by Kerri Lether | Apr 23, 2018 | Insurance Law, News & Updates
There is an age-old saying that lawyers – especially appellate lawyers – commonly use. That phrase is “bad facts make bad law”.
This statement was proven accurate once again in the decision of Keodalah v. Allstate Ins. Co., et al., Court of Appeals of the State Washington, Case No. 75731-8-I. In the Keodalah decision, Division I of the Washington State Court of Appeals created a whole new legal theory of bad faith directly against insurance adjusters as opposed to simply insurers. A copy of the decision is attached in the below link.
In Keodalah, the insured asserted a UIM claim following a motor vehicle accident. The accident involved the insured and a motorcycle. According to the Seattle Police Department (“SPD”), the motorcyclist was traveling around 70 mph in a 30 mph zone. The SPD further determined that the insured was not using his cell phone at the time of the accident. Allstate also hired an accident reconstruction expert, who opined that the motorcyclist’s excessive speed caused the accident.
Allstate took the position that the insured was 70% liable for the accident despite the above evidence. The insured filed suit. Ultimately, the case went to trial. A jury determined the insured had no fault for the accident. The insured was awarded damages for injuries, lost wages, and medical expenses.
The insured then filed a second lawsuit against Allstate and the adjuster directly alleging extra-contractual claims. Allstate and the adjuster moved to dismiss the complaint under CR 12(b)(6). The trial court granted the motion and dismissed the insured’s claims against the adjuster.
On discretionary review, the Court of Appeals reinstated the bad faith and Consumer Protection Act claims against the adjuster. With respect to the bad faith claim, the Court reasoned that Washington law imposes a duty of good faith on “all persons” involved in insurance, including the insurer and its representatives. RCW 48.01.030. A “Person” is defined as “any individual, company, insurer, association, organization, reciprocal or interinsurance exchange, partnership, business trust, or corporation.” RCW 48.01.070. The Court determined that, under the plain language of the statute, the adjuster had an individual duty to act in good faith and could be sued for breaching this duty.
The Court also maintained the CPA claim against the adjuster, finding that a consumer or business relationship was not necessary to support a CPA claim. Without any significant analysis, the Court held that “individual insurance adjusters can be liable for a violation of the CPA.”
The Keodalah decision is a dramatic departure from the law in most jurisdictions. Previously, most Washington State trial court decisions have refused to find adjusters directly liable for causes of action involving bad faith, particularly when adjusters are direct employees of the insurer. Although third-party administrators and independent adjusters are often sued for bad faith, this decision provides for the first time a bad faith claim against individual employees of an insurer.
The impact of this latest decision will be significant on the insurance industry and will raise even further questions. For example, will insurers need to appoint separate counsel for their adjusters when their adjusters are named in litigation? How will this decision impact adjusters’ relationships with their employers? What internal HR decisions will evolve from the decision? Can this analysis be a basis for counsel to be sued? Does this decision mean insureds are liable for their own bad faith conduct?
From a practical standpoint the biggest impact may be on out-of-state insurers who attempt to remove cases to Federal Court. Insureds could destroy diversity jurisdiction by naming an in-state adjuster. This would confine insurers to Washington State Court when litigating coverage issues. As a result, non-Washington insurers may want to consider filing a declaratory judgment action first when there is a possibility that an in-state adjuster may be named to defeat diversity. This approach may preserve an insurer’s ability to litigate in Federal Court and avoid the Washington State trial courts.
As always, it is crucial to look at the facts of any case and the impact an adverse decision may have on the entire industry before you take a case to the Washington Court of Appeals.
If you would like to discuss the impact of this decision, please feel free to contact us.
Keodalah v. Allstate
by Kerri Lether | Apr 10, 2018 | Insurance Law, News & Updates
The Washington Courts have repeatedly held that insurance agents and brokers do not have any legal duty to recommend specific policy limits to an insured absent what is commonly referred to as a “special relationship.” Washington case law on this point is one of the few areas where the Washington Courts have been favorable to insurers and insurance agents.
Division I of the Washington State Court of Appeals has again applied this rule of law in Norris v. Farmers Insurance Company of Washington et al., No 76236-2-I (Wash. Ct. App. Division I, March 19, 2018). What is of particular importance is that the Norrisdecision addresses an insurer’s and agent’s legal duty in the context of automobile liability insurance. Specifically, this is the first time Division I of the Washington Appellate Courts has addressed this issue in regard to automobile insurance. Moreover, the Court rejected the argument that a duty exists because an insurer has an obligation to train and supervise its agents, as well as the argument that an insurer’s marketing materials created a legal duty.
