STROTHER v. CAPITOL BANKERS LIFE, 68 Wn. App. 224 (1992)

842 P.2d 504

SUSAN B. STROTHER, Respondent, v. CAPITOL BANKERS LIFE INSURANCE COMPANY, Appellant.

No. 29088-6-I.The Court of Appeals of Washington, Division One.
December 31, 1992.

[1] Insurance — Life Insurance — Errors in Application — Failure To Correct — Effect. When a life insurance policy is issued and the insured is sent a copy of the policy with the application attached, the insured has a duty to read the application and to correct any misrepresentations. Even if the insurance agent was responsible for the misrepresentations in the application, the insured ratifies the misrepresentations by not reporting them to the insurer.

[2] Insurance — Claim for Loss — Misrepresentation — Ratification — Effect. When an insured makes or ratifies material misrepresentations in an application for insurance, the beneficiary may not recover under the policy.

[3] Insurance — Life Insurance — Replacement Policy — Notices — Purpose. The purpose of the administrative requirement that an insurer provide certain notices to an applicant for a replacement life insurance policy and to the existing insurer is to protect the applicant from making an unwise choice in canceling the existing policy and purchasing a new policy.

[4] Insurance — Life Insurance — Replacement Policy — Notices — Absence — Estoppel To Deny Coverage. When an insurer, despite actual or constructive knowledge that a policy is a replacement policy, fails to issue required notices to the insured and the existing insurer regarding the replacement insurance,

Page 225

the insurer is not equitably estopped from contesting the insurance coverage.

[5] Trial — Instructions — Sufficiency — Language — Discretion of Court. A trial court has broad discretion in deciding on the language of a jury instruction so long as the instruction is accurate and permits both parties to argue their theories of the case.

[6] Insurance — Life Insurance — Replacement Policy — Representations in Application — Reliance by Agent. An insurance agent may not rely on representations in an application for life insurance as to whether the applicant intends that the new policy replace an existing policy if the agent knows or should know from any source that the new policy may in fact be a replacement policy.

[7] Trial — Instructions — Proposed Instructions — Refusal of Correct Instruction. A trial court does not abuse its discretion in refusing to give instructions that, although they correctly state the law, are not helpful in deciding a material issue in the case.

[8] Appeal — Findings of Fact — Review — Substantial Evidence — In General. An appellate court will uphold a jury’s finding of fact if, considering the evidence most favorable to the prevailing party, there is substantial evidence supporting the finding.

[9] Witnesses — Credibility — Question of Law or Fact. Witness credibility is an issue for the trier of fact.

[10] Negligence — Elements — In General. The elements of a negligence action are (1) a breach of (2) a duty (3) proximately causing (4) an injury.

[11] Negligence — Duty — Source — Administrative Rule. An administrative rule may create a duty for purposes of a negligence action.

[12] Insurance — Brokers — Insurance Agent — Acts Binding Principal. An insurer is vicariously responsible for the acts and knowledge of its agent.

[13] Insurance — Life Insurance — Replacement Policy — Insurer’s Duty — Identifying Existing Insurer. When an insurer knows that an applicant has requested a replacement insurance policy but does not know the identity of the existing insurer, it may not issue a new policy until it ascertains the

Page 226

identity of the existing insurer and complies with the requirements of administrative rules.

[14] Negligence — Proximate Cause — Question of Law or Fact — In General. The issue of proximate cause in a negligence action is for the trier of fact unless reasonable minds could not differ.

[15] Insurance — Life Insurance — Replacement Policy — Notices — Absence — Insurer’s Liability — Proximate Cause — Conduct of Applicant. In an action to hold an insurer or an insurance agent liable for not giving an applicant for a replacement insurance policy notices and warnings required by administrative rules, what the applicant would have done had the applicant been given the required notices and warnings is not too speculative an issue to be resolved by a trier of fact if considered in light of all the surrounding circumstances.

[16] Insurance — Claim for Loss — Right of Action — Negligence of Insurer or Agent. When an insurer or an insurer’s agent breaches a duty to the insured resulting in a loss of insurance coverage, the insured has a right of action to recover damages proximately caused by the breach.

