About an hour after the accident, Mr. Trofimovich called Progressive to report it and make a claim. He told the customer service representative that the police report said the accident had occurred at 2:43 p.m. He also stated, “I was working and I was driving for, uh, what's it called, Lift [sic],” and he responded in the affirmative when asked if he was “working at the time.” When asked if he had a passenger, he responded, “I did have a passenger.”

Mr. Trofimovich also turned down the representative's offer to call him a tow, saying, “I'm trying to get Lift [sic] to do it 'cuz they're supposed to pay for it, like, or pay for a big chunk of it.”

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The representative's initial notes read: “IMMEDIATE CONCERNS: INSURED WAS DRIVING FOR LYFT AT THE TIME OF THE ACCIDENT. [GUEST PASSENGER] WAS A CUSTOMER.”

Conversation with Progressive claims adjuster

The next day, when speaking with Progressive claims adjuster Amber Sandbergen, Mr. Trofimovich stated that Ms. Dinson was not a paying customer, but a passenger whom he had transported for free. Mr. Trofimovich said, “We had used [Lyft] earlier in the day . . . because I was working . . . and then I was just giving her a ride back home afterwards. . . . [H]er mom's got cancer or something.”

Mr. Trofimovich further stated that he was “trying to do a favor.” He told Ms. Sandbergen that he had clocked off an hour before he had driven Ms. Dinson home.

No coverage letter

On June 30, 2016, Progressive sent a letter to Mr. Trofimovich advising him that there was “no coverage for this loss because [he was] driving for Lyft at the time of the loss and coverage for this [was] excluded under [his] policy.”

The next month, Mr. Trofimovich sent Progressive a notice under Washington's Insurance Fair Conduct Act (“IFCA”) indicating his intent to sue Progressive.

Progressive contacted Mr. Trofimovich's counsel regarding the basis for the notice; counsel responded that Mr. Trofimovich had no fare in his car at the time of the accident and that, because Progressive had ignored the supporting evidence he had offered, he would bring claims under IFCA, the Washington Consumer Protection Act (“WCPA”), and common law.

Progressive reversed initial denial & extended coverage

On July 29, 2016, Progressive extended coverage for Mr. Trofimovich's loss. On September 30, 2016, Progressive issued Mr. Trofimovich payment for the full amount of the damage to his vehicle.

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Meanwhile, on August 26, 2016, Mr. Trofimovich sued Progressive, alleging that it had “refused and continue[d] to refuse to pay for the full damages it caused” due to its “wrongful denial” of his claim.

Mr. Trofimovich alleged claims for breach of contract, common law bad faith, WCPA violations, and IFCA violations.

Progressive moved for summary judgment dismissal of all claims, arguing that it had accepted coverage and had paid for all damage to Mr. Trofimovich's vehicle and that its previous denial of coverage had been reasonable based on Mr. Trofimovich's initial statements.

The insured argued that he was entitled to consequential damages, including lost wages and attorneys' fees, arising out of Progressive's initial denial of coverage. (AP Photo)

Demand for damages for initial denial of coverage

Mr. Trofimovich also moved for summary judgment, arguing that he was entitled to consequential damages, including lost wages and attorneys' fees, arising out of Progressive's initial denial of coverage.

The Progressive Policy

The Progressive policy excluded coverage for damages arising out of the use of the insured vehicle while:

carry[ing] persons or property for compensation or a fee.

Washington Law

Under the IFCA, an insured who was:

unreasonably denied a claim for coverage or payment of benefits by an insurer may bring an action in the superior court of this state to recover the actual damages sustained, together with the costs of the action, including reasonable attorneys' fees and litigation costs.

Wash. Rev. Code § 48.30.015(1).

Court: Initial denial of claim 'reasonable'

The district court granted the insurer's motion, finding that Progressive's initial denial of Mr. Trofimovich's claim had been reasonable.

In its decision, the district court explained that Progressive had initially denied coverage because it had accepted Mr. Trofimovich's first statements that he had a paying customer in his car at the time of the accident. In the district court's opinion, it was “plainly reasonable to interpret his statements as such.” The district court noted that Mr. Trofimovich had stated that he was a Lyft driver, that he was working at the time, that he had a passenger, and that he expected Lyft to pay for him to tow the car.

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The district court rejected Mr. Trofimovich's suggestion that Progressive had a duty to further inquire as to whether his passenger was a paying customer.

'Amended statement'

The district court acknowledged that Mr. Trofimovich had subsequently clarified, or, in Progressive's view, had amended, his statement, and observed that Progressive had made the choice to reject one of two apparently conflicting statements, something that could “not be uncommon in claims adjusting.” The district court ruled that this “alone” did “not render Progressive's denial unreasonable.”

Then, the district court rejected Mr. Trofimovich's causes of action.

First, it dismissed his breach of contract claim against the insurer with prejudice, ruling that Mr. Trofimovich had not identified a contractual duty that Progressive had breached. The district court noted that Progressive ultimately had paid for the total damage to the automobile covered by Mr. Trofimovich's policy, adding that the fact that Progressive allegedly had done so as a “business decision” to avoid litigation was “irrelevant.”

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Next, the district court dismissed Mr. Trofimovich's bad faith claim against Progressive, explaining that to succeed on that claim, Mr. Trofimovich had to show that Progressive's breach of his insurance contract had been unreasonable, frivolous, or unfounded, and that it already had concluded that Progressive's denial of coverage had been reasonable.

Incorrect denial of coverage does not constitute unfair trade practice

For the same reason, the district court dismissed Mr. Trofimovich's IFCA claim.

Finally, it dismissed his WCPA claim, concluding that “an incorrect denial of coverage” did “not constitute an unfair trade practice if the insurer had reasonable justification for denying coverage.”

The case is Trofimovich v. Progressive Direct Ins. Co., No. C16-1510-JCC (W.D. Wash. Aug. 8, 2017).

Steven A. Meyerowitz, Esq., is the director of FC&S Legal, the editor-in-chief of the Insurance Coverage Law Report, and the founder and president of Meyerowitz Communications Inc. Email him at [email protected].