REI appeals Monika's case

Steve....REI is the petitioner. Period. Are you suggesting that REI was  required to file by their insurance policy carrier? ...to basically sign their name against their will? If REI failed to put its name on the dotted line, what would happen?

Certainly the board has obligations.  Members or bottom line (which becomes one and the same in thiis weird coop scenario).  But REI may end up in a pickle here.  How much does it lose if it blows off this insurer vs. how much business does it lose because if fails public trust.  No decisions other than bottom line, damn the members or public involved.

Do we really know the contractual terms that this insurer operates with REI?  Does REI have no freedom to act morally here?

If as you suggest, we should be lighting the fire under the carrier, then could you propose a way by which that is done?  Name the company and suggests ways that could be effective?

Is it impossible that a fairly potent corporation like REI not write into its contracts means by which it can avoid such a pickle.

Either way, the bucks go to REI and the buck has to stop at the top, just like the responsibility they should be held to for mistakes made by contractors.

If they made bad choices as to the insurance carriers they do business with, then so be it, they need to live by it.  Otherwise the suggestion is that there is no competition in the insurance business and we are all screwed.

Not much legal training other than bus law courses, but I think Big Steve is right:
REI probably has such a contract with the insurance co that any move to apologize / pay would be a breach.

Having said this, I still have the (maybe naive) idea that in some cases contracts can be breached to do the right thing.
Ivo

Steve....REI is the petitioner. Period. Are you suggesting that REI was  required to file by their insurance policy carrier? ...to basically sign their name against their will? If REI failed to put its name on the dotted line, what would happen?

Yes, almost all liability policies allocate to the insurance company the right and capacity to defend the lawsuit in REI's name.  Not sure what you mean by "sign the name" or "name on the dotted line," but if REI frustrated or interfered with the carrier's defense, it would likely forfeit coverage and that would put REI's board in the line of fire from the membership.  It's a Catch 22. 

If as you suggest, we should be lighting the fire under the carrier.  .  .  .

No, I’m not suggesting that.  I tried to make people aware that the insurance carrier, not REI, is the entity which has failed to compensate Monika or her estate, and that the law upon which the carrier relies was the product of intensive lobbying by the insurance companies (which was enabled by the industry's multi-million dollar blame the victim propaganda campaign).  If people are angry and want to do something to help future victims like Monika, they should direct their efforts to the legislators who time and again pass laws which favor the insurance industry and screw victims, stop buying into the industry’s propaganda and resist continued efforts to influence laws which will create more victims like Monika.  Blaming REI and ignoring the powerful insurance industry merely plays into the latter’s hands.

Steve....REI is the petitioner. Period. Are you suggesting that REI was  required to file by their insurance policy carrier? ...to basically sign their name against their will? If REI failed to put its name on the dotted line, what would happen?

IDK specifically about Monika's unfortunate case -- but I will say that in a personal injury case -- my wife was hit by a snowboarder -- that our medical insurance company persued the snowboarder to recover costs. They did this without asking us.

Fortunately for us, our medical insurance covered the bills for the ER visit and other care upfront. Other than providing a copy of the accident report we filed with the ski patrol we haven't been directly involved.

It sounds like Monika unfortunately didn't have medical and disablity insurance at the time of the accident ? If she had it it seems like it would be her insurance carriers that should be seeking a settlement from REI and the manufacturer instead of burdening her (and her estate) with this action.

So who is REI's insurance carrier?

Randy, you are talking about a victim's medical insurance carrier subrogating to the position of the victim.  I don't know what sort of coverage Monika had, and it's none of my business.  If she had med coverage, the carrier likely did subrogate because she had some severe, expensive to treat, physical injuries.  But, as Ryan's messages seem to indicate, she suffered damages which medical insurance would not cover, e.g., deductible, lost wages, loss associated with residual brain injury.  Also, many med policies do not cover dental work.

It's a Catch 22.   No, I’m not suggesting that.  I tried to make people aware that the insurance carrier, not REI, is the entity which has failed to compensate Monika or her estate, and that the law upon which the carrier relies was the product of intensive lobbying by the insurance companies (which was enabled by the industry's multi-million dollar blame the victim propaganda campaign).  If people are angry and want to do something to help future victims like Monika, they should direct their efforts to the legislators who time and again pass laws which favor the insurance industry and screw victims, stop buying into the industry’s propaganda and resist continued efforts to influence laws which will create more victims like Monika.  Blaming REI and ignoring the powerful insurance industry merely plays into the latter’s hands.

