Insurance Bad Faith Law in Washington

StateNovember 1, 2013

Washington’s Insurance Fair Conduct Act:

What’s It Really For?A Discussion of Purpose, Intent, and Strategy

Greg HarperHarper Hayes PLLC

The Speakers

Karen WeaverSoha & Lang P.S.

IFCAA Quick Review

IFCA – RCW 48.30.015(1)Action Created

Any first party claimant to a policy of insurance who is unreasonably denied a claim

◦for coverage ◦or payment of benefits by an insurer

may bring an action in the superior court . . . to recover the actual damages sustained, together with the costs of the action, including

reasonable attorneys' fees and litigation costs, as set forth in subsection (3) of this section.

IFCA – 48.30.015(2)Treble DamagesThe superior court may, after finding that an insurer has

◦ acted unreasonably in denying a claim for coverage or payment of benefits

◦ or has violated a rule in subsection (5) of this section,

increase the total award of damages to an amount not to exceed three times

the actual damages.

IFCA – RCW 48.30.015(3)Attorney’s Fees & Costs

The superior court shall, after a finding of unreasonable denial of a

claim for coverage or payment of benefits, or after a finding of a violation of a rule in

subsection (5) of this section, award reasonable attorneys' fees and actual

and statutory litigation costs, including expert witness fees, to the first party claimant of an insurance contract

who is the prevailing party in such an action.

Issues“First party claimant”“Denial” of “payment of benefits” “denial” vs. “delay” in payment

Does WAC violation alone support action?

“Actual damages”

No Appellate Interpretations

Certified Question: “actual damages”◦Morella v Safeco – SETTLED / DISMISSED

No Pending Washington Appellate Cases

FCA is intended to be a “new” cause of action

Other than the damages component, what’s “new” about it?

Burdens of proof?

IFCA’S Purpose?

Compare:WPI 320.06.01 Insurance Fair Conduct Act

__________ claims that __________ has violated the Washington Insurance Fair Conduct Act. To prove this claim, __________ has the burden of proving each of the following propositions:(1) That __________ [unreasonably denied a claim for coverage] [unreasonably denied payment of benefits] [or] [violated a statute or regulation governing the business of insurance claims handling];(2) That __________ was [injured] [damaged]; and(3) That __________ act or practice was a proximate cause of __________ [injury] [damage].

If you find from your consideration of all of the evidence that each of these propositions has been proved, your verdict [on this claim] should be for __________. On the other hand, if any of these propositions has not been proved, your verdict [on this claim] should be for __________.

With:WPI 320.01 Insurer's Failure to Act in Good Faith—

Burden of Proof—General__________ has the burden of proving each of the following propositions:(1) That __________ failed to act in good faith in one of the ways claimed by __________;(2) That __________ was [injured] [damaged]; and(3) That __________ failure to act in good faith was a proximate cause of __________ [injury] [damage].

If you find from your consideration of all of the evidence that each of these propositions has been proved, your verdict [on the claim of failure to act in good faith] should be for __________. On the other hand, if any of these propositions has not been proved, your verdict [on the claim of failure to act in good faith] should be for __________.

New cause of action or

statutory enhancement of existing bad faith remedy?

RCW 48.30.015(6)

(6) This section does not limit a court's existing ability to make any other determination regarding an action for an unfair or deceptive practice of an insurer or provide for any other remedy that is available at law.

• What’s intended?

• Who is the intended beneficiary?

• 1st party versus 3rd party debate

Think traditional definitions:

1st party = policyholder

2nd party = insurer

3rd party = tort claimant

“Any first party claimant to a policy of insurance who is unreasonably denied a claim for coverage or payment of benefits by an insurer may bring an action in the superior court . . . .” RCW 48.30.015(1)

“‘First party claimant’ means an individual, corporation, association, partnership, or other legal entity asserting a right to payment as a covered person under an insurance policy or insurance contract arising out of the occurrence of the contingency or loss covered by such a policy or contract.” RCW 48.30.015(4)

House Bill 2060:

“(b) ‘Third party claimant’ means [someone] asserting a claim against [a] legal entity insured under an insurance policy . . . .”

“(7) An insurer engaged in the business of insurance may not unreasonably deny a claim for coverage or payment of benefits to any first party claimant or third party claimant.”

Discuss

CA Experience Under Royal Globe

Royal Globe Ins. Co. v. Superior Court, 23 Cal. 3d 880, 592 P.2d 329, 153 Cal. Rptr. 842 (1979), reversed by Moradi-Shalal v. Fireman’s Fund Ins. Cos., 46 Cal. 3d 287 (1988).

Subsequent attempts by the California legislature to reinstate the Royal Globe rule were resoundingly overturned by California voters.

Liability Coverage vs. First Party Coverages

Pre-IFCA bad faith remedies for breach of duty to defend (liability coverage only) allowed coverage by estoppel and covenant judgments with presumed harm and reasonableness rulings

First-party had no presumption of harm, no coverage by estoppel, reasonableness criteria do not apply

Personal Lines Policies vsCommercial Insureds Are their strategic considerations the same?

Does size of claim matter? Does ability to pay attorney matter? Is construction defect a class by itself?

Impact of contingent fee vs. hourly?

Strategic Considerations

When to Allege

Procedural Considerations:

How to Allege IFCA does not operate retroactively IFCA notice – suit – litigate – damage

determination Suit – IFCA notice – amend – litigate –

damage determination Damage determination – IFCA notice – suit -

litigate

What’s trebled?Who trebles it? When is it trebled?What’s intended?

How Courts View IFCA

Federal versus state courtsApplication of Seventh Amendment

Is arbitration award subject to trebling?

Washington’s Insurance Fair Conduct Act: What’s It Really

For?A Discussion of Purpose, Intent, and Strategy

Greg HarperHarper | Hayes PLLC

Karen WeaverSoha & Lang P.S.

Greg Harper Harper Hayes PLCC 206.340.8830 greg@harperhayes.com

Karen Weaver Soha & Lang P.S. 206.654.1691 weaver@ sohalang.com

Speaker Contact Info