Date: 10-28-2024

Case Style:

Shelley S. Hawkins v. Ace American Insurance Company

Case Number: 95400-3-I

Judge: Not Available

Court: Superior Court, King County, Washington

Plaintiff's Attorney:

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Defendant's Attorney: Not Available

Description:

Seattle, Washington insurance law lawyer represented the Plaintiff seeking compensation for injuries sustained in a car wreck.

On November 16, 2016, Hawkins was driving her vehicle when she was rear ended by Fatemah Alsuwaidan. Moments later, Miguel's work van rear ended Alsuwaidan's vehicle, causing a second collision with Hawkins's vehicle. At the time of the collision, Miguel worked for Sears Holdings Management Corporation and was insured under a liability insurance policy issued to Sears by ACE.

On November 7, 2017, Hawkins's counsel sent a claims examiner at Sedgwick Claims Management Services Inc.-which managed claims for ACE on behalf of Sears-notice of representation of Hawkins in regard to the November 16, 2016 incident. On December 6, 2017, an adjuster called Miguel and documented that he had provided a statement and photographs of the collision. A different Sedgwick claims examiner sent a letter to Hawkins's counsel acknowledging his representation and requesting information to complete her investigation of the claim. On January 29, 2018, Hawkins sent a settlement demand. On April 25, 2018, Hawkins supplemented her demand with evidence of her 2017 earnings. Hawkins's counsel's correspondence indicates a different Sedgwick adjuster represented Alsuwaidan. ACE's claim file[1] describes an e-mail in which this Sedgwick adjuster on April 26, 2018, e-mailed Hawkins's counsel's
office seeking additional information, copying the Sedgwick claims examiner representing Miguel. This entry is dated June 11, 2018. The record does not indicate clearly whether any other presuit settlement communications occurred.

On September 18, 2018, Hawkins's counsel signed a complaint for negligence alleging the collision and naming as defendants A&E Factory Services LLC, Sears, Alsuwaidan and her husband, and Miguel and his wife.[2] The complaint asserted negligence by Miguel and asserted he was acting within the scope of employment for A&E and/or for Sears. Hawkins later filed the complaint.

Miguel was served with the complaint on October 10, 2018. On October 12, 2018, a Sears general manager e-mailed that "a tech [at Sears] was served paper for an accident he was involved in over a year ago" and requested information on where to send the documents. On October 15, 2018, Sears filed for bankruptcy, which triggered an automatic stay of all claims against it. The parties do not contend that Sears's filing triggered an automatic stay of the claim against Miguel. On October 16, 2018, the documents Miguel provided to Sears were internally forwarded to a Sears claims manager. On November 9, 2018, now beyond the 20 days in which Miguel had to answer service of the lawsuit, CR 12(a)(1), the Sears claims manager forwarded the documents to Sedgwick. The Sears claims manager explained, "I somehow missed this in my email." On November 12, 2018, the documents were sent to the Sedgwick claims examiner who had previously communicated with Hawkins's counsel. That day, the Sedgwick claims examiner replied, "I am no longer on that account," and to the extent of our record copied a supervisor "to assist."

The following day, on November 13, 2018, Hawkins filed a motion for an order of default against Miguel, which the superior court subsequently granted.[3]On December 11, 2018, an attorney at Williams, Kastner & Gibbs PLLC sent a message to Sears stating he had "accepted the assignment of this new matter in error" and the firm "cannot accept this or any other new matters at this time." The attorney further stated, erroneously, "[t]he Complaint has not yet been filed, however, so no immediate action needs [to be] taken." ACE's claim file adopted the view that no action needed to be taken on Sears files because of the bankruptcy stay.

On January 9, 2019, the United States Bankruptcy Court for the Southern District of New York issued an order extending the automatic stay to apply to Miguel and the other non-debtor parties in the case.[4] On January 22, 2019, Sears provided a copy of the stay extension order to Williams Kastner and asked that it file the notice with the superior court. Williams Kastner e-mailed Sears, again erroneously, that the "[c]omplaint was not actually filed with the court" and stated it "may be" that "once plaintiff's counsel learned of the bankruptcy, they opted not to actually file the suit." ACE recorded this belief in its claim file. Williams Kastner did not file the notice with the court, but on January 24, 2019, it mailed the notice extending the automatic stay to Miguel to Hawkins's counsel. It captioned the notice using the caption of Hawkins's lawsuit, described Hawkins's counsel as "Attorneys for Plaintiff," and did not indicate a cause number. The notice stated Williams Kastner represented only "Defendant Sears, Roebuck and Co.," an entity that was not named as a party.

