Ohio Sec. Ins. Co. v. AXIS Ins. Co. , 190 Wash. 2d 348 ( 2018 )

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IN CLERKS OPPICE
This opinion was filed for record
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SUSAN L. CARLSON
SUPREME COURT CLERK
IN THE SUPREME COURT OF THE STATE OF WASHINGTON
CERTIFICATION FROM THE
UNITED STATES DISTRICT
COURT FOR THE WESTERN
DISTRICT OF WASHINGTON
IN
OHIO SECURITY INSURANCE NO. 94677-9
COMPANY,
Plaintiff,
EN BANC
V.
AXIS INSURANCE COMPANY,
Filed:
Defendant.
YU,J.—This'case involves an insurance coverage dispute between two
authorized foreign insurers, Ohio Security Insurance Company and AXIS
Insurance Company. Ohio Security tried to serve AXIS at its office in Chicago,
Illinois, rather than through the Washington State Office ofthe Insurance
Commissioner.
Ohio Sec. Ins. Co. v. Axis Ins. Co., No. 94677-9
The United States District Court for the Western District of Washington
certified a question to this court, asking whether Washington law establishes
service through the Washington State Insurance Commissioner (Insurance
Commissioner) as the exclusive means of service for authorized foreign insurers
in Washington. The answer to the certified question is yes—^RCW
4.28.080(7)(a) provides the exclusive means of service on authorized foreign
insurers.^
I. FACTUAL AND PROCEDURAL BACKGROUND
Ohio Security and AXIS became involved in an insurance coverage
dispute after a snow storm caused structural damage to a commercial building in
Washington. Ohio Security's insured, Grosso Enterprises Tacoma LLC,leased a
building to AXIS's insured, Reddy Ice Holdings. The roof ofthat building
collapsed during a 2012 snow storm, which prompted Grosso and Reddy Ice to
tender claims to their respective insurers. Ohio Security alleges that it paid for
Grosso's loss and that AXIS has an equitable obligation to reimburse Ohio
Security for these expenses. Ohio Security sued AXIS in Pierce County Superior
Court, but failed to serve the Insurance Commissioner as required by RCW
'Ohio Security asserted at oral argument that it should be excused for its failure to
properly serve AXIS because AXIS received timely service of process and was not prejudiced.
Wash. Supreme Court oral argument, Ohio Sec. Ins. Co. v. Axis Ins. Co., No. 94677-9 (Feb. 27,
2018), at 19 min., 30 sec., audio recording by TVW, Washington State's Public Affairs Network,
http://www.tvw.org. We decline to address this issue and defer resolution of the question to the
district court.
Ohio Sec. Ins. Co. v. Axis Ins. Co., No. 94677-9
4.28.080(7)(a). Instead, Ohio Security served AXIS at its Chicago office
pursuant to RCW 4.28.080(10) and Washington's long arm statute, ROW
4.28.185.
Ohio Security served the Insurance Commissioner only after AXIS filed a
motion to dismiss for improper service. By this time, the statute of limitations on
Ohio Security's claim had already expired. AXIS removed the lawsuit to federal
court, where both AXIS and Ohio Security filed summary judgment motions.
AXIS argued, in part, that Ohio Security's equitable contribution claim was time
barred because its improper service failed to toll the statute of limitations. The
district court then certified the following question to this court.
11. CERTIFIED QUESTION
"Do RCW 4.28.080(7)(a), RCW 48.02.200, and RCW 48.05.200 establish
service through the Washington State Insurance Commissioner as a uniform and
exclusive means of service for authorized foreign or alien insurers in Washington
State?" Order Certifying Question to Wash. State Supreme Ct., Ohio Sec. Ins.
Co. V. Axis Ins. Co., No. C15-5698 BHS,at 2(W.D. Wash. June 20, 2017).
111. ANALYSIS
The legislature has the authority to designate an official as the exclusive
agent to receive service of process on behalf of certain classes of defendants.
Nitardy v. Snohomish County, 105 Wash. 2d 133, 135, 712 P.2d 296(1986). When
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Ohio Sec. Ins. Co. v. Axis Ins. Co., No. 94677-9
the legislature has identified a specific person to receive service, then service on
anyone else "is insufficient." Id. This case requires us to sort out multiple
statutes to determine who the legislature has designated to receive service of a
summons for actions commenced against an authorized foreign insurance
company and whether it is exclusive. We answer this certified question of
statutory interpretation as a matter of law. Jin Zhu v. N. Cent. Educ. Serv.
Dist.—ESD 171, 189 Wash. 2d 607, 613, 404 P.3d 504(2017).
