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Washington SB 5331: Expanded Enforcement and Restitution Risk for Insurers

by | Jan 30, 2026 | Appellate Practice, Auto & Trucking, Commercial Litigation, Construction Law, COVID-19, Decisions, Dispute Resolution, Events, Featured, Insurance Law, Misc., Natural Disaster Claims, News & Updates, Professional Liability & Significant Injury Claims, Uncategorized

The Washington State Capitol dome rises behind the historic Insurance Building in Olympia, symbolizing state government and insurance regulation in Washington.

Washington’s Senate Bill 5331, a newly presented piece of consumer protection legislation sponsored by Senate Business, Financial Services & Trade Committee and requested by the state’s Insurance Commissioner, would give the Office of the Insurance Commissioner (OIC) new authority to order restitution to policyholders harmed by established violations of state insurance law. Under current law, the OIC can issue fines and cease-and-desist orders but cannot compel insurers or agents to pay back money wrongfully taken. Senate Bill 5331 aims to change that and allow restitution with 8% simple interest, as well as update fines for property and casualty insurers to $10,000 per violation, rather than a single $10,000 cap.

Senate Bill 5331 passed the Washington State Senate with a bipartisan supported vote of 29-20 and is currently moving to the House Consumer Protection & Business Committee for further consideration. If it clears the House and is signed by the governor, it would take effect 90 days after adjournment of the session in which it is passed. Should Senate Bill 5331 become law, insurance carriers doing business in Washington should prepare for enhanced enforcement tools at the OIC’s disposal. This includes potential orders to provide direct restitution to policyholders, not just fines, when violations are found, and exposure to per-violation fines for compliance gaps. Insurers should review compliance protocols, documentation practices, and premium handling procedures to mitigate risk of enforcement actions that could result in restitution obligations.

Lether Law Group has extensive experience in handling insurance regulatory violation claims and provides comprehensive legal advice to insurance carriers for how to avoid regulatory violations. To the extent you have any questions regarding Senate Bill 5331 and the potential implications should the bill pass, or compliance with Washington insurance regulations, we invite you to contact us directly. 

New Unpublished 9th Circuit Decision:  Bitco Gen. Ins. Corp. v. Union Ridge Ranch, LLC

by | Nov 17, 2025 | Decisions, Events, Featured, Insurance Law, Misc., News & Updates, Professional Liability & Significant Injury Claims

The 9th Circuit Court of Appeals (9th Circuit) recently issued an unpublished decision affirming the District Court’s grant of summary judgement in favor of BITCO General Insurance Corporation (BITCO). Bitco Gen. Ins. Corp. v. Union Ridge Ranch, LLC, Nos. 24-6473, 24-6474, 2025 LX 492319 (9th Cir. Oct. 29, 2025).

Inland Co. (Inland) built a series of retaining walls for Union Ridge Ranch (URR). A portion of these walls failed and URR filed suit. During the course of discovery, it was revealed that a geotechnical engineering consultant tested Inland’s work on the project and identified numerous defects two months prior to the eventual failure. In light of these defects, the third-party purchaser withdrew from its agreement to purchase the subject parcel from URR. URR and Inland also met to discuss the defects raised by the geotechnical report and Inland agreed to reduce the contact price. Additionally, another geotechnical engineer hired by URR testified that there were obvious issues with the wall dating back to its original construction. Inland and URR ultimately reached a settlement. Subsequently, Inland sought indemnity from BITCO as a result of the settlement paid to URR.

BITCO filed a Declaratory Judgement Action in the United States District Court for the Western District of Washington (the “Western District”) seeking, in part, a judicial determination that it owed no indemnity obligation to Inland.  BITCO moved for summary judgement on the specific issue of whether the “impaired property” exclusion applied. This exclusion, in relevant part, provided:

“Property Damage” to “impaired property” or property that has not been physical injured arising out of:

(1)  a defect, deficiency, inadequacy or dangerous condition in “your product” or “your work.”

The Western District found this exclusion applied because URR’s claimed losses arose out of the defects contained in Inland’s work, including the grading work. The Western District granted summary judgement in favor of BITCO and found no coverage for Inland. URR and Inland appealed to the 9th Circuit.

On appeal, Inland conceded that the failed retaining walls fell within the definition of “impaired property.”  However, it argued that an exception to the exclusion applied.

The 9th Circuit affirmed the Western District’s finding that coverage was unavailable because URR’s claimed losses arose out of Inland’s work. Furthermore, the 9th Circuit pointed out that the “impaired property” exclusion also applied to the diminution of value of property adjacent to the failed wall as it sustained damage and loss of value as a direct result of Inland’s work.

