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The Pivotal Law Blog

Can Towns Ban Retail Marijuana Sales? Court of Appeals Says Yes

Posted Wednesday, March 14, 2018 by McKean J. Evans

With states increasingly legalizing recreational marijuana retail sales, one question is whether specific towns that prefer not to have marijuana sold at retail can prohibit marijuana stores from opening within their borders. The Court of Appeals’ March 13, 2018 decision in Emerald Enterprises, LLC v. Clark County answers “yes.”

Retail sales of recreational marijuana became legal in Washington after the voters approved Initiative 502 on November 6, 2012 (subsequently codified by the legislature as Washington’s Uniform Controlled Substances Act (“USCA”). The USCA legalized the limited production and sale of recreational marijuana under a licensing and regulatory system operated by the Washington State Liquor and Cannabis Board (the “Board”). The Board has final authority to issue retail licenses to persons desiring to sell marijuana at retail.

On May 27, 2014, Clark County passed an Ordinance banning the retail sale of recreational marijuana in unincorporated Clark County. Emerald Enterprises obtained a retail marijuana license from the Board, over Clark County’s objection. Emerald Enterprises then challenged the Clark County retail marijuana ban in court. While the dispute made its way through the lower courts, Emerald Enterprises began selling marijuana in Clark County despite the ban. Clark County ordered Emerald Enterprises to cease and desist, and revoked Emerald Enterprises’ building permit.

The Court of Appeals upheld Clark County’s marijuana retail ban. The court determined the USCA did not prohibit Clark County from banning retail marijuana. Emerald Enterprises claimed the Washington Constitution prohibited the Ordinance because it irreconcilably conflicts with the USCA, and because the USCA impliedly preempts local regulation of marijuana retail sales. Disagreeing, the court noted local governments in Washington historically “wield significant regulatory powers,” that local governments are presumed autonomous, and that Emerald Enterprises failed to overcome that presumption as applied to retail marijuana sales. The Court reasoned the USCA permits the sale of retail marijuana but grants no affirmative right to sell marijuana. Because the Ordinance did not prohibit the exercise of a right affirmatively granted by Washington law, no irreconcilable conflict existed.

The Court of Appeals also determined the Ordinance did not “thwart[] the will of voters and the legislative purpose” of the USCA. The Court held the USCA’s purpose was not to encourage the retail sale of marijuana but only to regulate and tax marijuana sales without any mandate to maximize or encourage sales. The Court also inferred the Washington legislature intended to permit local governments to ban marijuana sales from the legislature’s provision that local governments may derive certain financial benefits under the USCA only if they do not prohibit marijuana operations.

Finally, for many of the same reasons, the Court of Appeals also held the USCA did not preempt local regulation of marijuana sales. Since the USCA did not grant the affirmative right to sell marijuana and the Ordinance did not conflict with the USCA’s purpose, the USCA did not preempt local marijuana regulation.

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Does My Insurer Need to Tell Me When They Change My Policy?

Posted Wednesday, March 7, 2018 by McKean J. Evans

Court of Appeals decision emphasizes minimal notice requirement for renewal insurance policy changes.

A common pitfall for insurance policyholders lies in the insurer’s renewal notice. Policyholders often set their policy premiums to pay and set the policy to renew automatically. Having set the policy on “autopilot,” the policyholder receives the automatic renewal notice and thinks they do not need to closely read it, on the assumption that renewing the old policy means they are getting the same coverage. But insurers often add material changes to their policies in renewal notices, which policyholders may not realize until years later when a loss they thought was covered turns out to be excluded under the modified policy.

This was the issue in the Washington Court of Appeals’ recently-published decision in Jackson v. Esurance Insurance Company, Case No. 75506-4-L. The court’s decision parses coverage under Mr. Jackson’s Esurance auto insurance policy and the policy’s exclusion for racing. Whether a car was involved in racing at the time of an accident would seem straightforward, but that was not the case for Mr. Jackson, whose policy included an expanded racing exclusion Esurance added in the fine print of his renewal policy. This decision reminds policyholders to always check the fine print of the insurance policy renewal notice because it may not be consistent with their expectations.

In February 2006, Mr. Jackson purchased a personal auto insurance policy from Esurance. Esurance delivered the policy to Mr. Jackson electronically pursuant to Esurance’s business model as an internet-based insurance company. Mr. Jackson’s original policy excluded: “Loss to ‘your covered auto’ or any ‘non-owned auto’, located inside a facility designed for racing, for the purpose of: a. Competing in; or b. Practicing or preparing for any prearranged or organized racing or speed contest.” In January 2010, Mr. Jackson renewed his Esurance policy. The renewal policy contained a broader racing exclusion, also excluding: “Participating in any racing school, driving school, driver training, skills training, race driving experience, or race adventure program.”

In June 2014, Mr. Jackson attended an Audi driving-skills training program at the Pacific Raceways racecourse. Mr. Jackson wanted to make sure his insurance covered him for any damages that might occur during the event, so he checked the copy of his policy available on Esurance’s website. Esurance’s website only contained the original policy with the narrow racing exclusion that did not exclude “driving school” participation.

