                                                                          L
                                                            C:Otii'iT OF APPEALS
                                                               TATE OF           DIV
                                                                          WASHINGTON
                                                            201811AY 21 Ml 8: 43




      IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON


                                           )
SHANNON LEAHY,              •              )         No. 76272-9-1
                                           )
                      Appellant,           )         DIVISION ONE
                                           )
           v.                              )
                                           )
STATE FARM MUTUAL                          )         PUBLISHED
AUTOMOBILE INSURANCE                       )
COMPANY,                                   )         FILED: May 21, 2018
                                           )
                      Respondent.          )
                                           )

       Cox, J. — Shannon Leahy appeals the trial court's discovery orders and

its order granting summary judgment to State Farm Mutual Automobile Insurance

Company, dismissing her extracontractual claims with prejudice. We hold that

the trial court did not abuse its discretion in ruling on discovery matters. But

there are genuine issues of material fact on the reasonableness of State Farm's

actions in dealing with her UIM claim. We reverse and remand for further

proceedings.

       On November 1, 2010, Leahy's car was struck from behind, and she

suffered soft tissue injuries to her neck and back. The other driver was at fault,

and that driver's $25,000 liability insurance limit was split between three injured

parties. Leahy received only $9,128.50 of this insurance.
No. 76272-9-1/2

       She had automobile insurance with State Farm, including $25,000 of

personal injury protection insurance (PIP) and another $100,000 in underinsured

motorist coverage (UIM). Leahy received medical treatment for her injuries

including chiropractic, massage, and acupuncture services.

       Almost 24 months after the accident, State Farm requested that Leahy

undergo an independent medical examination (IME)to determine whether the

treatments she was receiving were reasonable and medically necessary.

       State Farm contacted a third party vendor, MES Solutions, and arranged

for Leahy to be examined by Dr. Geoff Lecovin, a licensed naturopath,

chiropractor, and acupuncturist. Leahy did not object. After the IME, Dr. Lecovin

determined that the treatments Leahy received were appropriate but excessive.

He determined that, although she was not yet at maximum medical improvement

(MM I), she should have been referred for physical therapy after about 20

acupuncture and 20 massage visits because those treatments were no longer

helping. He recommended that Leahy have six weeks of twice-weekly physical

therapy.

       On December 17, 2012, State Farm informed Leahy's counsel that it

would not cover any additional massages or acupuncture treatments because

they were no longer reasonable and necessary. State Farm asked Leahy to

inform it if either she or her medical providers had new or additional information

that she would like it to consider. Leahy did not submit any additional information

at that time.




                                            2
No. 76272-9-1/3

       While being treated for her soft tissue injuries, Leahy had also sought UIM

benefits for other injuries. In May 2012, she had informed State Farm that she

had been diagnosed with dermatomyocitis(DM)and that the DM was either

caused or triggered by the auto accident. DM is an autoimmune disease causing

muscle inflammation, fatigue, and rashes. Leahy informed State Farm that she

was seeking compensation under her UIM for the medical expenses associated

with DM.

      State Farm informed Leahy that it would likely seek medical review to

determine whether her DM was caused by the accident. On June 4, 2012, State

Farm received a letter of representation from Leahy's attorneys and it assigned

the claim to claim representative Leo Jung.

      Jung contacted State Farm's internal injury claim trainers who informed

him that the cause of DM is unknown but is suspected to be triggered by outside

factors such as malignancy, drugs, and infectious agents in genetically

predisposed individuals.

      Jung requested a demand letter from Leahy's counsel on September 17,

2012. On June 23, 2013, Leahy's counsel sent a demand letter alleging that the

auto accident caused a "lighting up" of Leahy's "dormant DM." The demand

estimated Leahy's damages at $287,900, most of which were medical expenses

related to DM. Leahy sought the policy limits of both her PIP and UIM.

      Jung requested that Leahy submit to State Farm all of her medical records

for the three years prior to the accident. Leahy did so, and those records made

no mention of DM or associated conditions prior to the accident. On December


                                           3
No. 76272-9-1/4

3, 2013, Jung told Leahy's counsel that he did not have enough information to

conclude that the DM had been caused by the accident and made an offer to

waive $1,615 of State Farm's PIP subrogation rights.

      On December 6, 2013, Leahy sent State Farm the medical report of Dr.

Paul Brown, a rheumatologist, who had examined Leahy in October 2013 and

concluded that her DM was caused by the accident. State Farm then contacted

Medical Consultants Network(MCN)to obtain an expert to review Dr. Brown's

report.

          MCN selected Dr. Kenneth Ta, a rheumatologist, who concluded that it

was more probable than not that Leahy's DM was not caused by the accident.

He reported that there was no medical support for a causal relationship between

trauma such as that resulting from an accident and DM.

           State Farm made a second offer of a $11,116.11 waiver of its PIP

subrogation rights based on its determination that only Leahy's soft tissue injuries

were caused by the accident. Leahy rejected the offer and sued State Farm for

her UIM policy limits.

          At the ensuing jury trial, Dr. Brown testified for Leahy and Dr. Ta testified

for State Farm. Dr. Lecovin's deposition testimony was also in evidence.

