Trinity Universal Insurance Co. Of Kansas, App. v. Ohio Casualty Insurance. Resp.

ZQISJUN-8 An 9:1*5
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
TRINITY UNIVERSAL INSURANCE No. 72106-2-
COMPANY OF KANSAS,
DIVISION ONE
Appellant,
v.
UNPUBLISHED OPINION
THE OHIO CASUALTY INSURANCE
COMPANY,
Respondent. FILED: June 8, 2015
Schindler, J. — This is the second appeal in this case. Trinity Universal
Insurance Company of Kansas (Trinity) sued Ohio Casualty Insurance Company (Ohio)
for subrogation, equitable contribution, and bad faith under the Washington Consumer
Protection Act (CPA), chapter 19.86 RCW, and under the Insurance Fair Conduct Act
(IFCA), chapter 48.30 RCW. The court entered an "Order of Default and Judgment"
against Ohio in the amount of $761,298.07, fees and costs of $2,972.89, and "interest at
the tort rate of 2.23% per annum until satisfied." The court denied the motion to vacate
the default judgment.
In Trinity Universal Insurance Co. of Kansas v. Ohio Casualty Insurance Co., 176
Wash. App. 185, 200-03, 312 P.3d 976 (2013), we held that because the language of the
insurance policy did not assign the CPA or IFCA claims of the insured to the insurer,
No. 72106-2-1/2
Trinity had no right to assert those claims. But we held Trinity was entitled to a
judgment based on equitable subrogation and contribution for the amount paid to
defend and settle the personal injury claim. Trinity. 176 Wash. App. at 205. We
concluded "Trinity's claims against Ohio were not based on an assignment or
contractual subrogation of rights" and held "Trinity's claim arose from its own equitable
subrogation rights as the paying insurer, not from the rights of the insured." Trinity. 176
Wash. App. at 209. We reversed in part, affirmed in part, and remanded "to correct the
judgment." Trinity. 176 Wash. App. at 209.
On remand, the court rejected Trinity's request to award an interest rate of 12
percent for a contract action and prejudgment interest. On appeal, Trinity argues the
court erred in denying its motion to award an interest rate of 12 percent. We disagree,
and affirm entry of the amended judgment.
The facts are set forth in our previous decision and will only be repeated as
necessary. Ohio insured general contractor Millennium Building Company (Millennium).
Trinity insured subcontractor Cascade Construction Company (Cascade). A Cascade
employee was injured while working on the construction project. The injured worker
sued Millennium.
Ohio tendered the defense to Trinity asserting Millennium was an "additional
insured" under Trinity's insurance contract with Cascade. Trinity accepted tender but
demanded that Ohio participate in the defense as a coprimary insurer. Ohio refused to
participate. Trinity settled the injured worker's lawsuit for $225,000 in exchange for a
full and complete release of all claims against Millennium and Cascade.
No. 72106-2-1/3
Trinity sued Ohio for subrogation, equitable contribution, and insurer bad faith
under the CPA and IFCA. Trinity requested an award of damages for Ohio's breach of
the duty to defend and indemnify Millennium, treble damages under the CPA and IFCA,
and an award of attorney fees and costs. Ohio did not file a notice of appearance or
answer. Trinity obtained an order of default and a judgment against Ohio in the amount
of $764,270.96 and interest "at the tort rate of 2.23% per annum until satisfied."
Approximately a year later, Trinity sought to execute on the judgment against Ohio.
Ohio filed a motion to vacate the order of default and set aside the judgment. The court
denied the motion to vacate the default judgment.
On appeal, we held Trinity had a right to equitable subrogation with respect to the
defense and indemnification costs and a right of contribution against Ohio as a
coprimary insurer. Trinity. 176 Wash. App. at 199-205. We reversed the award of treble
damages under the CPA and IFCA. Trinity. 176 Wash. App. at 205. We held that based
on the language of the insurance contract and in the absence of an express
assignment, Trinity did not have standing to assert the statutory claims under the CPA
and IFCA. Trinity, 176 Wash. App. at 202-03. We concluded that although equitable
subrogation "entitles a paying primary insurer to seek reimbursement for losses paid,"
equitable subrogation "does not allow the insurer to assert an insured's statutory rights
without express agreement." Trinity. 176 Wash. App. at 205. Accordingly, because
"Trinity's claims against Ohio were not based on an assignment or contractual
subrogation of rights" and "Trinity's claim arose from its own equitable subrogation
rights as the paying insurer," we held Trinity was not entitled to attorney fees under
Olympic Steamship Co. v. Centennial Insurance Co.. 117 Wash. 2d 37, 52, 811 P.2d 673
No. 72106-2-1/4
(1991). Trinity. 176 Wash. App. at 209. We affirmed in part, reversed in part, and
remanded to "correct the judgment." Trinity. 176 Wash. App. at 209.
