                                                                              FILED
                                                                            FEB. 6, 2014
                                                                   In the Office of the Clerk of Court
                                                                 W A State Court of Appeals, Division III



            IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
                               DIVISION THREE

THELMA, KARL, LORI, and KARIN                    )
KLOSTER,                                         )        No. 30546-5-III
                                                 )
                          Appellants,            )
                                                 )
       v.                                        )
                                                 )        UNPUBLISHED OPINION
SCHENECTADY ROBERTS, PACIFIC RIM                 )
BROKERS, INC., a corporation, AMERI-             )
TITLE, INC., a corporation, and DOES ONE         )
through FIFTY, inclusive,                        )
                                                 )

                          Respondents,           )

                                                 )

FIRST AMERICAN TITLE INSURANCE                   )

COMPANY, a corporation,                          )

                                                 )

                      Respondent and             )

                      Cross Appellant.           )

                                                 )

MICHAEL MOORE,                                   )

                                                 )

                      Defendant.                 )


            FEARING, J.   - Karl and Thelma Kloster, and Karl's parents, Lori and Karin

Kloster (Klosters) bought a vacant lot (Lot 1) in rural Klickitat County thinking they held

an access easement over property bordering to the south. The easement, however, was

not signed by the grantor, and the parties to this suit assume the easement does not bind

the neighboring property. When the neighboring property owner blocked use of the

easement, the Klosters, despite having an alternate access route, filed suit for
No. 30546-5-II1
Kloster v. Roberts


misrepresentation, against their seller of Lot I, the real estate broker, their title company,

and the title company's local agent. They sought additional damages from the title

company and its agent and underwriter for breach of the insurance contract, breach of the

duty to defend and indemnify, bad faith, and violation of the Consumer Protection Act

(CPA) chapter 19.86 RCW. The title company counterclaimed for a declaratory

judgment that its policy provided no coverage. After a series of summary judgment

dismissals of some defendants and a jury trial on the remaining claims, judgment was

entered for all defendants except the title company, which was ordered to pay the cost to

cure the lack of an easement and some of the Klosters' attorney fees related to the title

insurance coverage issue.

      The Klosters appeal most of the trial court rulings. Among other assignments of

error, the Klosters contend the trial court erred (1) in dismissing their claim, on summary

judgment, against the seller of the property; (2) in denying their motion to include the

developer in his individual capacity as a necessary party; (3) in dismissing the broker as

successor in interest of the developer; (4) in concluding that the title company's agent

was not a coinsurer of their title; (5) in ruling that there was insufficient evidence that the

agent was negligent; (6) in concluding that the title company did not breach the title

policy, the unfair claims settlement practices regulations, or the CPA; (7) in dismissing

the Klosters' claims for noneconomic damages and all economic damages except "cost of

cure"; (8) in awarding the broker and the seller attorney fees; and (9) in denying the

                                               2

No. 30S46-S-III
Kloster v. Roberts


Klosters' full claim for attorney fees from the title company. The title company cross

appeals, contending the trial court erred (1) in ruling that the Klosters had coverage under

the title policy for a purported access easement, (2) in allocating $9,000 against the title

company as a cost of cure, and (3) in awarding attorney fees to the Klosters.

       In a marathon opinion necessitated by the many issues raised on appeal, we affirm

the trial court's rulings in favor of the seller, real estate broker, and developer principally

on the ground that no representation was given to the Klosters concerning an access

easement. We reverse the judgment entered against the title company on the ground that

its policy did not cover the loss.

                                           FACTS

       Since the trial court dismissed some of the Klosters' claims on summary judgment

and the jury ruled on other claims of the Klosters, this outline of facts contains, where

respectively appropriate, testimony from summary judgment affidavits and from trial.

       In 1978, Alvin (Fred) Heany created short plat WS-146 on a 23-acre parcel he

owned in Klickitat County.l The short plat consisted of four tracts, each subject to

easements and use reservations. Tract 1, north of Tract 2, was divided into Lots 1 and 2.

In addition to owning the land, Heany was a real estate broker, who operated under the

name of Pacific Rim Properties (Pacific Rim), a sole proprietorship.




       1   A copy of the short plat is appended to the opinion.
                                               3

No. 30546-5-III
Kloster v. Roberts


        In 1979, Fred Heany filed an application for a long plat subdivision called Pacific

Rim Estates, which included land found within short plat WS-146. The map attached to

the long plat application showed a 30-foot wide access easement along the northern

border of Tract 2 for the benefit of the owners of Lots 1 and 2, Tract 1, as well as a 30­

foot wide easement along the southern border of Lots 1 and 2 for the benefit of Tract 2.

The 30-foot wide easement across the southern border of Lot 2 also benefited Lot 1. A

60-foot width is required by Klickitat County for a public right-of-way.

       Klickitat County insisted, for a long plat, that all property owners affected by

rights-of-way sign the plat and join in the dedication oftheir property for roads. In 1981,

pending final approval of the long plat application, Heany sold, on contract, Tract 2 to

Michael Fester, subject to "[t]hose easements and reservations of record" on the short

plat. Ex. 52. Fester agreed with Heany to permit an access easement across the northern

30-feet of Tract 2.

       In November 1981, owners of property within the Pacific Rim subdivision signed

the long plat application, which included a dedication of access easements. The owner of

Lot 2, Tract 1, signed the application acknowledging his dedication of an easement along

his southern border for the benefit of Lot 1 and other land. Robert Blades, a real estate

salesperson for Pacific Rim, notarized the signatures, including Fred Heany's signature.

The signature of Michael Fester, owner of Tract 2, however, was inadvertently omitted.




                                              4

No. 30546-5-111
Kloster v. Roberts


Klickitat County approved the long plat application and Heany recorded the plat in

December 1981 without Fester's signature.

       In 1982, Fred Heany and Robert Blades incorporated Pacific Rim Properties as

Pacific Rim Brokers, Inc. (PRB). Heany transferred his ownership interest in PRB to

Blades one year later.

       Fred Heany's fulfillment deed to Michael Fester, for Tract 2, was recorded in 1983

without mention of the long plat or the easement across the northern boundary of the

land. Fester sold Tract 2 to Larry and Rhonda Rickey in 2000. The map attached to the

Rickeys' title insurance policy did not show an easement encumbering the northern 30

feet of their land. The Rickeys constructed and used a road, along their northern

boundary, as a driveway.

       Defendant Schenectady Roberts inherited Lots 1 and 2, Tract 1, from her father,

who purchased the lots from Fred Heany. In 2005, Roberts sold, for $38,000, Lot 1 to the

Klosters. Karl and Thelma Kloster had previously bought and sold multiple properties.

PRB served as listing agent for the sale of Lot 1. Adrian Palmer, an agent of PRB, acted

as buying agent of the Klosters.

      At the time of the sale and during the events leading to the sale, Roberts resided in

California. She had no direct contact with the Klosters. Roberts had no knowledge of

any easements or the lack of easements, nor was she aware of any representations made

byPRB.

                                            5
No. 30546-5-III
Kloster v. Roberts


       PRB agent Adrian Palmer showed the land to Thelma and Karl Kloster. During

the showing, according to deposition testimony of Palmer, he "shared his feelings with

both Karl and Thelma that there was an easement." Palmer provided to Karl Kloster a

copy of the plat map that showed a 30-foot access easement along the northern edge of

Tract 2, and Palmer represented to Karl Kloster that the plat map was accurate.

       During the showing, the Klosters and Adrian Palmer noticed a barbed wire fence

along the boundary of Tract 2 and Lot I that blocked access to the easement on the north

end of Tract 2. Palmer still believed an easement existed across the northern part of Tract

2 and extended across the fence line, but he stated to the Klosters that the fence might be

a problem. The Klosters were then still contemplating whether to purchase the property.

The Klosters never thereafter asked Palmer about the fence.

       Adrian Palmer shared his concern about the barbed wire fence with PRB' s Robert

Blades. Blades told Palmer that he would contact the Rickeys. Blades left the Rickeys a

telephone message, but never spoke with them. Palmer did not tell the Klosters of his

conversation with Blades.

       As part of the sale, Schenectady Roberts and the Klosters signed, in January 2005,

a Vacant Land Purchase and Sale Agreement (VLPSA). The agreement provided for

attorney fees and costs to the prevailing party "[i]fthe Buyer, Seller, or any real estate

licensee or broker involved in this transaction is involved in any dispute relating to this

transaction." Clerk's Papers (CP) at 3744. The VLPSA also read that "[a]ll terms of this

                                              6

No.30546-5-II1
Kloster v. Roberts


Agreement, which are not satisfied or waived prior to closing, shall survive closing.