          The jury found in favor of Leahy and awarded her $884,017.31 in

damages. Post-verdict, State Farm paid the $100,000 UIM policy limit and the

remainder of the PIP limit because the jury had also found that Leahy incurred

sufficient medical bills within the scope of her PIP to exhaust that coverage.




                                                4
No. 76272-9-1/5

       Leahy then amended her complaint to add extracontractual claims against

State Farm for bad faith insurance practices, violation of the Consumer

Protection Act(CPA), and violation of the Insurance Fair Conduct Act(IFCA).

She originally brought additional claims, but they were dismissed pursuant to

State Farm's first summary judgment motion and are not at issue on appeal.

       Thereafter, the trial court resolved certain discovery disputes related to

access to the insurer's claim file and the responsiveness of witnesses at

depositions. Finally, the trial court granted summary judgment to State Farm and

dismissed Leahy's remaining claims.

       This appeal follows.

                                     DISCOVERY

       Leahy first argues that the trial court abused its discretion in concluding

that portions of State Farm's UIM claim file were protected either by attorney-

client privilege or as work product. We hold that this ruling was proper.

       "The attorney-client privilege applies to communications and advice

between an attorney and client and extends to documents which contain a

privileged communication."1 "The purpose of the attorney-client privilege is to

protect information from public disclosure so that clients will not hesitate to speak

freely and fully inform their attorneys of all relevant facts."2




       1 Pappas v. Holloway, 114 Wn.2d 198, 203, 787 P.2d 30(1990); see RCW
5.60.060(2)(a).
       Richardson v. Gov't Employees Ins. Co., 200 Wn. App. 705, 712, 403
       2
P.3d 115 (2017), review denied, 414 P.3d 575 (2018).

                                               5
No. 76272-9-1/6

       The work product doctrine applies to "documents and tangible things. . .

prepared in anticipation of litigation or for trial by or for another party or by or for

that other party's representative."3 In order to obtain documents protected by the

work product doctrine, the party seeking discovery must show a "substantial

need" for the materials and that "the party is unable without undue hardship to

obtain the substantial equivalent of the materials by other means."

       Whether a party has made the requisite showing of substantial need "is

ordinarily vested in the sound discretion of the trial judge, who should look at the

facts and circumstances of each case in arriving at an ultimate conclusion."5

Even if the party shows a substantial need,"the court shall protect against

disclosure of the mental impressions, conclusions, opinions, or legal theories of

an attorney or other representative of a party concerning the litigation."6

       We review the trial court's discovery orders for abuse of discretion.7 We

will only reverse the trial court's discovery rulings "on a clear showing' that the

court's exercise of discretion was 'manifestly unreasonable, or exercised on

untenable grounds, or for untenable reasons.'"5



       3 CR      26(b)(4).
       4   Id.

       5 Pappas, 114         Wn.2d at 210.

      6 CR       26(b)(4).
      7 Cedell      v. Farmers Ins. Co. of Wash., 176 Wn.2d 686, 694, 295 P.3d 239
(2013).
     8 Id. (quoting T.S. v. Boy Scouts of Am., 157 Wn.2d 416, 423, 138 P.3d
1053(2006)).

                                               6
No. 76272-9-1/7

         Leahy amended her complaint to assert the extracontractual claims on

November 5, 2015. On December 18, 2015, she served State Farm with

discovery including a request for its "entire unredacted claim file." That file

contains information concerning action taken on Leahy's claim, correspondence,

evidence gathered during the investigation of the claim, reserves, and notes and

worksheets where claims representatives documented their evaluation of her

claim.

         State Farm produced significant portions of its claim file with redactions on

some pages. All information withheld as privileged was described in a privilege

log. State Farm withheld as work product all evaluations and mental impression

evidence including settlement authority subsequent to June 23, 2013, the date on

which it received the demand letter from Leahy's counsel stating litigation would

follow. It also withheld as within the attorney-client privilege all documents

concerning litigation strategy including communications with its attorneys in this

action for periods after Leahy commenced this suit.

         Leahy moved to compel, claiming that these documents were prepared in

the ordinary scope of business and that she had a substantial need for them.

State Farm opposed the motion, arguing that once it received the demand letter,

it anticipated litigation and all internal evaluations, mental impressions, and legal

theories compiled after June 23, 2013, were protected as work product under CR

26(b)(4).

         The trial court entered an order requiring State Farm to submit many of

the withheld documents for in camera review. State Farm submitted 342 pages


                                              7
No. 76272-9-1/8

in response to this directive. On August 3, 2016, the trial court issued a letter

ruling followed up by an order on September 6, 2016, requiring State Farm to

produce 149 of the submitted pages. Leahy moved for reconsideration, but the

trial court denied her motion.

       Leahy argues that the trial court abused its discretion in limiting her

access to information in State Farm's claims file about claim evaluations and

settlement authority. We must disagree.