[17] Appeal — Findings of Fact — Review — Erroneous Identification as Conclusion of Law. A finding of fact erroneously identified as a conclusion of law is reviewed as a finding of fact.

[18] Appeal — Decisions Reviewable — Prevailing Party — Failure To File Cross Appeal. A respondent who fails to file a cross appeal from the dismissal of a claim is precluded from challenging on appeal findings of fact related to that claim.

[19] Appeal — Findings of Fact — Absence of Finding — Waiver of Cause of Action. A party who fails in the trial court to seek resolution of a factual issue material to a theory of recovery may not rely on that theory to uphold the judgment and may not reassert the theory on remand.

[20] New Trial — Limitation of Issues — Elements of Cause of Action. An appellate court may limit the issues to be decided on remand to one or more of the elements of the cause of action if the other elements were properly decided in the initial trial.

Nature of Action: A named beneficiary of a life insurance policy sought payment under the policy and damages under the Consumer Protection Act. The beneficiary’s husband had died in a mountain climbing accident. The insurance

Page 227

application erroneously stated that the decedent had not participated in mountain climbing within the last 3 years, that the policy was not intended to replace another policy, and that the amount of coverage provided by an existing policy was less than that actually provided.

Superior Court: The Superior Court for King County, No. 87-2-08757-3, Anthony P. Wartnik, J., on September 5, 1990, entered a judgment awarding the plaintiff the proceeds of the insurance policy but denying her damages under the Consumer Protection Act.

Court of Appeals: Holding that the decedent’s ratification of the material misrepresentations in the policy prevented recovery under the policy, that instructions regarding the insurance agent’s knowledge that the policy was a replacement policy were proper, that a jury finding regarding the agent’s knowledge was supported by substantial evidence, that the insurer could be liable for negligence, that the unresolved issue of proximate cause was for the trier of fact, and that the beneficiary’s failure to seek resolution of a factual element of the Consumer Protection Act claim precluded her from reasserting the claim on remand, the court reverses the judgment and remands the case for a new trial limited to the issue of proximate cause.

Ronald Schaps, Patrice Johnston, and Bogle Gates, for appellant.

Evan E. Inslee and Inslee, Best, Doezie Ryder P.S., for respondent.

FORREST, J.

Capitol Bankers Life Insurance Co. (hereinafter Capitol) appeals the trial court’s ruling that it was precluded from voiding Susan Strother’s (hereinafter Strother) deceased husband’s life insurance policy. Strother assigns error to the trial court’s dismissal of her Consumer Protection Act claim. We reverse the trial court’s judgment and remand.

Page 228

Strother’s husband, Mark, purchased a $250,000 life insurance policy from the Mutual Life Insurance Company of New York (hereinafter MONY) that became effective in September 1984. The purchase of life insurance was made pursuant to Mark’s purchase of a veterinary clinic from Dr. Thomas Van Meter. The purchase agreement for the clinic required Mark to maintain life insurance for the 10-year period in which payment on the clinic would be made.

Donald Mason was an agent of Capitol and a social and business acquaintance of Dr. Van Meter. Dr. Van Meter apparently referred Mason to Mark in 1984. At that time, Mason prepared a number of policy proposals for Mark among which was one which, if accepted, would have been a replacement policy for the MONY policy. However, Mark chose to purchase the MONY life insurance policy.

A year later, in September 1985, Mason again contacted Mark regarding life insurance. An application for a $250,000 life insurance policy was filled out by Mason and signed by Mark. That application contained certain misrepresentations. First, the application indicated that Mark, an avid mountain climber, had not participated in mountain climbing within the last 3 years. Second, the application indicated that the insurance was not intended to be a replacement policy, e.g., a policy which replaces another. Third, the application indicated that Mark only had a $40,000 policy with MONY and did not disclose that he also had another policy with MONY in the amount of $250,000.

Because the application indicated that the policy was not a replacement policy, no notices were issued to Mark or MONY as required by the Washington Administrative Code. The regulations require that in the case of replacement policies a notice must be sent to the applicant informing him of the hazards of replacing an existing life insurance policy. They also require that the replacing insurer send a notice to the existing insurer advising it of the proposed replacement.