The 9th Circuit recognized that the “impaired property” exclusion does in fact contain an exception for the “loss of use of other property arising out of sudden and accidental physical injury to ‘your product’ or ‘your work’ after it has been put to its intended use.” The parties disputed who had the burden of proving the existence of an exception fell on BITCO or Inland.

The 9th Circuit held that even if BITCO did bear the burden, it was abundantly clear that the exception did not apply. In the context of Washington Insurance Law, the phrase “sudden and accidental” generally means “unexpected and unintended”. Under this inquiry, the issue is whether the Inland, “subjectively expected or intended” that the wall would fail. The 9th Circuit concluded that there was no genuine dispute of material fact in that Inland knew or expected the wall would fail.

In reaching its conclusion, the 9th Circuit noted that two geotechnical engineers informed Inland and URR of issues with the wall well before it failed. Furthermore, the withdrawal of the third-party purchaser and subsequent reduction of the contract price is evidence that the parties had subjective knowledge of imminent failure. The 9th Circuit held that these facts undermined Inland’s argument that failure was unexpected. As such, in the months before the wall failed, Inland was on notice of the issues with the wall and that failure was expected. As a result, the 9th Circuit concluded that exception did not apply and coverage was unavailable.

This decision brings clarity to the nuances of the impaired property exclusion and related issues that have long been subject to dispute in Washington.

At Lether Law Group, we are committed to helping our Clients understand and navigate the dynamic and ever-changing world of insurance and complex litigation. Our experienced team continues to provide outstanding legal services in the 9th Circuit in addition to State and Federal Courts across Washington, Oregon, Idaho, California, Alaska, and Hawai’i. If you or someone you know needs legal representation or assistance, please do not hesitate to contact us or visit our website at www.letherlaw.com

Clearly Applicable Policy Exclusions and the Duty to Defend

by | Sep 17, 2024 | Construction Law, Decisions, Dispute Resolution, Events, Featured, Insurance Law, Misc., News & Updates, Professional Liability & Significant Injury Claims

On August 21, 2024, the Ninth Circuit Court of Appeals issued an unpublished opinion in Sec. Nat’l Ins. Co.  v. Urberg, Case No. 23-35228, 2024 U.S. App. LEXIS 21365, 2024 WL 3912582 (9th Cir. Aug. 21, 2024) affirming the dismissal of the appellants’ claims against Security National Insurance Company (SNIC) regarding SNIC’s duty to defend.

The underlying lawsuit in Urberg arose when the appellant-homeowners noticed damage to their properties several months after purchasing their homes. The homeowners filed suit against the builders and developers alleging breach of contract and breach of express and implied warranties. The general contractor filed a third-party complaint against the subcontractors, including LND Construction, who was insured by SNIC. LND Construction thereafter tendered the defense of the general contractor’s claims to SNIC and SNIC denied.

The United States District Court for the Western District of Washington (the “Western District”) granted summary judgment in favor of SNIC dismissing the appellants’ breach of contract and bad faith claims. The Western District found the appellants failed to establish that SNIC’s denial was unreasonable, frivolous, or unfounded. The Western District further dismissed LND Construction’s claims because aside from an unfounded timing argument, it failed to establish actual harm as a result of SNIC’s alleged bad faith denial.

Pursuant to Washington law, the duty to defend is triggered at the time a lawsuit is filed and “is based on the potential for liability.” Woo v. Fireman’s Fund Ins. Co., 161 Wn.2d 43, 164 P.3d 454, 459 (Wash. 2007) (quoting Truck Ins. Exch. v. VanPort Homes, Inc., 147 Wn.2d 751, 58 P.3d 276, 281 (Wash. 2002)). Additionally, despite insurers having a broad duty to defend in Washington, any alleged claims which are clearly not covered by the policy relieve an insurer of its duty. Kirk v. Mt. Airy Ins. Co., 134 Wn.2d 558, 951 P.2d 1124, 1126 (Wash. 1998).

The Ninth Circuit affirmed the Western District’s decision and likewise found that SNIC did not have a duty to defend. The Ninth Circuit also ruled that it was clear from the operative Complaint and the SNIC policy that the new construction exclusion clearly applied. In particular, the Ninth Circuit held that because it was certain that the claims alleged against LND Construction involved new construction, the exclusion directly applied and no further consideration of facts and/or Washington case law was necessary. Sec. Nat’l Ins. Co., 2024 U.S. App. LEXIS 21365 at *4.

