Washington Supreme Court Re-Affirms Mike M. Johnson Rules Regarding Waiver of Contractual Claims Provisions

Am. Safety Cas. Ins. Co. v. Olympia, 162 Wash.2d 762, 174 P.3d 54 (2007)

The Washington Supreme Court affirmed summary judgment for the City of Olympia against American Safety Casualty Insurance Company where the contractor (whose rights the surety was pursuing) failed to comply with contractual notice procedures.  During construction, the contractor had written letters purporting to reserve its right to bring a claim at a later date.  The contractor defaulted, and the surety completed the job.  After completion, the surety presented Olympia with a Request for Equitable Adjustment.  Though Olympia expressed a willingness to enter into negotiations if the surety provided sufficient supporting documentation, Olympia ultimately rejected the surety’s claim for failing to comply with the contract’s claims provisions.  When the surety filed suit, the Thurston County Superior Court granted Olympia summary judgment, which was then overturned by Division Two.

The Supreme Court reversed Division Two and affirmed the trial court, largely on the basis of its prior decision in Mike M. Johnson, Inc. v. Spokane County, 150 Wn.2d 375, 78 P.3d 1068 (2002).  The surety asserted an issue of fact existed with regard to whether Olympia waived its right to rely on contract claims provisions by expressing a willingness to negotiate.  In its unanimous decision, the Supreme Court disagreed and stressed that waiver by conduct required unequivocal acts of conduct evidencing an intent to waive.  Pointing to letters from Olympia stating that it was reserving its right to rely on the contract, the court noted that Olympia’s conduct was at least equivocal, and equivocal conduct could never be unequivocal.  Finally, the court noted that this decision was in accord with the important public policy favoring negotiated settlements.

K&L Gates attorneys Athan Tramountanas, Tom Wolfendale, and Paul Lawrence represented the City of Olympia in this case.