Seems like a catch 22.  Maybe it is time for industry to stand up along with the public to fight insurance.  I can only venture a guess as to where industry would side on this issue.  Maybe a little "civil disobedience" on REI's part might be in order here.  Sure it might piss the insurer off.  Sure it might require that REI go get insurance somewhere else, or self-insure such as some medical doctors do in pools (and if they can afford to do so certainly a company like REI could).  But regarding their backs being pinned to the wall and their having to answer to their members and board, I say that the public reason they can give is that it is bad business (and could dramatically hurt their business, $$$) if this become a public relations disaster.

Maybe if companies stand up to insurance, insurance might change.  Why is it always left to individuals to take on the big dollar responsibilities?  It is far easier for the public here in this case to put pressure on the retailer (and it is ultimately their responsibility) than it is to write letters to their state or fed. legislature. Edited to add: I think that we should also write the legislature as well.

I don't disagree with any of the technical legal stuff you state.  It is perfectly logical within the bounds of our current society.  I completely disagree with you if you are suggesting that REI take none of the heat in this situation.  At the very least let us make REI stand up in public (not their insurance representative) and explain where they stand on the issue and what their goals are.

Alan

At the very least let us make REI stand up in public (not their insurance representative) and explain where they stand on the issue and what their goals are.

As I state above, doing so before the litigation is resolved would likely be a breach of the insurance policy and may result in a forfeiture of coverage.

Some here seem to assume that REI has more bargaining power than it actually has when purchasing products liability insurance.  IME, product liability policies are offered on a take it or leave it basis.  In case you haven't noticed, the insurance companies, banks, defense contractors and a few other country clubbers control this world.  I once heard Yvon Chouinard speak about his frustration with the product liability system.  A couple decades ago, a series of products liability suits forced Chouinard Equipment into a Chapter 11 bankruptcy.  The technical equipment assets got sold out of BK to some CE employees (who formed Black Diamond).  Yvon took the soft goods into Patagonia.  He said that he missed dealing with the hard goods -- he was, of course, the inventor of many modern climbing devices -- but that he had grown weary of the product liablity issues and thus stayed away from BD's operation.  He specifically mentioned his frustration with the litigation control exerted by the insurance carriers.  (IIRC, he was dismayed by one insurance payout to a victim who had misused a product and, in his opinion, was not entitled to compensation.)

I don’t want to start a political argument here but, to fully understand the grip that the insurance industry has on American manufacturers, retailers and other industries, one might compare our system to Western Europe.  Western Europe does not have a tort system like ours (although one seems to be emerging in some nations).  Instead, people like Monika are compensated via socialized programs.  The government regulates designs and quality, and imposes fines, often very stiff fines, on manufacturers of dangerously defective products, and can even shut down the worst offenders.  The proceeds of the fines go into the govt general funds, thus helping to set off expenditures for compensation victims like Monika, whose medical expenses, lost wages and disability are covered by socialized systems.  This system cuts out the insurance middleman and the trial attorney middleman.  Americans seem to prefer the so-called tort (jury lottery) system even though a great deal of wealth gets skimmed off by the insurance companies and trial attorneys.  I am not suggesting here which system is better.  I bring up the issue only to help people take a big step backwards and see a bigger picture of how other parts of the developed world compensate victims of dangerously defective products.

is there any chance the state supreme court would refuse to review the case and thus let the prior ruling stand as the final judgement?

Randy, you are talking about a victim's medical insurance carrier subrogating to the position of the victim. I don't know what sort of coverage Monika had, and it's none of my business. If she had med coverage, the carrier likely did subrogate because she had some severe, expensive to treat, physical injuries. But, as Ryan's messages seem to indicate, she suffered damages which medical insurance would not cover, e.g., deductible, lost wages, loss associated with residual brain injury. Also, many med policies do not cover dental work.

Steve I think you make some good points -- doesn't it seem like if her medical insurance company persued cost recovery for the expenses covered by their policy that liability for expenses not covered would be (at least to some degree) established? It seems like the unpleasant thing here isn't that REI is offering a settlement that is unjustly small -- but that they are contending they bear no responsiblity for the injuries incurred.

is there any chance the state supreme court would refuse to review the case and thus let the prior ruling stand as the final judgement?

Yes and no. Yes, the WA Supremes could deny cert. No to the second question becuase there is no final judgment. The case would be remanded to the trial court and proceed. That's how I interpret the procedural status of the case.

ah, okay.  thanks Steve.... i was hoping there could actually be an end in sight for this if the supreme court refuses to review...guess not.

