Though it may seem counterintuitive, the Supreme Court recently decided that the undefined term “pedestrian” in an insurance policy included a bicyclist. How on earth is that possible, you ask? Welcome to the wonderful world of insurance law where not everything is as it seems.
First, a little background. The plaintiff, Todd McLaughlin, was injured when the door of a parked car opened right in front of him while he was riding his bicycle. The bicyclist fell and incurred tens of thousands of dollars in medical bills.
The plaintiff had a California auto insurance policy because he had recently moved to Seattle from there. That policy included medical payments coverage for, among others, anyone injured as a "pedestrian." He sought payment for his medical bills under MedPay and was denied.
The insurer argued that the bicyclist was not a pedestrian, pointing to both CA and WA statutes that defined pedestrian as excluding bicylists. So off to court they go. McLaughlin sues and loses at the trial court and Court of Appeals. Both lower courts agreed with the insurer. For different reasons they each held the definition of pedestrian excluded a bicyclist.
The first issue confronted by the Supreme Court was basically, what do we do with a California policy when a Washington resident is injured in Washington? Whose law applies?
The majority neatly sidesteps this issue by pointing to certain concessions made by the insurer during litigation. The insurer essentially agreed that Washington law applied and conceded there was no conflict in the laws of the two states. So no conflict of law analysis is required and court is left to interpret the policy under Washington law. That's key.
Washington doesn't have MedPay. We have what's called Personal Injury Protection (PIP) coverage, which is essentially the same thing. So the court looks to the state insurance code applying to PIP for the answer to the question of whether a bicyclist is a pedestrian.
The definition of "pedestrian" for purposes of PIP insurance is "a natural person not occupying a motor vehicle" as defined by a different statute. A "motor vehicle" is in turn defined as a "vehicle that is self-propelled." A bicycle is not self-propelled. Therefore, a bicyclist qualifies as a pedestrian.
The insurer had argued a different definition of "pedestrian" should apply that expressly excludes bicyclists from the definition of pedestrian. However, the court noted that definition was from a different set of statutes dealing with motor vehicles and roads, not the insurance code.
The court held the definition it relied upon was the most relevant because it came in the section applicable to auto insurance coverages. And in Washington, regulatory statutes are read into insurance policies. So a valid statute becomes part of an insurance policy.
The court also reasoned that the decision to apply the definition of pedestrian that included bicyclists comported with the state's "strong public policy in favor of full compensation of medical benefits for victims of road accidents." This is ultimately what makes insurance law different—the public policies almost always favor finding coverage.
As the court has said for decades, insurance policies are different. They are unlike traditional contracts and should be interpreted to afford consumers the maximum protection possible consistent with fairness to the insurer (though I’m guessing the insurer here would argue this result isn’t fair).
The court goes on to say, at the very least the undefined term "pedestrian" is ambiguous and therefore is interpreted against the drafter and in the way that most favors the policyholder.
Finally, the court awarded attorney fees to the plaintiff for prevailing. Washington normally follows the American rule for atty fees (each side pays there own). However, there are exceptions, one of which applies here. That exception is an equitable doctrine we call the Olympic Steamship doctrine (after the name of the case establishing it) that holds fees are mandatory if an insured has to pursue litigation to establish he is entitled to the full benefit of the policy.
The majority opinion had 5 votes. Justice Gonzalez concurred with the outcome, but wrote separately to say he would've found the term "pedestrian" ambiguous but not applied the Washington auto insurance statutes to a California policy.
A pause before I briefly touch on the dissent. This was a dispute over $5,000 in coverage. Because the insurer lost, it will now owe that money, plus attorney fees that are likely to be six figures. That's not a great outcome for the defendant here.
Justice Gordon McCloud wrote the dissent, which had 2 other votes. She also found it significant that this was a California policy and would not apply the statutory definitions. So she would've applied "regular" rules of contract interpretation. Under those rules , the goal is to ascertain the parties' intent. Looking to the plain and ordinary meaning of "pedestrian," she would find that does not include bicyclist.
She pointed to the dictionary definition of pedestrian, which includes things like "a person who travels on foot" or "one walking as distinguished from one travelling by car or cycle." The plain, ordinary meaning should prevail over the technical meaning because there is no evidence the parties intended Washington's technical definition to apply. Therefore, pedestrians would not include bicyclists.
The elephant in the room is, as I referenced at the top, what happens when someone from out of state moves to Washington, with an out of state policy? What happens if an out of state policy contains a more narrow definition of pedestrian that doesn't include a bicyclist? Since the defendant admitted the two states’ laws were the same, we don’t know. We’ll have to await a future decision on those issues. But for now, a bicyclist is a pedestrian for purposes of PIP insurance in Washington.