       Turning first to documents withheld as within the attorney-client privilege,

Leahy argues that "attorney-client privilege is rarely, if ever, available to insurers

in extracontractual actions." She further argues that "[a]n insured's right to an

insurer's claim file maintained for an insured is unambiguous under Washington

law." A close reading of the relevant case authority does not support this

argument.

       Leahy relies on CedeII v. Farmers Insurance Company of Washington,9

Barry v. USAA,19 and Escalante v. Sentry Insurance," to support her

contentions. None support her.

       Starting with the most recent, CedeII involved a bad faith insurance claim

brought by a homeowner.12 The supreme court held that "Rio accommodate the

special considerations of first party insurance bad faith claims, except for under-


        176 Wn.2d 686, 295 P.3d 239(2013).

       19 98 Wn. App. 199, 989 P.2d    1172(1999).
       11 49 Wn. App. 375, 743 P.2d 832(1987).

       12 176 Wn.2d   at 690-91.

                                              8
No. 76272-9-1/9

insured motorist(UIM)claims, the insured is entitled to access to the claims

file."13

           But the court expressly recognized that, unlike other first party bad faith

claims,

                UIM insurer steps into the shoes of the tortfeasor and may
           defend as the tortfeasor would defend. Thus, in the UIM context,
           the insurance company is entitled to counsel's advice in strategizing
           the same defenses that the tortfeasor could have asserted.[14]

Quite simply, in a UIM case like this, the insured must overcome a higher bar

before it can discover privileged information.15 Otherwise, the general rules

protecting attorney-client communications and work product apply.

           One way to overcome the bar is by showing that the party's opponent

"was engaged in or planning a fraud at the time the privileged communication

was made, and ... the communication was made in furtherance of that

activity."16 If the fraud exception is asserted, the court engages in a two-step

process first articulated in Escalante.17 Specifically:

           First, the court determines whether there is a factual showing
           adequate to support a good faith belief by a reasonable person that
           wrongful conduct sufficient to evoke the fraud exception has
           occurred. Second, if so, the court subjects the documents to an in
           camera inspection to determine whether there is a foundation in



           13   Id. at 697(emphasis added).

           14   Id.

           15 See     id. at 700.
           16 Barry, 98 Wn. App. at
                                    205.
           17   Cedell, 176 Wn.2d at 697-98 (citing Escalante, 49 Wn. App. at 394).

                                                 9
No. 76272-9-1/10

       fact for the charge of civil fraud. The in camera inspection is a
       matter of trial court discretion.1181

       In Barry, the court applied the test articulated in Escalante.19 Denisse

Barry alleged that USAA violated the Insurance Code and committed bad faith in

requiring her to institute litigation or arbitration to recover amounts due under her

insurance policy, failing to timely respond to her claim, and failing to timely act on

that claim.20 The court held that, while Barry's allegations were sufficient "to

establish a prima facie case of bad faith insurance and CPA violations," they

were not enough to "constitute a good faith belief that USAA committed fraud."21

Therefore, the trial court did not abuse its discretion in refusing to inspect the

privileged documents in camera.22

       Here, as in Barry, any communications between State Farm and its

attorneys is privileged for purposes of this bad faith suit unless Leahy could show

fraud.23 But there is absolutely nothing in the record before us that shows fraud

or anything suggesting fraud. More importantly, the trial court conducted its own

in camera review of documents from the claim file and did notsuggest that any




       18   Id. at 698 (quoting Barry, 98 Wn. App. at 206).

       19 98 Wn. App. at 205-06.

       2° Id. at 201.

       21   Id. at 206-07.

       22   Id. at 207.
       23   Id. at 206-07.

                                             10
No. 76272-9-1/11

fraud had been committed. In any event, it provided to Leahy the remedy to

which she would have been entitled under Barry and Escalante.

       Accordingly, Leahy has failed to show that the trial court abused its

discretion in determining, after in camera review, that she was not entitled to

documents covered by the attorney-client privilege.

       Leahy also contends that trial court abused its discretion in allowing State

Farm to withhold documents based on work product. We disagree.

       In Barry, USAA had withheld as work product documents including

evaluations, medical records and other materials upon which it relied in making

its coverage decision.24 The court recognized that most of the materials Barry

requested were those relied upon by insurance carriers in the regular course of

business to determine the limits of UIM coverage.25 It held that "the only way a

court can accurately determine what portions of a file may be exempt from

disclosure as work product is by an in camera review of the file."26

       Here, State Farm already produced the medical records and

documentation it relied upon in making its coverage decision—two of the three

types of documents at issue in Barry. And it produced all of Leahy's file before

June 23, 2013. Pursuant to Barry, the trial court then conducted an in camera

review before concluding that the remainder, involving evaluations and mental

processes, was protected as work product.


      24   Id. at 207.

      25   Id. at 208
      26   Id.

                                            11
No. 76272-9-1/12

       While Leahy is correct that there is an established protocol governing

discovery in bad faith insurance claims, this trial court followed that protocol by

conducting an in camera review. She has nothing to complain about in this

respect.

       In her reply brief, Leahy relies on State Farm Fire & Casualty Company v.

