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Washington’s Insurance Fair Conduct Act Does Not Create A Cause Of Action For Insurance Regulatory Violations

Perez-Crisantos v. State Farm Fire and Casualty Company, — Wn.2d —, — P.3d —, 2017 WL 448991

The Washington Supreme Court recently held the Insurance Fair Conduct Act (IFCA) does not create an independent private cause of action for violation of insurance regulations of the Washington Administrative Code (WAC) in the absence of “any unreasonable denial of coverage or benefits.”

Perez was rear-ended by an underinsured motorist. After collecting the tortfeasor’s policy limits, Perez made a claim under his UIM policy with his insurer, State Farm. State Farm retained a medical doctor, who examined Perez and opined as to his injuries caused by the accident and what subsequent treatment was reasonable and necessary. Based upon the doctor’s opinions, State Farm determined Perez was made whole by the tortfeasor’s policy limits and did not pay benefits under the UIM policy. Perez initiated suit against State Farm and was eventually awarded $24,000 in UIM benefits.

Perez then amended his Complaint and alleged State Farm violated IFCA by forcing him to initiate litigation as a result of unfair settlement practices. State Farm moved for summary judgment dismissal of Perez’s claims against State Farm on the basis (1) there was no genuine dispute that it had acted reasonably and in good faith throughout the process, (2) Perez had not alleged a cognizable claim because there was no denial of coverage or benefits; and (3) the parties had a reasonable disagreement regarding the value of the claim. The trial court granted summary judgment, concluding there was no evidence to support any unreasonable conduct on the part of State Farm.

The Washington Supreme Court affirmed the trial court’s dismissal of the case. The Court further analyzed the statutory language and history to determine if IFCA allows first party insureds to bring suit against their insurer for WAC insurance regulatory violations. The Court held that the plain language of the IFCA statute and legislative history does not. Instead, IFCA states regulatory violations are merely relevant to the award of attorneys’ fees and damages associated with that derivative violation. What IFCA does create is a cause of action for first party insureds who were “unreasonably denied a claim for coverage or payment of benefits.”

The Washington Supreme Court’s opinion resolves a split among Washington State Federal Courts as to whether a WAC regulatory violation alone can support a cause of action under IFCA. This opinion conclusively precludes plaintiffs from basing IFCA actions on mere regulatory violations and exposing insurers to the risk of treble damages and attorney fees and costs.

ABOUT THE AUTHOR: Colin Hutchinson-Flaming is an associate attorney in Tyson & Mendes’ Seattle office. Mr. Hutchinson-Flaming specializes in general liability, employment, and construction litigation. Contact Colin at 206.420.4267 or chutchinson-flaming@tysonmendes.com.