Washington Claims Compliance

PCVA Law, "What Are the Laws Regarding Insurance Bad Faith in Washington?"

In Coventry, the Washington Supreme Court evaluated a scenario involving a mudslide at an apartment construction site . The insurer ultimately denied the claim based on an applicable policy exclusion .

Soha & Lang PS, "Reasonable Stipulated Settlement Sets the Floor for Bad Faith Damages"

the insurer's failure to inform the insured of pertinent underinsured motorist benefits was deemed bad faith as a matter of law .

and similar first-party bad faith cases, the focus is not on whether the insurer hit a specific bi-weekly quota of letters, but whether the gaps in communication were "unreasonable, frivolous, or unfounded" .

the Court ruled on what constitutes a valid closing letter to trigger a statute of limitations under the Public Records Act . The Court held that an agency's mere use of the word "closed" is insufficient. A valid closing letter must explain how the request was fulfilled, why it is being closed, and explicitly state that the statute of limitations to seek judicial review has started to run .

the Washington Supreme Court temporarily embraced language suggesting that policyholders "must prove bad faith as a matter of law" to defeat summary judgment .

full text reference: https://caselaw.findlaw.com/court/wa-court-of-appeals/2074168.html

the Washington Court of Appeals demonstrated how this qualitative standard operates in practice . Following a property loss, the insurer paid the initial claim but subsequently ceased communication. The insureds repeatedly requested status updates over several months without response. The insurer finally provided a substantive update roughly seven months later.

: https://caselaw.findlaw.com/wa-court-of-appeals/1182997.html

the court established that a large disparity between an initial offer and an ultimate settlement/award does not automatically prove bad faith, but making an offer without "reasonable justification" constitutes bad faith .

as long as the insurance company acts honestly, bases its decision on adequate information, and does not overemphasize its own interests, a debatable coverage question or a simple misjudgment does not equate to bad faith . The insurer's conduct must transcend mere negligence or clumsiness .

the court reaffirmed that CPA claims are a primary vehicle for punishing bad faith conduct . A successful CPA claim allows the insured to recover actual damages, attorney's fees, and potentially treble damages (capped by statute).

a federal court applying Washington law found that a commercial property insurer's persistent unresponsiveness to the insured's phone calls, letters, and emails requesting status updates constituted a breach of the duty of good faith . The lack of frequency in communication forced the insured into litigation, serving as the factual basis for bad faith tort liability .

The recent federal case of Lee v. Berkshire Hathaway Guard Insurance Company perfectly illustrates the imposition of bad faith liability based almost entirely on an insurer's failure to provide status updates and communicate proactively during a property insurance claim.

an issue of first impression, the Washington Supreme Court held that an insurer defending under an ROR may not seek to recover defense costs from the insured, even if a court ultimately determines the underlying claims are not covered . The Court rejected the majority rule of other states (which often allows recoupment under an unjust enrichment theory) .

that an insured does not need to present evidence of "objective symptomatology" (physical manifestations of distress) to recover emotional distress damages in an insurance bad faith case, distinguishing it from standard negligent infliction of emotional distress claims .

The Supreme Court examined RCW 51.52.050(1), which requires that whenever an order is made, it must be promptly served on the "worker, beneficiary, employer, or other person affected thereby" . The Court concluded that an attending physician is a "person affected" by a closing order because the closure terminates the physician's right to receive payment for treating the worker .

the Washington Supreme Court explicitly overruled Ellwein on this point. The Smith court clarified that Washington analyzes bad faith like any other tort.

. This enhanced obligation requires the insurer to give equal consideration to the insured's interests, fully disclose conflicts, thoroughly investigate, retain competent defense counsel, and keep the insured continually updated on settlement offers and case progress .

. The Tank court recognized that defending under an ROR inherently creates potential conflicts of interest between the insurer and the insured. Consequently, an insurer utilizing an ROR is held to an "enhanced obligation of fairness" .

and Smith v. Safeco Ins. Co. (2002/2003)—the insurer must timely communicate its "investigations and evaluations" .

the court highlighted untimely investigations and delayed handling as actionable bad faith .

a marine policy was rescinded because the insured failed to disclose a partnership interest in the vessel; the court held this was a material nondisclosure, protecting the insurer from bad faith claims .

where the court noted that a policyholder could not use the CPA or IFCA to obtain policy coverage by estoppel that otherwise did not exist .