer did not challenge property owner's right to bring third party claim under same

     "covered property" provision at issue here; a directed verdict should have been entered in

     favor of property owner as to the property being within the "care, custody and control" of

     named insured).

            American Guarantee, whose policy interpretation is embraced by York, also raised

     warehouseman's insurance in the trial court, directing the court to§ 242:82 of the Couch

     treatise, which explains that "[t]he bailee's policy of insurance may be so worded that it

     does not give rise to any cause of action in favor of the bailor," and that ''where a policy

     contains a clause making the loss payable to and adjustable with the bailee ... it may be

     inferred that the insurer does not intend to assume a direct liability to the owners."

     Report of Proceedings at 219; 17 COUCH, supra, §242:82. American Guarantee's

     building and personal property coverage form does not say that loss is "payable to and

     adjustable with" Bernd, however-unlike the policy in Stanley, 411 So. 2d 210.

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No. 33929-7-111
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       A clear lesson from these authorities is that no presumption can be made that

"other owners" whose property is covered by this type of policy are first party claimants

or that they are third party claimants. Policies can be, and are, written both ways. When

interpreting an insurance policy, we consider the "policy as a whole," harmonizing

conflicting provisions to give effect to the whole policy. Kut Suen Lui v. Essex Ins. Co.,

185 Wash. 2d 703, 710, 375 P.3d 596 (2016). Considering the building and personal

property coverage form and the property basket coverage endorsement as a whole, we

come to the same conclusion as did the trial court: the policy is most reasonably read to

include all owners of covered property as insureds, thereby making the Merrimans and

other storage customers' first party claimants. 5 At worst, the policy is ambiguous and

must be construed in the property owners' favor, which leads to the same result.

           II. The Merrimans can assert a claim for insurance bad faith against York

       "The duty of good faith has been imposed on the insurance industry in this state

       5 Washington's insurance commissioner has adopted insurance regulations that
include the defined term "first party claimant" rather than "insured." WAC 284-30-320.
"First party claimant" is defined to mean
       an individual, corporation, association, partnership or other legal entity
       asserting a right as a covered person to payment under an insurance policy
       or insurance contract arising out of the occurrence of the contingency or
       loss covered by a policy or contract.
WAC 284-30-320(6). If the regulation is construed to mean "asserting a right" that the
individual or entity has in fact, rather than "asserting a right" that the individual or entity
merely claims to have (viz., a putative first party claimant), then the terms "first party
claimant" and "insured" mean the same thing for present purposes. However construed,
the Merrimans are first party claimants.
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No. 33929-7-111
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by a long line of judicial decisions." Tank v. State Farm Fire & Cas. Co., 105 Wn.2d

381,386, 715 P.2d 1133 (1986) (emphasis added). The legislature has imposed the duty

as well, having adopted RCW 48.01.030 in 1947. Id.; LA ws OF 1949, ch. 190, § 26.

That statute provides:

      The business of insurance is one affected by the public interest, requiring
      that all persons be actuated by good faith, abstain from deception, and
      practice honesty and equity in all insurance matters. Upon the insurer, the
      insured, their providers, and their representatives rests the duty of
      preserving inviolate the integrity of insurance.

RCW 48.01.030.

      Application of the statute presents a question of statutory interpretation, which we

review de novo. State v. Bradshaw, 152 Wash. 2d 528, 531, 98 P .3d 1190 (2004 ). We

begin by looking at the plain meaning of the statute as expressed through the words

themselves. Tesoro Ref & Mktg. Co. v. Dep 't ofRevenue, 164 Wash. 2d 310, 317, 190 P .3d

28 (2008). If the statute's meaning is plain on its face, then we apply that plain meaning.

State v. Armendariz, 160 Wash. 2d 106, 110, 156 P.3d 201 (2007). Only if the language is

ambiguous do we look to aids of construction, such as legislative history. Id. at 110-111.

       RCW 48.01.030 unambiguously applies to "the business of insurance," imposing

requirements on "all persons," and rests the duty of preserving inviolate the integrity of

insurance upon, among others, "[the] representatives" of the insurer. "Person" is defined

by RCW 48.01.070 to mean "any individual, company, insurer, association, organization,

reciprocal or interinsurance exchange, partnership, business trust, or corporation." As an

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     No. 33929-7-III
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     adjuster contracted by American Guarantee to act as its claims administrator, York was,

I    at all relevant times, a "person" engaged in "the business of insurance" and a
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!    representative of American Guarantee.

            York contends that despite this broad language, a common law bad faith claim is

     available only against an insurer. Its only authority is language from Tank and the fact

     that claims-handling regulations adopted by the insurance commissioner apply to

     insurers, not adjusters. See chapter 284-30 WAC.

            Tank involved the application of the duty of good faith to an insurer. The

     language York cites appears in a section of the opinion in which the court "focus[ed] on

     ... [ ]the evolution of the duty of good faith imposed on insurers." Tank, 105 Wash. 2d at

     385. The fact that a case involving an insurer focused on insurers is unsurprising. It does

     not signal any retreat from case law imposing the duty of good faith "on the insurance

     industry," id. at 386, or any narrowing construction ofRCW 48.01.030 that imposes the

     duty on "all persons" engaged in "the business of insurance."

           As for the claims handling regulations, the insurance commissioner is powerless to

     narrow the plainly broad language ofRCW 48.01.030. In choosing to focus regulation

     on insurers, the commissioner did not purport to narrow the statutory duty of good faith.