These terms shall include, but not be limited to, representations and warranties, attorneys

fees and costs, ... etc." CP at 3745.

       Defendant Ameri-Title, Inc., serving as First American Title Insurance Company's

agent, conducted a title search for Lot 1 and issued a preliminary commitment for title

insurance. The preliminary title commitment included an appended partial plat map. The

map showed a 30-foot access easement along the northern border of Tract 2 and 30-foot

access easements along the southern borders of Lots 1 and 2. As may be surmised,

neither Michael Fester nor his successors in interest, the Rickeys, signed a document

agreeing to the easement across Tract 2, and the lack of written approval gives rise to this

suit. Also, if the Klosters deemed the 30-wide easement across the southern end of Lot 2,

Tract 1, to be sufficient, this suit may not have ensued, despite the lack of an easement
                                                                                               I
across the northern boundary of Tract 2.

       Printed across the top of the map attached to the commitment was a disclaimer:

       ANY SKETCH ATTACHED HERETO IS DONE SO AS A COURTESY
       ONL Y AND IS NOT PART OF ANY TITLE COMMITMENT OR
       POLICY. IT IS FURNISHED SOLELY FOR THE PURPOSE OF
       ASSISTING IN LOCATING THE PREMISES AND FIRST AMERICAN
       EXPRESSL Y DISCLAIMS ANY LIABILITY WHICH MAY RESULT
       FROM RELIANCE MADE UPON IT.

Ex. 94, at 34. At trial, Karl Kloster testified, "I know the difference between a sketch and

a short plat map, and I know that is a sketch. That's provided as a courtesy to locate the



                                             7

No. 30546-5-111
Kloster v. Roberts


property, and that's it." Report of Proceedings (RP) at 1074. Mr. Kloster was asked ifhe

relied on the short plat sketch attached to his title policy as a representation of what was

covered in the policy. He explained that he did not rely on the sketch of the plat because

it had a disclaimer at the top.

       The agency contract between Ameri-Title and First American Title provided that

Ameri-Title was responsible for the first $3,500 of any loss on any First American policy

issued by Ameri-Title. Ameri-Title was instructed by First American to verifY whether

access easements are properly created for any property on which title insurance was

requested, and if they were not, to so note in the preliminary commitment and in the title

policy by use of a special exception. Ameri-Title did not determine whether access

easements were properly created for Lot 1 and did not note in the preliminary

commitment or in the title policy issued to the Klosters that the purported access

easement across Tract 2 was defective.

       The First American Title insurance policy provided coverage for loss due to a lack

of a right of access to Lot 1, but did not provide coverage for any specific easement. The

policy language read, in part:

       FIRST AMERICAN TITLE INSURANCE COMPANY ... insures ...
       against loss or damage, not exceeding the Amount of Insurance stated in
       Schedule A, sustained or incurred by the insured by reason of:

              4. Lack of a right of access to and from the land.
       The Company will also pay the costs, attorneys' fees and expenses
       incurred in defense of the title, as insured, but only to the extent provided

                                              8

No. 30546-5-II1
Kloster v. Roberts


       in the Conditions and Stipulations.

Ex. 95. Schedule A identified only Lot 1. The amount of insurance was $38,000.

       Schedule B of the title policy listed exclusions from coverage, including this

general exception: "Easements, claims of easement or encumbrances which are not

shown by the public records." Ex. 95, at 5. Specific exceptions related to the unrecorded

easement on the northern 30 feet of Tract 2 are:

       5. Easements, Conditions, Restrictions and Reservations, including
       the terms and provisions thereof, as contained in Short Subdivision
       filed as Auditor's File No. 167997, Klickitat County Short Plat Records.

       8. Conditions, Restrictions, Easements for roadways and Utilities and
       disclosure regarding maintenance of roads, including the terms and
       provisions thereof, as shown on the Plat recorded December 1, 1981 in
       Book 5, Pages 31 and 32, Klickitat County Plat Records.

Ex. 95, at 6. The plat sketch attached to the title policy is a portion of the short plat map

in Auditor's File No. 167997. Exclusion 8 refers to easements for roadways as shown on

the plat in Book 5, pages 31 and 32, of the county records, which is the same plat referred

to in Schedule A's description of the property.

       Under Section 4 in the title insurance policy, First American agreed to defend

against third party claims adverse to the title as follows:

               Upon written request by the insured ... , the Company, at its
       own cost and without unreasonable delay, shall provide for the defense
       of an insured in litigation in which any third party asserts a claim adverse
       to the title or interest as insured, but only as to those stated causes of
       action alleging a defect, lien or encumbrance or other matter insured
       against by this policy . . .. The Company will not pay any fees, costs

                                               9

No. 30546-5-III
Kloster v. Roberts


       or expenses incurred by the insured in the defense of those causes of
       action which allege matters not insured against by this policy.

Ex. 95.

       When the Klosters began using the Rickeys' driveway to drive to Lot 1, the

Rickeys blocked access over Tract 2 and reported the Klosters for trespass. Karl Kloster

conceded that he could build an access road to his property across land not found in Tract

2. Nevertheless, he would not have bought the property ifhe knew he needed to build the

road in an alternate location, because the terrain would render the road costly. Karl

Kloster, who has experience in building roads, testified the costs could approach

$20,000.

       The Klosters complained to Ameri-Title about the missing easement and Ameri-

Title recommended that the Klosters consult an attorney. On March 25,2005, the

Klosters submitted a claim to title insurer, First American Title. The Klosters made a

demand upon Ameri-Title and First American to defend their interest in the unrecorded

easement across Tract 2 from the adverse claims of the Rickeys, who were also insured

by First American.

      First American began its iilVestigation immediately. On its initial claim report,

First American wrote that the Klosters allege an "irregularity/omission-agent." Ex. 107.

The description referenced an attached letter from the Rickeys' attorney describing the

conflicting maps shown on the Klosters' and the Rickeys' title policies. The employee



                                            10 

No. 30S46-S-III
Kloster v. Roberts


who prepared the initial claim report testified that the appellation "irregularity/omission"

best fit the situation. She explained that the only choices she had for describing the claim

were "error omission by employee, error omission by agent, or company practice risk,"

and it appeared the Klosters were claiming that an agent was responsible. RP at 7S8.

       On March 31, 2005, First American Title sent a letter to the Klosters' attorney,

announcing its decision to deny the claim. In the letter, First American explained that the

legal description of the insured property did not include appurtenant easements. The

company wrote that the policy covered loss by reason of a lack of a right of access, but

the Klosters had a right of access over the south 30 feet of Lot 2, and the policy did not

cover an easement over Tract 2.

       The Klosters filed suit in April200S. The complaint caption included a listing of

defendants "DOES ONE through FIFTY." CP at 1. On September 10,2007, more than

two years after filing of the complaint, the Klosters served a summons and complaint on

Fred Heany as "Doe One." CP at IOS6, 1059. Heany moved to quash the summons,

asserting that he was known by name and capacity by the Klosters even before the suit

was filed, that it was therefore inappropriate to consider him a recently discovered party,

and that the Klosters had not properly moved to amend the complaint, citing CR 4(h), CR

lO(a)(2), and CR IS. The summons was quashed in April 2008. Thereafter the Klosters

moved pursuant to CR 10(a)(2), CR IS(c), and CR 21 to substitute Fred Heany as

Defendant Doe One. The trial court also denied this motion.

                                             11 

No. 30546-5-III
Kloster v. Roberts


       During the pendency of suit, the parties filed multiple motions, including motions

for summary judgment and for limitation of damages. The trial court dismissed Michael

Moore, the agent of Ameri-Title, with prejudice, dismissed the claims against seller

Schenectady Roberts on summary judgment, and dismissed the claims against Ameri-

Title as a matter oflaw under CR 50(a). Finding that the map appended to the

preliminary commitment and the final title insurance policy created an ambiguity

concerning coverage of the apparent easement over Tract 2, the trial court concluded as a

matter of law that the title insurance policy covered the unrecorded easement.

     The jury trial began October 31, 2011. After conclusion of the Klosters' case, the

trial court dismissed the claims against PRB and First American for fraudulent

misrepresentation, fraudulent concealment, and bad faith. The court also concluded as a

matter of law that PRB did not have successor liability for Fred Heany' s actions as

developer of Pacific Rim Estates. First American and PRB rested without presenting

additional testimony.