Pete, if the WA SC denies cert, there would be a high likelihood of a settlement. To my eyes, there are no federal issues in play so, if cert is not granted, the appeal process should end with Division I's opinion. When determining whether or not to grant cert the ostensible conflict between the two statutory schemes will be given weight and tend to militate in favor of granting cert. OTOH, a minority of cert applications are actually granted.

Email sent. Yet another reason to support Pro Mountain Sports, Marmot and Feathered Friends whenever possible.

this is totally unacceptable .. we have been members since the early 70's and i have sent the ceo letters .. not email cause i think they may be more potent.. b4 about the direction they're taking .. only to be brushed off .. i support you fully .. thx for posting this ryan

I disagree w/your conclusions Big Steve.  I think the business judgment rule would protect the Board if they decided to do the right thing (by forcing the insurer to settle or paying the claim directly).  The facts of this case, coupled with the determination of the appellate court should provide a sufficient basis for them to defend a decision to settle or pay the claim and separately seek redress from their insurer. Disagreements between insurers and insureds regarding what is necessary to satisfy indemnification and hold harmless obligations (including cutting potential losses when branding, reputation and/or goodwill will be harmed permanently) happen all the time.  It is within the Board's purview to elect that course of action, without breaching their duty to REI's members.  And, I stand by my earlier assertion: If this had happened to REI's CEO or one of her family members, there would have been no appeal.    

I have no reason to believe that an indemnification provision is in play here.  Perhaps you have some information that is not apparent from reading Division I's opinion.  The enforceability of provisions which allocate control over settlement and litigation decisions to the insurance carrier has been well established by the courts. 

I will disagree with your position that the business judgment rule would immunize the board if it were to forfeit insurance coverage through an advertant breach of the insurance policy and that fofeiture of coverage resulted in a huge award against REI that would have otherwise been covered by insurance.  If you have authority that the BJR has been applied in such a way, please advise and I will eat crow.

But, again, this misses the point.   If writing letters to REI and/or refusing to patronize REI makes people feel better, then have at it.  REI marketed a dangerously defective fork and there is nothing wrong with being outraged by that and refusing to do biz with such a company.  But confining one's action to REI merely preserves the status quo and paves the path for more injustice to victims like Monika in the future.  The insurance carrier, not REI, decided not to compensate Monika and to instead appeal.  And the carrier relies on a statute which is the product of the insurance lobby and which has resulted in great injustices to many other victims and will do so in the future.  If people are going get get angry, direct the anger where it belongs, i.e., the insurance industry lobby and the legislators in its hip pocket.   

Steve, you speak as though a breach of insurance policy and forfeiture of coverage is a natural and definitive place to end discussion about REI's responsibility in this.  As though either or both of those alternatives represent a line which REI is unable to cross. I disagree. Breaching an insurance policy and forfeiting coverage would be no more difficult to navigate and no more of an inconvenience to REI than any of the challenges Monika had to overcome in the past 4 years.  Apples to oranges, perhaps. But rotten apples and rotten oranges are both rotten.

What's more, as Monika's attorney has pointed out, REI could have avoided having to make such a difficult decision had it worked out the most basic type of contract with its supplier ( Fairly Bike Manufacturing Company was contracted by REI to make Monika's bike) such that REI would have recourse in the event of an accident due to a defective component manufactured by an entity other than the supplier (Aprebic, contracted by Fairly, made the fork).  REI failed to do this, and now it "has its hands tied". The insurance carrier is insisting that REI appeal because REI failed to protect itself.

I don't doubt anything you've said, Steve, and I certainly don't think you've been disrespectful or insensitive in any way.  I also appreciate your enlightening me about the state of affairs in the insurance industry. I just can't get over the irony, for lack of a better word, that REI-- the company that preaches 100% satisfaction guaranteed-- left Monika high and dry. As her attorney wrote to me an email,

"REI is all about branding to its members, creating that strong sense of value, community and reliability in their products.  But when push comes to shove, when a member is seriously hurt through no fault of her own, this is their response.  Shameful"

I may be naive, and I may not understand the case completely. But I believe that REI is responsible on some level for the bike it sold Monika and that it has failed on every level to accept any of that responsibility. Even a letter saying what you said, Steve, would have eased Monika's mind. She actually felt guilty at times for seeking compensation.

So like I began....
Fuck REI

Steve, you speak as though a breach of insurance policy and forfeiture of coverage is a natural and definitive place to end discussion about REI's responsibility in this.

