# Panag v. Farmers Insurance

> Washington Supreme Court · April 2, 2009 · 166 Wash. 2d 27

URL: https://www.frixlaw.com/law-library/cases/4714127

## Case

- **Full name:** Rajvir Panag, on Behalf of Herself and All Others Similarly Situated v. Farmers Insurance Company of Washington, Petitioners Michael Stephens, on Behalf of Himself and All Others Similarly Situated v. Omni Insurance Company, Credit Control Services, Inc.
- **Court:** Washington Supreme Court
- **Decided:** April 2, 2009
- **Citations:** 166 Wash. 2d 27
- **Precedential status:** Published
- **Opinion:** Dissent by Johnson
- **Judges:** Alexander, Chambers, Fairhurst, Johnson, Madsen, Owens, Sanders, Stephens
- **Cited by:** 1 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/4714127

## Opinion text

C. Johnson, J.
¶81 (dissenting) — The majority rewrites the Consumer Protection Act (CPA), chapter 19.86 RCW, *66 extending the statute far beyond its express reach. A private CPA claim for a deceptive practice involves, among other things, a deceptive act or practice, which occurs in trade or commerce. Until today, trade or commerce has meant some sort of consumer, intended beneficiary, or intermediary (i.e., special) relationship. But never has the CPA been extended to an adversarial relationship arising out of tortious conduct, and the CPA, as written, does not support such an expansion. The relationship presented here arises out of tortious conduct, a relationship that the CPA was not intended to protect, as written.
¶82 But in rewriting the statute, the majority effectively removes the second element of the well-settled Hangman Ridge analytical framework. Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wn.2d 778 , 719 P.2d 531 (1986). Although the majority recognizes this case involves statutory interpretation, it fails to follow cases establishing the statutory requirements necessary to support a CPA claim. The issue in this case is quite simple; we are interpreting the Consumer Protection Act, not the collection (subrogation) protection act. The Court of Appeals should be reversed.
¶83 The majority first construes RCW 19.86.090 in a manner that permits “any person” to bring a CPA claim. Majority at 39. But the sentence containing this quoted language provides that this “any” person must be “injured in his or her business or property by a violation of RCW 19.86.020. . . .” RCW 19.86.090 (emphasis added). In determining whether a CPA claim can proceed, we established five elements in Hangman Ridge. The majority rewrites this framework to require only four elements. But if we require, as we must, all five elements, Rajvir Panag and Michael Stephens fail to prove the second element: that the unfair or deceptive practice occurred “(2) in trade or commerce.” Hangman Ridge, 105 Wn.2d at 784 (setting out the conjunctive five elements for establishing a private CPA *67 claim). 17 Since that element traces the statutory requirements, we should not take that requirement out.
¶84 Although the majority points to cases where the court has permitted a plaintiff’s private action under the CPA to be predicated on something other than a strict consumer relationship, the majority’s extension of such precedent to the subrogation claims at issue here is too simplistic. 18 Of the courts that have extended the trade or commerce element of the Hangman Ridge analysis to something more than a classic consumer relationship, each has required that the relationship giving rise to the claim have some sort of intended beneficiary or intermediary (i.e., special) relationship. See, e.g., Wash. State Physicians Ins. Exch. & Ass’n v. Fisons Corp., 122 Wn.2d 299 , 858 P.2d 1054 (1993) (unique intermediary relationship exists between doctor and pharmaceutical company); Escalante v. Sentry Ins., 49 Wn. App. 375 , 743 P.2d 832 (1987) (injured passenger already covered by insurance policy enabling CPA claim for unfair practices; intended beneficiary case); Gould v. Mut. Life Ins. Co. of N.Y., 37 Wn. App. 756 , 683 P.2d 204 (1984) (intended third-party beneficiary of life insurance policy may bring CPA claim against insurer). In each of these cases, a consensual business relationship provides *68 the foundation of the relationship prior to the subsequent dispute. More simply, this line of cases permits CPA claims that arise from a consumer relationship, direct or indirect. But none involve a relationship formed in tortious conduct and none support the majority’s expansion. 19
¶85 Specifically, the Fisons decision weakens the majority’s position that an adversarial relationship can give rise to a CPA claim as opposed to consumer relationship, direct or indirect. In Fisons, we concluded that a rule requiring a CPA claim to be based only on a consumer transaction has been eroded by later cases. Fisons, 122 Wn.2d at 312 . There, we relied on the leading CPA case, Hangman Ridge, which does not include a rule requiring a CPA claimant to be a direct consumer or in a direct contractual relationship with the defendant. But, in extending the second element, trade or commerce, to the facts in Fisons, we explicitly remarked that “[t]his unique relationship results [from] the physician being comparable to the ordinary consumer in other settings.” Fisons, 122 Wn.2d at 313 (emphasis added). In other words, Fisons involved an indirect consumer relationship.