On August 22, 2024, the Western District issued another unpublished opinion in Bitco Gen. Ins. Corp. v. Union Ridge Ranch, LLC & Inland Co., Case No. C22-05624 BHS, 2024 U.S. Dist. LEXIS 150604*; 2024 WL 3924715 (W.D. Wash., Aug. 22, 2024). Specifically, the Western District addressed the applicability of an impaired property exclusion and its exception involving the retaining wall/concrete work the insured, Inland Corporation (Inland Co.), was retained to perform.

Specifically, the Bitco General Insurance Corporation (Bitco) policy included an impaired property exclusion which excluded coverage for property that is rendered “less useful” due to the defective work by the insured. The exception would apply, however, if the insured could prove the “loss of use of other property arising out of sudden and accidental physical injury” to its work after it has been put to its intended use.

After the construction was finished, a prospective buyer retained a geotechnical expert who identified multiple defects with Inland Co.’s work. As a result, the prospective buyer did not purchase the property. Inland Co. later discovered that one of the retaining walls it constructed had failed. A second geotechnical expert further confirmed that the retaining walls were still defective after Inland Co. attempted to repair the defects. The property was eventually sold. However, a third geotechnical expert’s analysis revealed that the retaining walls were improperly constructed and were at risk of failure.

Inland Co. filed suit against Union Ridge Ranch (URR) in Clark County Superior Cout based upon URR’s alleged failure to pay. URR raised counterclaims against Inland Co. alleging breach of contract and negligence based upon Inland Co.’s faulty work which prevented it from selling the property for a profit. Inland Co. tendered the defense of URR’s counterclaims to BITCO and BITCO defended under a full reservation of rights. The parties reached a settlement for $2.66 million and URR agreed not to seek recovery against Inland Co. and Inland Co. assigned its insurance rights against BITCO to URR.

BITCO then filed a declaratory judgment coverage action against URR arguing that it did not owe coverage for the settlement under the commercial general liability and umbrella policies it issued to Inland Co. The Western District determined that the failure of one of the retaining walls was gradual and inevitable rather than sudden or accidental. When considering the impaired property exception, the Western District ruled that the exception did not apply because even if the failure of the retaining wall was “sudden and accidental”, Inland Co. could not show that URR’s damages arose from that failure.

Moreover, the Western District commented that the only thing surprising about the failed retaining wall is that it was the only retaining wall to visibly fail. The Western District heavily considered the three geothermal experts’ analysis revealing that the retaining walls, both before and after the single wall failed, were likely to fail. Ultimately, the Western District determined that it was clear the impaired property exclusion applied, without exception, to exclude coverage to Inland Co. because the property was “less useful” as a direct result of the improperly constructed retaining walls.

The Bitco and Urberg decisions evidence that Washington Courts broadly construe insurers’ duty to defend. Specifically, when there is any reasonable interpretation of the facts or law which could result in coverage, the insurer must defend. However, when it is uncontested that an alleged claim is not covered or clearly excluded by the policy, Washington Courts will oftentimes determine that the insurer is relieved of its duty to defend and/or indemnify.

Lether Law Group has represented and advised commercial general liability primary and excess insurers on all aspects of coverage, including the duty to defend, scope of coverage, and application of policy exclusions and their exceptions. If you would like to discuss the implications of the Bitco and/or Urberg decisions or coverage issues involving these types of claims, please feel free to contact our offices.

Labor Day: Office Hours & the Evolution of Workers’ Insurance

by | Aug 29, 2024 | Events, News & Updates

As Labor Day approaches, we at Lether Law Group want to take a moment to recognize and celebrate the hard work and dedication that you and countless others demonstrate every day. Labor Day, observed on the first Monday of September, is a time to honor the achievements and contributions of workers across the country.

In observance of this National Holiday, our offices will be closed on Monday, September 2, 2024, to allow our team to enjoy some well-deserved rest and relaxation. We will resume our normal business hours on Tuesday, September 3, 2024.

Fun Fact: Labor Day is not just a day off—it is also a significant marker in the history of workers’ rights and the development of modern-day insurance practices. As the industrial revolution transformed the American workforce, the risks associated with labor grew, leading to the establishment of workers’ compensation laws and the expansion of insurance coverage to protect both employers and employees. These laws were designed to provide financial protection for employees injured on the job, paving the way for modern-day insurance practices related to workplace safety and employee benefits.

Today, these protections have evolved into the complex and sophisticated insurance landscape we know, where coverage disputes, liability concerns, and regulatory challenges are common.

