In non-coronavirus news, the Washington Office of the Insurance Commissioner has enacted a new Washington Administrative Code trade practice regulation that goes into effect on August 1, 2020.  WAC 284-30-770.  This new WAC relates to “Adverse Notification Requirements.”  Going forward, for any coverage denial, final claim payment if it is less than what the insured claimed, or cancellation, termination, etc., the letter to the insured must contain the following language:

“If you have questions or concerns about the actions of your insurance company or agent, or would like information on your rights to file an appeal, contact the Washington state Office of the Insurance Commissioner’s consumer protection hotline at 1-800-562-6900 or visit www.insurance.wa.gov. The insurance commissioner protects and educates insurance consumers, advances the public interest, and provides fair and efficient regulation of the insurance industry.”

The foregoing language must be in the same font and size of the text of the rest of the letter and must appear either on page 1 or at the end of the letter.

Although the WAC does not go into effect for a couple of months, Lether Law Group is recommending that the above language be added to outgoing adverse claims correspondence immediately.

Also, although technically this WAC would not apply to ROR letters, it may be prudent to add the language to those correspondence as we often find that policyholders will argue that an ROR letter is tantamount to a denial.

New Washington Caselaw

In other developments, on May 7, 2020, the Washington State Supreme Court issued a decision reaffirming its long-held jurisprudence on the duty to defend.  Robbins v. Mason County Title Ins. Co., 2020 Wash. LEXIS 288.

In Robbins, the insureds sought defense and indemnity from the title insurance provider on their property in a dispute with a local Native American tribe over the tribe’s claim that it had the right to harvest shellfish on the insureds’ property.  The title insurer denied coverage and refused to defend the insureds.  The denial was based on the title insurer’s conclusion that the tribe’s claim was an “easement” and that “[a] treaty between the federal government and a Native American Indian tribe is not a record that imparts constructive notice pursuant to Washington law.” Robbins, 2020 Wash. LEXIS 288, *5.

The Robbins’ then sued in Mason County Superior Court alleging breach of contract and bad faith.  The Superior Court granted summary judgment in favor of the insurer.  The Court of Appeals reversed, finding that not only was there a defense obligation, but also finding that the title insurer had acted in bad faith as a matter of law when it denied the defense.  The Supreme Court accepted review of the Court of Appeals decision.

The Supreme Court affirmed, holding that the insurer breached the duty to defend in bad faith.  The primary basis for the Supreme Court’s ruling is based on its prior decision in Am. Best Food, Inc. v. Alea London, Ltd., 168 Wn.2d 398, 229 P.3d 693, 2010 Wash. LEXIS 250.  Where there is uncertainty in Washington law as to whether a defense is required, an insurer may not adopt its own interpretation of Washington law in order to justify denial of a defense.  Because the title insurer in Robbins adopted its own interpretation of the law on a subject that the Washington Court’s had not addressed, the insurer placed its interests ahead of those of its insureds and acted in bad faith.

This result is frankly not too surprising.  The Washington Supreme Court has been consistent on its stance on the duty to defend for the better part of the past two decades.

Truck Ins. Exch. v. VanPort Homes, 147 Wn.2d 751, 761, 58 P.3d 276, 282, 2002 Wash. LEXIS 718, *14.

There is, however, one aspect of the Robbins decision that is novel and should be highlighted.  The Washington Courts have long held that the duty to defend is triggered by the filing of a Complaint against an insured and the insured’s tender of that lawsuit to its insurer.  VanPort, supra., Woo v. Fireman’s Fund Ins. Co., 161 Wn.2d 43, 164 P.3d 454, 2007 Wash. LEXIS 555.

The insurer in Robbins argued that it could not have breached the duty to defend because the tribe’s harvest-rights claim had not been filed as a civil action, but merely was set forth in a demand letter to the insureds.  The Supreme Court rejected that argument based on the insurer’s policy language, which stated that the insurer would defend any “claim or suit” to which the insurance applies.  There has always been some ambiguity in Washington law regarding this issue and now the Supreme Court appears to have firmly resolved the issue.  Insurers with “claim or suit” language should be prepared to assign defense counsel even when the claims against their insureds have not been formalized in a lawsuit.

If you would like to discuss these recent developments in Washington law or any other matters, please feel free to contact us at any time.