¶86 Here, Stephens and Panag lack the statutory basis to bring a CPA claim. Their relationship with the defendant is not that of an ordinary consumer, direct or indirect; rather, it is an adversarial relationship arising in tort. RCW 19.86.090 expressly states, “Any person who is injured in his or her business or property by a violation of RCW 19.86.020 ..., may bring a [CPA claim] to recover the actual damages sustained by him or her. . . .” (Emphasis added.) But Panag and Stephens are not “[a]ny person,” as defined *69 by the statute because they cannot establish a violation of RCW 19.86.020 occurred.
¶87 To establish a violation of RCW 19.86.020 requires, among other things, that the actor employs “[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.” (Emphasis added.) This element of trade or commerce is element two of the Hangman Ridge analysis. As discussed above, our cases have extended this element to certain relationships that arise from or derive out of a consumer relationship (i.e., direct or indirect). Here that relationship is lacking. Panag and Stephens were involved in separate automobile accidents. The drivers of the other cars were insureds of Farmers Insurance (in Panag’s case) and Omni Insurance (in Stephens’ case). Farmers and Omni both subrogated their claims to Credit Control Services (CCS). CCS then contacted Panag and Stephens with respect to the subrogation, which gave rise to the dispute presented here. This is certainly not a classic consensual business transaction; Panag and Stephens did not agree to engage in some sort of consumer transaction with CCS. Neither Panag nor Stephens are the intended beneficiary, named or implied, in the other drivers’ insurance policy. And, the relationship is wholly dissimilar to the special intermediary relationship found with, for example, a doctor working with a drug company for the benefit of the doctor’s patient. Instead, here, CCS works with the insurance company for the benefit of the insurance company, not Panag and Stephens. In other words, Panag and Stephens do not have a relationship with CCS that permits a claim for damages under the CPA. Rather, their adversarial relationship arises in tort; a relationship for which the CPA has never been extended, until today. 20
¶88 The majority attempts to distinguish this fact by asserting this matter involves allegedly deceptive methods *70 used by a subrogation agency and not liability or damages from the tort. While this is true, such analysis either mischaracterizes the application of Hangman Ridge’s second element or removes it completely. The majority fails to find or cite authority extending this element to an adversarial relationship that arose in tort, implicated here. Majority at 42 (conceding this matter arises out of an adversarial relationship). 21 As such, the petitioners’ claim of an “adversarial relationship” exemption to the CPA remains, which should leave Panag’s and Stephens’ claims beyond the scope of the CPA.
¶89 Next, based on the now rewritten CPA, the majority engages in a curious analysis regarding per se violations of the CPA. 22 In doing so, the majority points to the FDCPA (Federal Fair Debt Collection Practices Act (Collection Agency Act), 15 U.S.C. § 1692 ) and our state’s counterpart, the CAA. Majority at 53. But these Acts do not apply to the subrogation claims at issue here.
