On June 23, 2023, the United States District Court for the Western District of Washington (“the Court”) issued its opinion in the matter of First American Title Insurance Company v. Northwest Title Company, LLC, No. 2:21-cv-01057-JHC, 2023 U.S. Dist. LEXIS 108947 (W.D. Wash. June 23, 2023), deciding issues of first impression concerning the general application of fiduciary duties in Washington State, the accrual of breach of fiduciary duty claims, and the interplay of these claims and Washington’s three-year statute of limitations.

Background

Between 2009 and 2016, Plaintiff First American Title Insurance Company (“First American”) and Defendant Northwest Title Company LLC (“Northwest Title”) entered into various agency agreements under which Northwest Title was to act as First American’s agent in multiple states, in which capacity it would issue policies and collect premiums on First American’s behalf.  At all times, Northwest Title used computer software to track the premiums it owed to First American; however, sometime in 2012, it transitioned to new software which inadvertently created a backlog of premiums collected but never remitted.

In 2019, First American audited Northwest Title, as permitted by the parties’ agency agreements.  While Northwest Title initially complied with First American’s audit and generated spreadsheets of all outstanding premiums owed from 2010 to 2019, it later refused to comply with follow-up requests for additional records, and in April 2020, the parties agreed to terminate their agency relationship via the execution of mutual termination agreements.  Subsequently, Northwest Title ceased complying with the audit entirely, informing First American that it “no longer planned to audit and remit unpaid premiums on policies more than six years old.”

In August 2021, First American filed suit for, among other causes of action, breach of fiduciary duty and conversion, seeking to recover all unpaid premiums owed by Northwest Title.  Following discovery First American later moved for summary judgment, seeking a “ruling that [Northwest Title] breached its fiduciary duty by refusing to remit all unpaid premiums,” while Northwest Title contended in defense that First American’s claim ran afoul of Washington’s statute of limitations.

Summary Judgment Ruling and Adoption of Fiduciary Duty Standard

In ruling on the motion, the Court began by confirming that the agency agreements did impose a fiduciary duty upon Northwest Title, as they required it to “safely maintain and preserve all property” including premiums “ entrusted to [it].”  However, the Court next observed that Washington’s statutory scheme imposed a three-year statute of limitations on all breach of fiduciary duty claims.  In reliance on this statute, Northwest Title contended that “individual claims for breach of fiduciary duty would have accrued after each failure to remit” and that all of First American’s claims “arising out of premiums more than three years old [should] be barred.”  Conversely, First American argued that Northwest Title’s fiduciary duty was ongoing, continuous, and persistent, and accordingly, that breach of this duty did not occur until Northwest Title informed First American it would not remit unpaid premiums on policies older than six years, thereby repudiating its duty.  Under First American’s interpretation all of its claims were viable and none would be barred by Washington’s statute of limitations.

The Court ultimately agreed with First American’s proposed interpretation, observing that this was an issue of first impression as Washington courts had never “addressed whether a fiduciary has an ongoing duty in this context.”  In adopting the ongoing duty interpretation, the Court opined that it was “persuaded by the logic of various other state and federal district courts” – including Massachusetts, Texas, Delaware, California, and others – which had each interpreted and applied their respective fiduciary duties in the same manner.  Thus, holding in lockstep with these outside courts, the Court held that Washington fiduciaries owe a continuous and ongoing duty and – importantly – that claims for breach of this duty do not accrue until the party to whom the duty is owed learns that a repudiation of the duty has occurred.

In accordance with this newly adopted standard, the Court held that because Northwest Title owed an ongoing fiduciary duty, First American’s claims did not accrue until it became aware that Northwest Title intended to repudiate its duty, which occurred upon Northwest Title advising First American that it would no longer pay backlogged premiums older than six years.  As to actual breach of this duty, the Court concluded that the elements of breach were met, as there was “no dispute” that Northwest Title had “stopped cooperating [with] the audit and failed to remit older unpaid premiums,” thereby breaching its fiduciary duty to remit premiums and injuring First American in the amount left unpaid.

Takeaways

This matter determined an issue of first impression and made clear that, going forward, Washington will treat fiduciary duties as a continuous ongoing duty.  Perhaps most importantly, this opinion also demonstrates that breaches of this duty will not occur on a piecemeal basis generating multiple individual claims, but will instead be treated as a single claim accruing only upon the plaintiff gaining knowledge that an express repudiation has occurred, thereby allowing for an expanded scope of potential recovery.