Gallahan v. Philadelphia Indem. Ins. Co., C17-131RSM, 2017 WL 6310568, (W.D. Wash. Dec. 11, 2017), reconsideration denied, No. 17-131RSM, 2018 WL 259627 (W.D. Wash. Jan. 2, 2018) involves a claim for underinsured motorist coverage under a Washington State auto insurance policy. Under the policy, a suit must be commenced within 1 year after a cause of action accrues. The court holds that a cause of action accrues when the insurer (1) denies coverage, (2) refuses to pay a valid claim, or (3) pays less than the insured believes is due. The insurer argued that the parties participated in mediation that did not result in a settlement. At the conclusion of the mediation conference the cause of action for breach of the insurance policy accrued. The insured’s failure to sue the insurer within 1 year following the conclusion of the mediation barred the claim. The insured argued that nothing pertaining to the mediation was admissible, and that the insurer never notified the insured that its claims was denied. Therefore, the cause of action had not yet accrued and the claim was not time barred.

The court held that the facts that a mediation took place and did not result in settlement were not confidential. The court could infer from these facts that the insurer had either denied coverage or refused to pay the amount demanded or any amount at all. Therefore, the cause of action accrued at the conclusion of the unsuccessful mediation.

Analysis: This result is somewhat troubling because experienced mediators and litigators know that just because a case does not settle after the first mediation session does not mean that a valid demand was refused. Often one party’s position is “not yet” instead of “not ever.” One can draw no conclusions about the parties’ reasons for failing to settle without invading the realm of mediation confidentiality. On the other hand, in this case, the insured could easily have argued that the cause of action accrued as soon as the insured gave notice of a demand for coverage. Long before they engaged in mediation. Same result, but better reasoning.


This case analysis was prepared by Christopher L. Blank, Esq., 4675 MacArthur Court, Suite 550, Newport Beach, CA 92660; (949) 250-4600; Cases, statutes or rules summarized or cited herein should not be relied upon without fully reading the case, statute or rule, and checking subsequent case history, etc.