      The jury concluded that PRB was not liable for negligent misrepresentation, that

the Klosters failed to minimize their loss, and that the Klosters were 100 percent at fault.

The jury also found, however, that the cost to cure the defect was $9,000. The trial court

entered judgment against First American for the $9,000 "cost of cure." The trial court

entered an additional judgment against First American for the Klosters' presettlement

offer of attorney fees and costs related to their insurance coverage claims, offset by First

                                             12 

     No.30546-5-III 

     Kloster v. Roberts 



     American's costs incurred after the settlement offer expired, pursuant to CR 68, for a

     totalof$33,715.35. The Klosters were ordered to pay Roberts and PRB $269,918.08 in

     attorney fees and costs.

                                      ROBERTS LIABILITY

            In their complaint, the Klosters alleged that Schenectady Roberts affirmatively

     represented, through her real estate agent PRB, that the acreage was suitable for

     residential development and without impairment of access easements. In the alternative,

     the Klosters allege that Roberts held an obligation to affirmatively disclose the existence

     of the "defective" access easement. CP at 9. In support of the allegations and in

     opposition to summary judgment motions, Thelma Kloster and Karl Kloster filed nearly

     identical affidavits stating that real estate agents at PRB never warned her or him of any

     defect in an access easement. The plat map that Adrian Palmer gave to Karl Kloster,

     when walking the property, is attached to the Klosters' counsel's affidavit. The plat

     showed an access easement across the north 30 feet of Tract 2.

           The Klosters sued Schenectady Roberts for negligent and intentional

     misrepresentation and fraudulent concealment, three species of misrepresentation. In

     response to a summary judgment motion, the Klosters added a claim of innocent

     misrepresentation, another species of misrepresentation. Claims of misrepresentation are


I
.1
1
     no longer barred by the rejected economic loss rule, but permitted by the independent

     duty doctrine. Austin v. Ettl, 171 Wn. App. 82, 87 n.6, 286 P.3d 85 (2012). Because the

I
1
l
                                                 13
No. 30546·5·III
Kloster v. Roberts


duty to refrain from fraud is independent of the contract, the independent duty doctrine

permits a party to pursue a fraud claim even if a contract exists. Jackowski v. Borchelt,

174 Wn.2d 720, 738, 278 P.3d 1100 (2012). A party's misrepresentation renders a

contract defective, such that tort remedies are appropriate. Austin, 171 Wn. App. at 87

n.6.

       The trial court dismissed all claims against Roberts on summary judgment,

because facts submitted by the Klosters could not sustain any claim of misrepresentation.

We review the trial court's grant of summary judgment de novo, viewing the facts and

inferences in the light most favorable to the nonmoving party. Jackowski, 174 Wn.2d at

729. Summary judgment is appropriate ifthere is no genuine issue regarding a material

fact and if the moving party is entitled to judgment as a matter oflaw. Id.; CR 56(c).

       Innocent misrepresentation. The elements of innocent misrepresentation are

innocent misrepresentation of a material fact for the purpose of inducing the other to rely

on the misrepresentation, and pecuniary loss caused by justifiable response on the

misrepresentation. Hoffman v. Connall, 108 Wn.2d 69, 72·73, 736 P.2d 242 (1987)

(quoting RESTATEMENT (SECOND) OF TORTS § 552C(1) (1977)). The Klosters fail to

present a factual issue on this claim, because they forward no evidence that Roberts

supplied false information, a defect in most ofthe Klosters' misrepresentation claims.

Schenectady Roberts' assertion that she never communicated with the Klosters or knew




                                            14 

No. 30546-5-III
Kloster v. Roberts


of any purported easement across Tract 2 is unrebutted and conforms to the Klosters'

version of the facts.

      Negligent misrepresentation. To establish negligent misrepresentation, a plaintiff

must "prove by clear, cogent, and convincing evidence that (1) the defendant supplied

information for the guidance of others in their business transactions that was false, (2) the

defendant knew or should have known that the information was supplied to guide the

plaintiff in his business transactions, (3) the defendant was negligent in obtaining or

communicating the false information, (4) the plaintiff relied on the false information, (5)

the plaintiffs reliance was reasonable, and (6) the false information proximately caused

the plaintiff damages." Ross v. Kirner, 162 Wn.2d 493, 499,172 P.3d 701 (2007);

Austin, 171 Wn. App. at 88. Moreover, "[a]n omission alone cannot constitute negligent

misrepresentation, since the plaintiff must justifiably rely on a misrepresentation." Ross,

162 Wn.2d at 499. Since negligent misrepresentation carries a higher burden for the

plaintiff than a claim ofinnocent misrepresentation, it follows that, if the Klosters' claim

of innocent misrepresentation cannot survive a summary judgment motion, the claim of

negligent misrepresentation also loses.

      Intentional (fraudulent) misrepresentation. Intentional misrepresentation or fraud

carries an even higher burden for the plaintiff. "A plaintiff claiming fraud must prove

each of the following nine elements: '(1) representation of an existing fact, (2)

materiality, (3) falsity, (4) the speaker's know ledge of its falsity, (5) intent of the speaker

                                               15 

       No. 30546-5-III
       Kloster v. Roberts


       that it should be acted upon by the plaintiff, (6) plaintiffs ignorance of its falsity, (7)

       plaintiffs reliance on the truth of the representation, (8) plaintiffs right to rely upon it,

       and (9) damages suffered by the plaintiff.'" Stieneke v. Russi, 145 Wn. App. 544, 563,

       190 P.3d 60 (2008) (quoting Stiley v. Block, 130 Wn.2d 486,505,925 P.2d 194 (1996».

       As with their claim of negligent misrepresentation, the Klosters fail to show that Roberts

       made any representations at all or that she participated in or authorized any

       misrepresentations of material fact to the Klosters.

             Fraudulent concealment. Fraudulent concealment, another species of fraud, is

       sometimes considered a form of negligent misrepresentation. See Van Dinter v. Orr, 157

       Wn.2d 329,333, 138 P.3d 608 (2006). On a claim for fraudulent concealment, "the

       seller's duty to speak arises[:] where (1) the residential dwelling has a concealed defect;

       (2) the vendor has knowledge of the defect; (3) the defect presents a danger to the

       property, health, or life of the purchaser; (4) the defect is unknown to the purchaser; and

       (5) the defect would not be disclosed by a careful, reasonable inspection by the

       purchaser." Stieneke, 145 Wn. App. at 560. Failure to disclose a material fact when

       there is a duty to disclose is fraudulent Id. A duty to disclose in a business transaction

       typically arises under a fiduciary relationship. Austin, 171 Wn. App. at 90. The duty
i
       may also arise, however, "when the facts are peculiarly within the knowledge of one
I
I
       person and could not be readily obtained by the other," or when the seller takes advantage



I
 

1
                                                     16 


1

No. 30546-5-111
Kloster v. Roberts


of the buyer's lack of business experience by remaining silent. Van Dinter, 157 Wn.2d at

334.

       The Klosters provide no evidence that Schenectady Roberts knew that the easement

depicted on the short plat map was invalid, that the unrecorded easement presented some

kind of danger, or that the Klosters could not have discovered that the easement was

unrecorded with an inspection of the county records. Roberts had no special relationship

of trust or confidence with the Klosters and had less experience with real estate

transactions than the Klosters. Summary dismissal of this claim was also appropriate.

        Vicarious liability for real estate agent's representations. The Klosters contend

Adrian Palmer, a PRB agent, told them that the easement on Tract 2 served Lot 1, and

that Roberts, as principal, is vicariously liable for PRB' s false representation. A principal

is not liable, however, for any act, error, or omission by her real estate agent unless the

principal participated in or authorized the act, error, or omission. RCW 18.86.090. Thus,

PRB's statements may not be attributed to Roberts unless the Klosters could show that

Roberts participated in or authorized those representations. The Klosters made no such

showing. Their failure to raise a factual issue on this essential element supports dismissal

of this claim on summary judgment. White v. Kent Med. Ctr., Inc., 61 Wn. App. 163,

170, 810 P.2d 4 (1991). The nonmoving party's failure to provide evidence to support an

essential element of that party's case renders all other facts immaterial. Miller v. Likins,

109 Wn. App. 140, 145,34 P.3d 835 (2001).

                                              17
No.30546-5-II1
Kloster v. Roberts


      Warranty ofclear title. Finally, the Klosters contend Roberts is liable under the

statutory warranty deed given to the Klosters. Statutory warranty deeds are governed by

RCW 64.04.030. Edmonson v. Popchoi, 172 Wn.2d 272,278,256 P.3d 1223 (2011). A

warranty deed covenants against both known and unknown title defects. Mastro v.

