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Safeco Insurance Co. v. Butler2/6/1992
this context is blurred. Hamilton v. State Farm Ins. Co., 83 Wash. 2d 787, 792, 523 P.2d 193 (1974); Tyler, 3 Wash. App. at 175. Furthermore, bad faith is a tort arising out of the contractual duty to act in good faith. Long § 5B.02, at 5B-16; Insurance Claims § 2.02, at 27-28; Tank, 105 Wash. 2d at 385 (duty to act in good faith arises out of the fiduciary relationship that exists, in part, because of the contract between the insurer and the insured). Thus, it seems meaningless in this context to distinguish between a breach of the contractual duty to defend and a breach of the duty to act in good faith. If a covenant not to execute does not relieve an insurer of liability for its breach of contract, then it should not relieve the insurer from liability for breaching its "enhanced obligation" to act in good faith.
Second, even though the agreement insulates the insured from liability, it still
constitutes a real harm because of the potential effect on the insured's credit rating . . . damage to reputation and loss of business opportunities[.]
Barr v. General Accident Group Ins. Co. of North Am., 360 Pa. Super. 334, 342, 520 A.2d 485, 489, appeal denied, 517 Pa. 602, 536 A.2d 1327 (1987). Cf. Barker v. Sumney, 185 F. Supp. 298 (N.D. Ind. 1960); Ivy v. Pacific Auto. Ins. Co., 156 Cal. App. 2d 652, 320 P.2d 140 (1958); Insurance Claims § 6.05, at 300; Rager v. Superior Coach Sales & Serv., 110 Ariz. 188, 516 P.2d 324 (1973). As the Pennsylvania court noted, this type of agreement is not a release from liability. Instead, it is an agreement to seek recovery only from a specific asset -- the proceeds of the insurance policy and the rights owed by the insurer to the insured. Barr, at 341.
The Butlers had a potential bad faith claim against Safeco. They assigned that claim to the Zenkers. The Butlers had the power to assign their rights under the policy without Safeco's consent. Insurance Law § 4.1(3)(i), at 303; Kagele, 40 Wash. App. at 198. The Zenkers acquired all of the Butlers' rights as they existed at the time of assignment. Morse Electro Prods. Corp. v. Beneficial Indus. Loan Co., 90 Wash. 2d 195, 579 P.2d 1341 (1978). That assignment
does not relieve Safeco from liability, nor does it preclude a showing of harm.
Viewing all of the evidence in the light most favorable to the Butlers, we hold there are material facts at issue as to whether Safeco acted in bad faith. Therefore, we affirm the trial court's denial of summary judgment. We now turn to the question of whether the trial court erred in determining that the insurance policy did not cover the injuries to Eddie Zenker.
III
The Safeco policy provides coverage for "bodily injury . . . caused by an occurrence to which this policy applies". Clerk's Papers, at 25. The policy defines an occurrence as "an accident . . . which results, during the policy period, in bodily injury". Clerk's Papers, at 15.
It is undisputed that Butler intentionally fired his gun at Zenker's truck. Safeco argues that, as a matter of law, injuries caused by intentionally firing a gun can never be caused by an accident. In granting Safeco's motion for summary judgment, the trial court determined that Eddie Zenker's injuries
were not caused by an "accident" as required in the Safeco policy. Therefore, Safeco has no obligation to provide liability insurance coverage to either . . . Hap M. Butler or . . . Geraldine Butler . . . .
Order Granting Partial Summary Judgment;
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