New Growth at Lether & Associates

Lether & Associates is proud to announce that Kevin Kay has joined Lether & Associates as a partner. Kevin started his civil practice with Tom Lether and Eric Neal over 15 years ago and has since worked in the Northwest and around the country as coverage and extra-contractual counsel for a number of insurers. Kevin brings to Lether & Associates his years of experience as well as new opportunities for growth with our expanding client base. Given his prior work with Tom and Eric, it is great to welcome him back into the Lether family.

If you would like to discuss any matters with Kevin or Lether & Associates, feel free to reach out. Once again, we welcome Kevin to the firm.

The Washington Supreme Court Rules on the Impact of Agent’s Representations in Regard to a Certificate of Insurance

The Washington Supreme Court issued its decision in T-Mobile USA INC. v. Selective Insurance Company of America on October 10, 2019. The majority opinion, joined by seven of the nine justices, held that an agent with apparent authority can bind an insurance company through written representations, even if contrary to the policy.
This case reached the Washington Supreme Court through a certification from the Ninth Circuit Court of Appeals. The Ninth Circuit sought an answer as to whether an insurance company is bound by its agent’s written representation on a Certificate of Insurance that a company is an additional insured in a given policy. The Ninth Circuit had already ruled that the agent acted with apparent authority and the Certificates of Insurance included disclaimers stating the Certificates could not “amend, extend, or alter the coverage afforded by” the policy.
This case arose from the construction of a cell phone tower on the roof of a New York Building. T-Mobile Northeast (“T-Mobile NE”) hired a contractor for the project. The contract between them required the contractor to name T-Mobile NE as an additional insured and to provide annual Certificates of Insurance showing coverage. The contractor obtained a policy through Selective Insurance Company of America (“Selective”). T-Mobile NE became an additional insured under the policy based on the contract with the contractor. For the next seven years, Selective’s agent issued a series of Certificates of Insurance naming “T-Mobile USA, its subsidiaries and affiliates” as additional insureds. T-Mobile USA is a parent company for T-Mobile NE, but was not involved in the project or identified in the construction contract. Selective never objected to the agent’s issuance of the Certificates of insurance.
The owner of the rooftop sued the contractor and T-Mobile USA for damage that occurred during the construction. Both T-Mobile USA and the contractor tendered to Selective. However, Selective denied T-Mobile USA’s claim because T-Mobile USA was not an additional insured per the policy and construction contract. T-Mobile USA then sued Selective for coverage and defense. After having its claims dismissed on Summary Judgment, T-Mobile USA appealed. On appeal, the Ninth Circuit certified to the Washington Supreme Court the following question:

“Under Washington law, is an insurer bound by representations made by its authorized agent in a Certificate of insurance with respect to a party’s status as an additional insured under a policy issued by the insurer, when the Certificate includes language disclaiming its authority and ability to expand coverage?”

The Washington Supreme Court held that the Certificates of Insurance naming T-Mobile USA as an additional insured superseded the policy. The Court reasoned that the representations in the Certificates of Insurance were binding because they were made by an agent with apparent authority to bind Selective. The specific naming of T-Mobile USA as an additional insured controlled over general disclaimers. The Court also found Selective’s public policy arguments unpersuasive.
The two dissenting justices did not agree with the Court’s ruling because T-Mobile USA was not an insured under the terms of the Selective policy. They asserted that sophisticated business entities cannot reasonably rely on a Certificate of Insurance with clear disclaiming language.
This is an impactful decision regarding the use of Certificates of Insurance. Insurance companies in Washington must make sure Certificates of Insurance issued by agents accurately represent their insurance policies. Companies cannot rely on the general disclaimer language. The principle that an agent’s representations bind their employer may appear in other contexts too.
If you have any questions regarding the effect of this case or any other issues involving Washington insurance law, please contact our offices.

Join Eric Neal at NBI’s Civil Trial Seminar

Eric Neal will be presenting at the National Business Institute Seminar on November 6th at 2:45pm. “Civil Trial: Everything You Need to Know,”  is a two-day event on November 6th and 7th in Bellevue, Washington.

The subject of this presentation will be Creatively Using Motions in Limine in Civil Litigation.

This local live seminar will feature a discussion on how parties and practitioners can utilize pre-trial Motions in Limine.  The discussion will include a breakdown of what Motions in Limine are, their ostensible purpose, and various methods of utilizing these motions to present a case to the court and, more importantly, the jury.

This seminar is approved for 12.00 hours of Washington CLE credits, including 1.00 ethics credit.

If you have any questions, please contact our office at eneal@letherlaw.com or (206) 467-5444.