     The regulation provides that "acts performed, whether or not specified herein, may also

     be deemed to be violations of specific provisions of the insurance code or other

     regulations." WAC 284-30-310.

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No. 33929-7-111
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       RCW 48.01.030 unambiguously applies to insurance adjusters. A federal court

came to the same conclusion in Lease Crutcher Lewis Wa., LLC v. National Union Fire

Insurance Co. ofPittsburgh, No. C08-1862RSL, 2009 WL 3444762 (W.D. Wash. Oct.

20, 2009) (court order). 6

           III. The Merrimans assert a viable negligent misrepresentation claim

       The Merrimans asserted a claim for negligent misrepresentation. 7 "A plaintiff

claiming negligent misrepresentation must prove by clear, cogent, and convincing

evidence that ( 1) the defendant supplied information for the guidance of others in their

business transactions that was false, (2) the defendant knew or should have known that

the information was supplied to guide the plaintiff in his business transactions, (3) the

defendant was negligent in obtaining or communicating the false information, (4) the

plaintiff relied on the false information, (5) the plaintiffs reliance was reasonable, and

(6) the false information proximately caused the plaintiff damages." Ross v. Kirner, 162

Wn. 2d 493,499, 172 P.3d 701, (2007). York defends the trial court's dismissal of the

       6
          Were the language not plain, we could rely for the breadth of the statute's
application on legislative history. In 1995, the legislature added the language "their
providers," in order to capture the activities of"cappers"-persons who "acting under an
agreement or understanding that they will receive a pecuniary benefit, refer claimants
with real or imagined claims, injuries, or property damage to service providers." LA ws
OF 1995, ch. 285, § 1, § 17.
        7
          York contended below and contends on appeal that the Merrimans did not plead
a negligent misrepresentation claim. But the trial court concluded otherwise when it
initially denied York's motion for summary judgment dismissal of that claim. Since the
trial court could have permitted amendment or even deemed the complaint amended to
conform to evidence and arguments advanced in the summary judgment briefing, we
consider the issue moot.
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negligent misrepresentation claim on appeal solely on the basis of the Merrimans' failure

to demonstrate that York owed a duty to them and other property owners. Br. ofResp't

at 30.

         A defendant may "participate" in making a negligent misrepresentation without

being in direct communication with the plaintiff. In Haberman v. Washington Public

Power Supply System, 109 Wash. 2d 107, 161, 744 P.2d 1032, 750 P.2d 254 (1987), for

example, investors stated a claim for negligent misrepresentation against professionals

who made and "participated in making" negligent misrepresentations in official

statements and annual reports. The Washington Supreme Court held that it was enough

to state a claim that the professionals "supplie[d] the information for repetition to a

certain group or class of persons and that the plaintiff proves to be one of them." Id. at

163 (quoting RESTATEMENT (SECOND) OF TORTS,§ 552 cmt. h) (AM. LAW INST. 1977);

and see Johnson v. Harrigan-Peach Land Dev. Co., 79 Wn.2d 745,751,489 P.2d 923

( 1971) (imposing liability on corporate principals who "knew and approved"

representations made by sales representatives). Here, the Merrimans presented evidence

that York instructed Partners to provide misleading or misleadingly limited information.

         Ordinarily, an omission alone cannot constitute negligent misrepresentation, since

a plaintiff must justifiably rely on a misrepresentation. Ross, 162 Wash. 2d at 499. But if a

party has a duty to disclose information, the failure to do so can constitute negligent

misrepresentation. Van Dinter v. Orr, 157 Wash. 2d 329, 333, 138 P.3d 608 (2006). A duty

                                             18
    No. 33929-7-111
    Merriman v. Am. Guar. & Liab. Ins. Co., et al.

    to disclose in a business transaction arises if, among other circumstances, disclosure is

    necessary to prevent a partial or ambiguous statement of facts from being misleading. Id.

    at 334 (citing Colonial Imports, Inc. v. Carlton Nw., Inc., 121 Wn.2d 726,731,853 P.2d

    913 (1993)). In Colonial Imports our Supreme Court endorsed the notion that the duty

    arises when the facts are peculiarly within the knowledge of one person and could not be

    readily obtained by the other. Colonial, 121 Wash. 2d at 731-32 (noting that Washington

I
I
    adopted the Restatement (Second) of Torts as the standard governing claims of negligent

    misrepresentation in Haberman, 109 Wash. 2d at 161-62).

           A party is subject to the same liability for nondisclosure of a fact it knows may

    justifiably induce another to refrain from acting in a business transaction as it would be

    for representing the nonexistence of the undisclosed matter, if it is under a duty to

    exercise reasonable care to disclose the matter. Colonial, 121 Wash. 2d at 731 (citing

    RESTATEMENT (SECOND) OF TORTS § 5 51 ( 1)). Among circumstances in which a party to

    a business transaction is under a duty to exercise reasonable care to disclose a matter is

    "facts basic to the transaction, if [the party] knows that the other is about to enter into it

    under a mistake as to them, and that the other, because of the relationship between them,

    the customs of the trade or other objective circumstances, would reasonably expect a

    disclosure of those facts." RESTATEMENT (SECOND) at§ 551(2)(e).

