¶ 1 David Moeller insured his automobile through Farmers Insurance Company. After the vehicle sustained damage in a collision, Farmers paid the full cost of repairs, less a deductible. Moeller claimed that the policy covered loss for the diminished value of his vehicle, but Farmers disagreed.
¶ 2 Moeller filed a class action lawsuit, alleging breach of contract, insurance bad faith, and violations of the Washington Administrative Code and Consumer Protection Act (CPA).
¶ 3 Moeller appeals the order granting summary judgment. Farmers cross-appeals the class action certification. We affirm in part, reverse in part, and remand for further proceedings.
¶ 4 Moeller owned a 1996 Honda Civic CRX. Farmers insured the vehicle, covering loss from collision and comprehensive damage. After his vehicle sustained accident damage, Moeller notified Farmers. An adjuster inspected and elected to repair the vehicle. Farmers did not compensate Moeller for the vehicle's diminished value, that is damage that cannot be repaired such as weakened metal.
¶ 5 Moeller filed a third amended class action complaint against Farmers and Farmers Insurance Exchange (collectively Farmers) on behalf of himself and all others similarly situated (collectively Moeller). In his complaint, Moeller alleged (1) breach of contract, (2) insurance bad faith, (3) failure to disclose information/CPA violation, and (4) failure to make prompt payment of claim.
¶ 6 At the crux of Moeller's complaint was Farmers' failure to restore his vehicle to its "pre-loss condition through payment of the difference in the value between the vehicle's pre-loss value and its value after it was damaged,
¶ 7 After four days of oral argument, the trial court certified a class under CR 23(b)(3). We denied Farmers' motion for discretionary review of that order.
¶ 8 Farmers moved for summary judgment, claiming (1) the policy did not cover diminished value and (2) its denial of the diminished value claim was reasonable as a matter of law, thus barring Moeller's bad faith and CPA claims.
¶ 9 Moeller appeals and Farmers cross-appeals.
¶ 10 The relevant portions of the policy provide:
CP at 12, 19-20.
Standard of Review
¶ 11 We review orders granting summary judgment de novo, engaging in the same inquiry as the trial court. Qwest Corp. v. City of Bellevue, 161 Wn.2d 353, 358, 166 P.3d 667 (2007). On review of any pleadings, depositions, answers to interrogatories, admissions, and affidavits on file, a court may grant summary judgment if there are no genuine issues as to any material fact, thus entitling the moving party to judgment as a matter of law. Vallandigham v. Clover Park Sch. Dist. No. 400, 154 Wn.2d 16, 26, 109 P.3d 805 (2005); CR 56(c).
¶ 12 We interpret an insurance policy using contract analysis as a matter of law. Quadrant Corp. v. Am. States Ins. Co., 154 Wn.2d 165,
¶ 13 When interpreting a policy's terms, we do not analyze words and phrases in isolation. Peasley, 131 Wash.2d at 424, 932 P.2d 1244. Rather, we read the policy in its entirety, giving effect to each provision. Peasley, 131 Wash.2d at 424, 932 P.2d 1244.
¶ 14 An insurance policy must be interpreted in the manner in which the average insured would understand it. Weyerhaeuser Co. v. Commercial Union Ins. Co., 142 Wn.2d 654, 666, 15 P.3d 115 (2000). We give terms not defined in the policy their "`plain, ordinary, and popular'" meaning. Kitsap County v. Allstate Ins. Co., 136 Wn.2d 567, 576, 964 P.2d 1173 (1998) (quoting Boeing Co. v. Aetna Cas. & Sur. Co., 113 Wn.2d 869, 877, 784 P.2d 507 (1990)). We may ascertain this by referring to standard English dictionaries. Matthews v. Penn-America Ins. Co., 106 Wn.App. 745, 765, 25 P.3d 451 (2001).
¶ 15 When faced with clear and unambiguous language, we enforce the policy as written. Peasley, 131 Wash.2d at 424, 932 P.2d 1244. An ambiguous clause is one susceptible to two different, reasonable interpretations. McDonald v. State Farm Fire & Cas. Co., 119 Wn.2d 724, 733, 837 P.2d 1000 (1992). Extrinsic evidence is admissible to assist the court in ascertaining the parties' intent and in interpreting the contract. U.S. Life Credit Life Ins. Co. v. Williams, 129 Wn.2d 565, 569, 919 P.2d 594 (1996). After examining the available extrinsic evidence, we resolve any remaining ambiguity against the insurer and in favor of the insured. Quadrant Corp., 154 Wash.2d at 172, 110 P.3d 733.
¶ 16 Our analysis differs, depending on whether an inclusionary or exclusionary clause is at issue. See Mercer Place Condo. Ass'n v. State Farm Fire & Cas. Co., 104 Wn.App. 597, 602-03, 17 P.3d 626 (2000). We liberally construe inclusionary clauses, providing coverage whenever possible. Ross v. State Farm Mut. Auto. Ins. Co., 132 Wn.2d 507, 515-16, 940 P.2d 252 (1997). In contrast, we strictly construe exclusionary clauses against the drafter. Quadrant Corp., 154 Wash.2d at 172, 110 P.3d 733.