On April 25, 2019, in violation of the bankruptcy stay, Hawkins moved for an order of default and default judgment against Miguel. The record does not indicate Hawkins gave notice of the motion to Williams Kastner. Hawkins argued at the hearing that Miguel and his employer had not appeared in the action, which meant they were not entitled to notice under CR 55(a)(3). Hawkins included an April 23, 2019 declaration by her chiropractor Chris Rivera, DC, stating that as a result of the November 16, 2016 collision, Hawkins suffered permanent injuries and would not regain the full state of health enjoyed prior to the collision. Dr. Rivera stated Hawkins had incurred reasonable and necessary medical charges consisting of $5,266.00 incurred on November 16, 2016 for an emergency department visit with computerized tomography scans of her head and cervical spine, $760.00 charged the same day by Evergreen Emergency Services, and $17,111.32 charged by Dr. Rivera for chiropractic services starting on November 18, 2016, and running through June 30, 2017, totaling $23,137.32. Hawkins claimed lost income of $125,880.00 and past and future noneconomic damages totaling $250,000.00.

The superior court held a hearing on the motion for default and heard testimony from Hawkins regarding her injuries from the collision. When the superior court inquired whether the defendants had insurance, Hawkins's counsel answered in a manner that did not disclose his previous communications with Sedgwick or the bankruptcy stay he had received from Williams Kastner, instead alluding to the possibility of a coverage dispute:

We are aware of one insurer, at least what I think is an insurer. But I'm getting mixed signals on whether there's actual coverage, so I really can't say that positively in the affirmative. And then two of these three defendants are confirmed-well, I can't say confirmed. No, they haven't appeared so I really have no idea at all from them from even an insurer.

The superior court entered an order of default and judgment for $399,297.32, plus statutory costs of $1,455.05, bearing interest at 7.50 percent.

On August 26, 2020, Hawkins's counsel sent a letter to Miguel informing him of the default judgment entered against him and advising that he owed the judgment, at that time totaling $440,827.61 with interest, but also now stating that his insurer should pay the judgment because it had committed bad faith. Hawkins's counsel stated in the letter,

I can free you from this judgment and subpoena, however. This is the worst case of insurance bad faith conduct I have ever seen. Your insurer should have to pay, not you. Hopefully, the insurer and their lawyer will not recommend that you file a bankruptcy when the insurer should be obligated to pay for its gross negligence in mishandling the claim.

I would like to discuss this with you. However, I cannot help you, and our offer to free you from paying this judgment is withdrawn, if you contact your insurance company.

After assisting Miguel in selecting an attorney, Hawkins's counsel e-mailed Miguel's counsel a draft settlement agreement with assignment of rights and covenants. Miguel agreed, among other things, to assign certain claims against ACE to Hawkins in exchange for Hawkins's agreement not to execute the default judgment against Miguel, then amounting to $443,323.00. Miguel's counsel emailed Hawkins's counsel the signed settlement agreement on October 9, 2020.

Attorney time records that Hawkins later filed in the superior court after being awarded attorney fees shed light on the next events. Hawkins hired Foster Garvey PC. On November 9, 2020, Foster Garvey reviewed "Sears documents and multiple docket filings." On November 12, 2020, Foster Garvey had a call with Hawkins's counsel after having researched extension of a bankruptcy stay to non-debtor parties. With Foster Garvey's assistance, Hawkins reached a stipulation with Sears, and on April 5, 2021, the bankruptcy court entered an order lifting the automatic bankruptcy stay as to Miguel.