           Washington law provides that "[n]o insurer shall fail to fully disclose to first party

    claimants all pertinent benefits, coverages or other provisions of an insurance policy or

                                                   19
I
I   No. 33929-7-111
    Merriman v. Am. Guar. & Liab. Ins. Co., et al.

    insurance contract under which a claim is presented." WAC 284-30-350(1). Reasonable

    jurors could find that York knew that if it did not provide property owners with the

    information about policy coverage and claims process to which they were entitled under
1
•
I   Washington law, then no one would-because American Guarantee was relying on York

I
'
    to make the disclosure. Jurors could reasonably find that the coverage for the personal

    property of others provided by Bernd' s policy was a fact basic to the insurance claim

    transaction with Bemd's customers. They could reasonably find that customers told that

    York was handling property owners' claims, and that Partners was assisting York, would

    reasonably expect disclosure of policy provisions. They could reasonably find that

    property owners would foreseeably abandon the effort to make a claim under Bemd's

    policy if left with the impression that they would need to look to their own homeowners'

    policies for coverage.

           Because the common law imposes liability for negligent misrepresentation under

    such circumstances in all business transactions, York's status as an independent adjuster

    engaged by American Guarantee does not exempt it. The Merrimans state a viable claim

    for negligent misrepresentation.

         IV. As insureds intended to benefit from York's undertakings in the third party
            administrator agreement, the Merrimans assert a viable negligence claim

           The Merrimans also assert a claim for negligence, specifically, negligent claims

    handling. A claim for negligent claim handling exists in Washington. In First State

    Insurance Co. v. Kemper National Insurance Co., 94 Wash. App. 602, 612-13, 971 P.2d
20
                                                                                                     ------.

l
                                                                                                           I

I   No. 33929-7-111
    Merriman v. Am. Guar. & Liab. Ins. Co., et al.

    953 (1999), the court held that the plaintiffs claim for negligence against an insurer was

I
1
    not subsumed within its claim for common law bad faith because "a party may fail to use
I
    ordinary care yet still not act in bad faith."

I
I
           York does not dispute that negligence and bad faith claims are distinct, but argues

    that unlike the defendant-insurer in First State, York was a mere adjuster, owing no duty

I
l
    to the Merrimans and Bemd's other customers.

           By statute, an "[a]djuster"

l          means any person who, for compensation as an independent contractor or as an
           employee of an independent contractor, or for fee or commission, investigates or
           reports to the adjuster's principal relative to claims arising under insurance
           contracts, on behalf solely of either the insurer or the insured.

    RCW 48.17.010(1). An "[i]ndependent adjuster"-which York was here-"means an

    adjuster representing the interests of the insurer." RCW 48.17.0lO(l)(a).

           Nothing in the licensing definition of an adjuster prohibits or makes it unlawful for

    the adjuster to exercise additional authority on behalf of its principal if its agreement with

    the principal grants it additional authority. United Truck Lines v. Emp 'rs Mut. Cas. Co.,

    44 Wash. 2d 520, 522-23, 268 P.2d 1014 (1954). There is substantial evidence that York

    acted as more than an adjuster in this case.

           York's contract with American Guarantee identified York as a third party claims

    administrator and the scope of its duties was broad, including to "[p]romptly and

    thoroughly review, process, Adjust, settle and pay Claims under the Policy in full

    compliance with (1) this Agreement, (2) the Policy, and (3) all applicable legal and
                                                     21
No. 33929-7-III
Merriman v. Am. Guar. & Liab. Ins. Co., et al.

regulatory requirements." CP at 2491. The duration of York's responsibility covered the

entire process of administration, from beginning to end: it promised to "provide ...

services" and "perform ... duties" for claims under American Guarantee's policies, and

to carry out that responsibility for all promised services "from the date of first report until

final resolution." Id.

       American Guarantee's CR 30(b)(6) designee testified that American Guarantee

looked to York to tell property owners of the provisions of the insurance policy within 30

days of the fire and to advise them of the claims investigation and inventory process, and

of York's responsibilities to provide support and assistance in that process. See Br. of

Appellant at 9 (citations to testimony). But York did not fulfill the insurer's duties under

the Washington insurance code and regulations that it took on under its agreement with

American Guarantee-so no one did. See id. at 10-11 (citing evidence). American

Guarantee always asserted that York was at fault for any mishandling of the property

owners' claims.

       In a negligence action, in determining whether a duty is owed to the plaintiff, the

court considers "logic, common sense, justice, policy, and precedent, as applied to the

facts of the case." Centurion Props. IIL LLC v. Chi. Title Ins. Co., 186 Wash. 2d 58, 65,

375 P.3d 651 (2016). In Centurion, our Supreme Court began its analysis by considering

                                              22
    No. 33929-7-III
    Merriman v. Am. Guar. & Liab. Ins. Co., et al.

    the duties owed by the type of defendant (in Centurion, a title insurer) in other

I
J
    Washington cases. Id. at 66. We therefore begin with other Washington cases as well. 8

                           Washington cases addressing adjuster liability

           The Merrimans contend that the decision of this court in Aldrich & Hedman, Inc.

    v. Blakely, 31 Wash. App. 16, 639 P.2d 235 (1982) has already recognized a Washington

    adjuster's duty to an insured. In that case, the adjuster undertook to hire a contractor to

    repair an insured's damaged home. Deviating from its usual procedures, the adjuster

    hired an individual, Ted Erwin, who was unlicensed and unbonded. Id. at 17-18. He

    proved to be unqualified, and was ordered to stop construction by the building inspector.

    Id. The adjuster "considered itself responsible for what happened" and obtained a bid to

    complete necessary repairs from another contractor. Id. at 18. In that respect, the duty of

    the adjuster was not at issue in the trial court or on appeal. Id.