Justus, to support her contention that she is entitled to the claims file.27 She

argues that "denial of access to insurer claim files in extracontractual claim

litigation contravenes the key purposes of discovery — 'the production of all

relevant facts and the promotion of the efficient and early resolution of claims.'"28

But Justus did not involve a UIM claim.29 Moreover, in that case, the remedy was

to remand for an in camera hearing and here the trial court has already held such

a hearing.30

       Leahy further argues that the trial court never addressed whether she had

a substantial need for the documents that it determined were work product. She

cites to Pappas v. Holloway, as support for her contention that, if the material

sought to be discovered is essential to the party's claim or defense, an exception

to CR 26(b)(4) should apply.31 But Pappas concerned a legal malpractice action,




       27   199 Wn. App. 435, 398 P.3d 1258, review denied, 189 Wn.2d 1026
(2017).

       28 Appellant's   Reply Brief at 17.

       28   Justus, 199 Wn. App. at 439-40.

       38   Id. at 459-60.

       31   114 Wn.2d 198, 787 P.2d 30(1990).

                                              12
No. 76272-9-1/13

not a bad faith insurance claim.32 And the supreme court reiterated that it is

within the trial court's "sound discretion" to determine whether a party has shown

substantial need based upon the facts and circumstances of each case.33

       Here, the trial court exercised its discretion by looking at the facts and

circumstances of the case. First, it conducted an in camera review. Then, it held

a hearing to consider Leahy's argument that she had a substantial need for these

materials. She argued that she needed these materials in order to show that

State Farm's actions were unreasonable. She claimed that without access to its

internal valuations and settlement authority, she could not show that State Farm

acted in bad faith by offering nothing on her UIM claim. The court considered her

arguments and denied her motion. She has failed to show that the trial court

abused its discretion in doing so.

       Despite the trial court's exercise of its discretion in deciding that Leahy did

not have a substantial need for these documents, Leahy argues that State

Farm's internal valuation of her UIM claim and its rationale for its investigation

and "low ball settlement offers" are vital to prove her extracontractual claims.

       State Farm produced all of the documentation showing what it did to

investigate and settle her claim. Leahy has failed to cite to any Washington

authority holding that internal evaluations are "normally discoverable" or any




      32 See   generally, id. at 200-02.
      33   Id. at 210.

                                             13
No. 76272-9-1/14

cases where such documents were used by trial or appellate courts in

determining whether an insurer's UIM settlement offer was made in bad faith.34

         Leahy relies on federal authority.35 But the work product doctrine in

federal cases is a procedural immunity governed by Federal Rule of Civil

Procedure 26(b)(4).36 This court need only follow federal analysis if it finds the

reasoning persuasive.37 Leahy has failed to persuasively argue why this court

needs to resort to federal analysis to guide its interpretation of CR 26(b)(4).38

         Leahy also argues that State Farm is using discovery as both a "sword

and a shield," producing only evidence that is favorable to it. But examination of

the record does not support this contention. The materials relied upon by Jung in

his affidavit in support of State Farm's second motion for summary judgment

were produced before the June 23, 2013 letter, and State Farm produced all of

its claim file prior to that date.




      34 See Cowiche Canyon Conservancy v. Bosley, 118 Wn.2d 801, 809, 828
P.2d 549 (1992); DeHeer v. Seattle Post-lntelligencer, 60 Wn.2d 122, 126, 372
P.2d 193(1962).

     35 See, e.g., Barge v. State Farm Mut. Auto. Ins. Co., 2016 WL 6601643 at
*5(W.D. Wash. Nov. 8, 2016).

         36   United Coal Cos. v. Powell Constr. Co., 839 F.2d 958, 966 (3rd Cir.
1988).

      37 Washburn v. City of Federal Way, 178 Wn.2d 732, 750-51, 310 P.3d
1275 (2013).

       38     Id.

                                               14
No. 76272-9-1/15

      We also note that at the hearing on State Farm's second motion for

summary judgment, the trial court asked Leahy to identify any information that

State Farm selectively produced. She could not do so.

      After the parties submitted their appellate briefs, State Farm filed a

statement of additional authority attaching Division Two's opinion in Richardson

v. Government Employees Insurance Companv.39 Richardson fails to provide

helpful guidance.

      Christine Richardson was injured in an auto accident and the at-fault

driver's insurance company settled for its $25,000 policy limits.40 Richardson had

$35,000 of PIP and $50,000 in UIM with Government Employees Insurance

Company(GEICO). When GEICO stopped paying for Richardson's medical

treatments under the PIP policy, Richardson retained an attorney and demanded

arbitration.'" GEICO also retained an attorney, and the PIP arbitrator awarded

Richardson the $35,000 limit of her PIP policy.42 She then filed a UIM claim, but

GEICO determined that she had already been fully compensated and denied

UIM coverage.43 Richardson sued, alleging that GEICO breached its duty to deal

in good faith when it wrongfully denied her claims for PIP and UIM benefits.'"



      39 200 Wn. App. 705, 403 P.3d   115 (2017).
      4° Id. at 707.
      41   Id.

      42   Id.

      43 Id.

      44   Id. at 708.

                                           15
No. 76272-9-1/16

Discovery issues arose, and the trial court performed an in camera review.'"

