Many insurers are extremely hesitant to allow a jury to consider insurance coverage or extra-contractual claims in Washington. The pro-insured temperament of Washington law and the reactions of juries to these types of claims give insurers every reason to avoid trial. This is particularly true given the treble damage exposures available under Insurance Fair Conduct Act. As a result, many insurers believe a file has to be “perfect” in order to go to trial.
That belief ignores the reality of modern claims-handling. In almost any claim there will be some type of an issue wherein the claim was not handled perfectly. Mistakes, however, do not mean bad faith. Sometimes you have to not be afraid to present your case and let the jury decide.
That is exactly what happened in the matter entitled Gallagher v. Fire Insurance Exchange (Farmers). In the Gallagher case, the insured suffered an accidental residential fire. The fire was small and primarily involved only smoke damage. Following the fire, and during the course of the investigation of the first claim, a secondary water damage event occurred as the result of an alleged frozen pipe. Although the insured was residing in the home at the time of the initial smoke loss, the repairs had not yet been completed for the smoke loss. Farmers extended coverage and issued payments for the dwelling, contents, and additional living expenses. Between the two claims, there were several issues which arose. Although the insured raised several complaints in regard to the claim handling, Farmers paid what it believed it owed on all claims.
Regardless, the insured sued and alleged the standard claims for breach of contract, bad faith, treble damages under IFCA and violations of the Washington Consumer Protection Act. A significant part of the insured’s claim involved allegations surrounding a claim that her home had been contaminated by toxic smoke as part of the losses.
Despite Farmers’ efforts to resolve the claims, the litigation dragged on for years with exhaustive and extensive discovery, motions practice, expert witnesses etc. This all resulted in significant costs to both sides. When a reasonable resolution could not be arrived at, Farmers elected to proceed to have the jury decide the issues.
The insured asked for an award in excess of 12 million dollars. This demand primarily involved extra-contractual claims.  Following an almost three-week trial, the jury returned a complete defense verdict for Farmers on all issues. The jury deliberated for approximately an hour. The primary theme that the jury agreed on was that despite some claims handling issues, Farmers acted reasonably and that the plaintiff herself was overreaching. Farmers also argued that the insured was using the insurance funds to remodel her house.The insured’s claims of toxic smoke conditions were flatly rejected. The below photos illustrated the dispute.
      The bottom line is that trying to resolve claims through a reasonable settlement or mediation is always preferable. However, there are some claims that need to go to trial. Some parties need to have a jury give them an honest assessment of the value of the claim. Even if there are claims-handling issues and exposures, you cannot be afraid to try a case.
Farmers Insurance was represented throughout the course of the claim and at trial by Tom Lether and Eric Neal of Lether & Associates. If you would like to discuss this case or other bad faith claims involving property losses, please contact our offices.