           8
             At issue is only whether a duty exists that will support a negligence claim. We
    do not perceive any issue under the independent duty doctrine, discussed by the dissent,
    because no party has suggested that York's third party administrator agreement gave rise
    to contractual duties owed by York to the Merrimans from which a tort duty would have
    to be independent. York denies owing any duty whatsoever to the Merrimans.
            The court's discussion affirming dismissal of negligence claims against an
    insurer's employee-adjuster in International Ultimate, Inc. v. St. Paul Fire & Marine
    Insurance Co., 122 Wash. App. 736, 758, 87 P.3d 774 (2004) is so fleeting as to be
    inscrutable. To read it as suggesting that the tort liability of an agent is limited to
    conversion situations involving corporate officers, see id., cannot be correct. "Under
    Washington law ... [a]n employee or agent is personally liable to a third party injured by
    his or her tortious conduct, even if that conduct occurs within the scope of employment or
    agency." Annechino v. Worthy, 175 Wn.2d 630,638,290 P.3d 126(2012).

                                                  23
    No. 33929-7-111
    Merriman v. Am. Guar. & Liab. Ins. Co., et al.

           The litigation that ensued was brought by a contractor engaged by Mr. Erwin to

    finish the needed repairs, who sued the homeowner, the insurer, and the adjuster for the

    cost of the repairs when Mr. Erwin failed to pay. Id. at 18-19. Only the homeowner was

    found liable for a small amount of work that went beyond the loss indemnified by her

    policy. Id. at 19.
!
i          It was in making an equitable award of attorney fees to the homeowner for her
l   successful defense of most of Aldrich's claim that the trial court applied the ABC rule9
j
'
    and concluded that the adjuster's negligence subjected the homeowner to the litigation.

    Id. at 19-20. In making the equitable award of fees, the trial court necessarily found and

    this court necessarily reviewed, whether the adjuster's wrongful act or omission toward

    the insured homeowner exposed her to Aldrich's suit. In affirming that it did, the

    decision states, "[T]his litigation came about only because of [the adjuster's]

    negligence---not through the fault of [the homeowner] or [the insurer]." Id. at 20.

           While Aldrich recognized a duty on its facts, it cannot reasonably be read to create

    a general duty of care owed by adjusters to insureds. The result is best explained as an

    application of the common law duty of reasonable care arising when a defendant

    undertakes to render services on which a plaintiff reasonably relies, including relying on

           9
             "ABC" describes the elements necessary under the rule giving rise to the
    equitable right to recover attorney's fees: "(l) a wrongful act or omission by A towards
    B; (2) such act or omission exposes or involves Bin litigation with C; and (3) C was not
    connected with the original wrongful act or omission of A towards B." Aldrich, 31 Wn.
    App. at 20.
                                                 24
I
I    No. 33929-7-III
     Merriman v. Am. Guar. & Liab. Ins. Co., et al.

l
Il   the defendant to perform the services nonnegligently. In Roth v. Kay, this court observed,
I    quoting Judge Benjamin N. Cardozo, "' It is ancient learning that one who assumes to act,
1
l
     even though gratuitously, may thereby become subject to the duty of acting carefully, if
i
     he acts at all."' 35 Wash. App. 1, 4,664 P.2d 1299, (1983) (quoting Glanzer v. Shepard,

     233 N.Y. 236,239, 135 N.E. 275, (1922)). The principle applies in voluntary rescue

     cases. Brown v. MacPherson 's, Inc., 86 Wn.2d 293,299, 545 P.2d 13 (1975); Meneely v.

     S.R. Smith, Inc., 101 Wash. App. 845, 859-60, 5 P.3d 49 (2000) (by voluntarily

     promulgating industry wide safety standards relied on by manufacturers, trade association

     assumed duty to warn that they created risk of injury to a particular demographic);

     Roundtree Villas Ass'n v. 4701 Kings Corp., 282 S.C. 415,423,321 S.E.2d 46 (1984)

     (when lender undertook to repair roof defects, a common law duty to use due care arose).

              The American Law Institute's most recently approved treatment of liability for

     pecuniary loss from the negligent performance of services imposes liability on an actor

     who, in the course of its business, is relied on to perform a service for the benefit of the

     plaintiff-although not under contract with the plaintiff-and negligently causes

     pecuniary loss. RESTATEMENT (THIRD) OF TORTS: LIABILITY FOR ECONOMIC HARM § 6

     (AM. LAW INST., Tentative Draft No. 2, 2014). 10 In essence, the Restatement (Third) of

     Torts recognizes liability for negligently performed services in the same narrow

         10
              Section 6 provides, in its entirety:
                                                     25
Il
     No. 33929-7-111
l    Merriman v. Am. Guar. & Liab. Ins. Co., et al.
Ii
     circumstances in which liability for negligent misrepresentation is recognized, but

I
)

l
     imposes liability for negligently performed services that cannot be characterized as

I    negligent statements. Id., cmt. The Washington decision in Estes v. Lloyd Hammerstad,
I
     Inc., 8 Wash. App. 22, 503 P.2d 1149 (1972) is the basis for one of its illustrations. See
II   RESTATEMENT (THIRD) OF TORTS,§ 6, Reporter's Note (discussing Illustration 3). In

     Estes, a real estate broker promised to arrange for transfer of fire insurance upon the sale

     of a home, thereby making himself an agent of the buyer and creating a duty.