GEICO had already disclosed its claim file, but the trial court ordered disclosure

of all of the documents submitted for review, including most documents related to

activity taking place after Richardson sued.46

      On appeal, the court held that the trial court erred in requiring GEICO to

produce materials compiled after the lawsuit had been filed.47 The court held that

privileged "postlitigation materials, work product, and information in [the] UIM bad

faith" action were not discoverable."

       In Richardson, the court specifically held that the postlitigation materials

were not discoverable. But the court was not asked to address whether the trial

court would have abused its discretion had it determined that a portion of the

earlier materials was not discoverable. Also, the opinion notes that the trial court

did allow for redaction of some prelitigation documents but does not specify what

those documents contained.49

      As we read Richardson, had Leahy sought any materials that were

prepared after she commenced this action on November 15, 2015, they would

have been protected. Because the trial court did not abuse its discretion in

protecting documents that State Farm produced after Leahy sent her demand


      45   Id.
      46   Id. at 708-10.

      47   Id. at 716-17.

      48   Id. at 721.

      49   Id. at 708 n.2.

                                             16
No. 76272-9-1/17

letter but before she filed her extracontractual claims, this case has no bearing

on the proper analysis of this argument.

               REASONABLENESS OF DENIAL OF UIM COVERAGE

       Leahy next argues that there are genuine issues of material fact whether

State Farm's refusal to pay UIM benefits was reasonable. We agree.

      "[S]ummary judgment is appropriate where there is `no genuine issue as to

any material fact and ... the moving party is entitled to a judgment as a matter of

law.'"5° Although the evidence is viewed in the light most favorable to the

nonmoving party, if that party is the plaintiff and it fails to make a factual showing

sufficient to establish an element essential to its case, summary judgment is

warranted.51 Once the moving party shows there are no genuine issues of

material fact, the nonmoving party must bring forth specific facts to rebut the

moving party's contentions.52

      [A]n insurer has a duty of good faith to its policyholder and violation
      of that duty may give rise to a tort action for bad faith. To succeed
      on a bad faith claim, the policyholder must show the insurer's
      breach of the insurance contract was unreasonable, frivolous, or
      unfounded. Whether an insurer acted in bad faith is a question of
      fact. Accordingly, an insurer is entitled to a directed verdict or a
      dismissal on summary judgment of a policyholder's bad faith claim
      only if there are no disputed material facts pertaining to the
      reasonableness of the insurer's conduct under the circumstances,




      50 Elcon Const., Inc. v. E. Washington Univ., 174 Wn.2d 157, 164-65, 273
P.3d 965(2012)(quoting CR 56(c)).

       51Young v. Key Pharmaceuticals, Inc., 112 Wn.2d 216, 225, 770 P.2d 182
(1989), overruled on other grounds by 130 Wn.2d 160 (1996).

      52    Elcon Const., Inc., 174 Wn.2d at 169.

                                             17
No. 76272-9-1/18

      or the insurance company is entitled to prevail as a matter of law on
      the facts construed most favorably to the nonmoving party.[53]

      "[A]n insurer's denial of coverage, without reasonable justification,

constitutes bad faith."54 "The insurer is entitled to summary judgment if

reasonable minds could not differ that its denial of coverage was based upon

reasonable grounds."55

      However, the existence of some theoretical reasonable basis for
      the insurer's conduct does not end the inquiry. The insured may
      present evidence that the insurer's alleged reasonable basis was
      not the actual basis for its action, or that other factors outweighed
      the alleged reasonable basis.[561

       Finally, for purposes of a bad faith or CPA claim based on a denial of UIM

benefits, a disparity between the ultimate award and the insured's initial offer is

not enough, standing alone, to establish bad faith or a CPA violation.57

      To summarize, questions of fact such as whether an insurer acted in bad

faith may only "be determined on summary judgment as a matter of law where

reasonable minds could reach but one conclusion."55




       53 Smith v. Safeco Ins. Co., 150 Wn.2d 478, 484, 78 P.3d 1274(2003)
(internal citations omitted).

     54 Indus. lndem. Co. of the NW. v. Kalleviq, 114 Wn.2d 907, 917, 792 P.2d
520(1990); see Smith, 150 Wn.2d at 486; see generally chapter 19.86 RCW;
RCW 48.30.015(1); WAC 284-30-330.
      55 Smith, 150 Wn.2d   at 486.
      56   Id.

      57 Perez-Crisantos v. State Farm Fire & Cas. Co., 187 Wn.2d 669, 684,
389 P.3d 476(2017).

      58 Smith, 150 Wn.2d   at 485.

                                            18
No. 76272-9-1/19

       We review de novo a trial court's order granting summary judgment.59

       Leahy alleged violations of common law bad faith, the CPA, and IFCA

based on State Farm's failure to pay her UIM benefits and alleged failure to

adequately investigate her claim. State Farm moved for summary judgment on

the grounds that it handled her UIM and PIP claims reasonably as a matter of

law. It argued that it had made its decisions after consulting with its experts, and

it submitted documentation in support of its decision including the opinion

testimony of Dr. Ta and Dr. Lecovin.

