Surety companies in Washington are generally not liable in tort to a third party. However, a specific exception was created for the setting up and siting of mobile homes. Poor or lacking performance with regards to these aspects may cause a safety risk or seriously impact use of the mobile home.

Background

Plaintiff hired a bonded contractor to set up a new mobile home.[i]  The contractor was registered with the Washington State Department of Labor and Industries and a surety company. The setup of the mobile home was not completed properly, and the mobile home allegedly sustained damage.  A year later, plaintiff wrote the surety company, which issued the contractor’s licensing bond, and demanded the bond proceeds.  Plaintiff had not filed suit against the contractor because the contractor’s company had dissolved prior to the letter.  The surety company informed plaintiff of the proper way to obtain the bond – filing a lawsuit against the bond in superior court pursuant to RCW 18.27.040.[ii]  If plaintiff filed suit against the bond, the surety company would then have a duty to investigate the claims.

Approximately two-and-a-half years after plaintiff sent the letter to the surety company, plaintiff filed suit against the surety company for a variety of claims, including Washington Insurance Fair Conduct Act and Consumer Protection Act violations.  The surety company filed a motion for summary judgment, and the court dismissed all of plaintiff’s claims.

Appeal

Plaintiff appealed the decision of the superior court.  The Court of Appeals held RCW 18.27.117(3) created a duty for surety companies who issue licensing bonds under the “Registration of Contractor’s Act” (RCA), chapter 18.27 RCW, to investigate claims made by injured parties in a reasonable and professional manner.  Any such claim must be filed against the bond.  A claim is not made properly unless and until a lawsuit is filed in superior court against the bond.  Once a claim against the bond is made by filing suit, the surety has an obligation to investigate and resolve the claim reasonably and professionally.

The Court of Appeals reviewed the claims and found plaintiff had never filed suit against the bond, as required by law.  As such, the surety company had no duty to investigate the claims regarding the mobile home damages.

Plaintiff founded her Consumer Protection Act claim on the letter she received from the surety company, claiming the letter was an unfair and deceptive trade practice.  This argument was rejected, as the letter was very clear as to exactly what plaintiff was required to do to access the bond.  Similarly, the Washington Insurance Fair Conduct Act claim was rejected, because plaintiff was not a first-party claimant and was not eligible for shelter via RCW 48.30.015.[iii]

Conclusion

Washington law is strongly geared towards public protection from businesses.  Here, the public – albeit a niche group – receives the same protection from unscrupulous contractor practices.  Plaintiff was a member of this select group, and the protections afforded by the law applied specifically to her situation.

Interestingly, plaintiff fumbled at the one-yard line, with no tackler in sight.  Plaintiff was instructed on exactly how to collect from the bond available by the surety company – the letter from the surety company spelled it out in detail, yet, plaintiff did not follow the path that would lead her to collect for the damages incurred.

[i] Caskey v. Old Republic Surety Co., WL 803811 (2022).

[ii] RCW 18.27.040 was formulated to enforce the registration of contractors.

[iii] RCW 48.30.015 enforces the unreasonable denial of a claim for coverage or payment of benefits.

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