In the Norris case, the insured carried a $100,000 automobile liability insurance policy. The insured ran into a pedestrian. The resulting claim arguably exceeded the policy limits. Farmers promptly tendered the policy limits to the insured. The insured, however, refused to accept the tender and instead filed a third-party Complaint in the underlying action against Farmers Insurance Company of Washington and the two Farmers agents who had been involved in placing the automobile insurance policy.
During the course of the ensuing litigation, the insureds admitted that they had never specifically discussed liability automobile insurance with their agents. There was also no evidence of any of the other elements which would potentially create a “special relationship” between the insureds and the agent. Regardless, the insureds argued that marketing materials that had been utilized by agents and Farmers created an implied duty. Moreover, it was argued that there was liability on Farmers as a result of Farmers’ alleged failure to supervise and train its agents.
The Court of Appeals rejected both arguments. The Court concluded that the question of a legal duty was a matter of law for the Court to determine. The Court did not accept the marketing theory as creating a legal duty. Likewise, the Court found there was no liability on the part of an insurer for allegedly failing to train or supervise independent contractor agents. In its ruling, the Court upheld the longest established Washington case law regarding the legal duties of the insurance agent or broker. An agent or broker does not have a legal duty to recommend specific automobile liability limits absent a special relationship. The Court also further distinguished the limited cases where the Courts have found that a special relationship exists. A link to the Norrisdecision is below.
This decision again establishes that insurers and insurance agents can be successful even in the state courts of Washington on specific legal questions. Lether & Associates has represented insurance agents and brokers, as well as insurers, in a number of cases involving claims of failure to advise insureds on limits or other coverage issues. In addition to representing Farmers in the successful Norris appeal, our firm also represented Farmers and the agent in Lipscomb v. Farmers Ins. Co. of Wash., 142 Wn. App. 20, 174 P.3d 1182 (2007), a decision which is referenced repeatedly by the Court in Norris. As a result, Lether & Associates has established the law in regard to agent and broker liability in the two controlling decisions in Division I of the Washington State Court of Appeals. As a follow up to our last publication – good facts make good law.
If you have any questions in regard to agent or broker claims, please feel free to contact our office.
by Kerri Lether | Jun 11, 2017 | Decisions, Insurance Law, News & Updates
For years, Oregon’s primary legislative device for compelling prompt settlement of insurance claims has been the availability of an attorney fee award for insureds who recover more than the amount tendered by an insurer within six months of the proof of loss in a lawsuit seeking coverage under ORS 742.061. Prior to the decision in Long v. Farmers Ins. Co. of Oregon, 360 Or 791 (2017), most believed that an insured had to actually obtain a judgment awarding monetary damages in the suit seeking coverage to be entitled attorney fees. However, in Long, the Oregon Supreme Court identified a new way that an insured can obtain an attorney fee award under ORS 742.061, which can apply even if the insured does not prevail in the suit seeking additional coverage.
In Long, the insured submitted a claim under a homeowner’s policy due to a water leak. Farmers promptly paid about $3,000 to the insured for the actual cash value of the claim. Shortly thereafter, the insured submitted estimates indicating that his ACV claim was worth more than $3,000. However, no further payments were made at that time.
About two years later, the insured filed suit against Farmers seeking additional ACV coverage. Farmers subsequently issued two voluntary ACV claim payments following a court-ordered appraisal. On the eve of trial, the insured submitted a proof of loss for his replacement cost claims. Farmers adjusted and paid the RCV claim three days later.
The verdict rendered by the court after trial found that the insured was owed less for his claim than what he received from Farmers before the suit was filed. Accordingly, judgment in favor of Farmers was entered. Nevertheless, the insured filed a petition seeking an award of attorney fees under ORS 742.061. In that petition, the insured argued that he was entitled to an attorney fee award because he “recovered” more than was timely tendered by Farmers based on the voluntary payments issued after the suit was filed. The trial court denied the insured’s petition because it believed that the insured had to obtain a judgment awarding monetary damages to be entitled to attorney fees under ORS 742.061.
