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Truck Insurance Exchange v. Vanport Homes11/21/2002
Oral Argument Date: 11/08/2001
Concurring: Charles W. Johnson, Richard B. Sanders, Faith E Ireland, Susan J. Owens Dissenting: Bobbe J. Bridge, Charles Z. Smith, Gerry L. Alexander, Barbara A. Madsen
En Banc
We are asked to determine whether policy provisions relieve an insurer of the duty of providing coverage. However, because Truck Insurance Exchange breached its duty to defend in bad faith, we hold that it is estopped from denying coverage. The insurer further argues that in order to establish damages the insured must prove that its settlements with claimants were reasonable. We hold that where an insurer acts in bad faith in refusing to defend, the settlements entered into by insureds with third parties and approved by a court as reasonable will be presumed to be reasonable; such presumption may be overcome by the insurer upon a showing that the settlements were the product of fraud or collusion. The trial court's judgment is affirmed as indicated and the Court of Appeals is reversed to the extent it remanded for further findings regarding the reasonableness of the insured's settlement with the claimants.
FACTS
VanPort Homes, Inc., provided services in connection with the construction of new homes, and it offered two alternative contracts to its customers. It could act either as a general contractor or as a construction consultant to future homeowners wishing to build their own homes. All claims relevant to this appeal arose out of contracts to consult.
VanPort's boilerplate consultation contract provided that, with the exception of minor matters, the customer would 'have complete and full authority as to the construction of {the} residence.' Clerk's Papers (CP) at 428. The customer's responsibility included the selection of real estate , building plans, and design professionals. VanPort's services included assisting with schedules, budgets, and compliance with government requirements, and were 'limited to the advice and materials it provide{d} to client.' CP at 428-30.
When Truck Insurance first insured VanPort in 1987, it requested and received a report from Equifax regarding the nature of VanPort's business. The report stated that the company would be 'operating as building consultants to prospective clients who come to them and want to have a house built by themselves' and that they would be 'strictly a consulting firm.' The report outlined VanPort's role essentially as it was laid out in VanPort's contracts with customers. CP at 372-73.
In 1987, after receiving the report from Equifax, Truck Insurance issued a 'T-410' policy. From May 1991, coverage was provided by a commercial general liability (CGL) policy. Both policies provided coverage to VanPort as 'engineers or architects, consulting, not engaged in actual construction.' CP at 484, 524. Thus, the policies acknowledged the fact that VanPort was not functioning as a general contractor but classified the company role as engineers and architects. Both policies imposed on Truck Insurance the duty to defend.
Between 1989 and 1991, VanPort entered into construction consulting agreements with five sets of customers (collectively 'customers'). The customers complained of numerous incidents of defective labor and materials, which VanPort failed to catch in its inspections, and notified VanPort of the failure of several subcontractors to properly perform work.
Dissatisfied with VanPort's response, the customers sued VanPort in four separate lawsuits for violations of the Washington State Consumer Protection Act, chapter 19.86 RCW, the federal Consumer Credit Protection Act, 15 U.S.C. sec.sec. 1601-1693r, misrepresentation, u
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