Washington Court of Appeals Holds Insurance Company Liability Liable for PIP Wage Loss

The Washington Court of Appeals issued an unpublished opinion on February 10, 2014, on an insured’s entitlement to wage loss benefits under the personal injury protection (“PIP”) coverage available in an automobile insurance policy.  In addition, it addressed the applicability of the Insurance Fair Conduct Act (“IFCA”) in the context of a denial of a PIP wage loss claim.  The case, which was titled Ainsworth v. Progressive Cas. Ins. Co., Wash. Ct. of App., Div. 1, No. 69433-2-I (2014), concerned an insured that was injured in a motor vehicle accident on July 24, 2010.  As a result of his injuries, the insured was unable to perform his duties at his warehouse job and part-time pizza delivery job.  Shortly after the accident, the insured filed a wage loss/income continuation claim under the PIP coverage in his automobile insurance policy.  The adjuster determined the amount of wages lost, but did not include any wages lost from the insured’s part-time pizza delivery job.  Based on the adjuster’s calculation, the insurance company paid the insured only the wages he lost from his warehouse job.

The insurance company received updates from the insured’s primary care physician, who indicated that the insured would be able to return to full-time work—with time and lifting restrictions—on October 15, 2010.  The physician also noted that the restrictions would remain in place until a follow-up visit, and that it was unclear when the restrictions would be removed.  Based on the physician’s note, the insurance company terminated the insured’s wage loss benefits on October 14, 2010.  The insured returned to his warehouse job full time as scheduled, but later claimed 60 hours of lost wages in October and November 2010 for medical appointments.  On December 7, 2010, the insured requested additional lost wages for work missed while attending the medical appointments.  The insurance company denied the insured’s claim, relying on the policy language providing that wage loss benefits are extended until “the insured is reasonably able to perform the duties of his or her usual occupation.”

The insured sued the insurance company alleging claims for breach of contract and violation of the IFCA.  The insured moved for partial summary judgment, arguing it was undisputed he lost wages from his warehouse and pizza delivery jobs due to accident-related injuries.  In its opposition, the insurance company relied on the language of the policy, arguing that the insured did not submit proof entitling him to lost wages for the pizza delivery job, and that it did not unreasonably deny his claim as required to succeed under the IFCA.  The trial court granted the insured’s motion awarding him the requested contractual damages and his attorney fees and costs pursuant to Olympic S.S. v. Centennial Ins. Co.  In addition, the trial court found as a matter of law that the insurance company unreasonably denied the wage loss claim and awarded double contractual damages, attorney fees and costs.  The insurance company appealed.

The Court of Appeals affirmed the trial court’s ruling in favor of the insured.  The court found that the insured was not able to return to his “usual” employment due to the restrictions imposed by his physician.  It held that the insured was entitled to all of the lost wages from his pizza delivery job because the insurance company did not include them in its calculation.  With respect to the post-release medical appointments, the Court of Appeals found that not compensating the insured for wages lost during those reasonable and necessary appointments would frustrate the purpose of PIP benefits and determined the insured was entitled to those wages as well.  In addition, the court rejected the insurance company’s argument that the insured failed to mitigate his damages by scheduling medical appointments during regular work hours because it did not satisfy its burden to of proof on the issue.

The trial court’s findings with respect to the insured’s claim for violation of the IFCA we also affirmed.  The insurance company challenged the trial court’s ruling on the grounds that (1) it denial was reasonable under the circumstances and that the IFCA applies only to coverage disputes, not valuation disputes, and (2) the insured failed to establish “actual damages” as required by the statute.  The Court of Appeals rejected the initial argument, finding that the IFCA, RCW 48.30.015(1) provides two bases for an action—unreasonable denial of a claim or failure to pay benefits—and that the insurance company violated both of those provisions.  The court refused to consider the latter argument because it was raised for the first time on appeal.

Finally, the Court of Appeals affirmed the trial court’s holding on attorney fees.  The insurance company argued that Olympic S.S. v. Centennial Ins. Co. was not applicable because the case was a valuation dispute, not a coverage dispute.  Citing Washington law that coverage disputes include issues where coverage is disputed and in which the extent of benefits owed is in dispute, the court determined this case qualified for attorney fees and affirmed the trial court ruling.

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