            A second decision involving a duty owed by an adjuster is Jones v. Allstate

     Insurance Co., 146 Wash. 2d 291, 45 P.3d 1068 (2002), in which our Supreme Court held

     that Allstate could be vicariously liable for its lay employee-adjuster's negligent

     performance of services on which a third party claimant relied. Much of the decision

            ( 1) One who, in the course of his business, profession, or employment, or in
            any other transaction in which he has a pecuniary interest, performs a
            service for the benefit of others, is subject to liability for pecuniary loss
            caused to them by their reliance upon the service, ifhe fails to exercise
            reasonable care in performing it.
            (2) The liability stated in Subsection ( 1) is limited to loss suffered
                   (a) by the person or one of a limited group of persons for whose
                   benefit the actor performs the service; and
                   (b) through reliance upon it in a transaction that the actor intends to
                   influence.
            (3) A plaintiffs recovery under this Section is subject to the same rules of
            comparative responsibility that apply to other claims of negligence.
            (4) This Section does not recognize liability for negligence in the course of
            negotiating or performing a contract between the parties.

                                                  26
No. 33929-7-111
Merriman v. Am. Guar. & Liab. Ins. Co., et al.

deals with the issue, not present here, of whether the adjuster's actions constituted the

practice of law. But both the majority and dissenting opinions also addressed the

separate issue of whether the adjuster owed a duty to the claimant, and both concluded

that on the facts of the case, she did: the claimant was "at least one of the intended

beneficiaries of the transaction to which [the adjuster's] advice pertained." Id. at 307

(majority); and see 319 (Madsen, J., dissenting). There was no suggestion that adjusters

owe a general duty; instead it was the nature and extent of the assistance provided by

Allstate's adjuster that supported the conclusion that the plaintiffs were intended to

benefit from her services.

       Addressing the potential conflict of interest in the adjuster's performance of

services for Allstate and the plaintiffs, none of the justices concluded that the potential

conflict made it impossible for a duty to arise. The majority held that the adjuster owed

both a duty to perform nonadversarial services to the standard of a practicing attorney

and, to the extent a potential conflict existed, to disclose it. See id. at 310-11. The

dissent took the position that the duty owed was to fully disclose her adversarial role to

the plaintiffs and advise them to consult an attorney. Id. at 321-22.

            Other circumstances held by Washington courts to give rise to an
                       agent's duty of care: intended beneficiaries

       Returning to Centurion's guidance, after considering Washington cases dealing

with the type of professional involved, the court next considered other circumstances that

had led it to recognize a professional duty of care. 186 Wash. 2d at 66. Relevant here, the
                                             27
f
I   No. 33929-7-111
I
1
t
    Merriman v. Am. Guar. & Liab. Ins. Co., et al.

I   court observed that it has extended a professional duty of care to third parties "when the

I
I
    third party is an intended beneficiary." Id.

           Centurion cites Stewart Title Guaranty Co. v. Sterling Savings Bank, 178 Wash. 2d
561, 567, 311 P.3d 1 (2013) as an example of a case in which the court applied the

    principle that an intended beneficiary of an agent's promise to its principal is owed a duty

    by the agent. In Stewart Title, the plaintiff title insurer issued a policy to a bank in

    connection with a project financed by the bank. When a priority dispute arose that

    conflicted with the title insured, Stewart Title hired the bank's longtime law firm to

    represent the bank. The bank lost, and Stewart Title indemnified the bank against the

    loss. Contending that the law firm stipulated away a viable defense, Stewart Title sued

    the law firm for malpractice.

           Where a nonclient third party asserts a professional negligence claim against a

    lawyer, Washington courts apply a six factor test, adopted in Trask v. Butler, 123 Wash. 2d
835, 841, 872 P.2d 1080 (1994), to determine whether the lawyer may be liable. (The

    same test applied in the case of Allstate's adjuster in Jones, 146 Wash. 2d 291.) The first

    factor, which is the primary inquiry and determines whether the court needs to consider

    the remaining five, is "[t]he extent to which the transaction was intended to benefit the

    plaintiff." Stewart Title, 178 Wash. 2d at 565-66 (quoting Trask, 123 Wash. 2d at 843). The

    lawyer's conduct must be intended to benefit the third party "to some extent." Id. at 570.

    Stewart Title's only evidence that the bank and its law firm intended to benefit Stewart

                                                   28
    No. 33929-7-III
    Merriman v. Am. Guar. & Liab. Ins. Co., et al.

l
j
I
    Title was that there was an alignment of interests between it and the bank on the issue of

    the bank's priority, and that the law firm agreed to keep Stewart Title informed about the
I   litigation. Noting other respects in which the bank's and Stewart Title's interests

    diverged, the court held that the evidence was insufficient to establish that the bank and

    its law firm intended Stewart Title to benefit from the representation. Id.

            Other authorities support finding a duty where a plaintiff is intended to benefit

    from the type of promise of performance that American Guarantee secured from York.

    See   w. KEETON ET AL., PROSSER AND KEETON ON THE LA w OF TORTS § 93, at 670 (5th
    ed. 1984) (Stating, in addressing third party injury resulting where a promisor fails to

    perform its contractual undertaking, "It is time to dispense with the distinction between

    misfeasance and nonfeasance when foreseeable harm has resulted from reasonable

    reliance on a promisor to do what was promised."). Where economic harm results from a

    defendant's misfeasance or its nonfeasance plus reliance, the promisor may be liable on a

    tort theory not only to the promisee "but also to those who are intended beneficiaries of

    the promise." W. KEETON ET AL., supra, pocket part at 91.