Ryan, I don't think that's a fair characterization of what I said.  For example, among other things, in my prior post I said:

REI marketed a dangerously defective fork and there is nothing wrong with being outraged by that and refusing to do biz with such a company.

I am dismayed to hear that REI failed to have meaningful recourse against its supplier.  (BTW, I dealt with Bob Christie years ago.  He's a very fine attorney.)  I have not suggested that REI be given a pass.  If you got that impression, please read my messages again.  But I will stand on my position that the decision to not compensate Monika and instead appeal was made by the insurance carrier, and that confining the anger to REI will not do much good to prevent future injustices to people in Monika's circumstance.  She was the victim of a system rigged in favor of the insurance carriers.  The system needs fixing.

But I will stand on my position that the decision to not compensate Monika and instead appeal was made by the insurance carrier, and that confining the anger to REI will not do much good to prevent future injustices to people in Monika's circumstance.  She was the victim of a system rigged in favor of the insurance carriers.  The system needs fixing.

Don't hate the player, hate the game.

While I agree the system needs fixing, it's easier to target outrage towards an entity than an industry.

I'm not a litigator, but I have purchased commercial insurance on behalf of US corporations, and I continue to stand behind everything I said.  REI's purchasing power does significantly influence the decisions made by its insurers, irrespective of what the policy says.  Are you suggesting that an insurer does not have to take the insured's best interests (apart from just payment amounts) into account when fulfilling their defense (and potentially indemnification) obligations?  Also, do you believe the insurer acted against REI's wishes at any point in this case?  My guess is that REI has been complicit throughout.  And, a "huge judgement" to you and me is hardly even worth mentioning on REI's annual report.  As such, the BJR should be sufficient to insulate the Board's decision to settle or pay in the manner I described above.

Finally, do you disagree that the result would have been different if the injury had happened to REI's CEO or a member of her family?  IME, the rules you are touting only apply to people like Monika, but not "VIPs".  How can that possibly be the case if a corporation's hands are tied by the insurance industry, as you are suggesting?  

IMO, the focus can and should stay squarely on REI.  If there is enough public outcry, the case will be swiftly resolved.

Did REI have the bike and/or the fork designed to meet its cost requirements?

Did REI have the bike and/or the fork designed to meet its cost requirements?

Interesting question.  I would assume that cost was a factor.  Legally, in WA, it's not very relevant because the WPLA imposes strict liability on REI a private labeler.  Strict liability means that once Monika (and now her estate) establishes that the fork was dangerously defective and the defect caused injury to her, she is not required to prove fault to establish liability.  OTOH, in states with punitive damages, the manufacturer's use of cost as a factor might be relevant, e.g., the Ford Pinto memo.

G2G, I'll keep my response to your most recent comments brief and then withdrawal from this thread.  I'm not an expert on insurance bad faith law, but I have dealt with the subject numerous times in the past 20+ years.  I am pretty certain that the duty of an insurance carrier does not extend anywhere near the extent you suggest.

I'm out of this thread.  I have done what I can to raise awareness of a rigged system and hope some of someone here might do something (e.g., vote against the next anti-victim/pro-carrier initiative) to help future victims of that rigged system.  (Mofro, note that I condemned the entire system, i.e., the insurance industry, its lobbyists, its PR blame the victim propagandists and the legislators.)

I wish Monika's estate, Monika's loved ones and Mr. Christie's firm all the best.  I am hopeful that justice will be served and that the WA Supremes will either deny cert or affirm Division I.

Big Steve,

I think you have done a fine job of illustrating some of the major issues regarding the way insurance operates, why they do what they do and how we have all played a part in it.

You suggest attacking all facets of the problem, and in that I agree.

However the problem is that society as a whole, and us as individuals have little power against powerful lobbies.

Insurance companies respond to $$$. If insurance companies lost money because of the way they operate then they might change. But I have no doubt that they have rigged and will continue to rig the markets in their favor.

However, REI is a purchaser of insurance. It too should fight the good fight. If it insurance companies are placing it between a rock and a hard place then it should seek a solution.

If REI sought to offer the highest quality under its own brand (those items which place it in line for such liability claims) then its liabilities should be relatively low. Maybe it should seek to be self-insured for those instances so that it has control as to how it will satisfy customer/member product issues. I am assuming that a company the size of REI could handle a typical yearly rate of claims. This creates three positives for a company like REI. 1) it probably saves them tons of money. 2) it puts pressure on them to offer only the highest quality in their products and demands it from their suppliers to their own brand. 3) they settle claims fairly and under the spirit of a "cooperative". That is good for business. They should pay to be insured for only that which is catastrophic, such as buildings, and maybe class action law suits, etc. What I propose is akin to raising their deductible (for us little guys), that way in small individual cases such as this their insurance company never hears about it.