Kumakichi Corp., 90 Wn. App. 157, 162,951 P.2d 817 (1998); see Foleyv. Smith, 14

Wn. App. 285,292,539 P.2d 874 (1975). Under RCW 64.04.030, a grantor conveying

land by statutory warranty deed makes five covenants against title defects:

       "(1) that the grantor was seised of an estate in fee simple (warranty of
       seisin); (2) that he had a good right to convey that estate (warranty of right
       to convey); (3) that title was free of encumbrances (warranty against
       encumbrances); (4) that the grantee, his heirs and assigns, will have quiet
       possession (warranty of quiet possession); and (5) that the grantor will
       defend the grantee's title (warranty to defend)."

Mastro, 90 Wn. App. at 162 (quoting 17 WILLIAM B. STOEBUCK, WASHINGTON

PRACTICE: REAL ESTATE: PROPERTY LAW § 7.2, at 447 (1995)).

       The Klosters contend the trial court found that the title was defective due to the

unrecorded access easement. On the contrary, the trial court ruled on more than one

occasion that, as a matter of law, the Klosters have legal and physical access to Lot 1.

The court refused to rule that the unrecorded easement was a defect on the title.

      After trial, the court entered findings of fact and conclusions of law to support the

awards of attorney fees. The Klosters seize upon one of these findings, which states,

"The "'cost of cure'" is a covered loss under FIRST AMERICAN's title policy issued to



                                             18 

No.30546-5-II1
Kloster v. Roberts


the KLOSTERS because the title policy is a contract of indemnity which insures against

actual loss from the existence of a title defect." CP at 4452. As will be discussed below,

this finding is erroneous. More importantly, the finding was not entered in the context of

any claim against Schenectady Roberts.

      At any rate, the Klosters' title in Lot 1 is unencumbered. Generally, an easement is

an encumbrance on the servient property, and the failure to disclose an easement on the

servient property breaches the warranty of clear title. See Hebb v. Severson, 32 Wn.2d

159, 167,201 P.2d 156 (1948). But the Klosters claim the opposite-that their seller of

the dominant property failed to pass title to an easement on the adjoining servient land.

No case or statute demands that the warranty of clear title extend to an interest offthe

sold land.

       No other party has a recorded ownership      inte~est   in Lot 1. Accordingly, no defects

or encumbrances affect the Klosters' legally recognized rights in their property. See

Dave Robbins Constr., LLC v. First Am. Title Co., 158 Wn. App. 895,902,249 PJd 625

(2010). The trial court did not err in concluding as a matter of law that Ms. Roberts is not

liable under the statutory warranty deed.

                          JOINDER OF DEVELOPER HEANY

     More than two years after filing of the complaint, the Klosters served a summons

and complaint on Fred Heany as "Doe One." CP at 1059. The summons was quashed in

April 2008, since Heany had not been joined as a defendant. Thereafter the Klosters

                                             19 

No.30546-5-III
Kloster v. Roberts


moved pursuant to CR 10(a)(2), CR 15(c), and CR 21 to substitute Fred Heany as

Defendant Doe One. The trial court also denied this motion. From these rulings, the

Klosters appeal.

       Service on Heany. Under CR lO(a)(2), if a plaintiff does not know the name of a

defendant, the pleading must indicate that there is an unknown defendant, and when the

"true name" is discovered, the pleading may be amended accordingly. The Klosters

attempted to substitute Fred Heany as Doe One by merely serving him with a summons

and complaint. The Klosters, in tum, impliedly argue on appeal that the trial court

committed error by refusing to consider service of process as successfully joining Heany

as a defendant.

       We agree with the trial court that the Klosters "placed the cart before the horse."

The "cart" was service of process and the "horse" to be placed in front was a formal

amendment to the complaint. CR lO(a)(2) directs the plaintiff to "amend" the complaint

upon discovering a Doe's true name. Substitution of a true name for a fictitious party

constitutes an amendment substituting or changing parties. Kiehn v. Nelsen's Tire Co.,

45 Wn. App. 291, 295, 724 P.2d 434 (1986). Thus, the rule is read in conjunction with

CR l5(a), which provides that a party seeking to amend a pleading after the responsive

pleading must do so only by leave of the court or by consent of the adverse party.

      Amendment ofcomplaint. The Klosters next contend the trial court erred in

denying their CR 15 motion to amend their complaint to substitute Fred Heany as

                                            20 

No. 30546·5·111
Kloster v. Roberts


"Defendant Doe One." CP at 1099. We review the trial court's application of the rules

for abuse of discretion. See Burt v. Dep't o/Corr., 168 Wn.2d 828, 832,231 P.3d 191

(2010); Gildon v. Simon Prop. Grp., Inc., 158 Wn.2d 483,493, 145 P.3d 1196 (2006).

       The trial court did not abuse its discretion when later denying the Klosters' motion

to amend their complaint to join Fred Heany as a new defendant. The Klosters filed the

motion on May 1, 2008, after the running of the three· year statute of limitations for suits

alleging fraud and misrepresentation. RCW 4.16.080. The statute of limitations

commences to run when the plaintiff knows, or in the exercise of due diligence should

have known, all the essential elements of the cause of action. See In re Estates 0/

Hibbard, 118 Wn.2d 737, 752, 826 P.2d 690 (1992). If the statute of limitations bars the

claim against Heany, the amendment serves no purpose. In determining a motion to

amend, the trial court may consider the futility of the amendment. Watson v. Emard, 165

Wn. App. 691, 699, 267 P.3d 1048 (2011).

       The Klosters bought Lot 1 in February 2005 and filed suit in April 2005. Before

filing the original complaint in April 2005, the Klosters could have researched the record

title of Lot 1 and Pacific Rim Estates to determine if they held an enforceable easement.

The public record shows Heany as the developer of Pacific Rim Estates and the creator of

the easements on Lots 1 and 2 and Tract 2. The Klosters should have then known of the

failure of Heany to obtain the signature of Michael Fester on the plat.

       The Klosters admit that, shortly after the filing of suit, they approached Fred

                                             21 

     No. 30546-5-111
     Kloster v. Roberts


     Heany, who claimed the easement was properly recorded. The Klosters either had or

     should have had information then to know that Heany was wrong. The trial court could

     reasonably conclude that the Klosters knew of any claim against Fred Heany by April

     2005.

             The Klosters argue that any amendment joining Fred Heany should survive the

     statute of limitations since the lawsuit was commenced timely. Under CR 15(c), an

     amendment adding a party may avoid the statute of limitations and relate back to the date

     of filing the suit, when the plaintiffs show that they timely sought an amendment, once

     they gained relevant knowledge. Teller v. APM Terminals Pac., Ltd., 134 Wn. App. 696,



I
   705,142 P.3d 179 (2006). The moving party must also prove that any mistake in failing

     to timely amend was excusable. Id. at 705-06. Conversely, when the amendment is to

I
   add an additional defendant, inexcusable neglect alone is a sufficient ground to deny the

I
   motion. Id. at 706 (quoting Haberman v. Wash Pub. Power Supply Sys., 109 Wn.2d 107,

I

j
     174, 744 P.2d 1032 (1988)). "If the parties are apparent or are ascertainable upon

     reasonable investigation, the failure to name them will be inexcusable." Id. "For

     example, failure to name a party in an original complaint is inexcusable where the

     omitted party's identity is a matter of public record." Id. at 707. The plaintiffs attorney

     is presumed to have researched and identified all potential parties with verifying



l
J
     information in the public record. Id.



                                                 22 

No.30546-5-III
Kloster v. Roberts


       Although the trial court did not indicate the basis for denial in the order denying the

motion to substitute, this court may affirm on any basis supported in the record. Deep

Water Brewing, LLC v. Fairway Res., Ltd., 170 Wn. App. 1, 11,282 P.3d 146 (2012).

The evidence is more than sufficient to support the trial court's decision on the basis that

the failure to name Heany in the original complaint was inexcusable. Teller, 134 Wn.

App. at 706.

       Necessary party. For the first time on appeal, the Klosters contend Fred Heany

should have been joined under CR 19 as a necessary party because he was responsible for

failing to record the access easement. "Necessary party" may be raised for the first time

on appeal because a trial court lacks jurisdiction if all necessary parties are not joined.