Page 229

The existing insurer is then free to contact the applicant and caution him against replacement.

Two days after Mark signed the application he instructed his wife to stop payment on the check written to pay the premium for the MONY policy. Only under the MONY policy, not the Capitol policy, was Mark insured for the risks of mountain climbing. The new policy was issued by Capitol on November 21, 1985. On December 2, 1985, the approved policy was sent to Mark, with a copy of the application attached.

Mark died in a mountain climbing accident in August 1986. Because the application for the Capitol policy contained a material misrepresentation as to Mark’s mountain climbing activities, Capitol refused to issue payment on the $250,000 life insurance policy. Strother filed suit against Mason and Capitol, alleging in part that Capitol was precluded from denying coverage. The claim against Mason was dismissed without prejudice prior to trial.

At trial, Strother alleged that because Mason knew or should have known that the policy was a replacement policy, but none of the required regulatory notices were issued by Mason or Capitol, Capitol should be precluded from denying coverage on the basis of material misrepresentations on the application. Strother demanded a jury trial, but requested that only one issue be submitted to the jury: whether Mason knew or should have known as of the date of the application that the policy was intended to be a replacement policy. The trial court granted Strother’s request. The jury answered the special verdict form in the affirmative.

The trial court concluded that as a matter of public policy, Capitol was precluded from denying coverage due to its failure to comply with the regulatory notice requirements. The trial court also rejected claims Strother had brought under the Consumer Protection Act, concluding that Strother had not established a causal link between an unfair practice and her injury and that Strother was precluded from recovering due to Mark’s fraud.

Page 230

PRECLUSION ON PUBLIC POLICY GROUNDS [1, 2] Capitol assigns error to the trial court’s conclusion of law 1,[1] holding that public policy precludes Capitol from voiding the policy on the basis of Mark’s misrepresentations. We agree. Public policy as to material misrepresentations is established by Hein v. Family Life Ins. Co.[2] Pursuant to the rule set forth in Hein, it is immaterial whether the insured or the agent was responsible for misrepresentations in the application. When the policy is issued and the applicant is sent a copy of the policy with the application attached, the applicant has the opportunity and the duty to read the application and correct any misrepresentations.[3] Failure to report any misrepresentations amounts to ratification of those misrepresentations.[4] Pursuant to Hein, Mark’s ratification of the material misrepresentations in the application prevents Strother from recovering on the policy.[5]

Strother does not challenge the Hein rule but urges this court to supplement it by adopting the New York rule established in Tannenbaum v. Provident Mut. Life Ins. Co.[6] I Tannenbaum, the deceased insured failed to disclose a mental

Page 231

disorder in his application. The application also indicated that the policy was not intended to replace another. However, a customary investigation procured by the insurer indicated that the policy was intended to replace another. The insurer did not request further investigation and issued the policy without contacting its agent or the prior insurer as to the intended replacement.[7] Thus, the insured received no counseling as to the hazards of replacing his existing insurance. The New York court reasoned that due to the insurer’s negligence in not further investigating the matter, the insured replaced incontestable insurance with contestable insurance without the benefit of vital information.[8] Citing public policy, the court invoked the doctrine of equitable estoppel to preclude the insurer from denying coverage.[9]
[3, 4] Although the trial court in the case at bar specifically rejected the estoppel theory advanced i Tannenbaum, it appears to apply the same concept under a different name, holding that failure to issue the required replacement notices precludes assertion of Capitol’s position that Strother’s recovery is barred by the misrepresentations. We conclude that adoption of the estoppel theory of Tannenbaum or the trial court’s public policy reasoning would produce indefensible results. Under either analysis, if Mark had previously held a $125,000 policy with MONY, Capitol would still be liable on its $250,000 policy. Such a windfall to Strother would be totally unwarranted considering that she is bound by Mark’s misrepresentations.[10]

Page 232

The purpose of the Washington Administrative Code provisions[11] governing the sale of replacement life insurance policies, sometimes referred to as the “twisting” regulations, is to protect the holder of an insurance policy from making an unwise choice in canceling an existing policy and buying a new policy. A decision to replace an existing policy may be good or bad depending on the facts. The evil to be avoided is unwise cancellation. The remedy should be to give the insured the benefit of his prior policy, not the benefit of his new policy.[12] To deprive Capitol of the right to assert a misrepresentation defense is in effect to allow Strother to enforce the policy in the face of Mark’s misrepresentations. We reject the trial court’s conclusion that Capitol is precluded from asserting misrepresentations to avoid the policy.