On review, the Oregon Supreme Court decided that the “recovery” which must exceed the amount of any timely tenders made by an insurer does not need to be based on a judgment entered in favor of the insured. Accordingly, the Court held that voluntary payments given during litigation can qualify as a “recovery” which triggers entitlement to an attorney fee award under ORS 742.061.
In this case, the Court held that the insured was entitled to an attorney fee award for the work performed by his attorneys up until the time he received the additional ACV claim payments. However, the Court also ruled that the insured was not entitled to any further attorney fees because Farmers paid the RCV claim just days after that claim was submitted and the insured did not recover any more at trial than was timely tendered by Farmers.
The Long case reiterates the importance of determining and paying the full value of a claim within six months of the claim submission because it establishes that subsequent claim payments made during litigation will result in at least some attorney fee exposure. See also Jones v. Nava, 264 Or App 235, 240-241 (2014) (confirming that tenders must be made within six months of proof of loss to avoid attorney fee exposure, even if untimely tender exceeding ultimate recovery is given prior to filing of action). However, the decision is not completely adverse to insurers because it also confirms that the requirements for an attorney fee award must be separately met for each claim submitted, even if claims arise from the same loss.
If you have any questions about this case or how it may affect any of your pending or future claims, do not hesitate to contact our office.
by Kerri Lether | Apr 28, 2017 | Decisions, Insurance Law, News & Updates
A reasonable denial of coverage. Based on the weight of legal authority, insurers might wonder if such a thing even exists in Washington. A new decision from the Western District of Washington demonstrates that insurers will not always find themselves in peril after a denial. In Trofimovich v. Progressive Direct Insurance Company, 2017 U.S. Dist. LEXIS 125328 (W.D. Wa.), Honorable John Coughenour ruled that Progressive’s denial of an auto physical damage claim based on an exclusion for operation of the vehicle for hire was reasonable. The Court dismissed all contractual and extra-contractual causes of action based on that finding.
Trofimovich involved an accident occurring on June 17, 2016. After the accident, the insured contacted Progressive and gave a recorded statement. During that statement, the insured stated that he was working for Lyft, a ride share company, and that he had a passenger at the time of the accident. The insured further declined Progressive’s offer to arrange towing services based on his belief that Lyft would provide a tow.
The next day, the insured gave a second statement. In this statement, the insured indicated that the passenger in his vehicle at the time of the loss was not a paying customer. He claimed that he had given that passenger a ride earlier in the day, but that the ride at issue was being given for free due to a financial hardship on the part of the passenger.
On June 30, 2016, Progressive issued a letter denying coverage based on an exclusion that precluded coverage for damage occurring while operating the vehicle to transport passengers for a fee.
In July, the insured retained counsel, who issued an Insurance Fair Conduct Act Notice alleging that the denial was in violation of the statute. On July 29, 2016, without amending its coverage position, Progressive agreed to pay the claim. On August 26, 2016, the insured filed suit alleging breach of contract, bad faith, and violations of IFCA and the Washington Consumer Protection Act.
On Cross-Motions for Summary Judgment on all causes of action, the Court ruled that Progressive’s interpretation of the insured’s initial statement was reasonable. The Court further held as follows:
Progressive made the choice to reject one of two apparently conflicting statements, something that cannot be uncommon in claims adjusting. This alone does not render Progressive’s denial unreasonable. . .
Thus, the Court concludes as a matter of law that Progressive’s initial denial of coverage was reasonable.
2017 U.S. Dist. LEXIS 125328 at 7-8.
Based on this finding, the Court proceeded to grant Summary Judgment in favor of Progressive dismissing the insured’s causes of action for breach of contract, bad faith, violation of the Consumer Protection Act, and violation of the Washington Insurance Fair Conduct Act.
The Court’s decision in Trofimovich demonstrates that insurers can secure good results in Washington when they play by the rules and act reasonably, basing their decisions on sound reasoning and a straight-forward assessment of the facts.