If REI could give this insurer the boot, i.e. the insurer loses business, do you think that is one way to fight the problem? Conversely, does insurance allow businesses to operate poorly? Do they feed off of one another. If an insurance company knows that it will never suffer a payout because it has the best lawyers, it can then be highly competitive in offering insurance to lousy companies who operate callously.

What I propose in self insurance is not pie in the sky. I know that some clinics (essentially doctor cooperatives, etc.) that have given the boot to insurance and now self insure. Typically doctors as individuals cannot sustain the risk so must go to insurers who offer the advantage of the pool. But clearly it does not take that many members to form a pool which can be self sustaining. So if doctors can do this, which have to be among the most sued businesses an highest level of risk per income than any group, why can't a company like REI, which probably easily exceeds revenues and profits of any clinic do this?

What we as customers of REI can do is all that you propose, BUT not just accept that REI has no culpability and throw our hands up. A war is won with many small fights and battles and REI must be put on the hot seat, so that if they are also suffering an injustice at the hands of insurance, then they also fight the good fight. We as customers can more easily pressure REI than we can the other groups and we can do it very fast. You propose one long drawn out fight, but here we may be able to win this one small battle that will also potentially move the broader battle into their field of play.

REI's entire response to an email:
[Someone on CC reposts getting the exact same text, apparently it is their form reply]

<quote>
Thank you for your email. Monika Johnson was highly regarded in the outdoor community, a member of the REI community, and a dear friend of many REI employees. Please know that we have expressed our condolences to Monika's family and extend them to you, as well.

The issues addressed in any lawsuit are often complex and sometimes, as is the case here, have broad impacts beyond just the parties. REI's appeal is not about the amount of money Monika's estate should receive through either a trial or a settlement. Instead, it is about the degree to which responsibility should be shared between a private label seller, like REI, and the manufacturer who designed and made the bike component.

The right to have a court or jury consider this question is important to all companies, big or small, that sell products under private labels. REI would have preferred to resolve Ms. Johnson’s case early on, but circumstances beyond our control made this impossible. 

As we have since REI was founded in 1938, we stand behind our products, and we are committed to acting in accordance with the co-op’s values. We have kept those values front and center throughout the defense of this case, and we will continue to do so through final resolution.

Sincerely,

Libby Catalinich
Director, REI Corporate Communications

<end quote>

REI's entire response to an email:
[Someone on CC reposts getting the exact same text, apparently it is their form reply]

Same as I got. Forwarded it to the Seattle PI and Times.

Pretty much as expected from what Big Steve had to say.

"The right to have a court or jury consider this question is important to all companies, big or small, that sell products under private labels. REI would have preferred to resolve Ms. Johnson’s case early on, but circumstances beyond our control made this impossible."

Would seem to be a conflicting statement except for the explanations that we have had. In this case it would appear the company most intent on exercising this right is the insurance company.

When a product fails under warranty almost all companies will rectify the situation immediately without protest. Many companies will also do so if a product is out of warranty but clearly defective. But if such a product somehow causes damage, then the admission seems to go away.... Clearly money is everything here.

As simplistic & naîve as it sounds:

REI's product liability representation exists at the behest of REI, not the other way around. They can choose to do the right thing at any point, just as a patient in a medical situation can decide to go against medical advice.

This is an REI/Novara brand equipment malfunction, not a Trek or Cannondale merely purchased through REI.

If REI is to reap the rewards of selling their own house branded Novara products, they must also own up to the liability of such products.

The onus of due diligence should be on REI in making sure (sub)contracting manufacturer(s) is competent.

As independent citizens, we have only two legal means of recourse. For the lawmakers, write them about you displeasure and always vote for the incumbent ( I do) until such time as you are satisfied that they are representing you and not their capitalist pimps. Probably when hell freezes over but so be it. Nothing wrong at all with capitalism but as it is by nature amoral, it needs to be overseen.

For the profit makers, do not buy from them. A publicized boycott at least gets a public response. Given their inability to monitor the quality of their suppliers, I would not purchase any REI branded product that I had to trust my safety with. I've been a sales rep for Asian manufacturers selling to US sporting good companies and I know how it works and the pit falls.

You CAN make a difference.