       The issue is whether, on this record, State Farm established that there

were no genuine issues of material fact whether its actions were reasonable

under the circumstances. We conclude that it failed in its burden and that

summary judgment was incorrectly granted.

                        UIM for Expenses Associated with DM

       Leahy claims that State Farm acted in bad faith because it failed to

consider the testimony of Dr. Brown and her other treatment providers when it

refused to offer any reasonable amount to settle her claimed DM-related injuries.

She argues that State Farm failed to provide any evidence showing how it

incorporated her expert's opinion into evaluating her UIM claim and its settlement

offers. She notes that Dr. Brown provided expert evidence that her DM was

caused on a more probable than not basis by the automobile collision. She

acknowledges that Dr. Ta disagreed. She argues that State Farm's settlement




       59   Elcon Const., Inc., 174 Wn.2d at 164.

                                             19
No. 76272-9-1/20

offers were unreasonable in not addressing her DM-related damages "at least to

some degree."

       State Farm argues that it was reasonable for it to deny DM-related

benefits based on Dr. Ta's opinion because his opinion directly contradicted Dr.

Brown's and it was also based on other medical experts and accepted

professional standards. It argues that, based on Dr. Ta's opinion and the

documentary support he relied upon in forming that opinion, any "lay person in

State Farm's position would have given more weight to Dr. Ta's opinion and

made an offer consistent with it."

       As Smith teaches, whether an insurer acts in bad faith "remains a question

of fact."6° Thus, a question here is whether there is a genuine issue of material

fact whether this insurer acted reasonably in relying solely on its expert on

causation, while ignoring Leahy's expert on causation.

       Both Dr. Brown and Dr. Ta are board-certified rheumatologists and both

are on the faculty at the University of Washington. At the summary judgment

stage with which we are concerned, both appeared qualified to render opinions

whether the accident caused Leahy's DM. There was a clear conflict between

two experts on a central question: causation. Could this insurer, on this record,

claim that there was no genuine issue of material fact on the reasonableness of

its action in solely relying on its expert? We think not.




      60150 Wn.2d at 485.

                                             20
No. 76272-9-1/21

       First, Heide v. State Farm Mutual Automobile Insurance Company, is

instructive.61 In May 2015, Christopher Heide was in an auto accident with an

uninsured motorist that caused pain to his lower back, left side, and left leg.62 In

August 2015, he reported he had been hospitalized for internal bleeding, and his

doctors believed the bleeding was caused by the ibuprofen he took for his

injuries from the accident.63 In February 2016, he submitted a demand letter to

his insurer requesting the UIM policy limits of $50,000.64 State Farm's injury

claim trainer reviewed Heide's medical records and concluded that, although the

cause of the bleeding was unknown, it was "thought to be the result of the use of

too much NSAID [ibuprofen] medication."65 In March 2016, State Farm extended

an offer of $11,900, explaining that it did not consider the bleeding to be due to

the accident.66 The offer was later increased to $12,840 and waiver of $4,970.90

of PIP benefits.67 Heide sued State Farm for common law bad faith and violation

of IFCA.

      The United States District Court for the Western District of Washington

denied State Farm's motion for summary judgment because there was a genuine



      61   261 F. Supp. 3d 1104(W.D. Wash. 2017).

      62   Id. at 1106.

      63 Id.

      64   Id.

      65   Id.

      55   Id.

      67   Id.

                                            21
No. 76272-9-1/22

dispute of material fact concerning the reasonableness of State Farm's

determination that Heide's gastro-intestinal bleeding was unrelated to the

accident.68 It noted that lajlthough no doctor has been able to conclusively

determine the etiology of plaintiffs gastro-intestinal bleeding, NSAIDs are a well-

known risk factor and the claim file clearly indicates that State Farm knew at the

time it made the offer that plaintiffs medical providers believed that NSAIDs were

the cause."68 The court further observed that no test ruled out that NSAIDs

caused the bleeding and no alternative causes were determined.76

      Another case, Anderson v. State Farm Mutual Insurance Company, albeit

not involving disputed medical opinions, addresses an insurer's choice to ignore

one version of disputed testimony.71

      Sharon Anderson suffered severe injuries when she lost control of her car

and hit a cement barrier.72 She and her passenger told State Farm that she was

driving carefully and that another "big old white car" swerved in front of her." But

another witness, Paul Benedict, described the event differently, reporting that

Anderson's car and a Camaro had been speeding, tailgating, and "zig-zagging" in




      68   Id. at 1108.
      69   Id.

      70 Id.

      71   101 Wn. App. 323, 2 P.3d 1029 (2000).

