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Desmond v. Liberty Northwest Insurance Corp.9/23/1991
Liberty Northwest Insurance Corporation appeals an order requiring it to pay a pro rata share of its
insured Kathryn Desmond's attorney fees incurred in a lawsuit Desmond brought against a third party tortfeasor. Liberty contends that the trial court lacked jurisdiction, thus its order is unenforceable. Alternatively, Liberty contends that the trial court erred in determining that Liberty had an obligation to pay a share of Desmond's attorney fees.
I
On April 30, 1988, Kathryn Desmond was injured when her car was rear-ended by Nicole Larson's car. Allstate Insurance Company insured Larson, and Liberty Northwest Insurance Corporation insured Desmond. Desmond's insurance policy included up to $10,000 for medical expenses and $10,000 for lost wages.
On June 28, 1988, Desmond retained John M. Graham to represent her in her personal injury claims. On July 15, 1988, Graham wrote Liberty requesting "personal injury protection" (PIP) payments for Desmond. Because Graham was proceeding on Desmond's behalf against Larson, Graham also offered to represent Liberty on a contingency basis for any subrogation claim it might have against Allstate. Liberty responded on July 27, 1988, confirming Desmond's PIP coverage and stating that it would represent itself in its subrogation claim against Allstate.
Liberty began paying Desmond PIP benefits in July 1988. After several months, Liberty apparently stopped making these payments, and Desmond took the matter to arbitration to compel Liberty to continue making PIP payments. Desmond prevailed in the arbitration, and Liberty resumed the payments.
On September 9, 1988, Liberty sent Allstate a memo promising to "forward substantiation for rental and PIP upon receipt." On August 1, 1989, Liberty wrote Allstate, updating the status of its PIP lien, which at that time was $18,646.18 in medical expenses and lost wages. On February 5, 1990, Liberty notified Allstate of its final PIP lien, which totaled $19,984.43.
Meanwhile, in February 1989, Desmond had commenced an action against Larson to recover for injuries sustained in the accident. On March 20, 1990, Desmond also filed a complaint against Liberty to compel arbitration under the underinsured/uninsured motorist (UIM) provision of her insurance policy. Desmond argued that she was entitled to UIM compensation because Larson was an underinsured motorist.
Ultimately, Desmond settled with Larson for $60,000 in July 1990. Allstate issued a $40,015.57 check payable to Desmond and Graham. Allstate also issued a $19,984.43 check payable to Desmond, Graham and Liberty. The second check represented Liberty's PIP payments to Desmond.
On October 9, 1990, Desmond filed a motion in the UIM action to determine reasonable attorney fees and to disburse funds. Desmond asked the trial court to allow her to place the $19,984.43 check made out to Desmond, Graham and Liberty into the registry of the court. Desmond also asked the trial court to enter an order requiring Liberty to pay a pro rata share of her attorney fees ($6,661.48) and costs ($623.15) for a total of $7,284.63.
Graham submitted an affidavit to the trial court in support of Desmond's attorney fees. Graham asserted that the prosecution of Desmond's claim resulted in his expending more than an estimated 225 hours of legal work and litigation costs of $1,869.46. This total included Graham's work on the PIP arbitration, the UIM action against Liberty and the personal injury action against Larson.
Graham took the position that although Liberty did not agree to have him obtain Liberty's PIP payments from Larson's carrier, Liberty's efforts had b
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