Mr. Jackson crashed his vehicle during the driving skills program. He made a claim with Esurance. Esurance denied his claim under the expanded racing exclusion’s exclusion for racing school participation, quoting the current policy language.

Mr. Jackson sued Esurance under Washington’s Insurance Fair Conduct Act and Consumer Protection Act, as well as bringing claims for breach of the policy contract and common law bad faith. He claimed that Esurance failed to properly notify him of the 2010 policy amendment expanding the racing exclusion, and that Esurance’s conduct was deceptive and unlawful in violation of the Consumer Protection Act. The trial court dismissed Mr. Jackson’s lawsuit. Mr. Jackson appealed to the Court of Appeals, who affirmed the dismissal.

First, the Court of Appeals held Esurance’s 2010 broadening of the racing exclusion was enforceable. The Court of Appeals agreed with Mr. Jackson that Washington law required Esurance to notify him before amending or modifying the policy. But the court noted Washington law does not require notice be given in a specific manner, and permitted Esurance to deliver notices of policy changes electronically. Mr. Jackson consented to receive policy notices electronically when purchasing his original policy from Esurance. Even though Esurance’s renewal consisted of a terse email with a hyperlink to renewal “terms and conditions” not contained in the email itself, the court ruled this was sufficient to give Mr. Jackson notice of the expanded racing exclusion.

Second, the Court of Appeals determined Esurance’s electronic notice of the expanded racing exclusion was not deceptive or unlawful under the Consumer Protection Act. Mr. Jackson argued his difficulty in locating the actual policy on Esurance’s website rendered Esurance’s notice procedures deceptive. The court rejected that argument because Esurance provided Mr. Jackson instructions to access his policy when he first purchased it in February 2006. The court attributed Mr. Jackson’s difficulty solely to his decision not to carefully read the renewal notices Esurance sent him.

This decision emphasizes the need for policyholders to carefully read notices and renewal policy documents their insurers send them. If you have questions regarding insurance issues, contact Pivotal Law Group attorney McKean J. Evans today for a free consultation.

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Washington Court of Appeals Rules on Insurance Coverage and Arson Case

Posted Wednesday, February 28, 2018 by McKean J. Evans

The Washington Court of Appeals, in an unpublished decision in Schmidt v. American Commerce Insurance Company, recently decided claims against an insurance company where the jury concluded the insured burned his own house down. Schmidt rebuilt his home following landslides, but found that the home violated King County code and could not lawfully be torn down or rebuilt. Thereafter, a fire burned down the home while Mr. Schmidt was home alone. Mr. Schmidt, a firefighter, testified he was unable to put out the fire because he had previously shut off power to the home, and could not call the fire department because his phone was dead.

Mr. Schmidt made a claim for the fire to his insurance company American Commerce Insurance Company (“ACIC”). ACIC denied the claim, asserting arson. A jury concluded Mr. Schmidt set fire to his own home, and found for ACIC. After the verdict, ACIC asked the court to award ACIC its costs of defending the suit, but the court awarded ACIC only $200.00 out of its requested $30,009.67 in fees.

Mr. Schmidt asked for a new trial. He claimed ACIC’s counsel made prejudicial statements in ACIC’s closing argument to the jury by telling the jury to infer Mr. Schmidt’s guilt from the lack of his fellow firefighters supporting him at trial. Even though his lawyer failed to object to this statement, Mr. Schmidt claimed the statement was so prejudicial that he was entitled to a new trial even absent an objection. Mr. Schmidt also sought a new trial on the basis that ACIC’s lawyers prejudiced Mr. Schmidt by repeatedly pointing out Mr. Schmidt’s claims handling experts were from outside Washington. Finally, Mr. Schmidt claimed he was entitled to a new trial because ACIC disclosed new expert witness opinions in the middle of trial.

The Court of Appeals denied Mr. Schmidt’s request for a new trial. It found ACIC’s improper statements could have been cured by an instruction from the trial judge, but Mr. Schmidt’s lawyer’s failure to ask for such an instruction at the time precluded Mr. Schmidt from seeking a new trial on appeal. The Court of Appeals determined ACIC’s references to Mr. Schmidt’s expert being from outside Washington was part of an appropriate effort to show that the expert was not qualified to opine on insurer practices in Washington. Lastly, the court determined Mr. Schmidt was not prejudiced by ACIC’s late expert opinions because those opinions responded to statements by Mr. Schmidt’s experts. Mr. Schmidt’s other objections were dismissed because he failed to adequately assert them at trial.

ACIC asked the Court of Appeals to award ACIC all its attorney’s fees and costs based on the jury’s finding that Mr. Schmidt committed arson. ACIC relied on Washington statutory provisions requiring insurance policyholders to act in good faith and imposing criminal penalties for false or fraudulent insurance claims. The Court of Appeals concluded neither statute authorized attorney’s fees.