Contrary to Capitol’s position, however, rejection of the trial court’s conclusion does not necessarily mean that Strother has no remedy. Her claim is properly analyzed as a classic negligence tort action based on a duty to a plaintiff and a breach of that duty proximately causing damage.[13]

JURY INSTRUCTIONS
Before analyzing the elements of a tort action as applied to this case we need to consider Capitol’s challenge to the jury’s finding that Mason knew or should have known that he was selling a replacement policy.

[5, 6] Capitol first asserts that this finding was based on improper instructions. The trial court has broad discretion in framing instructions to the jury so long as they are

Page 233

accurate statements of the law and allow each side to argue its theory of the case.[14] Capitol assigns error to instructions 11 and 12 given by the court. Instruction 11 reads:

An insurance company has the right to rely upon the representations in an application for insurance and there is no duty on the part of the insurance company or the insurance company’s agent to question the veracity of the applicant or to pursue or seek out undisclosed information absent having knowledge of information that would require it to investigate or inquire further.

Capitol objects to the inclusion of the phrase, “absent having knowledge of information that would require it to investigate or inquire further.” In WAC 284-23-410 “replacement” is defined as

any transaction in which . . . it is known or should be known to the proposing agent . . . that by reason of such transaction, existing life insurance or annuity has been or is to be:
(1) Lapsed, forfeited, surrendered, or otherwise terminated;

(Italics ours.) The regulations governing replacement policies clearly do not permit the agent or insurer to rely blindly on the application. On the contrary, agents’ actions are to be judged in light of all the information known to them from any source. The challenged language of the instruction properly reflects the additional duty imposed on the agent and insurer in the sale of replacement policies to prevent “twisting”.

Instruction 12 reads:

The word “known” as used in these instructions means to have knowledge.
The term “should be known” as used in these instructions means a reasonable person of ordinary intelligence, based on the information known, should have known that a replacement would, in fact, or would likely take place.

Capitol argues that WAC 284-23-410 imposes no duty on the agent to go beyond the answers on the application. We disagree.

Page 234

The trial court properly used the standard as mentioned in WAC 284-23-410, whether “it is known or should be known”. WAC 284-23-410. The language of the instruction is also supported by WAC 284-23-440(1)(b), which requires the agent to sign a statement as to whether replacement “is or may be involved in the transaction.” (Italics ours.)

[7] Capitol also objects to the failure to give its requested instructions 3[15] and 5,[16] but fails to demonstrate that they were necessary and appropriate to guide the jury’s deliberations on the issue submitted. Although abstractly correct statements of the law, and relevant in a suit on the insurance policy, we do not find the proposed instructions helpful to the jury deciding the issue submitted: in light of all the facts did Mason know or should he have known that he was selling a replacement policy? We find no abuse of discretion or error in the trial court’s instructions to the jury.

JURY FINDING [8, 9] Next Capitol argues that the evidence is insufficient to support the jury’s finding that Mason knew or should have known that Mark intended the Capitol policy to replace another policy. In reviewing a jury’s finding of fact this court’s inquiry is limited to whether that finding is supported by substantial evidence.[17] The jury is free to judge the credibility of the witnesses before it.[18] This court need

Page 235

only consider the evidence most favorable to the prevailing party.[19]

We find that there was substantial evidence to support the jury’s finding that Mason knew or should have known that Mark intended the Capitol policy to replace another policy. The jury was entitled to find that Mason was referred to Mark by Dr. Van Meter, a personal friend of Mason’s, who knew of Mark’s need for insurance through the purchase of the clinic and who had arranged to share in Mason’s commission on other sales. Mason actually prepared and presented insurance proposals to Mark in November 1984. The MONY policy became effective in September 1984, and thus the annual renewal date was September 1985. Mason’s calendar had a “tickle date”, to remind him to contact Mark in September 1985, at which time he submitted a similar proposal to Mark. A reasonable inference from this evidence is that at the time Mason submitted the proposals to Mark in 1984, Mason learned that Mark had already purchased the MONY policy. Mason, however, also knew that the MONY policy was subject to renewal in September 1985, and thus contacted Mark again at that time in order to replace the MONY policy with a policy from Capitol. The policies had the same face amount. Undisputed evidence established that 85 percent of Mason’s business was selling replacement policies and that Mason filled out the application based on verbal answers from Mark. Moreover, there is no reason to believe that Mark would have lied about the fact that he was intending to replace the MONY policy.

