Appeals Court Upholds Clallam County Judge’s Ruling in Auto Insurance Dispute
The Court of Appeals Division II has affirmed a Clallam County Superior Court decision allowing a local motorist to pursue claims against her auto insurer, even after the company eventually paid her arbitration award.
The published opinion, filed Tuesday, upholds a May 10, 2024 ruling by Clallam County Superior Court Judge Simon Barnhart.
The appellate decision addresses the state’s Insurance Fair Conduct Act and clarifies whether an insurance company can be shielded from liability for extracontractual damages after paying an arbitration award following a dispute.
A 2018 Collision and Initial Arbitration
The case stems from a November 2018 auto accident in which Labeaume was struck by a driver who was determined to be 100 percent at fault.
Because the at-fault driver’s insurance policy limit was $100,000, Labeaume’s initial personal injury claim went to mandatory arbitration. To qualify for that specific arbitration proceeding, Labeaume signed a statement waiving claims in excess of the $100,000 limit.
An arbitrator awarded Labeaume $85,929.35 in January 2021. Labeaume and the at-fault driver reached a settlement for that amount rather than seeking a trial de novo, and the superior court filed a stipulation dismissing the matter with prejudice, noting it had been “fully settled and compromised.”
The Underinsured Motorist Dispute
According to court records, Labeaume asserted her total damages exceeded the settlement, leading her to file an Underinsured Motorist claim with her own insurer, First National, seeking to utilize her $250,000 UIM policy limit.
First National evaluated Labeaume’s gross damages at $77,214.46 based solely on its assessment of her submitted medical records.
The insurer excluded damages from a period after July 2019, noting she had been discharged by her physical therapist as “pain free” and had not yet reported postconcussive symptoms.
Because its damage estimate was lower than her $85,929.35 settlement from the at-fault driver, First National determined she had been fully compensated and initially declined to pay additional UIM benefits without further documentation.
Labeaume, represented by Port Townsend-based attorneys Rafael Edward Urquia and Eva Margreta Weber, sued First National for breach of contract.
A second arbitrator ultimately determined her total crash-related damages equaled $205,590.
On June 21, 2023, First National paid Labeaume $94,822.80—the remaining balance of her damages after offsetting the at-fault driver’s $100,000 policy limit and personal injury protection payouts already made by First National.
Judge Barnhart denied the insurer’s motion in Clallam County Superior Court, stating that no Washington State legal authority supported First National’s arguments.
First National then sought discretionary review from the Court of Appeals, halting the local trial proceedings to certify the questions.
The Appeals Court Decision
On Tuesday, the Appeals Court firmly backed Judge Barnhart. Writing for a unanimous three-judge panel, Judge Rebecca Glasgow clarified that the waiver Labeaume signed was explicitly limited to the initial arbitration with the at-fault driver.
Because the parties settled and the trial court never entered a final judgment on that specific arbitration award, Labeaume was not legally precluded from seeking UIM coverage from her own insurer.
Crucially, the appellate court also ruled that an insurer’s eventual payment of an arbitration award does not automatically prevent an insured from pursuing a claim over an allegedly unreasonable initial denial.
“Given IFCA’s intended purpose of protecting insureds, we hold that payment of insurance benefits, particularly when it occurs after a final determination of damages, does not prevent an IFCA claim for extracontractual damages resulting from an allegedly unreasonable initial denial of benefits,” Judge Glasgow wrote. Judges Anne Cruser and Bernard Veljacic concurred.
The court emphasized that it was not ruling on whether First National’s initial actions were, in fact, unreasonable.
The opinion noted that the outcome “does not mean First National acted reasonably as a matter of law,” and left the factual determination of whether the insurer effectively denied her claim or acted unreasonably to a future jury or fact-finder.
The decision allows Labeaume’s lawsuit to survive summary judgment and proceed to the next steps in Clallam County Superior Court.