DeLong v. Parmelee, 157 Wn. App. 119, 165,236 P.3d 936 (2010). A person must be

joined as a necessary party if(l) a complete determination of the controversy cannot be

made without that party and (2) the party claims an interest in the subject of the case that

would be impeded by a judgment. CR 19(a); DeLong, 157 Wn. App. at 165. In

determining whether a party is necessary, the court asks to what extent a judgment

rendered in the party's absence might be prejudicial to him or to those already parties,

and whether a judgment rendered in his absence will be adequate. Gildon, 158 Wn.2d at

495.

       Fred Heany was not a necessary party. His participation in this suit was

unnecessary for a complete determination of the controversy, which involves claims of

                                              23 

No.30S46-S-III
Kloster v. Roberts


fraud, concealment, and misrepresentation. Heany transferred his interest in PRB to

Blades in 1983 and made no representations at all to the Klosters. He testified at trial that

he intended to create an easement over Tract 2 when he sold that tract to the previous

owner. The trial court instructed the jury to consider Heany's intent in determining

whether an easement was created. Although the Klosters claim Fred Heany admitted to

fault for failing to obtain Michael Fester's signature on the plat, the Klosters do not

explain their basis for recovery against Heany personally or how they were prejudiced by

his absence as a party.

                             PRB SUCCESSOR LIABILITY

       The Klosters seek to impose liability upon Pacific Rim Brokers, Inc., as the

successor to Fred Heany and Heany's sole proprietorship, Pacific Rim Properties. The

Klosters argue that the issue ofPRB's successor liability should have gone to the jury and

the trial court should have adopted their proposed special jury instruction 16 on

constructive or imputed knowledge. The Klosters wish to employ the jury instruction to

argue that PRB, when acting as the broker during the sale from Roberts to the Klosters,

knew of the defect in the easement, because knowledge held by Fred Heany is imputed to

PRB.

       Before trial, Judge Reynolds entered an order indicating that PRB was the

successor in interest to Pacific Rim as the continuation and incorporation ofFred Heany

and his associate, Robert Blades, doing business as Pacific Rim. During trial, Judge

                                             24 

No. 30546-5-111
Kloster v. Roberts


Altman set aside Judge Reynolds' decision and entered an order dismissing PRB as a

matter of law. In granting PRB's motion, Judge Altman addressed the effect of the

previous ruling:

       Rulings were made previously based on a certain status of the file, which,
       as I indicated earlier, has changed in subtle ways now that we finally have
       the evidence of live under-oath witnesses.
              I'm not going to allow Mr. Heany's error to be attributed to the
       defendant [PRB] in this case, so to the extent that that's a previous ruling
       based on the facts as I knew them at the time, or Judge Reynolds did, that
       has changed.

RP at 1141.

      A trial court's order or ruling may be revised at any time before final judgment.

Owens v. Kuro, 56 Wn.2d 564, 566,354 P.2d 696 (1960). Anyway, Judge Altman did

not alter Judge Reynolds' finding that PRB was the successor in interest of He any's

brokerage business. Judge Altman ruled that PRB is not liable for mistakes Heany made

in his separate business as a developer of Pacific Rim Estates. The Klosters contend the

court erred in finding a distinction between Heany's brokerage business, known as

Pacific Rim Properties, and his separate business as developer of Pacific Rim Estates.

They argue that PRB is liable as a continuation of Heany's sole proprietorship, including

his activities as developer and as broker.

      The Klosters cite Cambridge Townhomes, LLC v. Pac. Star Roofing, Inc., 166

Wn.2d 475,209 P.3d 863 (2009). Cambridge noted the general rule that a corporation

purchasing the assets of another corporation does not take on the liabilities ofthe selling

                                             25 

No. 30546-5-111
Kloster v. Roberts


corporation. Id. at 481-82. One exception to this rule, however, is when the purchaser is

a "mere continuation" of the seller. Id. at 482. Factors used by the court to determine

whether a successor business is really just a continuation of the former business include

whether there is a common identity between the officers, directors, and stockholders of

the selling and buying companies, and the sufficiency of the consideration for the sale.

Id. In the case of a sole proprietorship, which has no officers, directors, or shareholders,

the court considers "the continuity of individuals in control of the business." Id. at 483.

The objective of the test is to discern whether the purchasing company is merely a '''new

hat'" for the selling company. Id. at 482 (quoting Cashar v. Redford, 28 Wn. App. 394,

397,624 P.2d 194 (1981)).

      The Klosters assert that while Fred Heany developed Pacific Rim Estates, he

represented to the world that he acted for Pacific Rim Properties. They emphasize that

Heany's letters to Klickitat County Commissioners, regarding the requirements for the

long plat, were written on Pacific Rim Properties letterhead. Additionally, they note that

the articles of incorporation for PRB state its purpose is "[t]o engage in the general

business of brokering and development of real estate." Ex. 137, at 1 (emphasis added).

These facts are not conclusive, however.

      Mere use of a company's letterhead generally is insufficient to show that the letter

writer is acting on behalf of the company. See Griffin v. Union Sav. & Trust Co., 86

Wash. 605, 610-11, 150 P. 1128 (1915). The intent of the parties controls whether the

                                             26 

No. 30546-5-111
Kloster v. Roberts


letter in effect "binds" the company. Bailie Commc'ns Ltd, v. Trend Bus. Sys., 53 Wn.

App. 77, 80, 765 P.2d 339 (1988); see Griffin, 86 Wash. at 610.

       In this case, Fred Reany signed his name to these letters without any reference to

representation of Pacific Rim Properties, and the letters themselves do not mention

Pacific Rim Properties. Other letters written by Reany regarding development of the

long plat were not sent on Pacific Rim Properties letterhead. At trial, he testified that he

conducted his development activities independent of his brokerage activities for Pacific

Rim Properties. Reany further testified that, despite language in the articles of

incorporation, PRB never developed real estate. After he formed PRB with Robert

Blades, his development activities prevented him from carrying out his brokerage duties

for PRB, and that is why he sold his interest in PRB a year later to Blades. According to

Robert Blades, the articles of incorporation were drawn up by an attorney who

recommended including "development of real estate" in the purpose section "in case

anybody wanted to do anything down the road," not because he and Reany intended to

develop property for PRB. RP at 858.

      The "continuity of individuals" test supports a conclusion that PRB is a

continuation of the former brokerage sole proprietorship. Cambridge, 166 Wn.2d at 483.

But the evidence also conclusively supports the trial court's conclusion that Reany's

development activities were not performed for Pacific Rim Properties and were not

intended to be incorporated in PRB. Consequently, the trial court did not err in rejecting

                                             27 

No. 30546-5-III
Kloster v. Roberts


the Klosters' argument that PRB had successor liability for Reany's development

activities for Pacific Rim Estates.

       Any error in dismissing PRB was harmless. The jury ruled that the Klosters

suffered no damages from any defect in the easement.

                                AMERI-TITLE LIABILITY

       Coinsurer. Evidence showed that Ameri-Title was a local agent for First

American and sold the First American title insurance policy to the Klosters. In the

agency agreement with First American, Ameri-Title retained 90 percent of the premiums

paid for a First American title policy and agreed to bear the first $3,500 of risk of loss on

some policies written for First American. Ameri-Title prepared the preliminary

commitment for title insurance that was supplied to the Klosters.

       The Klosters contend Ameri-Title qualifies as an insurer under RCW 48.01.040,

.050, and .070 and WAC 284-30-320. In 2009, Judge Reynolds granted a motion in

limine preventing argument that Ameri-Title did not act as a title insurer. After

presentation of the Klosters' evidence, however, the trial court granted First American's

and Ameri-Title's motion to revise this interlocutory issue on summary judgment or

under CR 56(d) (partial summary judgment). The trial court ruled that the Klosters could

not assert a claim against Ameri-Title as an insurer, and therefore all claims on that basis

were dismissed, including claims for breach of contract, breach of the duty to defend and

indemnity, bad faith, and violations of the CPA.

                                             28 

     No.30546-5-III
     Kloster v. Roberts


           Review of an order of summary judgment is de novo. Campbell v. Ticor Title Ins.

     Co., 166 Wn.2d 466, 470, 209 P.3d 859 (2009). Summary judgment is appropriate if

     there are no genuine issues of fact and the moving party is entitled to judgment as a

     matter oflaw. Id.; CR 56(c). We also review a trial court's ruling on a CR 50(a) motion

     for judgment as a matter of law de novo, using the same standard applied by the trial

     court. Davis v. Microsoft Corp., 149 Wn.2d 521, 530-31, 70 P.3d 126 (2003); Hawkins v.

     Diel, 166 Wn. App. 1, 13,269 P.3d 1049 (2011).

           Real estate title insurers in Washington are regulated under Title 48 RCW. See ch.