BREACH OF CONTRACT
¶ 17 First, Moeller contends that his policy covers diminished value.
¶ 18 The coverage clause states that Farmers "will pay for
¶ 19 But the policy does not define "direct" and "damage."
¶ 20 "Direct" means "without any intervening agency or step: without any intruding or diverting factor." Webster's Third New Int'l Dictionary 640 (1976). Commentators generally agree with this definition. As noted in Couch on Insurance, where an insurance policy covers direct and accidental loss to the insured vehicle, the term "direct" "refers to [a] causal relationship, and is to be interpreted as limited to the harm resulting from an immediate or proximate cause as distinguished from a remote cause." 11 Lee R. Russ, Couch on Insurance, § 156:21 (3d ed. 1998) (Supp. 2009) (footnotes omitted). In addition, "damage" is defined as "loss due to injury: injury or harm to person, property, or reputation." Webster's, supra, at 571.
¶ 21 Moeller's collision damages have been repaired and Farmers paid for those repairs. But there remains damage that cannot be repaired, e.g., weakened metal. Farmers has not paid for this diminished value loss.
¶ 22 Here, the policy covers diminished value. "[D]irect" losses include those proximately caused by the initial harm. CP at 19. A collision begins a chain of events that sometimes results in a tangible, physical injury that cannot be fully repaired. Absent an intervening cause, diminished value is a loss proximately caused by the collision and thus is covered. As Moeller argues, "[B]ecause it is indisputable that there was physical injury to [his] vehicle[ ], any and all damages flowing therefrom, and not expressly excluded by the policy, are clearly covered." Appellant's Br. at 22.
¶ 23 Because the policy covers diminished value, we examine whether Farmers limited its liability elsewhere in the policy.
Limits of Liability Clause
¶ 24 Moeller next contends that the limits of liability clause
¶ 26 The policy does not define the terms "like," "kind," and "quality" and, therefore, we turn again to a standard English dictionary. Matthews, 106 Wash.App. at 765, 25 P.3d 451. "Like" is defined as "the same as or similar to." Webster's, supra, at 1310. Webster's provides that "kind" refers to "fundamental nature." Webster's, supra, at 1243. And "quality" is a "degree of excellence: grade, caliber." Webster's, supra, at 1858.
¶ 27 Moeller posits that the clause "like kind and quality" means a restoration of appearance, function, and value. He argues that the amount of his premiums was based, in part, on the pre-loss value of the vehicle. When the vehicle returned from the auto shop, the average insured could reasonably expect it to be similar in nature, caliber, and value. Otherwise stated, after repair or replacement with like kind and quality, the vehicle's capacity and value post-loss should be similar to its capacity and value pre-loss. This is a reasonable interpretation.
¶ 28 Farmers argues that the "like kind and quality" could reasonably be an obligation to restore the vehicle to a similar appearance and function. As it explains, "[j]ust as a plate that is broken in two can be repaired by gluing the parts together and making the plate usable again, a damaged car be repaired by pounding out dents or replacing damaged parts so that the vehicle can be driven again." Respondent/Cross-Appellant's Br. at 13. Farmers asserts that a reasonable interpretation of this clause suggests that the vehicle need only be "restored to good condition with parts and workmanship of the same essential nature that existed on the vehicle prior to the accident." Respondent/Cross-Appellant's Br. at 18-19.
¶ 29 Farmers' argument about the reasonableness of its interpretation does not persuade us. Even under its interpretation, the vehicle could not be restored to its pre-loss status because the nature of metal and stressed, but working parts, cannot be repaired.
¶ 30 The limits of liability clause and does not exclude recovery here. We reverse the summary judgment order and remand.
CONSUMER PROTECTION ACT
¶ 31 Next, Moeller contends that Farmers' actions constituted per se violations of the Washington Administrative Code and, thus, per se violations of the CPA. Here, the trial court determined that Moeller premised his CPA claim on a successful breach of contract claim. Because we reverse the trial court's summary judgment on the contract claim, we remand for further proceedings on Moeller's CPA claim.
CROSS APPEAL ON CLASS CERTIFICATION
¶ 32 In its cross appeal, Farmers argues that the trial court abused its discretion when it certified a class under CR 23(b)(3). We disagree.
¶ 33 When a party seeks class certification, it must satisfy the requirements of CR 23. Under CR 23(a), numerosity, commonality, typicality, and adequacy of representation comprise the four prerequisites to certification.
¶ 34 In addition to the demands of CR 23(a), a party must also satisfy one of the three requirements of CR 23(b). Here, the trial court certified a class under CR 23(b)(3), which provides for certification if
¶ 35 We review the trial court's decision for a manifest abuse of discretion. Nelson v. Appleway Chevrolet, Inc., 160 Wn.2d 173, 188-89, 157 P.3d 847 (2007). A trial court abuses its discretion when it bases its decision on untenable or unreasonable grounds. Chuong Van Pham v. City of Seattle, 159 Wn.2d 527, 538, 151 P.3d 976 (2007). Generally, we uphold the certification decision if it has tenable, reasonable support and if the record indicates that the trial court considered the CR 23 criteria. Nelson, 160 Wash.2d at 188-89, 157 P.3d 847.