ACIC also asked the Court of Appeals to reverse the trial court’s decision that ACIC improperly failed to identify policy coverage for the interest of Mr. Schmidt’s mortgage lienholder. ACIC claimed Mr. Schmidt lacked standing to invoke policy provisions benefitting his lienholder and that Mr. Schmidt’s arson precluded his claim against ACIC. Even though the jury ultimately concluded Mr. Schmidt intentionally set fire to the house, the Court of Appeals found ACIC could be liable for failing to disclose and pay the leinholder’s coverage.

Because the Court of Appeals’ decision is unpublished, it lacks precedential value, but it is nevertheless an interesting example of the issues that can play out where both an insurer and policyholder engage in misconduct.

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Washington Supreme Court Clarifies Court of Appeals Decisions of One Division Do Not Bind Other Court of Appeals Divisions

Posted Wednesday, February 21, 2018 by McKean J. Evans

On February 15, 2018, the Washington Supreme Court issued an important decision clarifying the authority of Washington’s Court of Appeals in the case In re Personal Restraint of Arnold, Case No. 94544-6. Washington’s Court of Appeals is divided into three co-equal divisions adjudicating appeals arising from Superior Courts in three geographic parts of Washington – Division One in the Seattle and North Puget Sound area, Division Two in the Tacoma and Southwest Puget Sound area, and Division Three in Eastern Washington. The Arnold decision answers the question: what weight does one Court of Appeals division give to the decisions of another division?

In the Arnold case, Division Three of the Court of Appeals considered whether Mr. Arnold was required to register as a sex offender. The Division Three based its decision on prior decisions from Divisions One and Two on similar legal issues. Division Three reasoned it was bound to follow the prior decisions of Divisions One and Two under the principle that courts must follow existing decisions of co-equal branches of the same court. Division Three found that even if the prior decisions were wrong, departing from the prior decisions would create “unjustified harm by rendering the applicable law impermissibly vague” (a principle Division Three called “horizontal stare decisis”).

Washington’s Supreme Court reversed, holding that Division Three’s deference to prior decisions of Divisions One and Two violated the statutes establishing the powers and duties of the Court of Appeals. First, the Supreme Court analyzed Washington’s sex offender registration statute and concluded the statute unambiguously required Mr. Arnold to register as a sex offender. Second, the Supreme Court analyzed the decisions from Court of Appeals Divisions One and Two to the contrary, and rejected those courts’ reasoning. Third, the Supreme Court rejected Division Three’s deference to the prior decisions of Divisions One and Two.

The Supreme Court ruled Court of Appeals Divisions must give other Divisions’ decisions “respectful consideration” but not total deference. The court rejected any kind of “horizontal stare decisis” among Court of Appeals Divisions. The Supreme Court observed the Washington Constitution and statutes specifically anticipated that different Court of Appeals Divisions would disagree, and placed responsibility with the Supreme Court to resolve such disagreements. Conflicts among the Court of Appeals must be resolved by the Supreme Court, not by deference to prior Court of Appeals decisions. The Supreme Court recognized conflicting Court of Appeals decisions can create confusion, but affirmed that “our current system of rigorous debate” between Court of Appeals Divisions “creates the best structure for the development of Washington common law.”

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Insurance Regulators Investigating Aetna for Training Employees to Deny Coverage Without Reviewing Patient's Medical Records

Posted Wednesday, February 14, 2018 by McKean J. Evans

Aetna, the country’s third largest health insurer, is under investigation by state insurance regulators following Aetna’s admission that it routinely denies medical treatment coverage without reviewing the insured’s medical records. Aetna’s admission surfaced in a lawsuit by a California man who claimed Aetna improperly denied coverage for his medical treatment. The insured has a rare autoimmune disorder requiring monthly dosages of an expensive medication.

Aetna’s physician admitted in the course of the lawsuit that he routinely denied coverage for insured’s treatment without reviewing the insured’s medical records. Aetna’s training, the physician testified, permitted him to simply follow the recommendations of Aetna’s nurses.

Since the physician claimed to have followed Aetna’s normal procedures, other Aetna insureds may similarly have had coverage for necessary treatment erroneously denied by reviewing physicians who failed to examine their medical records.

Insurance coverage for chronic conditions has become a hot-button issue. In recent years, patients with rare chronic diseases have faced increasing challenges getting insurers to cover treatment. Insureds’ difficulty covering treatment for chronic diseases is often complicated by pharmaceutical companies’ increasingly common practice of raising prices on chronic disease medications by several hundred percent in a single increase.

Washington insureds who suspect their health coverage was improperly denied have ample legal recourse. If the insurance plan is through an employer, the federal Employee Retirement Income Security Act (“ERISA”) gives the patient the right to appeal a coverage denial, to sue in federal court if the appeal is wrongfully denied, and to obtain coverage and attorneys’ fees. For non-employer insurance, Washington’s Insurance Fair Conduct Act and Consumer Protection Act give insureds the right to bring a lawsuit to obtain coverage as well as exemplary damages and attorneys’ fees.

Pivotal Law Group attorney McKean Evans has obtained favorable coverage decisions for insureds and ERISA plan participants in disputes regarding coverage denials. If you have concerns regarding insurance coverage, contact McKean at (206) 805-1493 for a free consultation.

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