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. 

The 9th Circuit Court of Appeals (9th Circuit) recently issued an unpublished decision affirming the District Court’s grant of summary judgement in favor of BITCO General Insurance Corporation (BITCO).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

On July 21, 2025, after almost 15 years of litigation, the 9th Circuit Court of Appeals affirmed the Western District Of Washington’s summary judgment decision in favor of Northland Insurance Company dismissing all contractual and extra-contractual claims. The 9th Circuit found that injunctive relief and discretionary costs arising therefrom do not constitute covered monetary damages. Furthermore, the 9th Circuit held that money damages resulting from an insured’s deliberate actions cannot constitute a covered “occurrence.” Lether Law Group represented Northland in both the Western District Washington and 9th Circuit Court of Appeals.

In 2012, an injunction was entered against Kitsap Rifle and Revolver Club (KRRC) whereby the club was prohibited from using its property as a shooting range until in complied with Kitsap County’s permitting requirements. Per KRRC, such permitting costs were approximately $400,000. It was undisputed that these costs were “the result of KRRC’s deliberate actions.”

KRRC then sought commercial general liability insurance coverage for the costs to comply with the injunction and obtain permits. KRRC also argued that the costs to comply with permitting was a covered defense cost. KRRC further asserted that Northland’s refusal to pay such fees and costs constituted bad faith, violation of Washington’s Consumer Protection Act, and violation of the Insurance Fair Conduct Act.

The District Court dismissed the KRRC’s claims, finding that the KRRC caused damage to its own property in developing the land in violation of Kitsap County ordinances. The District Court reasoned that, as the Northland policies strictly provided coverage for damage to third-party property, damage to KRRC’s own property did not qualify for coverage. Further, the District Court agreed with Northland that the KKRC’s claims did not constitute monetary damages as required by the policies because no such monetary damages had been incurred. Finally, the District Court found that the Club’s claims did not constitute an “occurrence” because permitting costs were not only foreseeable but also known and ignored by the Club.

The 9th Circuit affirmed in whole. “[T]he monetary damages for which KRRC seeks coverage—are the result of KRRC’s deliberate actions…Consequently, whatever money damages KRRC faces are not attributable to an “occurrence” and are therefore not covered by Northland’s CGL policies.” The 9th Circuit further held that the permitting costs were “a discretionary cost KRRC must pay only because it elected to develop its property” and therefore were not a defense cost or otherwise within the scope of the Northland policies.

Lether Law Group has extensive experience in the Washington State Courts, the Washington State Court of Appeals, Washington Federal Courts, and the 9th Circuit Court of Appeals litigating insurance coverage disputes in a wide variety of claims. If you have questions about commercial general liability coverage, Washington extra-contractual claims, or 9th Circuit’s decision, we invite you to contact us directly.

On July 29, 2025, the United States District Court for the Western District of Washington issued a summary judgment ruling in a matter entitled Ngethpharat v. State Farm Mut. Auto. Ins. Co., regarding State Farm’s methods for determining actual cash value (ACV) for total losses in Auto Physical Damage (APD) claims. Ngethpharat is an ongoing class action against State Farm accusing the carrier of violating Washington law by applying a “typical negotiation” deduction in calculating ACV.

A “typical negotiation” deduction is a reduction in the ACV calculation based upon a presumption that an advertised price for a comparable auto could be negotiated at the point of sale. The Washington Office of the Insurance Commissioner has promulgated WAC 284-30-391, which sets forth the methods and standards of practice for settlement of total loss vehicle claims. In its July 29, 2025 ruling, the Court held that “typical negotiation” deductions are not permitted under this regulation and that State Farm’s violation of the WAC constituted a per se violation of the Washington Consumer Protection Act (CPA), RCW 19.86 et seq.

As a demonstration of the potential implications of this type of ruling, the Court held that the Class Plaintiffs had produced uncontroverted evidence of CPA damages in the amount of $54,650,595.28.

The Ngethpharat matter is ongoing and is certain to include additional motions practice and likely appeals to the Ninth Circuit Court of Appeals. The question of whether these types of discounts rise to the level of an actual CPA violation has not been decided by any Washington appellate court, and the District Judge’s decision in Ngethpharat is ultimately not binding on any other court. This issue may ultimately need to be brought before the Washington State Supreme Court before there is any ultimate resolution.

Lether Law Group has, for over 35 years, represented insurers, businesses, and individuals in significant claims. Lether Law Group is currently involved in some of the most high-value claims in the State of Washington. We pride ourselves on our track record of fair and equitable resolutions in tough cases.

If you have questions about total loss valuation practices, class exposure, or compliance risks arising from this decision, we invite you to contact us directly.

In November, several new faces were elected to various positions within the Washington State government. This includes Patty Kuderer, who defeated Phil Fortunato to become Washington’s new Insurance Commissioner.

Recently, an AM Best report revealed some of the areas in which the newly elected Kuderer wants to implement reforms within Washington’s complex insurance code. House Bill 1199, which Kuderer is backing, would affect how the State regulates insurance code violations. The current system mandates that fines imposed by the Commissioner are directed to a general fund operated by the State. However, Kuderer argues that the current system does not provide restitution to affected consumers. Instead, the new bill would allow the Commissioner to directly order the payment of restitution to affected consumers.

While industry groups have expressed concerns about these measures, arguing that regulators can already negotiate penalties exceeding the current $10,000 limit, Kuderer believes per-violation fines are necessary to ensure accountability on the part of insurers. In supporting the bill, Kuderer looked to 40 other states that have passed similar regulations.

Another change would be to the system in which complaints are addressed by the Commissioner. Kuderer has requested a $470,000 budget increase to establish a claims review team consisting of three full-time employees focused on dispute resolution between claimants and their insurers.

In addition to resolving issues of restitution, Kuderer also wishes to address underwriting practices that may disproportionately affect policyholders based on race, gender, income, or national origin.

HB 1199 had its first public hearing in the House Committee on Consumer Protection & Business on January 24.

Lether Law Group actively tracks proposed changes to State laws across multiple jurisdictions to keep our clients fully apprised of any new developments. If you have questions about the implications of Washington’s upcoming legislative session or general questions in regard to compliance with Washington insurance law, please feel free to contact our office.