¶90 The FDCPA expressly limits its reach to those obligations to pay “arising from consensual transactions, where parties negotiate or contract for consumer-related goods or services.” Bass v. Stolper, Koritzinsky, Brewster & Neider, SC, 111 F.3d 1322, 1326 (7th Cir. 1997) (emphasis added). Similarly, the CAA defines “[c]laim” to “mean[ ] any obligation for the payment of money or thing of value arising out of any agreement or contract, express or implied.” RCW 19.16.100(5). Because a subrogation claim against an underinsured motorist does not arise from an agreement, it is not a “claim” for purposes of the CAA. As such, neither the FDCPA nor the CAA applies to obligations arising from *71 a tortious relationship, which is the type of relationship at issue here. The majority concedes this point.
¶91 Nonetheless, the majority expends numerous pages of analysis on this issue. In doing so, the majority essentially argues that a reasonable person would believe she or he is protected under these inapplicable acts, so she or he should be able to rely on these inapplicable acts as if the acts did apply to subrogation claims. In doing so, the majority bootstraps the relevance (or lack thereof) of two inapplicable acts in an effort to reach the conclusion that the CPA applies in this case.
¶92 One example of this curious line of argument is found in the majority at 43:
Our legislature has declared that violations of the regulations applicable to [insurance and debt collection] implicate the public interest and constitute a per se violation of the CPA. While the collection practices here do not come within the regulations that apply to insurance and debt collection, there is nevertheless no doubt that after decades of intensive regulation, members of the public have come to expect that insurers and collection agencies may be held accountable for deceptive collection practices regardless of whether there is a “consensual relationship.”
(Emphasis added.) The majority does not offer adequate authority to support this claim of perceived accountability based on admittedly irrelevant acts. The majority offers no adequate basis for why such irrelevant analysis should supplant our Hangman Ridge factored analysis, which requires the deceptive practice or act to occur in trade or commerce, as defined by statute and interpreted by our cases. And the majority does not cite or find any Washington case applying the Hangman Ridge factors with the analysis presented by the majority; nor do the parties advance such an argument. 23 In fact, Panag even titles one *72 argument “Off Point Statutes or Cases Prom Other States Are Irrelevant.” Resp’t Rajvir Panag’s Answer to Pets, for Discretionary Review at 13, 15 (arguing irrelevant statutes and cases cannot change the CPA, as enacted by our legislature).
¶93 Further, considering there has been, as the majority claims, “decades of intensive regulation,” (majority at 43) it certainly stands to reason then that these regulatory bodies would have created a law permitting CPA claims based on subrogation claims stemming from relationships arising in tort. But no such law exists, and the absence of such law after decades of regulation undermines rather than supports the majority’s analysis. We should refuse to create judicially such a rule today, by rewriting the CPA.
¶94 Instead, subrogation is outside the scope of both the FDCPA and the CAA. As such, resorting to cases interpreting the FDCPA or the CAA is not helpful in analyzing the CPA. 24
*73 ¶95 In this case, we should be interpreting the requirements of the CPA. The CPA is limited to protecting consumer relationships and those derived from consumer relationships. The CPA was not designed to nor should it be rewritten to regulate relationships arising out of tortious conduct. The Court of Appeals should be reversed.
Alexander, C.J., and Owens and J.M. Johnson, JJ., concur with C. Johnson, J.
Reconsideration denied August 17, 2009.
The majority suggests that this dissent is “intermingling the second element, occurrence in trade or commerce, with the fourth, that the violation cause an injury to plaintiff’s business or property.” Majority at 44. This is not the case. Indeed, the analytical framework consists of five conjunctive elements. A plaintiff must establish each element to bring a successful CPA claim. In other words, for purposes of bringing a CPA claim, it is irrelevant that a person was injured in their business or property by a deceptive act or practice when such injury did not occur in trade or commerce. Hangman Ridge, 105 Wn.2d at 785 (the first “two elements may be established by a showing that (1) an act or practice which has the capacity to deceive ... (2) has occurred in . . . trade or commerce”). As discussed in this dissent, because Panag and Stephens cannot establish the act or practice took place in trade or commerce, their CPA claim (and the majority’s analysis) must fail.