With the stay lifted, on June 23, 2021, Miguel signed a new settlement agreement that Hawkins's counsel had previously sent Miguel's counsel. This agreement was similar to the first settlement agreement, except it increased the amount of the settlement from $443,323.00 to $1.5 million. The new agreement also provided for judgment interest at 12 percent. Hawkins filed a motion for a determination of reasonableness with respect to the June 23, 2021 settlement agreement and for judgment thereon. Hawkins relied on the same April 23, 2019 declaration by Dr. Rivera she had relied on two years earlier. However, Hawkins signed a new declaration in which she explained that her injuries had turned out to be worse than she had envisioned when she obtained the default judgment. Although not indicating either supporting expert testimony or any new medical treatment since 2017, Hawkins alluded to the possibility of having "known effects" of a traumatic brain injury. Hawkins relied on a two page declaration by the attorney to whom her counsel had referred Miguel, who stated it is "not unusual for a traumatic brain injury (TBI) case in Washington to be resolved for well over $1 million," and that settlement of $1.5 million was reasonable. Hawkins acknowledged that she had not given notice of the hearing to any insurers.[5]

Meanwhile, ACE's claim file indicates it first took note of the lifting of the bankruptcy stay as to Miguel on July 2, 2021. That day, ACE documented a plan to contact defense counsel. On July 19, 2021, Williams Kastner filed a notice of appearance on behalf of Sears, Roebuck and Co., A&E, and Miguel and mailed a copy of the notice to Hawkins's counsel.[6]

On July 20, 2021, the superior court e-mailed a signed copy of the order on Hawkins's motion for determination of reasonableness to Hawkins and Williams Kastner. Entering the order on July 21, 2021, the superior court granted Hawkins's motion to find the settlement reasonable. On August 12, 2021, Hawkins and Miguel mailed ACE a 20 day presuit notice and purported opportunity to cure under IFCA. Around the same time, Hawkins and Miguel agreed on a new interlineation to the settlement agreement, to clarify their intent concerning Miguel's right to receive damages obtained by Hawkins in pursuing the assigned claims. On September 2, 2021, the superior court entered a confession of judgment against Miguel for $1.5 million. Hawkins filed a corrected amended complaint, asserting claims against ACE for negligence, violation of IFCA, and breach of the duty of good faith, and on October 1, 2021, served ACE through the Office of the Insurance Commissioner.

Litigation between Hawkins and ACE followed. In responsive pleadings, ACE asserted, among other affirmative defenses, that Miguel violated the cooperation clause of the policy and "[s]uch acts forfeited coverage for the damages sought by [Hawkins]." Hawkins filed a motion for partial summary judgment against ACE seeking to establish coverage for Hawkins's judgment against Miguel, strike ACE's affirmative defenses, enter judgment against ACE on the amount of the covenant judgment, and find ACE liable for breach of contract, violation of IFCA, and failure to act in good faith.[7] ACE filed a CR 60 motion to relieve Miguel and ACE from judgments and orders. In addition to seeking vacatur of the May 2, 2019 order of default which Hawkins had voluntarily vacated and the bankruptcy court had vacated as well, and the October 9, 2020 settlement that the bankruptcy court had vacated, ACE sought vacatur of Miguel's representation agreement with the attorney referred by Hawkins's counsel, the June 23, 2021 settlement, the reasonableness determination, and the later interlineated settlement agreement.

The superior court granted Hawkins's motion for partial summary judgment and denied ACE's CR 60 motion. In a May 3, 2023 order granting Hawkins's motion for partial summary judgment, the superior court concluded Hawkins's negligence claims and consent judgment against Miguel were covered by ACE's insurance policy, and Hawkins was entitled to the $1.5 million consent judgment plus interest. The superior court concluded that ACE as a matter of law breached the insurance policy, breached the duty of good faith, and violated IFCA. The court struck ACE's affirmative defense that Miguel failed to comply with the policy's conditions to the prejudice of ACE.[8] The superior court found that enhanced damages were appropriate under IFCA, and Hawkins was entitled to recover reasonable attorney fees and costs under Olympic Steamship Co. v. Centennial Insurance Co., 117 Wn.2d 37, 811 P.2d 673 (1991). In a May 3, 2023 judgment, after adding treble damages under IFCA, the court entered judgment for Hawkins against ACE in the amount of $5,443,200.00. Hawkins moved for attorney fees pursuant to the summary judgment order, and on May 23, 2023, the superior court entered judgment against ACE for $232,195.60. ACE appeals.[9]...

Hawkins v. Ace Am. Ins. Co., 85400-3-I (Wash. App. Oct 28, 2024)

Outcome: Affirmed

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Defendant's Experts:

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