      72 Id. at 326.

      73   Id. at 327.

                                           22
No. 76272-9-1/23

two lanes when another car moved in front of them.74 Jason Gipe, the driver of

the Camaro, said Anderson had tried to pass him on the shoulder of the road and

hit the barrier when she attempted to reenter the highway.78 State Farm ignored

Anderson and her passenger's version of the events and, based solely on the

witnesses against her, offered Anderson $7,500 of UIM.78 After Benedict altered

his version to state that Anderson tried to pass the Camaro on the shoulder,

State Farm determined that Anderson had no UIM claim because she was the

sole cause of the accident.77

      Anderson demanded arbitration, the arbitrator concluded Anderson was

25 percent negligent, and State Farm then paid Anderson her UIM policy limits of

$100,000.78 Anderson sued State Farm for bad faith and violation of the CPA,

and the trial court granted summary judgment to State Farm.79

      This court reversed on a number of Anderson's claims.80 It held that

whether State Farm acted in bad faith and violated the CPA by first offering




      74   Id.

      75   Id. at 328.

      76   Id.
      77   id.

      78   Id.

      79   Id. at 328-29.

      89 Id. at 331-37.

                                           23
No. 76272-9-1/24

$7,500 and then offering no UIM benefits presented an "issue of the

reasonableness [which] is for the finder of fact to determine"81

       We see these cases as instructive on whether it is reasonable for an

insurer to deny coverage based solely on its own expert when there is other

credible evidence on causation. This is a factual question, and State Farm fails

to persuasively explain why this factual question was properly decided on

summary judgment.

       A related question is whether the offers made by State Farm were

reasonable, on this record. Leahy characterizes the offers as "low ball," a

determination we need not make. What we do hold is that the amount of the

offers, on this record, also raises the question whether they were reasonable

under the circumstances. This, too, is a factual question that cannot be

determined on summary judgment.

       State Farm relies on Keller v. Allstate Insurance Company, arguing that

there, summary judgment was granted on the reasonableness of the insurer's

settlement offer after comparing the offer to Lydia Keller's medical records and

expert reports.82 But its reliance is misplaced because Keller's bad faith and

CPA claims were resolved in a bench trial, not on summary judgment.83 Here,

the question is whether summary judgment was properly granted, avoiding a trial.




      81   Id. at 336.

      82 81   Wn. App. 624, 915 P.2d 1140 (1996).

      83 j.çL. at 629; see Anderson, 101   Wn. App. at 335-36.

                                              24
No. 76272-9-1/25

       State Farm also cites to American Manufacturers Mutual Insurance

Company v. Osborn, where the court held that the disparity between an offer and

subsequent arbitration award was not enough to raise an issue of material fact

on Lora Osborn's claimed violation of WAC 284-30-330(7).84 But in that case,

the disparity of the offer and the subsequent arbitration award was the only

evidence of an unreasonably low offer.85 More importantly, Osborn is not a UIM

case and it does not address a difference of opinion between two medical

experts.88

       In relying on Osborn, State Farm improperly characterizes Leahy's

argument as solely claiming bad faith based on the disparity between its decision

and the eventual award.87 But Leahy is also arguing that State Farm should

have accorded some weight to Dr. Brown's opinion.

       We take this opportunity to explain that the focus of our analysis is the

record that existed at the time of the summary judgment hearing. At that time, no

one knew that the jury would award Leahy over $800,000 in damages based on

her contractual claims at trial. So, the proper focus of our analysis is what State

Farm knew at the time of the summary judgment determination. It is undisputed

that it knew of the conflict in testimony of the two experts on causation. Likewise,




      84   104 Wn. App. 686, 700-01, 17 P.3d 1229(2001).
      85   Id.

      66 See     generally id. at 690-95.

      87 See     Perez-Crisantos, 187 Wn.2d at 684.

                                            25
No. 76272-9-1/26

it was then able to make its own assessment on how much it would offer to settle

and when.

       State Farm argues that there is no genuine issue of material fact because

Leahy was seeking UIM benefits for expenses associated with her DM. It relies

on language in the supreme court's opinion in Ellwein v. Hartford Accident &

Indemnity Company that UIM is "unique from other types of insurance" in that "it

is 'designed to place the insured in the same position as if the tortfeasor carried

liability insurance."88 Relying on Ellwein, State Farm argues that it was "free to

be adversarial within the confines of the normal rules of procedure and ethics."99

It argues it had no duty to "indiscriminately accept Leahy's assertions about the

causation of her DM," but instead only had to have a "reasonable basis" for its

actions 90

       This is a remarkable position to take in dealing with an insured who has

purchased UIM insurance. The sale of such insurance carries with it the duty to

deal in good faith with its insured. While UIM insurance does allow an insurer to

step into the shoes of the third-party tort feasor, that does not mean that the

insurer is relieved of all duty to deal with its insured in a proper manner.




      88 Respondent's Brief at 37; 142 Wn.2d 766, 780, 15 P.3d 640, 645
(2001), as amended (Jan. 18, 2001), and overruled by Smith v. Safeco Ins. Co.,
150 Wn.2d 478, 78 P.3d 1274 (2003)).

       89   Id. (quoting Ellwein, 142 Wn.2d at 780).

       9° Id.

                                             26
No. 76272-9-1/27

       Moreover, in Ellwein, the supreme court expressly recognized that "the

duty of good faith and fair dealing survives within the UIM relationship."91 This

case simply does not stand for the proposition that anything goes when an

insurer deals with its insured in the UIM arena.