            The Restatement (Third) ofAgency also identifies the intent to benefit a third party

    as a circumstance in which an agent's breach of duty to the principal may subject the

    agent to liability for the third party's loss. RESTATEMENT (THIRD) OF AGENCY§ 7.02

    cmt. d (AM. LA w INST. 2006). As the Restatement provision explains, it is not enough

    that the principal has instructed an agent to do an act that will benefit a third party; the

                                                  29
'
I
I
I
!
    No. 33929-7-111
    Merriman v. Am. Guar. & Liab. Ins. Co., et al.

i
I   agent must have manifested to the principal-expressly or implicitly-that it intends to

    implement the principal's instruction. Id.

           To reiterate, York promised American Guarantee that it would "[p]romptly and

    thoroughly review, process, Adjust, settle and pay Claims under the Policy;" that it would

    perform its duties "from the date of first report until final resolution," and that it would

    do so in compliance not only with its agreement and the policy, but "in full compliance

    with ... all applicable legal and regulatory requirements." CP at 2491. It would have

    been impossible for York to both keep property owners in the dark about the policy's

    coverage for their property-which it did-and at the same time fulfill its contractual

    duties. A plain reading of the contract supports American Guarantee's position that

    property owners were expected to benefit from York's performance of its obligations

    under the third party administrator agreement.

           York nonetheless points to a statement in the contractual definition of "Claims

    Administrative Services" that it argues absolves it of any duty to property owners: the

    definition disavowed a duty on York's part to "engage in the practice of law or assume

    the obligations of an insurer, with respect to the payment of Claims and [Allocated Loss

    Adjustment Expense]." CP at 2490. We are unpersuaded that the definition prevents any

    duty owed to insureds. American Guarantee had no duty under Washington law to

    provide insureds with legal advice, so York could take on a Washington insurer's duties

    without engaging in the practice of law. And the Merrimans have never contended that

                                                  30
I   No. 33929-7-III

I   Merriman v. Am. Guar. & Liab. Ins. Co., et al.

    York undertook American Guarantee's duty to "pay[ ] ... Claims and [Allocated Loss

    Adjustment Expense]."

                      Advancing Washington's policy ofprotecting insureds

           After examining precedent in Centurion, the court next considered whether

    providing a legal duty of care would advance or frustrate relevant insurance law. 186
Wash. 2d at 65. York argues that a finding that it owed a duty of care would frustrate

    Washington law by causing it, as an adjuster, to "represent" both the insurer and insured

    in the same transaction. RCW 48.17.410 prohibits licensed adjusters from representing

    both parties as an adjuster in the same transaction.

           The Merrimans have not persuaded us that an independent adjuster owes a general

    duty of care to an insured; what they do argue persuasively is that York had a duty to

    exercise reasonable care to fulfill the insurer's duties to insureds that it promised to fulfill

    in the third party administrator agreement. Specifically, the Merrimans argue that York

    owed a duty to exercise reasonable care to "fully disclose to first party claimants all

    pertinent benefits, coverages or other provisions of an insurance policy or insurance

    contract under which a claim is presented," as provided by WAC 284-30-3 50( 1); to

    refrain from "[m]isrepresenting pertinent facts or insurance policy provisions," as

    provided by WAC 284-30-330(1); and to refrain from "[r]efusing to pay claims without

    conducting a reasonable investigation," as provided by WAC 284-30-330(4).

    Recognizing such a duty on York's part advances Washington insurance law.

                                                  31
    No. 33929-7-111
    Merriman v. Am. Guar. & Liab. Ins. Co., et al.

           Since the duty to comply with claims handling regulations could not require York

    to do anything that American Guarantee was not itself required to do, it cannot present a

    conflict between York and American Guarantee. York would not be representing

    insureds as an adjuster, so RCW 48.17.410 does not apply. Just as the regulations in

I   chapter 284-30 WAC do not prevent American Guarantee from watching out for its own
i

I   legal rights and interests in investigating, settling, and paying claims, they cannot prevent

    York from representing American Guarantee's interests as an independent adjuster.

           When an insurer engages a claims administrator to take on all or substantial

    responsibility for claims investigation, adjustment, settlement and payment, it would be

    strange for it not to require the claims administrator to take responsibility for the

    associated claims handling regulations. Holding that a claims administrator owes a duty

    to insureds under these circumstances advances the policies of the insurance code by

    increasing the likelihood that the entity on whom everyone relies to comply with legal

    and regulatory requirements will comply. And since a Washington insurer's duties are

    nondelegable, it simplifies any resulting litigation. See DAN D. DOBBS, nrn LA w OF

    TORTS § 321 at 873 n.17 (2000) (pointing out that a direct action by a plaintiff is

    "probably more desirable" than requiring the plaintiff to sue the party who has delegated

    a nondelegable duty and will have a claim over for indemnification). Finally, imposing a

    duty on the claims administrator safeguards against what might otherwise be an incentive

    for an unscrupulous insurer to engage an unscrupulous claims administrator who, by

                                                  32
I
II    No. 33929-7-111
      Merriman v. Am. Guar. & Liab. Ins. Co., et al.

I
j     withholding information and cooperation, will prevent persons from ever discovering that

l     insurance covers their loss.