On remand, Trinity filed a motion to award prejudgment and postjudgment
interest at the rate of 12 percent for a contract action rather than the 2.23 percent for a
tort action. The court denied the motion. "The trial court's default interest order was not
disturbed on appeal and no basis exists to modify that portion of the default judgment
and order." The court entered an amended judgment and ordered the court clerk to
enter satisfaction of judgment.1
On appeal, Trinity contends the court erred in denying its motion to award an
interest rate of 12 percent for a contract action under RCW 4.56.110 rather than the
2.23 percent interest rate for a tort action.
RCW 4.56.110 sets forth the judgment interest rate for "(1) breach of contract
where an interest rate is specified, (2) child support, (3) tort claims, and (4) all other
claims." Woo v. Fireman's Fund Ins. Co.. 150 Wash. App. 158, 165, 208 P.3d 557 (2009).
Here, there is no dispute that under RCW 4.56.110, the interest rate for a tort action is
2.23 percent and the interest rate for a contract action would be 12 percent.
Trinity argues that because our decision in the previous appeal "stripped the
judgment of all tortious elements," the 12 percent interest rate for contract claims
applies. We disagree.
In Trinity, we held Trinity did not have a right under the insurance contract to
assert the statutory bad faith claims of the insured but was entitled to entry of judgment
against Ohio on the grounds of equitable subrogation and contribution. Trinity. 176 Wash.
1Before Trinity filed the motion to increase the judgment interest rate to 12 percent, Ohio paid
Trinity the full amount of the principal judgmentas amended plus interest calculated at the statutory rate
of 2.23 percent as set forth in the default judgment.
No. 72106-2-1/5
App. at 203. "Trinity paid a personal injury claim under its liability coverage. Trinity
recovered a judgment on those losses from Ohio based on subrogation of that claim
and equitable apportionment, which we affirm in this opinion." Trinity. 176 Wash. App. at
203.2
Subrogation is an equitable doctrine that imposes "ultimate responsibility for a
wrong or loss on the party who, in equity and good conscience, ought to bear it."
Mahler v. Szucs. 135 Wash. 2d 398, 411, 957 P.2d 632 (1998). In the insurance context,
"subrogation creates in the insurer, by contract or equity, a right to be reimbursed" for
benefits paid pursuant to its policy with the insured. Mahler. 135 Wash. 2d at 417, 428.
Under the doctrine of equitable subrogation, the "right to reimbursement" arises by
operation of law and not by contract. Mahler, 135 Wash. 2d at 412.
The related doctrine of equitable contribution establishes a legal right to
reimbursement that entitles "one party to recover from another party for a common
liability." Mut. of Enumclaw Ins. Co. v. USF Ins. Co.. 164 Wn.2d411.419, 191 P.3d 866
(2008). In the insurance context, equitable contribution enables a paying insurer "to
recover from another insurer where both are independently obligated to indemnify or
defend the same loss." Mut. of Enumclaw. 164 Wash. 2d at 419. Because the reciprocal
rights and obligations of coprimary insurers " 'do not arise out ofcontract,'" the paying
insurer's right to contribution "is a right of the insurer and is independent ofthe rights of
the insured." Mut. of Enumclaw, 164 Wash. 2d at 419-20 (quoting Signal Cos. v. Harbor
Ins. Co.. 27 Cal. 3d 359, 369, 612 P.2d 889 (1980)).
In Trinity, we clearly held that "Trinity's claims against Ohio were not based on an
assignment or contractual subrogation of rights by Millennium. . . . Rather, Trinity's
2 Emphasis added.
No. 72106-2-1/6
claim arose from its own equitable subrogation rights as the paying insurer, not from the
rights of the insured." Trinity. 176 Wash. App. at 209.
We affirm entry of the amended judgment in the amount of $245,432.69 and
interest of $19,695.02 for a total judgment of $264,626.19.
K,Q.t.AVt&9^ ,
WE CONCUR:
^