       State Farm further argues that summary judgment was warranted

because it only need have a reasonable basis for its actions. But the Smith court

held that if "reasonable minds could differ that the insurer's conduct was

reasonable, or if there are material issues of fact with respect to the

reasonableness of the insurer's action, then summary judgment is not

appropriate."92 Thus, even if State Farm "can point to a reasonable basis for its

action," summary judgment is not warranted because Leahy presented evidence,

in the form of Dr. Brown's opinion "that other factors outweighed the alleged

reasonable basis."93

       In making this ruling, we express no opinion on how a jury may resolve

these or related questions. But we emphasize these questions are for a jury, not

a court, to decide.

                                UIM for Non-DM Expenses

       Leahy also argues that there is a genuine issue of material fact whether

State Farm's settlement offer was reasonable when it repeatedly made low ball

offers less than its own internal valuations. Because State Farm's settlement


      91   142 Wn.2d at 780.

      92 Smith   150 Wn.2d at 486.

      93   Id.

                                            27
No. 76272-9-1/28

offers appear to have excluded DM-related coverage, this presents a separate

question from whether it acted reasonably in failing to accord any weight to Dr.

Brown's testimony and denying DM-related benefits. We conclude that Leahy is

correct.

       On December 2, 2013, Jung updated his "low value estimate" for

damages for Leahy's past pain and suffering from $4,000 to $7,000. On

December 5, 2013, State Farm informed Leahy that it would not make a "new

money" offer under her UIM claim but it would waive $1,615 of its PIP

subrogation claim against Leahy's $9,128.50 settlement. Leahy claims that State

Farm's first offer was unreasonable because it was less than the total amount of

its internal value of her claim ($9,128.50 of past medical plus $7,000 pain and

suffering).

       After receiving Dr. Ta's report, State Farm made a second offer to waive

$11,116 in PIP although it failed to explain why it increased the settlement offer,

given Dr. Ta's opinion that Leahy's DM did not result from the accident. Leahy

argues that even with its second offer, State Farm was still making a low ball

offer because it was only waiving subrogation of PIP instead of offering actual

UIM dollars. She argues that since she received the policy limits from the tort-

feasor, State Farm's use of the PIP waiver rather than a UIM offer itself was

unreasonable.

       The general rule is that, even if an insurer is entitled to reimbursement

from payments its insured recovers from a responsible tort-feasor, the insurer's




                                            28
No. 76272-9-1/29

right to subrogation only arises after the insured has been whole.94 And it is the

insurer's burden to prove the insured had received double recovery.95

       Leahy argues that State Farm failed in its burden to prove at summary

judgment that she was fully compensated before it claimed entitlement to the

offset or subrogation payments. Here, by offering only a PIP waiver, Leahy

argues that State Farm's offer was unreasonably low. And, because the jury

later awarded her all of her damages, both DM-related and non-DM related, it is

a genuine issue of material fact whether Leahy was fully compensated for her

injuries from the $9,128.50 payment so as to render State Farm's offer to waive

subrogation reasonable.

       State Farm argues that the amount of Leahy's medical bills in the original

UIM demand is not "undisputed" because it never agreed that the $9,128.50 she

claimed is correct. Because the amount is disputed, State Farm argues that

Leahy's attempts to parse State Farm's first offer are groundless.

       But uncertainties do not establish that the offer was reasonable as a

matter of law. The reasonableness of the offer on the record before the trial

court at the summary judgment hearing was still a question of fact.

       State Farm also argues that any error was harmless because it made a

second offer in June 2014. But Leahy claims this offer was unreasonable as

well. Thus, this factual issue remains unresolved.


      94 Thirinoer   v. American Motors Ins. Co., 91 Wn.2d 215, 219, 588 P.2d
191 (1978).

      95 Sherry  v. Financial lndem. Co., 132 Wn. App. 355, 368, 131 P.3d 922
(2006), aff'd and remanded, 160 Wn.2d 611, 160 P.3d 31 (2007).

                                           29
No. 76272-9-1/30

       State Farm also disputes Leahy's claim that its internal evaluation of the

low end of her pain and suffering damages changed from $4,000 to $7,000 on

December 2, 2013. It claims that this is the only piece of internal evaluation

evidence Leahy has so it is meaningless without context.

       This argument is remarkable in that the need for "context" suggests a

need for additional information that only State Farm could supply. We cannot

see how State Farm should be allowed to argue that the evidence is meaningless

out of context, yet not provide that context at the summary judgment hearing.

                                  ATTORNEY FEES

       Leahy argues that she is entitled to recover her reasonable attorney fees

at trial and on appeal with regard to her CPA and IFCA claims.96 Because such

an award is premature, we disagree.

       Although attorney fees are available under the CPA and IFCA, we reverse

the summary judgment grant and remand for trial. Any decision about attorney

fees should be made by the trial court after trial, in the first instance.

       We affirm the trial court's discovery orders, reverse the order granting

summary judgment, and remand for further proceedings.

                                                            Cm,7
WE CONCUR:



                                                     cele      /v\C"


       96 See   RCW 19.86.090; RCW 48.30.015.
                                              30