Lether & Associates proudly represented Progressive in the Trofimovichcase. A copy of the decision is attached. If you would like to discuss the case, or any other matter, in further detail, please feel free to contact us at any time.
by Kerri Lether | Feb 3, 2017 | Decisions, Insurance Law, News & Updates
Washington Supreme Court Addresses the Insurance Fair Conduct Act
Perez-Crisantos v. State Farm et al., Wash. Sup. Ct., No. 92267-5, (February 2, 2017), is perhaps the most favorable ruling for insurers from the Washington Supreme Court in the past several years. The Perez-Crisantos Court was asked to decide whether, in the absence of an unreasonable denial of coverage or benefits, the Insurance Fair Conduct Act (IFCA) creates an independent and private cause of action for an alleged violation of Washington’s Unfair Claims Settlement Practices Regulations. Definitively, the Court held that it does not.
In Perez-Crisantos, the insured was involved in car accident and sustained injuries. The insured was not at-fault and ultimately settled with the at-fault party’s insurance carrier for its policy limits. The insured then tendered a claim for underinsured motorist (UIM) benefits to his insurance carrier, State Farm. State Farm paid its personal injury protection (PIP) limit of $10,000 in medical benefits and $400 in lost wages, but did not pay benefits under the UIM policy, taking the position that the insured had already been made whole. Arguing that State Farm unreasonably denied benefits, the insured sued State Farm alleging violations of IFCA, the Consumer Protection Act (CPA), chapter 19.86 RCW, bad faith and negligence. This lawsuit was stayed while the UIM claim was sent to arbitration.
The arbitrator found that the insured’s damages from the accident totaled $51,000. After adjusting for settlement with the at-fault party, PIP payments, and attorneys’ fees, the insured received $24,000 of new money from State Farm. The stay in the bad faith lawsuit was then lifted. State Farm moved for summary judgment arguing that it had acted reasonably and that the parties had simply had a reasonable disagreement about the value of the claim. The insured moved for partial-summary judgment arguing that State Farm had violated WAC 284-30-330(7)’s prohibition of forcing first party claimants to litigation to recover “amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in such actions.” The Spokane County Superior Court ruled in State Farm’s favor, finding no evidence that State Farm’s actions were unreasonable, and dismissed the case with prejudice.
The insured appealed directly to the Washington Supreme Court, seeking a determination as to whether IFCA creates an independent and private cause of action for an insurer’s technical violation of the Unfair Claims Settlement Practices Regulations in the absence of an unreasonable denial of coverage or benefits.
Like many of the federal courts before it, the Washington Supreme Court struggled with the interplay of paragraphs 2, 3, and 5 of the statute, and ultimately found that the statute was ambiguous. The Court further admitted that the result of an isolated regulatory violation was not clear.
[G]iven that the trier of fact must find that an insurer acted unreasonably under subsection (1), and that such a finding mandates attorneys’ fees under subsection (3) and gives the trial court discretion to award treble damages under subsection (2), it is not clear what a finding of a regulatory violation accomplishes. (emphasis added).
. . .
IFCA explicitly creates a cause of action for first party insureds who were “unreasonably denied a claim for coverage or payment of benefits.” IFCA does not state it creates a cause of action for first party insureds who were unreasonably denied a claim for coverage or payment of benefits or “whose claims were processed in violation of the insurance regulations listed in (5),” which strongly suggests that IFCA was not meant to create a cause of action for regulatory violations.” (Internal citations omitted) (emphasis added).
In finding IFCA ambiguous, the Court then analyzed IFCA’s official ballot title and determined that it was not the legislature’s intent to create a private cause of action for mere technical violations.
This language does not suggest an intent to create a private cause of action for regulatory violations. Quite the opposite: it suggests that IFCA creates a case of action for unreasonable denials of coverage and also permits treble damages in some circumstances. On balance, we conclude that the legislative history suggests that IFCA does not create a cause of action for regulatory violations. (emphasis added).
The Washington Supreme Court then advised that Washington’s current pattern jury instruction on IFCA is a misstatement of the law. The current pattern instruction concludes that IFCA creates a cause of action if an insurer “unreasonably denied a claim for coverage” or “unreasonably denied payment of benefits,” or “violated a statute or regulation governing the business of insurance claims handling.” Based on the foregoing, this instruction is clearly incorrect.
The Perez-Crisantos decision is a rare win for insurers in what has become a very difficult jurisdiction. This decision should prove extremely important as IFCA claims, and IFCA claims premised solely on technical violations of Washington’s insurance regulations, are becoming more and more prominent. To the extent that you have detailed questions about this case or how it may affect any of your pending or future claims or litigation, do not hesitate to contact our office.
by Kerri Lether | Sep 17, 2015 | Events, Insurance Law