The majority cites Nordstrom for the proposition that it is not necessary to establish a consumer relationship to bring a CPA action. Nordstrom, Inc. v. Tampourlos, 107 Wn.2d 735, 740 , 733 P.2d 208 (1987) (CPA action based on trade name infringement). But the CPA permits claims for “[ujnfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce....” RCW 19.86.020. Nordstrom is an unfair competition case and is irrelevant with respect to this deceptive act or practice case.
The majority appears to imply that this analysis has conjured up some “specified range of qualifying relationships that must exist before a CPA suit may be brought. . . into factors that must be established.” Majority at 45. In so doing, the majority discounts or disregards the common thread that runs through each of these cases, an underlying consensual business transaction (direct or indirect). Here, no such commonality exists. Instead, the facts in this case show an adversarial relationship arising in tort. Such relationship is not analogous to nor the logical extension of our precedent interpreting trade or commerce. The majority does not offer adequate authority on why this precedent should be overturned or disregarded in this case.
Although the CPA, as applied today, has been changed over the years through judicial interpretation, the majority does not present adequate authority to justify extending the CPA in the context of an adversarial relationship arising in tort.
This is the same point in the analysis where the Court of Appeals strays from the well-settled precedent regarding the trade or commerce element.
Notably, to be successful in bringing a per se violation requires proof that a party violated a statute that proscribes the particular practice used. See Lidstrand v. Silvercrest Indus., 28 Wn. App. 359, 623 P.2d 710 (1981). No facts are presented by Panag, Stephens, or the majority that CCS violated a statute that would give cause for a per se violation. Majority at 44. As such, Panag and Stephens would not be successful in bringing a per se violation and neither have argued that theory to us. See Panag’s Answer to Pets, for Discretionary Review at 12 (“This case does not involve a per se CPA claim. . . .”).
Panag and Stephens explicitly disclaim any relevance of the FDCPA to this case. Besp’t’s Answer to Amici Mem. at 5 (“the FDCPA is . . . wholly inapplicable to these matters”), n.7 (“since subrogation claims are not debts under the *72 [FDCPA], a plaintiff would not be entitled to any of the Act’s protections”); see also Resp’t Rajvir Panag’s Answer to Pets, for Discretionary Review at 13 (“The FDCPA Is Inapplicable and Unhelpful.”). By logical extension, the parties’ position on this issue would be the same for the CAA.
For example, the majority cites DIRECTV, Inc. v. Cephas, 294 F. Supp. 2d 760 (M.D.N.C. 2003) (allowing CPA claim to proceed even though the state FDCPA did not apply to deceptive attempts to recover alleged tort damages). In DIRECTV, the court found that the alleged unfair and deceptive acts at issue were not within the scope of the North Carolina Debt Collection Act (NCDCA), N.C. Gen. Stat. § 75-50 to -56, because the act did not apply to “debt” arising through theft. But the court concluded the alleged acts did come within the state’s Unfair and Deceptive Trade Practices Act (UDTPA), N.C. Gen. Stat. § 75-1.1 . The court then relied on examples provided under the NCDCA that are considered deceptive within the broader scope of the UDTPA’s restrictions and held DIRECTV could be liable for its acts. DIRECTV, 294 F. Supp. 2d at 765 ; see also N.C. Gen. Stat. § 75-1.1 (North Carolina’s UDTPA). Here, the majority seeks to make a similar connection between the CAA and the CPA (i.e., using provisions of the inapplicable CAA to create liability under the broader scope of the CPA). In so reasoning, the majority asserts the UDTPAis similar to our CPA. Majority at 54 n.11. But North Carolina’s UDTPA is not similar in at least one critical respect to our CPA. See N.C. Gen. Stat. § 75-51 (“No debt collector shall collect or attempt to collect any debt . . . owing from, a consumer. . . .” (emphasis added)). Indeed, the majority’s argument is premised on the idea that one need not be a consumer to invoke the CPA. Majority at 39. Considering these facts, DIRECTV is distinguishable on this point. Further, as discussed above, our cases do not invite extending the trade or commerce element to include a relationship arising in tort.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/4714127. Public record. Not legal advice.