At Lether Law Group, we understand the vital role that labor plays in our society and the importance of ensuring that workers are protected. As we take this time to reflect on the importance of labor and the protections that have been established over the years, we remain dedicated to serving the needs of our clients in this ever-evolving field.

We hope you have a safe and enjoyable Labor Day weekend. Should you need any assistance before or after the holiday, please do not hesitate to reach out.

Thank you for your continued trust in Lether Law Group.

Ninth Circuit Partially Revise Class Action Claims Against State Farm

by | Aug 22, 2024 | Events, Featured, Insurance Law, Misc., News & Updates, Professional Liability & Significant Injury Claims

On Monday, August 19, 2024, the Ninth Circuit Court of Appeals issued a published opinion in Jama, et al. v. State Farm Mutual Auto. Ins. Co., et al, No. 22-35499, 2024 U.S. App. LEXIS 20881, __ F.4th___ (9th Cir. 2024) reversing in part a Western District of Washington summary judgment ruling decertifying class action claims against two State Farm entities.

At the trial court level, the insureds asserted class action claims against State Farm based on how State Farm compensated vehicle owners for actual cash value (ACV) after accidents that involved the total loss of the insured vehicle. The insureds initially sought class certification for two classes: 1) the negotiation class; and 2) the condition class.

To determine ACV, State Farm would use an Autosource report from a third-party vendor which reported information regarding advertised price of comparable vehicles and then would make adjustments including adjustments for the condition of a vehicle and adjustments for “negotiation.”  The condition adjustment was based on the assumption that vehicles were in different conditions than those on the market and would adjust the value of the car accordingly. The negotiation adjustment was based on an assumption that a customer would negotiate with a dealer and buy a car for less than advertised price.

The District Court decertified the classes and dismissed claims against State Farm on summary judgment based on the court’s reading of Lara v. First National Ins. Co. of Amer., 25 F.4th 1134 (9th Cir. 2022) finding that just because the insureds could establish an illegal adjustment was not sufficient to establish injury on a class-wide basis “by relying class members’ car value as calculated in the Autosource reports less the amount of the challenged negotiation or condition adjustments.” 

The Ninth Circuit affirmed with respect to the condition class because it was undisputed that an insurer could take condition into account and adjust ACV accordingly and because any injury would be individualized based upon the condition of each individual’s vehicle.  However, it reversed with respect to the negotiation class.

With respect to the negotiation class, the insureds argued that Washington law did not allow an insurer to reduce ACV payments by a “typical negotiation discount”. The Court of Appeals agreed with the trial court’s  finding that applicable Administrative Code (WAC) provision (WAC 284-30-391) did not allow for such discounts and only provided for discounts specifically set forth in the WAC. See WAC 284-30-391(4)(b).  Accordingly, any reduction in ACV payment for a negotiation discount was unlawful.

The insureds asserted that class certification for the negotiation class was appropriate because it could be determined on a class wide scale for those who were paid according to the Autosource report and had their payment reduced by a uniformly applied negotiation discount. State Farm argued that measuring injury that way would effectively allow the class to establish injury just based upon the illegality of the act, which was prohibited by the Lara decision.

The trial court effectively agreed with this argument when it decertified the class and entered summary judgment for State Farm. The Ninth Circuit, however, reversed. In doing so, it clarified that its holding in Lara was distinguishable because in Lara the proposed class was broader than the proposed class in Jama.  In Lara, the proposed class included those who received a report containing an unlawful adjustment but nevertheless received ACV for other reasons. The class Jama was not as broad.

Instead, the proposed negotiation class was limited only to:

…those class members who (1) were paid based on the Autosource report, excluding those who negotiated or pursued an appraisal; and (2) were paid a negotiation adjustment that, according to the Plaintiffs, can never measure a lawful deduction.

The Ninth Circuit concluded that narrowing the class avoided the issues raised in Lara. It further summarized that the Plaintiff’s arguments were that the ACV was originally calculated based on permissible factors, but then reduced by a factor that was not allowed under Washington law. The Court went on to state that “[n]othing in Lara precludes common proof of injury as the amount of State Farm’s estimates less the impermissible deduction as to the class of owners who were paid the Autosource valuation.” Accordingly, the Court reversed the trial court’s decertification and dismissal. This included reversing summary judgment against the individual class representatives and remanding the case for consideration in light of the Court’s holding. 

Lether Law Group has represented and advised auto insurers on all aspects of coverage including valuation disputes for over 30 years. If you would like to discuss the implications of the Jama decision or coverage issues involving these types of claims, please feel free to contact our offices.