1. The plain language of RCW 4.28.080 and RCW 48.05.200(1)
designate the Insurance Commissioner as the exclusive agent to
receive service
RCW 4.28.080 governs service of a summons. As with all cases involving
statutory interpretation, we consider the plain language of the statute to
determine the legislature's intent. Dep't ofEcology v. Campbell & Gwinn, LLC,
146 Wash. 2d 1, 9-10, 43 P.3d 4(2002). The statute designates who should be
served a summons based on the class of defendants. In this case, the issue is
whether the statutory provision that governs service for actions against "an
authorized foreign or alien insurance company" provides the exclusive means of
service on defendant AXIS, an authorized foreign insurer. RCW 4.28.080(7)(a).
The statute dictates that service of a summons on "an authorized foreign or alien
insurance company" is "as provided in RCW 48.05.200." Id.
Ohio Sec. Ins. Co. v. Axis Ins. Co., No. 94677-9
Turning to RCW 48.05.200(1), it states:
Each authorized foreign or alien insurer must appoint the commissioner as
its attorney to receive service of, and upon whom must be served, all legal
process issued against it in this state upon causes of action arising within
this state. Service upon the commissioner as attorney constitutes service
upon the insurer. Service oflegal process against the insurer can he had
only by service upon the commissioner, except actions upon contractor
bonds pursuant to RCW 18.27.040, where service may be upon the
department of labor and industries.
(Emphasis added.)
The word "must" means "is required . . . to" and places a mandatory duty
on the subject of the clause. Webster's Third New International
Dictionary 1492(2002). Therefore, the plain language ofthe statute requires
that the authorized foreign insurer appoint the Insurance Commissioner as its
attorney to accept service of legal process. The requirement that service of
process can be had "only" on the Insurance Commissioner means that the
Insurance Commissioner is the exclusive agent for accepting service on behalf of
an authorized foreign insurer.^ As we determined in Nitardy, service on any
party other than the official designated by the legislature "is insufficient." 105
Wash. 2d at 135. The only exception to this statute is in actions involving
^ The certified question also cites RCW 48.02.200. While not critical to the analysis
here, we note that in light of RCW 48.05.200(l)'s requirement that authorized foreign insurers
appoint the Insurance Commissioner to reeeive service of legal process, the plain language of
RCW 48.02.200 also requires that service be made on the Insurance Commissioner. RCW
48.02.200(l)(a)("Legal process against a person ... for whom the commissioner has been
appointed attorney for service of process . . . must be served upon the commissioner.").
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Ohio Sec. Ins. Co. v. Axis Ins. Co., No. 94677-9
contractor bonds, but this case involves an insurance coverage dispute and does
not implicate this exception.
Despite the plain language of the statute, Ohio Security argues that it
properly served AXIS at its Chicago offices because the legislature has provided
two ways to serve a foreign authorized insurer. In addition to the procedures
provided by ROW 4.28.080(7)(a), Ohio Security claims that service is also
proper if it follows a different statutory provision in ROW 4,28.080 that applies
when a defendant is "aforeign corporation or nonresident joint stock company,
partnership or association doing business within this state." ROW 4.28.080(10)
(emphasis added). Service of a summons is then on "any agent, cashier or
secretary thereof and in compliance with the service provisions of Washington's
long arm statute, RCW 4.28.185. Id. (emphasis added). Thus, Ohio Security
contends that service is proper by serving the foreign insurer's agent in
compliance with the long arm statute, RCW 4.28.185.^
Ohio Security's interpretation not only defies the plain language mandate
of RCW 4.28.080(7)(a) and 48.05.200(1), but it also runs counter to a
fundamental canon of statutory construction—generalia specialibus non
derogant(the specific governs the general). Nitro-Lift Techs., LLC v. Howard,
^ We note that Ohio Seeurity's interpretation also eonfliets with the plain language of
the long arm statute, whieh states that "[pjersonal serviee outside the state shall be valid only
when an affidavit is made and filed to the effect that service cannot be made within the state."
Ohio Sec. Ins. Co. v. Axis Ins. Co., No. 94677-9
568 U.S. 17, 21-22, 133 S. Ct. 500, 184 L. Ed. 2d 328 (2012). "It is well settled
that a more specific statute prevails over a general one should an apparent
conflict exist." Flight Options, LLC v. Dep't ofRevenue, 111 Wash. 2d 487, 504,
259 P.3d 234(2011).
Permitting alternative methods of service for an authorized foreign insurer
would create a conflict between the statutes. On the one hand, service "can be
had only . . . upon the commissioner" pursuant to RCW 48.05.200(1) and, on the
other hand, service must be on "any agent, cashier or secretary" ofthe
corporation pursuant to RCW 4.28.080(10). A party cannot comply with both.
Applying the general-specific rule, we use the statute governing service of
process that applies only to the commencement of actions against authorized
foreign insurers because it is more specific than the statute that applies broadly to
service on foreign corporations. Compare RCW 48.05.200(1), with RCW
4.28.080(10). Thus, even if we construe both statutes as applicable, we give
effect to RCW 48.05.200(1) because it is more specific. See Flight Options, 111
Wash. 2d at 504.