In view of the blatant inconsistencies in Mason’s testimony, the jury was free to disbelieve Mason’s assertion that he had no knowledge as to replacement. Indeed, considering the evidence most favorably to Strother, the evidence supports a finding not only that Mason should have known about the replacement, but that he in fact did know about the replacement. In light of the foregoing evidence the jury’s finding will not be disturbed.

Page 236

TORT ACTION [10] We turn now to an analysis of the elements of Strother’s tort action.[20] In an action for negligence the plaintiff must establish (1) a duty owed to her, (2) a breach of that duty, (3) a resulting injury, and (4) that the breach was the proximate cause of the injury.[21]
[11] Duty. In the sale of a replacement policy the regulations place certain duties on the insurer and the insurer’s agent. WAC 284-23-440[22] requires that where replacement is involved the agent shall deliver a replacement notice to the applicant. At the time of the replacement, in 1985, the form of that notice was prescribed by former WAC 284-23-500 and WAC 284-23-530.[23] A significant aspect of the agent’s notice to the applicant pursuant to former WAC 284-23-500 is that the applicant must be told that “[y]ou should also recognize that a policy which has been in existence for a period of time may have certain advantages to you over a new policy.” Former WAC 284-23-500. Such information communicated to Mark would almost surely have provoked a question, “what advantages might my existing policy have?”[24]

Page 237

Former WAC 284-23-450[25] prescribed the insurer’s duties in regard to replacement, which in summary were that upon receiving an application for a replacement policy, the new insurer must notify the existing insurer of the proposed replacement.[26]
This in turn triggers the opportunity for the existing insurer to furnish the insured with a policy summary for the existing life policy.[27] The regulations are specifically directed to one in Mark’s position, the holder of a policy who is being solicited to cancel it and buy another policy. As such, the regulations impose a duty to the applicant on the insurer.

[12] Breach. Capitol is directly responsible for the performance of its own duty and is vicariously responsible for Mason’s performance of his duties.[28] A finding that a person should have known imposes the same liability as if he knew.[29]
Elementary rules of the law of principal and agent make Capitol legally responsible for the acts and knowledge of its agent Mason.[30] Indeed, this responsibility is not disputed.

Page 238

[13] Capitol argues that it could not comply with the applicable regulations because it did not know the name of the existing insurance carrier for Mark, and because it had no reason to know it was issuing a replacement policy. It overlooks the fact that it is charged with the knowledge of its agent. If an insurer knows that it is being asked to issue a replacement policy, but does not know the name of the existing insurer, it must decline to issue the policy until such time as it ascertains the existing insurer and is able to comply with its obligations under the regulations. Since it is undisputed that neither Mason nor Capitol complied with the applicable regulations, Capitol breached its duty to Mark.

Injury. It is undisputed that the Strothers were injured by replacing the MONY policy, which provided coverage for mountain climbing, with the Capitol policy which was voided upon Mark’s death.

[14] Proximate Cause. A breach of duty results in liability only when it is a proximate cause of damage to the plaintiff.[31] Except when reasonable minds cannot differ, proximate cause is an issue of fact for the jury.[32] In the case at bar the issue of proximate cause was never submitted to the jury. It may be likely that, had Mark been advised he would not be covered for a mountaineering death, he would not have allowed his existing policy with MONY to lapse and would not have bought Capitol’s policy for a minor premium benefit. Such a switch deprived his wife of vital protection and was arguably a breach of his contractual obligation to Dr. Van Meter. However, we cannot assume proximate cause. Causation must be proved and found by the trier of the fact.