     48.29 RCW. An "insurer" is defined generally in the statute as "every person engaged in

     the business of making contracts of insurance." RCW 48.01.050. A more detailed

     definition of "insurer" is supplied by former WAC 284-30-320(5) (1978): any individual

     or legal entity "engaged in the business of insurance, authorized or licensed to issue or

     who issues any insurance policy or insurance contract in this state." "Insurance" is

     defined as "a contract whereby one undertakes to indemnifY another or pay a specified

     amount upon determinable contingencies." RCW 48.01.040. A title insurance agent is

     "a business entity licensed under the laws of this state and appointed by an authorized

     title insurance company to sell, solicit, or negotiate insurance on behalf of the title

     insurance company." RCW 48.17.010(16).

           The difference between a title insurer and its agent, therefore, is that the title

     insurer enters into the contract with the insured to indemnifY for certain losses, while the

I                                                  29 

I

,

1
No.30546-5-III
Kloster v. Roberts


agent enters into a separate contract with the insurer to sell, solicit, or negotiate insurance

on behalf of the insurer. An agent, such as Ameri-Title, is not licensed to issue an

insurance policy on its own behalf. Id. Ameri-Title's agreement to be compensated with

a percentage of the premiums and to indemnity a portion of the loss paid by First

American was negotiated with First American, not with the Klosters. See Title Ins. Co.       0/
Minn. v. State Bd. o/Equalization, 4 Cal. 4th 715,842 P.2d 121, 126-27, 14 Cal. Rptr. 2d

822 (1993). First American remained solely liable to the Klosters for any covered loss.

Id., at 127. Consequently, the trial court did not err in concluding as a matter of law that

Ameri-Title was not a coinsurer with First American on the Klosters' title insurance

policy.

          Negligent misrepresentation. At the conclusion of the Klosters' evidence, the trial

court found "no evidence whatsoever" to support the claims against Ameri-Title, and

dismissed them all. The Klosters contend Ameri-Title had a duty to investigate and

disclose to them that the access easement shown on the short plat had not been recorded,

and that the breach of this duty constituted negligence.

      To support a prima facie case of negligent misrepresentation, the Klosters had to

produce evidence that Ameri-Title negligently supplied them false information to induce

a business transaction and that the Klosters justifiably relied on that false information.

Douglas v. Visser, 173 Wn. App. 823, 833-34, 295 P 3d 800 (2013). The Klosters

contend the "false information" here was the failure to inform them that the easement on

                                               30 

No.30546-5-II1
Kloster v. Roberts


Tract 2 shown in the preliminary commitment document was unrecorded. Ameri-Title

had no duty, however, to infonn the Klosters ofthis fact.

      A preliminary commitment does not represent the condition of the title, but is

merely a statement of the terms and conditions by which the insurer is willing to issue its

title policy. Barstad v. Stewart Title Guar. Co., 145 Wn.2d 528, 536,39 P.3d 984

(2002); Courchaine v. Commonwealth Land Title Ins., Co., 174 Wn. App. 27, 36, 296

P.3d 913 (2012). Neither a preliminary commitment nor a title policy serves the purpose

of an '" abstract of title'" which is a written representation, intended to be relied upon by

the party who requested it, that gives constructive notice of all recorded conveyances or

documents in the chain of title. Courchaine, 174 Wn. App. at 36 (quoting RCW

48.29.010(3)(b)). Because the preliminary commitment here was not an abstract of title,

Ameri-Title had no duty to infonn the Klosters that one of the easements on the attached

short plat map had not been recorded. Furthermore, the preliminary commitment

specifically excluded from coverage any easements shown on the short plat map.

       The Klosters rely on Sheridan v. Aetna Casualty & Surety Company, 3 Wn.2d

423, 440, 100 P .2d 1024 (1940), when arguing that Ameri-Title voluntarily assumed the

obligation to warn the Klosters of the inability to use an easement across the Rickeys'

land. Sheridan was a personal injury accident against a liability insurer, who agreed with

the owner of a building to inspect the premises and report the condition of the premises to

the government authority. Any relevance to duties of a title insurer is distant. Whereas

                                             31 

     No.30546-5-III 

     Kloster v. Roberts 



     First American Title may have wanted its agent to be more careful in researching

     easements, this want created no duty to the Klosters, particularly when the commitment

     excluded coverage for easements shown on the plat map.

                      FIRST AMERICAN TITLE INSURANCE COMPANY
                            EXTRACONTRACTUAL LIABILITY

            The Klosters seek recovery against the title insurance policy issuer, First American

     Title, for breach of a duty to defend, bad faith, violations of the unfair claims settlement

     practices regulations, violations of the CPA, and breach of the title insurance contract. In

     this context, the claims of bad faith, violations of the regulations, and violations of the

     CPA are coextensive.

            After the Klosters rested their case, the trial court granted First American's CR
j
     50(a) motion for judgment as a matter of law and dismissed the claims. Our review of a

     CR 50(a) judgment is de novo, viewing the evidence in the light most favorable to the

     nonmoving party. Hawkins, 166 Wn. App. at 13. Judgment as a matter oflaw is

     appropriate if we can say that there is neither substantial evidence nor reasonable

     inference to sustain a verdict for the nonmoving party. Id. (quoting Sing v. John 1. Scott,

     Inc., 134 Wn.2d 24,29,948 P.2d 816 (1997)). We address each claim in the order above.

           Breach ofduty to defend. Under Section 4 in the title insurance policy, First


I
~i


I
I
     American agreed to defend, at its own costs, against third party claims "adverse to the

     title" to the Klosters. Ex. 95, at 3. The Klosters contend First American had a duty to
i
j


I
1

                                                   32 

No. 30546-5-111
Kloster v. Roberts


defend their claim that they had an access easement across Tract 2 and that First

American held a conflict of interest since it also insured the purchase of Tract 2 by the

Rickeys. First American responds that no duty to defend arose because the Rickeys

never filed suit against the Klosters, and because the Klosters had no coverage for the

purported easement.

      The duty to defend is triggered whenever an insurance policy conceivably covers

the allegations of a complaint filed against the insured. Campbell, 166 Wn.2d at 471.

"The duty to defend arises whenever a lawsuit is filed against the insured alleging facts

and circumstances arguably covered by the policy." Kirk v. Mount Airy Ins. Co., 134

Wn.2d 558,561,951 P.2d 1124 (1998). "The triggering event is the filing ofa complaint

alleging covered claims." Griffin v. Allstate Ins. Co., 108 Wn. App. 133, 138,29 P.3d

777 (2001).

       The Rickeys have not filed a lawsuit against the Klosters and have not sued to

quiet title. The Klosters contend the duty to defend extends, however, to any legal action

necessary to establish title. Although unclear in their brief, they may contend First

American had a duty under Section 4 to file an action to quiet title in the unrecorded

easement. The Klosters cite no case that supports their assertion and we find no case.

We will not rewrite the insurance contract to impose a duty on the title insurer to "clear

title" when the title policy imposes no such obligation but merely obliges the insurer to




                                             33 

No.30546-5-II1
Kloster v. Roberts


indemnify for losses not exceeding the policy limits. Sec. Serv., Inc. v. Transamerica

Title Ins. Co., 20 Wn. App. 664, 669-70, 583 P.2d 1217 (1978).

       Moreover, the duty to defend does not arise if the alleged claim clearly is not

covered by the policy. Kirk, 134 Wn.2d at 561. As we discuss below, the title policy

here excludes coverage of any road easement on Tract 2.

       Badfaithlviolations ofthe unfair claims settlement practices regulations. An

insurer has a duty of good faith to its insured, and violations of that duty may give rise to

tort actions for bad faith. Smith v. Safeco Ins. Co., 150 Wn.2d 478,484, 78 P.3d 1274

(2003); Rizzutiv. Basin Travel Servo ofOthello, Inc., 125 Wn. App. 602, 615,105 P.3d

1012 (2005). Under RCW 48.30.010(1), an insurer "shall not engage in unfair methods

of competition or in unfair or deceptive acts or practices" as defined by the statute and its

regulations, found in WAC 284-30-300 through -800. Violations of these standards

constitute a breach of the insurer's duty of good faith. Rizzuti, 125 Wn. App. at 616.

     WAC 284-30-330 identifies specific unfair claims settlement practices. The

Klosters allege the following violations: misrepresentation of pertinent facts or policy

provisions (WAC 284-30-330(1)) and denial of coverage without a reasonable and

prompt investigation (WAC 284-30-330(3), (4), (6)). According to the Klosters, First

American misrepresented facts when it failed to reveal until a year after it filed its claim

report that its first investigation of the Klosters' claim indicated agent

"irregularity/omission" caused the dispute between the Klosters and the Rickeys.