             Considering logic, common sense, justice, policy, and precedent, we hold that
j
i     given the duties undertaken by York in the third party administrator agreement; the intent

      of that agreement to benefit, in part, American Guarantee's insureds; and the foreseeable

      harm to the insureds if York's relevant promises were not performed, York owed the

      insureds a duty of reasonable care to perform those promises.

                  V. The Merrimans assert a viable non per se CPA claim, but their per
                                 se claims were properly dismissed

             The CPA prohibits "[u]nfair methods of competition and unfair or deceptive acts

      or practices in the conduct of any trade or commerce." RCW 19.86.020. It authorizes

      civil suits by any person "who is injured in his or her business or property" by a violation

      of the act. RCW 19.86.090. The legislature intends the CPA to "be liberally construed

      [so] that its beneficial purposes may be served." RCW 19.86.920. The CPA does not

      apply only to disputes between parties with a consumer relationship. Panag v. Farmers

      Ins. Co. of Wash., 166 Wash. 2d 27, 42,204 P.3d 885 (2009). 11 Available remedies include

             11
                 York argues that a different and controlling result was reached in International
     _ Ultimate, Inc. v. St. Paul Fire & Marine Insurance Co., 122 Wash. App. 736, 758, 87 P.3d
774 (2004), which held that "[t]o be liable under the CPA, there must be a contractual
      relationship between the parties." The International Ultimate court provided no authority
       for that statement; it conflicts with our Supreme Court's identification of the five
       elements of a CPA claim in Hangman Ridge Training Stables, Inc. v. Safeco Title Ins.
       Co., 105 Wash. 2d 778, 784-85, 719 P.2d 531 (1986), and later cases; and it cannot survive
                                                     33
     No. 33929-7-111
I    Merriman v. Am. Guar. & Liab. Ins. Co., et al.
!
i
I    injunctive relief, damages, attorney fees and costs, and exemplary damages not to exceed

     trebled actual damages, capped at $25,000. RCW 19.86.090.
\
:!

            To prevail in a private CPA claim, the plaintiff must prove five elements: (1) an

     unfair or deceptive act or practice, which (2) occurs in trade or commerce, and (3) affects

     the public interest, for which (4) the plaintiff suffered injury to her business or property,

     and was ( 5) caused by the act in question. Hangman Ridge Training Stables, Inc. v.

     Safeco Title Ins. Co., 105 Wash. 2d 778, 784-85, 719 P.2d 531 (1986).

            We tum first to the Merrimans' claims that York committed "per se" unfair and

     deceptive acts or practices by violating claims handling regulations. The first two

     elements required to prevail in a CPA action may be established by showing that the

     alleged act constitutes a per se unfair trade practice. Id. at 786. A per se unfair trade

     practice exists when a statute that has been declared by the legislature to constitute an

     unfair or deceptive act in trade or commerce has been violated. Id. A first party insured

     may bring an action for violation of the CPA based on a single violation of a claims-

     handling regulation. St. Paul Fire & Marine Ins. Co. v. Onvia, Inc., 165 Wash. 2d 122, 129,

     196 P.3d 664 (2008), aff'd, 301 F. App'x 707 (9th Cir. 2008) (citing Indus. Indem. Co. of

     the Nw., Inc. v. Kallevig, 114 Wash. 2d 907, 921, 792 P.2d 520 (1990)). The Merrimans'

     opening brief identifies several unfair or deceptive acts or practices identified by WAC

     284-30-330 and -350 that they claim were violated by York. Br. of Appellant at 28.

     the Supreme Court's holding in Panag that a CPA claim need not arise from a consensual
     business transaction or a business relationship. Panag, 166 Wash. 2d at 38-39.
                                                  34
I
Ii
I
     No. 33929-7-III
     Merriman v. Am. Guar. & Liab. Ins. Co., et al.
j

Ii          The problem for the Merrimans is that the per se deceptive practices on which they

     rely appear in regulations that apply only to insurers. See WAC 284-30-310 ("This
!
1    regulation 12 applies to all insurers and to all insurance policies and insurance contracts");

II   and WAC 284-30-350(1) ("No insurer shall fail to fully disclose to first party claimants

     all pertinent benefits, coverages or other provisions of an insurance policy or insurance
I

I    contract under which a claim is presented") (emphasis added). York did not violate the

     regulations unless it is an "insurer."

I           "Insurer" is defined in the regulation to mean "any individual, corporation, ... [or]

     other legal entity engaged in the business of insurance, authorized or licensed to issue ...

     any insurance policy or insurance contract in this state." WAC 284-30-320(8) (emphasis

     added). An adjuster is not licensed to issue an insurance policy or contract. 13

            The Merrimans nonetheless argue that York is "in the business of insurance,"

     satisfying the first clause of the definition of an "insurer." But the definition is not

     framed in the disjunctive; both clauses of the definition modify the subject. The

     regulations do not apply to York, so the Merrimans' claims of per se violations of the

     CPA were properly dismissed.

            12
               WAC 284-30-300 states that "this regulation" is "WAC 284-30-300 through
     284-30-400."
            13 The insurance code includes its own, similar definition of "insurer" that likewise

     does not encompass adjusters: "' Insurer' as used in this code includes every person
     engaged in the business of making contracts of insurance." RCW 48.01.050 (emphasis
     added).
                                                 35
No. 33929-7-111
Merriman v. Am. Guar. & Liab. Ins. Co., et al.