For more information or to register please visit:
https://www.nbi-sems.com/ProductDetails/Civil-Trial-Everything-You-Need-to-Know/Seminar/83916ER_WACLEET1100000?st=WA&crdt=WA%20CLE&pt=1

Supreme Court Holds there is no Cause of Action against Insurance Adjusters for Bad Faith or under the CPA based on Violation of the Statutory Duty of Good Faith (RCW 48.01.030)

A split Washington Supreme Court issued its decision in Keodalah v. Allstate on October 3, 2019. The majority opinion, joined by five of the nine justices, held that there is no cause of action against an employee insurance adjuster for three types of claims:
  1. Insurance Bad Faith based on alleged violation of RCW 48.01.030 by an adjuster;
  2. Consumer Protection Act per se claims based on alleged violations of WAC 284-30-330 (The Unfair Claims Settlement Practices Act); and
  3. Consumer Protection Act per se claims based on alleged violation of RCW 48.01.030.
To recap, in Keodalah, the insured asserted a UIM claim following a motor vehicle accident.  Allstate took the position that the insured was 70% at fault for the accident, despite substantial evidence to the contrary. Following trial, a jury determined the insured had no fault for the accident and awarded damages well in excess of the coverage limits. The insured then filed a second lawsuit against Allstate and the adjuster, which included extra-contractual claims against the adjuster. The trial court then granted a motion to dismiss the extra-contractual claims against the adjuster. The Court of Appeals reversed the trial court’s dismissal of the bad faith and CPA claims against the adjuster, finding that an adjuster’s alleged bad faith conduct could support those claims.
On review, the Supreme Court held that a bad faith claim based on the good faith insurance statute (RCW 48.01.030) was not available because the statute did not imply a cause of action under the applicable test. In particular, the Court explained that the statute was enacted to benefit the general public, as opposed to a certain class of individuals. It further reasoned that the legislature did not intend for the statute to form the basis of a civil action because, in part, doing so would also create a bad faith cause of action against insureds.

The Court then quickly dispensed with CPA claims against adjusters based on violations of WAC 284-30-330 because the express language of that regulation applies the standards contained therein to “insurers” only.

Finally, the majority stated that CPA claims against adjusters based on violations of RCW 48.01.030 are not cognizable because that statute does not imply a private right of action and prior case law (primarily, Tank v. State Farm) shows that CPA claims based on bad faith arise from the quasi-fiduciary relationship between insurers and insureds. The Court reasoned that, because there is no quasi-fiduciary relationship between adjusters and insureds, there is no CPA claim based on the alleged bad faith of an adjuster.

The dissenting opinion, joined by four justices, agreed that there is no cause of action against employee insurance adjusters for bad faith claims based on violation of RCW 48.01.030 and CPA claims based on violations of WAC 284-30-330.

However, the dissenting justices believed that there should be a CPA cause of action against adjusters based on violation of RCW 48.01.030. Their primary arguments were that a CPA claim based on violation of a statutory duty can exist, even when that statute does not imply a right of action, and the existence of a quasi-fiduciary relationship is not a requirement for a CPA claim in any context.

Most interestingly, the dissenting opinion further stated that a bad faith cause of action based purely on the common law should be available against an adjuster.[1]Whether an adjuster has a common law duty of good faith has never been addressed before by a Washington court. In analyzing whether it should recognize such a duty, the dissenting court noted that the majority of jurisdictions that have addressed the issue have found there is no such duty in common law. Nevertheless, the dissenting court believed it should follow the minority of states that do impose a common law duty on adjusters based on the similarities regarding the other principles of common law bad faith between Washington and those states. The dissent further stated that public policy, common sense, logic and justice support imposing a common law duty of good faith on adjusters because they are most directly responsible for how a claim is handled.  The dissenting court did note that this duty should be limited to knowing bad faith conduct within their control and that adjusters should not held responsible for improper policies imposed upon them by their employers.

This opinion provides both clarity and questions for insurance litigation moving forward. There is clearly no cause of action against adjusters based on violation of the good faith statute and any WACs expressly directed at insurers. However, whether an adjuster could face a cause of action for common law bad faith remains an open question of law in Washington. Unfortunately, the only source of Washington law addressing this issue is the dissenting opinion in this case.

If you have any questions regarding the effect of this case or any other issues involving Washington insurance law, do not hesitate to contact our offices.


[1] This type of claim was not addressed by the majority court apparently because it was not addressed by the Court of Appeals. The dissenting justices believe the majority court should have addressed this claim because it was part of the insured’s pleadings, briefing and arguments throughout this case.

Join Eric Neal for an Audio Webinar

Eric Neal will be presenting an audio webinar for the National Business Institute on October 16th. “Insurance Bad Faith 2019: Hot-Button Issues and New Case Law,” will be streaming from 1:00 p.m. – 4:15 p.m. Eastern Standard Time.

The subject of his presentations will be Individual Liability for Adjusters and Other Recent Developments and Bad Faith Set-Ups and More: Present Day Pitfalls and Best Practices.

This is a national webinar regarding hot-button issues in regard to bad faith claims.  The discussion will broadly include recent developments in the law and how insurers, practitioners, and the Courts are handling those developments.  More specific areas of discussion will include items such as individual adjuster liability, post-litigation continuing bad faith, and best practices for avoiding claims of bad faith.

This seminar is approved for 3.00 hours of Washington CLE credits.

If you have any questions, please contact our office at eneal@letherlaw.com or (206) 467-5444.

For more information or to register please visit:
https://www.nbi-sems.com/ProductDetails/Insurance-Bad-Faith-2019-Hot-Button-Issues-and-New-Case-Law/Audio-Webinar/83686ER_KYCLE144800000?crdt=WA%20CLE&pt=1