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Division I Addresses IFCA and PIP Income Continuation Benefits

April 2nd, 2014

In Ainsworth v. Progressive Casualty (No. 69433‑2‑1, Unpublished Opinion filed 2/10/14, Order to Publish entered 3/14/14), Division 1 of the Court of Appeals became the first appellate court to enter a ruling on an IFCA case in Washington, and even more importantly, issued a potentially adverse ruling regarding PIP income continuation benefits.


On July 14, 2010, Ainsworth suffered neck and back injuries in a fairly typical rear-ender accident. At the time he worked two jobs: (1) a warehouse job at Contour, Inc., and (2) a part-time evening pizza delivery job. Shortly after the accident, he submitted a claim for income continuation benefits under his PIP coverage with his first-party insurer, Progressive. The PIP application and information supporting it evidently included wage loss information for both his Contour day job, as well as his pizza delivery job.


Ainsworth was off all work for approximately three months. On October 15, 2010, he was released for “full-time work” with Contour, although his physician did place weight lifting restrictions of 25 pounds.


Although the facts of the decision are not terribly clear, it appears Mr. Ainsworth was able to earn virtually his normal wages at Contour, notwithstanding the weight restrictions. However, he did not return to his pizza delivery job, as he was not given any shifts due to the weight lifting restrictions.


After he went back to work with Contour, Ainsworth continued to have appointments/treatments for his medical condition. He then subsequently submitted an additional claim for PIP benefits for his time off work to attend these medical appointments. These lost wages totaled only $736.12. Progressive’s adjuster, relying upon policy language which stated that payments would end at the earliest of “the date on which the insured person is reasonably able to perform the duties of his or her usual occupation,” refused to make any additional payments for time lost due to medical appointments.


Mr. Ainsworth, through counsel, filed an IFCA 20-day notice demanding payment of this $736. Progressive refused to pay this, and a lawsuit was subsequently filed in King County, Case No. 11‑2‑08562‑7.


Evidently, either through discovery or through some additional discussions between counsel and Mr. Ainsworth, it was discovered that Progressive never made any payment for Mr. Ainsworth’s lost wages as a pizza delivery person. A subsequent IFCA notice for these benefits, totaling at the time $3,884.41, was submitted to Progressive. Again, Progressive refused to make any additional payment for these benefits, notwithstanding evidence in the file that its adjuster was aware of the work and the alleged wage loss. A subsequent motion to amend the complaint was granted by the court, and the pizza wage loss was added as an issue to be decided by the court.


It is clear from the online docket sheet that there were numerous issues regarding admissibility of evidence, discovery complaints or issues, and generally a royal mess. Ultimately, however, Ainsworth filed a motion for partial summary judgment seeking a ruling from the court that Progressive breached its contract concerning the PIP benefits, and also that there was no issue of genuine fact regarding Progressive’s violation of IFCA. Progressive opposed the motion, and brought its own motion for summary judgment seeking a ruling that it had paid all PIP benefits required to be paid under the policy, and that it was not in violation of IFCA as a matter of law.


The trial court eventually granted Ainsworth’s motion for summary judgment, denied Progressive’s, and concluded that Ainsworth was entitled to $5,458.18 in unpaid income continuation benefits covering both the Contour and pizza delivery wage loss claims. The court then found, examining the claims under IFCA, that Progressive unreasonably denied the PIP benefit claims without adequate investigation, and therefore doubled the amount of damages under RCW 58.30.015(2) to $10,916.36.


Ainsworth’s counsel subsequently moved the court for an award of attorney fees and costs under IFCA and Olympic Steamship, and ultimately (although the amount is not stated in the appellate record), Ainsworth’s counsel was given a judgment for fees and costs of approximately $105,000.


Largely because of this attorney fee award, Progressive decided to appeal. On appeal, Progressive argued generally that the PIP coverage was never intended to pay for time loss due to medical appointments, and that no PIP benefits should have been paid after Mr. Ainsworth was released to “full-time work,” notwithstanding the limitations. Progressive further argued there was no evidence that Ainsworth lost any income as a result of going back to work full time, and importantly, that he failed to mitigate his damages by not seeking medical appointments during his off hours in order to avoid additional wage loss.


The Court of Appeals rejected all of Progressive’s arguments. Essentially, the court found the PIP language to be unambiguous, and since Ainsworth was not released to his “usual occupation” because of the weight restrictions, he was entitled to PIP benefits for his medical appointments, as he was prevented from performing his “usual occupation” during the time he had to seek medical treatment.


The Court of Appeals seemed to primarily focus on the fact that Progressive, without explanation, failed to investigate or adjust the pizza delivery wage loss claim in any manner. According to Progressive’s counsel, the adjuster’s file was extremely undocumented regarding what happened or didn’t happen with respect to the pizza claim, and the adjuster had left Progressive’s employment by the time the lawsuit was filed.