       Absent a per se violation of the CPA, a plaintiff may undertake to prove to the jury

that the defendant engaged in a practice that was nonetheless unfair or deceptive. To

demonstrate a deceptive act, "[the] plaintiff need not show that the act in question was

intended to deceive, but that the alleged act had the capacity to deceive a substantial

portion of the public." Hangman Ridge, 105 Wash. 2d at 785 (emphasis omitted). An

unfair act is established by evidence that it (1) causes or is likely to cause substantial

injury, which (2) consumers cannot avoid, and (3) is not "outweighed by countervailing

benefits." Klem v. Wash. Mut. Bank, 176 Wash. 2d 771, 787, 295 P.3d 1179 (2013)

(quoting 15 U.S.C. § 45(n)).

       The Merrimans argue that a jury could conclude that York's failure to alert

property owners to available coverage was an unfair or deceptive act that led to harm for

purposes of the CPA when the owners were required to resort to other sources of

payment for their loss, or in some cases go without complete indemnity as a result. We

agree. The Merrimans have asserted a viable non per se CPA claim.

        VI. Given our reinstatement of two claims against York that were never
       decertified as class actions, the trial court should reassess its decertification
              of the negligent misrepresentation and non per se CPA claims

       Finally, the Merrimans ask us to reverse the trial court's decision decertifying the

class action against York. We review a trial court's order on class certification for abuse

of discretion. Lacey Nursing Ctr., Inc. v. Dep 't ofRevenue, 128 Wash. 2d 40, 47, 905 P.2d
338 (1995).

                                              36

                                                                                              ,
I
I

    No. 33929-7-111
    Merriman v. Am. Guar. & Liab. Ins. Co., et al.

           Here, the trial court never decertified the class as it relates to two of the claims that

    we reinstate: insurance bad faith and negligence. While it found that individual issues

    would predominate with respect to the negligent misrepresentation and non per se CPA

    violation claims, it appears from our record on appeal that acts and omissions are

    relatively likely to have been identical as to affected parties at York's level-more so

    than, say, at Partners' level.

           Still, the trial court presided over extensive proceedings in this case involving four

    defendants, not just York, and unquestionably has a greater command than we do of the

    similarities or differences between class members' claims. We are satisfied that the trial

    court is in the best position to reexamine its decertification decision in the first instance.

    We remand with directions that the court reconsider its decertification decision in light of

    the claims that have been reinstated.

           We reverse dismissal of the Merrimans' insurance bad faith, negligent

    misrepresentation, negligence, and non per se CPA claims and remand for proceedings

    consistent with this decision.

                                                          d?~tu*1, U9=.
                                                       Siddoway, J.

    I CONCUR:

                                                  37
                                        33929-7-III

       KORSMO,   J. (dissenting in part) - The majority goes too far in creating new

causes of action against the adjuster, York Risk Services Group, Inc. (York), under these

facts and in unnecessarily conflicting with the decision in International Ultimate, Inc. v.

St. Paul Fire & Marine Insurance Co., 122 Wash. App. 736, 87 P.3d 774 (2004) (JUI).

Since these plaintiffs often must choose between suing in tort and in contract under our

independent duty doctrine, I do not think they can evade that stricture by suing the insurer

in contract and the insurer's agent in tort over the same contractual duty. An action under

our Consumer Protection Act (CPA), ch. 19.86 RCW, is an adequate remedy here for

York's alleged misbehavior and would avoid blurring a line our court has long struggled

to make clear.

       The leading case is Eastwoodv. Horse Harbor Foundation, 170 Wn.2d 380,241

P.3d 1256 (2010). Recognizing that the question presented was how to determine when a

plaintiff is limited to contract remedies and when tort remedies might be available, the

court answered its own question:
No. 33929-7-111
Merriman v. Am. Guar. & Liab. Ins. Co., et al.

       An injury is remediable in tort if it traces back to the breach of a tort duty
       arising independently of the terms of the contract. The court determines
       whether there is an independent tort duty of care . . . . When no independent
       tort duty exists, tort does not provide a remedy.

Id. at 389 (emphasis added). 1

       Here, as the majority nicely demonstrates, the only duty imposed on York arose

from its contractual obligation to fulfill American Guarantee's obligations under the

insurance policy. Absent that contract, there was no independent duty owed the plaintiffs

by York. Accordingly, there is no basis for extending liability to the adjuster.

       Similarly, Division One rejected the idea of independent tort liability for adjusters

in JUI. 122 Wash. App. at 757-58. The court expressly recognized that any liability would

have been based on contract. Id. The employees could not be sued separately from their

employer. Id. at 758. 2

       1
          In Eastwood, the long recognized tort of waste was independently actionable
despite the fact that the contract between the parties also required the defendant to
maintain the property. 170 Wash. 2d at 402 (lead opinion), 417-418 (Chambers, J.,
concurring).
        2
          York's actions could certainly be held against American Guarantee and support
an action against the insurer. However, the claims between the plaintiffs and American
Guarantee have been settled. Although all participants to an insurance claim have a duty
to act in good faith, RCW 48.01.030, I do not think that statute creates a basis for relief
against the adjuster where, as here, there is no other relationship between the plaintiffs
and the adjuster except through the adjuster's status as the insurance company's agent.
York acted as American Guarantee's agent and any liability should belong to the
principal, not the agent.

                                             2
No. 33929-7-III
Merriman v. Am. Guar. & Liab. Ins. Co., et al.

      While that explains the basis for my disagreement here, I do agree with the

majority that the CPA analysis in JUI has been superseded by subsequent case law. For

that reason, I would permit a CPA claim independent of the contract to proceed.

      I respectfully dissent.

                                            3