In sum, Ohio Security's arguments that RCW 4.28.080(7)(a) and .080(10)
create two alternative means of service on an authorized foreign insurer is
unconvincing. Pursuant to RCW 4.28.080(7)(a), service on an authorized
RCW 4.28.185(4). Because service can be made on the Insuranee Commissioner, the long
arm statute would not permit service on the foreign insurer's agent outside ofthe state.
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Ohio Sec. Ins. Co. v. Axis Ins. Co., No. 94677-9
foreign insurer must comply with RCW 48.05.200(1). The plain language of
RCW 48.05.200(1) places a mandatory duty on an authorized foreign insurer to
appoint the Insurance Commissioner as its attorney to receive service of process
and establishes the Insurance Commissioner as the exclusive agent to accept
service on behalf ofthe insurer. Thus, the answer to the certified question is yes.
2. The Court of Appeals opinions relied on by Ohio Security are
distinguishable
While we resolve this case on the statute's plain language, we take this
opportunity to distinguish two Court of Appeals cases relied on by Ohio
Security. First, Ohio Security cites Powell v. Sphere Drake Insurance PLC,97
Wn. App. 890,988 P.2d 12(1999), but it involved an unauthorized foreign
insurer.'^ The question was whether former RCW 48.05.215 (1981), rather than
the statute at issue here, RCW 48.05.200, provided the exclusive means for
service on the insurer.^ Id. at 899-900. Because it involved a different statutory
provision, Powell is not relevant to the resolution of this certified question.
AXIS describes the differences between foreign authorized and unauthorized insurers
and argues there may be policy justifications for subjecting them to different service
requirements. Reply Br. of Def. AXIS Ins. Co. at 5-6. Authorized foreign insurers obtain a
certificate to sell insurance in Washington and are members of the Washington Insurance
Guaranty Association(WIGA), which guarantees payment of covered claims. Id. at 5.
Unauthorized foreign insurers underwrite '"surplus lines,'" which are not available on the
admitted market and are not covered by WIGA. Id. at 6.
^ Furthermore, unlike the mandatory language of RCW 48.05.200(1), former RCW
48.05.215(2) had permissive language: "[Sjervice of legal process against such unauthorized
foreign or alien insurer may be made by service of duplicate copies of legal process on the
commissioner." (Emphasis added.)
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Ohio Sec. Ins. Co. v. Axis Ins. Co., No. 94677-9
Second, Ohio Security relies on Kiblen v. Mutual ofOmaha Insurance Co.,
42 Wash. App. 65, 708 P.2d 1215 (1985). In Kiblen, an individual served legal
process on an authorized foreign insurer at the insurer's home office in Omaha,
Nebraska. The Court of Appeals held that Washington's long arm statute,
former ROW 4.28.185 (1977), and its companion service statute, ROW 4.28.180,
provided an alternative to former ROW 48.05.200(1985)for service on
authorized foreign insurers. The court reasoned that former ROW 48.05.200(1)
did not place a mandatory duty on authorized foreign insurers to appoint the
Insurance Commissioner as its attorney to receive legal process because the
statute at the time stated that a foreign insurer "shall" appoint the Insurance
Commissioner, which "indicates at best a preference for service upon the
Insurance Commissioner." Former RCW 48.05.200(1)(1985); Kiblen, 42 Wn.
App. at 67-68.
We do not need to address whether Kiblen was correctly decided because
the legislature subsequently amended RCW 48.05.200 in 2011 to replace the
word "shall" with "must," thereby removing any ambiguity as to whether an
authorized foreign insurer has a mandatory duty to appoint the Insurance
Commissioner as the exclusive agent to receive service of process. LAWS OF
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Ohio Sec. Ins. Co. v. Axis Ins. Co., No. 94677-9
2011, 1st.Spec. Sess., ch. 47, § 5.^ Thus, Kiblen has been abrogated by statutory
amendment and has no bearing on our resolution ofthis case.
IV. CONCLUSION
The answer to the certified question is yes. ROW 4.28.080(7)(a) and
ROW 48.05.200(1) establish service through the Insurance Commissioner as the
exclusive means of service for authorized foreign or alien insurers in
Washington.
^ Ohio Security asserted at oral argument that the 2011 amendment could not have
been intended to clarify the meaning of the statute because "[i]t was a mere cleanup" of the
statute. Wash. Supreme Court oral argument,supra, at 30 min., 30 sec. However,the
legislative history indicates otherwise. Senate Bill 5213 contained "minor substantive or
technical changes" that "complete[d] the 2010 modernization process by requiring various
insurance providers . . . that are foreign ... to appoint the Commissioner as its attorney to
receive service of legal process"). Final B. Rep. on S.B. 5213, at 1, 62d Leg., Reg. Sess.
(Wash. 2011). Therefore, the effect ofthe bill was to make clear that an authorized foreign
insurer must appoint the Insurance Commissioner as its exclusive agent to receive service of
process.
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Ohio Sec. Ins. Co. v. Axis Ins. Co., No. 94677-9
WE CONCUR:
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