[15] In this case proximate cause could possibly be established in one of two ways: (1) a showing of what MONY’s response would have been if it had been notified as required by former WAC 284-23-450, and what Mark’s response would have been to any resulting communication from MONY or its

Page 239

agents, or (2) a showing of what Mark’s response would have been to the notice issued to him by Mason as required by WAC 284-23-440. Although it is impossible to have direct evidence as to what Mark would have done, we do not consider the question to be so speculative as to defeat liability.[33] It is analogous to proving causation in products liability actions where the defendant is charged with failure to provide adequate warnings.[34] The issue here can properly be resolved by the trier of fact in light of all the surrounding circumstances.[35]
Damages. The amount of damages is not in issue. If Mark allowed his MONY policy to lapse as a proximate result of Capitol’s breach of duty, Strother is entitled to recover the face amount of that policy.[36]
[16] In summary we hold that a policyholder who has made or ratified material misrepresentations may not recover on the policy either by way of estoppel or public policy. However, if the insurer or the insurer’s agent breaches a duty to the insured which results in loss of other policy coverage the insured may maintain an action for the damage proximately caused by that breach. In the case at bar the issue as to proximate causation must be resolved on retrial.

Page 240

CONSUMER PROTECTION ACT
Strother assigns error to the trial court’s conclusions of law 3, 4 and 5, regarding Strother’s Consumer Protection Act claim.[37] In conclusions of law 3 and 4 the trial court concluded that Strother failed to establish a causal link between the claimed injury and unfair trade practices. In conclusion of law 5 the trial court concluded that Strother is precluded from asserting a Consumer Protection Act claim because Mark perpetrated a fraud.

Strother asserts that the trial court erred in ruling that her claim under the Consumer Protection Act is precluded by Mark’s fraud. In Mutual of Enumclaw Ins. Co. v. Cox,[38] the Supreme Court ruled that a consumer who himself is guilty of fraud in the disputed transaction may not use the Consumer Protection Act to recover damages.[39] In that case, the plaintiff, in submitting a claim on his fire insurance, fraudulently listed items on his inventory list that had not been lost in the fire.[40] The plaintiff’s actual loss, however, still exceeded the policy coverage. In addition to trying to

Page 241

estop the insurer from voiding the policy, Cox brought a Consumer Protection Act claim alleging unfair practices in the processing of his insurance claim.

We find the case at bar distinguishable from Mutual of Enumclaw. The “fraud” in the case at bar is the misrepresentations which are imputed to Mark pursuant to Hein v. Family Life Ins. Co., 60 Wn.2d 91, 376 P.2d 152 (1962). These misrepresentations would not have precluded coverage once the policy entered the incontestability stage after 2 years pursuant to RCW 48.23.050.[41] Most significantly, however, the alleged unfair practice in the case at bar preceded, and in fact likel contributed to, any misrepresentations on Mark’s part. In other words, a jury might well find that Mark would not have allowed his MONY policy to lapse if Capitol had complied with the regulations, and hence Mark would have had no occasion to make any misrepresentations. In contrast, the fraud in Mutual of Enumclaw preceded any bad faith handling of the claim. It would contradict the purpose of the Consumer Protection Act to extend the rule of Mutual of Enumclaw to the case at bar.

Five elements are required to establish a private Consumer Protection Act claim pursuant to RCW 19.86: (1) an unfair or deceptive act or practice, (2) occurring in trade or commerce, (3) public interest impact, (4) injury to the plaintiff in his or her business or property, and (5) causation.[42]

The first element in a Consumer Protection Act claim is an “unfair or deceptive act or practice.” Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wn.2d 778, 785, 719 P.2d 531 (1986). Strother urges us to find that Capitol’s acts, or in this case failure to act, constitute a per se violation of the Consumer Protection Act based on RCW 48.30.010. We disagree. That statute recognizes that certain unfair or deceptive acts or practices will be expressly prohibited by the insurance code and that in addition, the

Page 242

Insurance Commissioner may define other acts and practices to be unfair or deceptive.[43] Neither the Legislature nor the Insurance Commissioner has chosen to designate the acts with which we are here concerned as constituting unfair or deceptive conduct per se.[44] Hangman specifically requires that a designation as a per se violation be done by legislative authority and not by the judiciary.[45] Accordingly, a violation of WAC 284-23-440 or former WAC 284-23-450 is not a per se unfair or deceptive act or practice.