With respect to the IFCA aspect of the lawsuit, Progressive made several arguments. It claimed that based upon the PIP language, Progressive’s position that PIP benefits were not owed for post full-time employment return to work or payment for medical appointment time loss was justified under Washington law (or the lack thereof). Progressive also argued that the PIP benefits which the court found they were obligated to pay under the contract were not “actual damages” under IFCA, as IFCA provides for trebling of extra-contractual damages and, therefore, the court erroneously doubled the contractual damages awarded under PIP. Finally, Progressive argued that the court’s decision to award additional PIP benefits was actually a dispute over the “value” of the claim and, therefore, attorney fees and costs should not have been awarded under the Dayton v. Farmers Ins. line of cases.


The Court of Appeals rejected all of Progressive’s IFCA-related arguments. Essentially, the court held that the PIP language does not expressly exclude payment for time loss due to medical appointments, and especially focused on the fact that Progressive never adjusted or investigated the pizza delivery wage loss claim. Therefore, it found that Progressive had “unreasonably denied” a claim for PIP benefits, and was in violation of IFCA as a matter of law. The court understandably rejected Progressive’s argument that the contractual damages were not “actual damages,” and also distinguished the Dayton v. Farmers line of cases, as Progressive was in fact arguing that PIP benefits were not payable under the policy, and therefore there had been a “denial of coverage,” as opposed to simply a dispute over the “value” of the insured’s claim.


The Court of Appeals’ decision was originally non‑published. However, Ainsworth, through his attorney, moved to publish the decision, and although Progressive objected, the court granted the motion and published the decision effective March 14, 2014.


In speaking with Progressive’s counsel, they have no plans to appeal this decision, and in fact settled the claim by payment to the plaintiff (presumably before an additional motion for fees on appeal was filed or paid). It is unfortunate that this settlement was not achieved before the order granting the motion to publish.


Although the Ainsworth v. Progressive decision is very fact specific, the language of the opinion certainly opens the door for arguments by insureds’ counsel that, notwithstanding the weight restrictions placed on the insured, and therefore their not being released back to their “usual occupation,” the court’s decision supports an argument that in any situation where a PIP claimant returns to work, but has to miss some hours of work subsequent to that return for medical appointments, that those lost wages are payable under the PIP policy. I would expect an argument to be made that if medical appointments are necessary, due to injuries sustained in the accident, then those medical appointments prevent the insured from performing their “usual occupation” during those hours they need to be released for work. I would not be surprised if many PIP claimants attempt to reopen their PIP claims, submitting additional claims for lost wage time incurred for medical appointments.


Largely unexplained by the briefing and appellate decision is why arguments were not made to bar recovery of PIP income continuation benefits under the policy language which reads as follows:


Income earned during the period income continuation benefits are being paid will be deducted from income continuation benefit.


The obvious intent of this provision is to prohibit recovery of income continuation benefits if the insured is earning income from whatever source which exceeds the amount of the benefits claimed. Under the Ainsworth case, this language should have allowed an argument that if the insured was earning nearly full-time income during the time they went back for medical appointments, then that income should have been deducted from the amount of income continuation benefits being claimed, thereby negating the claim for those benefits. Again, according to counsel for Progressive, there were severe evidentiary issues concerning what was known about Mr. Ainsworth’s earnings, both before and after the return to work, largely the result of poor adjusting by Progressive before the lawsuit was filed. Therefore, they were prohibited from making many of the arguments they wanted to before the trial court, and subsequently on appeal.


An additional warning based upon the appellate language. Progressive evidently did not submit argument on the issue of the doubling of the award by the court on summary judgment. Therefore, they were prohibited on appeal from arguing that the court should not have doubled the benefits granted.  I suspect that Progressive anticipated that any doubling of benefits would be done subsequent to the motion for summary judgment, and that they might have had a further opportunity to brief that issue at the later time. However, since they did not specifically address the doubling issue in their responsive briefing on the summary judgment motion, they were subsequently prohibited from making their appellate arguments later on. All insurers would be well advised to avoid this potential problem by specifically reserving argument on the doubling issue by stating that is a later issue to be decided and briefed by the court. Alternatively, the matter should be briefed even where the doubling issue is left to the court’s discretion after the fact.


The Ainsworth v. Progressive case does not add a great deal to Washington’s IFCA arguments, but the ruling on PIP benefits for subsequent medical appointments could be far reaching, and could impact virtually every PIP claim where income continuation benefits are demanded, or where medical appointments occur which require missed work after the insured returns to full-time work. In fact, I would expect arguments that even where the insured does not initially miss any work time, if they subsequently have to miss work for medical appointments, they should be compensated under their PIP income continuation benefit policies for this loss.


The Ainsworth v. Progressive decision is a primary example of how a very simple case became complicated and had far-reaching implications, primarily because of bad facts concerning the insurance company’s failure to properly adjust the pizza delivery wage loss claim. From there, it appears things simply snowballed into a major “FUBAR” situation where early resolution was probably impossible due to the time and expense incurred, and the result was an adverse decision which should never have been made in the first place.


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