                                              34 

I
    No. 30546-5-111
    Kloster v. Roberts


    Ex. 154. Nevertheless, the claim report drew no such conclusion, but only characterized

    the claim of the Klosters.

           The Klosters also argue that First American's initial claim report did not deny

    coverage, and thus First American's eventual denial of coverage is evidence of bad faith.

    Nevertheless, whether the initial internal report failed to document a denial of coverage is

    immaterial. First American, from the inception of the dispute, consistently informed the

    Klosters that it denied coverage, in part because the Klosters had access over other land.

    An insured does not establish bad faith when the insurer denies coverage based on a

    reasonable interpretation of the policy. Am. Best Food, Inc., v. Alea London, Ltd., 168

    Wn.2d 398, 412, 229 P.3d 693 (2010).

          "To prevail on a claim of bad faith denial of coverage, the insured must come

    forward with evidence that the insurer acted unreasonably." Rizzuti, 125 Wn. App. at

    616. Once the insurer shows a reasonable basis for its action, the insured can raise an

    issue of fact by presenting evidence that the insurer's alleged basis was not the real

    reason for its decision to deny coverage. Id. at 616-17; see also Smith, 150 Wn.2d at

    486. First American provided a reasonable basis for denial, and the Klosters failed to

    show that First American's stated reasons for denial were not the actual reasons.

           The Klosters established at trial that First American employees did not receive

    training on specific regulations of the unfair claims settlement practices regulations. Nor

    did First American maintain internal rules regarding the handling of claims. These facts

                                                 35 

No.30546-5-III
Kloster v. Roberts


could support a claim that First American did not adopt and implement reasonable

standards for the prompt investigation of claims arising under insurance policies in

violation of WAC 248-30-330(3). Ultimately they did not show, however, that this lack

of training led to any delay in a prompt investigation, nor that any delay harmed the

Klosters.

       Violations ofthe Consumer Protection Act. The Klosters contend that violations

of the unfair claims settlement practices regulations also violate the CPA, chapter 19.86

RCW. To prevail on a CPA claim, the plaintiff must show (1) an unfair or deceptive act,

(2) in trade or commerce, (3) impacting the public interest, and that (4) the plaintiff

suffered a business or property injury (5) caused by the unfair or deceptive act.

Courchaine, 174 Wn. App. at 44-45. A violation of the unfair claims settlement practices

regulations can constitute a violation of the CPA. Shields v. Enter. Leasing Co., 139 Wn.

App. 664, 675, 161 PJd 1068 (2007). Since the Klosters failed to show violations of the

unfair claims settlement practices regulations and otherwise failed to present evidence of

First American's breach of the duty of good faith, the trial court did not err in dismissing

their claims of violations of the CPA as a matter oflaw.

                      TITLE INSURANCE POLICY COVERAGE

       In its cross appeal, First American Title Insurance Company contends the trial

court erred when ruling, as a matter of law, that the Klosters had coverage under the title

policy for an incomplete access easement. We agree and reverse.

                                             36
No.30546-5-1I1
Kloster v. Roberts


      The trial court agreed with First American that (l) its title policy insured against

loss resulting from the right to access or legal access from a public road; (2) the title

policy did not insure any specific easement; (3) the Klosters have legal access to their

land across the southern 30 feet of Lot 2 and the eastern 30 feet of Lots 5, 6, and 7 of

Pacific Rim Estates; (4) Schedule A to the policy, which includes the description of the

land insured by the policy, does not include any property beyond its bounds; (5) the

unrecorded purported easement over the northern 30 feet of short plat Tract 2 is outside

the Pacific Rim Estates plat; and (6) Schedule B excludes all specific easements in the

Pacific Rim Estates and short plat Tract 2. The trial court, nonetheless, ruled that the

partial plat map attached to the policy created an ambiguity. The court reasoned that the

average person purchasing insurance would not reasonably glean that the additional

access easement was not within the definition of access contained elsewhere in the

policy. Therefore, the trial court ruled as a matter oflaw that the policy insured against

the unavailability of the easement across the Rickey property, since it had to read any

ambiguity in favor of the insured.

       Waiver ofcross appeal. Before we reach the merits of First American's cross

appeal, we must address the Klosters' contention that First American waived its appeal

since it did not assign error to the trial court's finding that the Klosters' title to Lot 1 was

defective or to Judge Reynolds' order that the title policy access coverage was

ambiguous. According to the Klosters, First American has appealed only the trial court's

                                               37 

    No. 30546-5-111 

    Kloster v. Roberts 



    denial of its motion to set aside Judge Reynolds' pretrial order that the title policy access

    coverage was ambiguous, and First American is appealing only from the second of the

    trial court's orders refusing to set aside Judge Reynolds' pretrial order, not the third and

    final ruling.

          We read First American's brief as assigning error to the findings of fact, in addition

    to the legal ruling that the policy covered the missing easement because of the attached

    map. We know of no rule that requires an appellant to challenge each time a trial court

    repeats the same ruling. We may also excuse a party's failure to assign error to specific

    findings if the briefing makes the challenge clear. Noble v. Lubrin, 114 Wn. App. 812,

    817,60 P.3d 1224 (2003). We know what First American is appealing and, thus, we

    reach the merits of the cross appeal.

           Title policy coverage. Interpretation of an insurance policy is a matter of law and

    is reviewed de novo. Butzberger v. Foster, 151 Wn.2d 396,401,89 P.3d 689 (2004);

    Courchaine, 174 Wn. App. at 43. The policy is construed as a whole, giving effect to

    each clause. Id. Policy language must be interpreted so that it is consistent with the way

    an average person would understand it. Greer v. Nw. Nat 'I Ins., Co., 109 Wn.2d 191,

    198, 743 P.2d 1244 (1987); Courchaine, 174 Wn. App. at 43. Ifa clause in the policy is

    ambiguous, the clause will be interpreted in the insured's favor. Capitol Specialty Ins.
I
1
    Corp. v. JBC Entm't Holdings, Inc., 172 Wn. App. 328, 335, 289 P.3d 735 (2012). "That

I   is especially so in the context of exclusionary clauses." Id. A clause is ambiguous if it is

i                                                38
J
I
No. 30546-5-III
Kloster v. Roberts


fairly susceptible of two reasonable interpretations. Greer, 109 Wn.2d at 198. When the

language is clear and unambiguous, however, the court may not create an ambiguity.

Courchaine, 174 Wn. App. at 43.

       The First American title policy insured against loss or damage sustained or

incurred by the insured by reason of a "[l]ack of a right of access to and from the land."

Ex. 95, at 1. Schedule A describes the "land" covered as "Lot 1, PACIFIC RIM

ESTATES." Ex. 95, at 4. Since the Klosters gained, upon their purchase, legal and

actual access to their land, regardless of the absence of an easement across the Rickeys'

land, their claim does not fulfill the policy inclusory language.

       The First American policy also excluded coverage three times over. Schedule B

excluded from coverage, "Easements, claims of easement or encumbrances which are not

shown by the public records." Ex. 95, at 5. Specific exceptions related to the unrecorded

easement on the northern 30 feet of Tract 2:

       5. Easements, Conditions, Restrictions and Reservations, including
       the terms and provisions thereof, as contained in Short Subdivision
       filed as Auditor's File No. 167997, Klickitat County Short Plat Records.

       8. Conditions, Restrictions, Easements for roadways and Utilities and
       disclosure regarding maintenance of roads, including the terms and
       provisions thereof, as shown on the Plat recorded December 1, 1981 in
       Book 5, Pages 31 and 32, Klickitat County Plat Records.




                                               39 

No.30546-5-II1
Kloster v. Roberts


Ex. 95, at 6. The map sketch attached to the title policy is a portion of the short

plat map in Auditor's File No. 167997 and shows various easements, over the

short subdivision known as WS-146, including the unrecorded easement on

Tract 2. Also, exclusion 8 referred to easements for roadways as shown on the plat in

Book 5, pages 31 and 32, of the county records, which is the same plat referred to in

Schedule A's description of the property.

       The trial court concluded that the "unfortunate plat map appended to the policy"

created an ambiguity of coverage because an "average person could reasonably conclude

that the title policy for Lot 1, Pacific Rim Estates, covers access outside the plat across

the northern   30~feet   of the Rickey parcel, Tract 2," and the policy "both references the

mistaken easement by attachment and guarantees coverage to 'access.'" CP at 4613. The

Klosters' own testimony contradicts this conclusion. Karl Kloster was asked at trial if the

title policy exceptions included the property containing Tract 2 and he replied, "I guess."