An unfair or deceptive act or practice may also be established by a showing that the act or practice has the capacity to deceive a substantial portion of the public.[46] Once the facts have been found by the trier of the fact, whether a particular act or practice is unfair or deceptive is a question of law.[47]

In the case at bar, it was established at trial that Capitol and Mason failed to issue the required replacement notices despite knowledge that replacement was involved and thus failed to comply with the regulations. The impetus behind the requirement for replacement notices is to guarantee that the insured is aware of the benefits she may be forfeiting by changing policies.[48] The regulations attempt to achieve this in two ways. One way is by giving the existing insurer, through

Page 243

notification, an opportunity to present the insured with reasons not to replace the existing policy. The other way is notice issued to the insured from the agent of the replacing insurer which is designed to inform the insured of possible disadvantages resulting from replacement.

Knowingly failing to issue the required notices has the effect of depriving the insured of information which is necessary to make an educated decision as to replacing an existing policy. As such, it has the tendency to deceive a substantial portion of the public.[49] Indeed, the very existence of the regulations indicates a determination by the Insurance Commissioner that failure to provide this information tends to deceive the consumer and results in imprudent replacements.

The second element which must be established is that the act or practice occurred in the conduct of trade or commerce.[50]
There is no question that the act occurred in the conduct of trade or commerce. Thus, Strother has established the first two elements, an unfair trade practice.

The third element of a Consumer Protection Act claim is a showing of public interest.[51] This element may be established per se with a showing of “a specific legislative declaration of public interest impact.” Hangman, at 791. RCW 48.01.030 is such a specific declaration of public interest.[52] RCW 48.01.030 is a broad pronouncement that unfair practices in the business of insurance meet the public interest requirement.[53] The adoption of specific regulations for replacement and the

Page 244

existence of RCW 48.30.180,[54] prohibiting “twisting”, also demonstrate a public interest. Thus, Strother’s establishment of a violation of the insurance regulations satisfies her burden of proof as to this third element.

The fourth element of a Consumer Protection Act claim is a showing that the plaintiff has suffered an injury.[55] There is no dispute in the case at bar that Strother suffered injury when her claim on her husband’s life insurance policy was denied. Thus, this element has been established.

[17] The fifth element is that a plaintiff must make a showing that there is a causal link between the unfair trade practice and the injury;[56] in other words, that the unfair trade practice was the proximate cause of the injury. No such finding has been made in the case at bar. The trial court did not submit this factual issue to the jury nor did it purport to resolve it as a factual issue in its own limited findings.[57]
Rather, in conclusions of law 3 and 4, which may be treated as findings of fact,[58] the court determined that Strother did not establish the causation element.

Page 245

[18, 19] Having failed to take a cross appeal from the trial court’s dismissal of the Consumer Protection Act claim, Strother is precluded from contesting these findings of fact although she purports to assign error to them. Moreover, Strother has failed to show that the findings are so contrary to the evidence that this court should reverse them. Having failed to seek a factual determination from the jury as to the causal connection between the unfair trade practice and Strother’s injury, Strother may not rely on the consumer protection claim to affirm the judgment below, nor may she reassert it upon remand.[59]

REMAND [20] It is well settled that in cases where both liability and damages are at issue, error in the determination of one element may not require a retrial on both issues.[60] This is true of special verdicts as well as general verdicts.[61] In this case the jury found that Mason knew or should have known he was selling a replacement policy. Considerations of judicial economy strongly suggest that there is no necessity to retry this issue. Nor do we perceive any unfairness to Capitol in accepting the jury finding as the law of the case. As a matter of law, this finding constitutes a breach of Capitol’s

Page 246

duty under the applicable regulations. The only issues that need to be tried on remand are the issues of proximate cause and any as yet undetermined issues that bear on Strother’s right to recover under a negligence theory. Reversed and remanded for further proceedings consistent with this opinion.

GROSSE, C.J., and PEKELIS, J., concur.

Review granted at 121 Wn.2d 1008 (1993).