¶ 36 Although we liberally construe CR 23 in favor of certification, class actions must strictly conform to the rule's requirements. Weston v. Emerald City Pizza LLC, 137 Wn.App. 164, 168, 151 P.3d 1090 (2007). When determining whether to certify a class, the trial court must engage in a rigorous analysis to ensure that the prerequisites of CR 23 have been established. Weston, 137 Wash.App. at 168, 151 P.3d 1090.
¶ 37 Courts afford CR 23 liberal interpretation because it "avoids multiplicity of litigation, `saves members of the class the cost and trouble of filing individual suits[,] and ... also frees the defendant from the harassment of identical future litigation.'" Smith v. Behr Process Corp., 113 Wn.App. 306, 318, 54 P.3d 665 (2002) (quoting Brown v. Brown, 6 Wn.App. 249, 256-57, 492 P.2d 581 (1971)). "`[A] primary function of the class suit is to provide a procedure for vindicating claims which, taken individually, are too small to justify individual legal action but which are of significant size and importance if taken as a group.'" Behr, 113 Wash.App. at 318-19, 54 P.3d 665 (quoting Brown, 6 Wash.App. at 253, 492 P.2d 581). In close cases, then, we resolve doubts in favor of allowing or maintaining the class. Sitton v. State Farm Mut. Auto. Ins. Co., 116 Wn.App. 245, 250, 63 P.3d 198 (2003).
¶ 38 Under CR 23(b)(3), the trial court must determine that common issues of law or fact predominate over questions affecting individual members and that a class action is the superior method of adjudication. Sitton, 116 Wash.App. at 253, 63 P.3d 198. In this analysis, we engage in a "`pragmatic' inquiry into whether there is a `common nucleus of operative facts' to each class member's claim." Behr, 113 Wash.App. at 323, 54 P.3d 665 (quoting Clark v. Bonded Adjustment Co., 204 F.R.D. 662, 666 (E.D.Wash. 2002)).
¶ 39 Questions of judicial economy remain central. Sitton, 116 Wash.App. at 255, 63 P.3d 198. That class members may have to make individual showings of damages does not preclude class certification. Behr, 113 Wash.App. at 323, 54 P.3d 665.
VI CP at 1582.
¶ 41 In its analysis, the trial court identified several common issues of law and fact: (1) where the relevant policy language was materially identical, whether the class members' insurance policies covered diminished value; (2) whether "each class member's vehicle suffered a reduction in value as a result of the vehicle having been in an accident without consideration of repair related diminished value"; (3) whether each class member's vehicle could be returned to preaccident condition; and (4) whether Farmers engaged in "a common and systematic course of conduct designed to process physical damage claims so as to avoid acknowledging or paying diminished value claims in first party insurance contracts." VI CP at 1574.
¶ 42 When determining whether these common issues of fact and law predominated over individual concerns, the trial court analyzed the four factors set forth in CR 23(b)(3)(A)-(D). It identified CR 23(b)(3)(D), the management factor, as a heavily disputed issue and the most significant factor in its examination.
¶ 43 In conclusion, the trial court determined that "the only conceivable method to adjudicate or resolve this case is through a class action, as the de minimus size of individual claims would leave policyholders without practical recourse, absent class treatment, to address the contract construction (legal) and damages (fact) issues." VI CP at 1579.
¶ 44 Tenable reasons support the trial court's determination that common issues predominated over individual issues. The trial court identified the common nucleus of operative facts, namely, that class members shared the same insurance policy, potentially suffered damage, and were allegedly harmed by Farmers' course of conduct.
¶ 46 We affirm in part, reverse in part, and remand for further proceedings.
We concur: BRIDGEWATER and ARMSTRONG, JJ.
In a majority of these cases, the policy expressly limits liability to the "lesser" of the vehicle's "actual cash value" or the cost of repair or replacement. See e.g. Schaefer, 124 S.W.3d at 156. Most cases involving this "lesser" and "actual cash value" language have declined recovery for diminished value because the insured was not entitled to both repairs and monetary compensation. See Schaefer, 124 S.W.3d at 159. Instead, the insurer could choose the "lesser" of these options. There is no such language here. Because of the different policy language, these cases are of limited value in our analysis.
In other jurisdictions, the courts found no ambiguity, thus distinguishing them from the situation here. Sims, 303 Ill.Dec. 514, 851 N.E.2d at 707; Allgood, 836 N.E.2d at 248; Davis, 142 P.3d at 24.
CP at 1579-80. We see nothing in the record indicating that the trial court abused its discretion on this point.
CP at 1578. The trial court acted within its discretion when it determined that classwide treatment both protected Farmers' interests and served interests of judicial economy.