RP at 1072. He was also asked if he relied on the short plat sketch attached to his title

policy as a representation of what was covered in the policy. He replied that he would

never rely on a sketch because he knew the difference between a sketch and a recorded

short plat. Karl Kloster further explained that he did not rely on the sketch of the plat

because it had a disclaimer at the top. This disclaimer noted the map was provided as a

courtesy and does not constitute a part of the title policy. We wonder how the title

company could have more clearly communicated to the reader that any easements

                                                40 

No. 30546-5-III
Kloster v. Roberts


depicted on the sketch are not guaranteed. We assume that Karl Kloster agrees he is a

reasonable person capable of reading and understanding the language of the policy.

       With the inclusory language, the exclusionary clause, and the disclaimer on the

map, the average person would not assume that easements shown on the plat sketch were

covered in the Klosters' title policy. With the disclaimer, the map is not sufficient to

rebut what the trial court recognized is the unambiguous language of the policy.

       A decision of limited relevance is Havstad v. Fidelity National Title Insurance

Company, 58 Cal. App. 4th 654, 68 Cal. Rptr. 2d 487 (1997). The Havstads, upon

purchasing the insured property, began use of a strip of neighboring land for access. The

strip was delineated on a subdivision map as "not a public street." One of the neighbors

sued the Havstads for trespass and the Havstads tendered the defense of the suit to the

title company. The California Court of Appeals affirmed a summary judgment ruling in

favor of the title company on the ground that the title company has no duty to defend

when a claim is not covered.

       Fidelity National Title Insurance Company's policy read similarly to the First

American Title Insurance Company's policy. The policy insured against loss by reason

of "lack of a right of access to and from the land." Id. The insured property was the

property purchased by the insured and did not extend to land outside its boundaries.

Nevertheless, the policy referenced the subdivision map that contained the "not a public

street" notation across a portion of the neighboring lands. Id. The Havstads argued that

                                             41 

No. 30S46-S-III
Kloster v. Roberts


coverage extended to an easement for the street because of the reference. The court

disagreed, stating that the insured's position contradicted the plain language of the policy

that described the covered property as only that within the legal description of the

insured's land.

       Our trial court erred in concluding that the title policy was ambiguous and

therefore covered a "defect" in the title caused by the Klosters' inability to use the

unrecorded easement on Tract 2. The judgment against First American is therefore

reversed.

       First American Title also cross appeals the jury award of the cost of cure as

damages, contending the measure of damages should be the decrease in the Klosters'

property value resulting from the missing easement. In tum, the Klosters appeal the trial

court's decision limiting their damages to the cost to cure. Finally, First American Title

also cross appeals the trial court's award of reasonable attorney fees and costs to the

Klosters, and the Klosters appeal the limited amount of fees awarded them. Because we

hold judgment should have been entered in favor of First American Title, not the

Klosters, we reverse the jury award and need not address the correct measure of damages

or the elements of damages available. We also reverse the award of reasonable attorney

fees and costs in favor of the Klosters against First American Title and do not address

whether the trial court's award should have been higher.




                                             42 

No. 30546-5-111
Kloster v. Roberts


                                    ATTORNEY FEES

       The sale agreement between Schenectady Roberts and the Klosters stated, "If the

Buyer, Seller, or any real estate licensee or broker involved in this transaction is involved

in any dispute relating to this transaction, any prevailing party shall recover reasonable

attorneys' fees and costs." CP at 3744 (emphasis added). The Klosters contend the trial

court erred when awarding PRB and Roberts fees because their claim was not for a

breach of contract but for misrepresentation and concealment. They rely on Boguch v.

Landover Corp., 153 Wn. App. 595,609-10,618-19,224 P.3d 795 (2009), for the

proposition that there is no right to recover attorney fees based on contract when the

claim is based on negligence. The Klosters do not object to the high amount of the fees

and costs.

       When determining whether to award fees under a contract clause, the court must

focus on the language of the clause. See Belfor USA Grp., Inc., v. Thiel, 160 Wn.2d 669,

671, 160 P.3d 39 (2007); Hindquarter Corp. v. Prop. Dev. Corp., 95 Wn.2d 809,815,

631 P .2d 923 (1981). The fee provision in Boguch was narrow and limited to actions "to

enforce any of the terms of this Agreement." Boguch, 153 Wn. App. at 607. The

Klosters' contract clause was broader.

       An analogous case is Brown v. Johnson, 109 Wn. App. 56,58-59,34 P.2d 1233

(2001). In Brown, the court held that a property buyer's tort misrepresentation claim was

properly a basis for an attorney fees claim under a real estate purchase and sale

                                             43
No.30546-5-II1
Kloster v. Roberts


agreement. Id. at 59. The fee provision in the agreement applied to any "suit concerning·

this Agreement." Id. The court held that the buyer's misrepresentation claim was "on

[the] contract" because it arose "out of the parties' agreement to transfer ownership of

[the property]" and the sale agreement was central to the buyer's claims. Id. at 59. The

Klosters' misrepresentation and concealment claims also arose out of the agreement by

which Roberts sold property to them. The Klosters' own complaint prayed for an award

of attorney fees under the sale agreement.

       The Klosters also contend the trial court could not award Roberts and PRB fees

because the statutory warranty deed that Roberts gave the Klosters superseded the sale

agreement. Therefore, they argue that the sale agreement merged into the statutory

warranty deed and the attorney fees clause was extinguished. The sale agreement

specifically read, however, that "[a]ll terms of this Agreement, which are not satisfied or

waived prior to closing, shall survive closing. These terms shall include, but not be

limited to, representations and warranties, attorneys fees and costs, ... etc." CP at 3745.

Thus, the trial court properly awarded reasonable attorney fees and costs to Roberts and

PRB as provided in the sale agreement.

       We also award reasonable attorney fees and costs, on appeal, to Roberts and PRB.

RAP 18.1 permits the prevailing party to recover reasonable attorney fees incurred on

appeal if the party was entitled to attorney fees at trial. Landberg v. Carlson, 108 Wn.

App. 749, 758, 33 P.3d 406 (2001).

                                             44
No. 30S46-S-III
Kloster v. Roberts


                                     CONCLUSION

       We reverse the judgment entered against First American and affirm the remaining

decisions of the trial court. We award Schenectady Roberts and PRB reasonable attorney

fees and costs incurred on appeal.

      Reverse and affirm.

      A majority of the panel has determined this opinion will not be printed in the

Washington Appellate Reports, but it will be filed for public record pursuant to RCW

2.06.040.




WE CONCUR: 





Korsmo, C,J.                                      Kulik, J.P.T.




                                           45 

                        A
                                                                                                              (509) 4~3"r.196S
                                                                                                      Fox:    (S09) 493·1905
                                                                                                    PO Box 73s - 165 NE Estes
                       AmenTtfie                                                                    'White Salmon, WA 98672



                                  ANY SKETCH ATTACHED HERETO IS pONE SO AS A COURTESY ONLY AND
                                        IS NOT PART OF J.\NYTITLE COMMITMENT OR POLICY. IT IS
                                 ':.: 	 FURNLSHED SOLE~Y FOR THE PURPOSE OF ASSISTING IN LOCATING
                                        THE P.REMISES AND FIRST AMERICAN EXPRESSLY DISCLAIMS ANY
                                        LIABILITY WHICH MAY RESULT FROM RELIANCE MADE UPON IT.


                                                                                                                      -
                                                                  ............ ­   -   - -"   ...
                                                                                                                                          ,'.




          I
          I
          I
         .t
          t
              I
              I
              I
              I
                                                          .....    --­
              I
              I
                  I




~         ...          _ _ _ tl....




-.
-..,,'1& ....:
.~ f.;:.'S·'
T'
~
~~L"­
          -""
            ,.'
          .".­



*,~..,z......"
 ~                    ',.:
 .. M·.. _~I/IIf'
 III
 ~ ~ ~ ... .
          ,."""..-0
                  . ....
                             .
                                                                                                                     ...
 PI..w" .... .                                                                                                               . - -­
                                                      .
                                                                                                                                      .
 ......,.c...........                                                                                  _. -.- w .....~"'­
       .. \c-D . . .
         ......."..
        ~",.""
                                                    ,
                                                    ~


                                               ,,
                                              "
                                                                                                                    (,:     034
