The Consumer Protection Act (CPA) prohibits unfair and deceptive trade practices. Persons “injured in their business or property” may sue for injunctive relief, damages, attorney’s costs and fees, and treble damages. Krista Peoples and Joel Stedman sued their insurance carriers under the CPA for violating Washington claims-handling regulations and wrongfully denying them personal injury protection (PIP) benefits. The Washington Supreme Court analyzed whether Peoples and Stedman allege an injury to “business or property” in Peoples v. United Servs. Auto. Ass’n., — P.3d —-, 2019 WL 6336407 (2019).
PIP coverage is an immediate source of payment for out-of–pocket expenses resulting from a vehicle collision, regardless of fault. PIP covers “all reasonable and necessary” medical expenses for an insured’s injuries arising from a covered event. Under WAC 284-30-330(4), it is an unfair practice for an insurer to deny PIP coverage without first conducting a reasonable investigation. Under WAC 284-30-395(1), it is also an unfair practice to deny, limit, or terminate PIP coverage for any reason other than the medical bills “(a) [a]re not reasonable; (b) [a]re not necessary; (c) [a]re not related to the accident; or (d) [a]re not incurred within three years of the automobile accident.”
Peoples alleged USAA refused, without any individualized assessment, to pay medical provider bills whenever a computerized review process determined the bill exceeded a predetermined limit. As such, USAA’s failure to investigate or make an individualized determination regarding the reasonableness or necessity of a provider’s charges before denying payment violated WAC 284-30-330(4) and WAC 284-30-395(1). Peoples alleged this practice of algorithmic review resulted in a routine failure to pay all reasonable medical expenses.
Stedman alleged Progressive terminated PIP coverage whenever an insured reached “Maximum Medical Improvement” (MMI) and this practice violated WAC 284-30-395(1) He alleged termination of coverage on the basis of MMI resulted in routine failure to pay all reasonable medical expenses. He and class members sought to enjoin Progressive from using MMI to limit PIP claims.
Both insurance companies moved to dismiss the CPA claims on the grounds the insured was not “injured in [their] business or property.” The federal district court consolidated the cases solely for the purpose of asking the Washington Supreme Court court whether the plaintiffs alleged cognizable CPA injuries. The certified questions were as follows:
With regards to the injury to “business or property” element of a CPA claim, can insureds in Ms. Peoples’ and/or Mr. Stedman’s circumstances, who were physically injured in a motor vehicle collision and whose Personal Injury Protection (“PIP”) benefits were terminated or limited in violation of WAC 284-30-330, bring a CPA claim against the insurer to recover out-of-pocket medical expenses and/or to compel payments to medical providers?
With regards to the “injury to business or property” element of a CPA claim, can insureds in Ms. Peoples’ and/or Mr. Stedman’s circumstances, who were physically injured in a motor vehicle collision and whose Personal Injury Protection (“PIP”) benefits were terminated or limited in violation of WAC 284-30-330, bring a CPA claim against the insurer to recover excess premiums paid for the PIP coverage, the costs of investigating the unfair acts, and/or the time lost complying with the insurer’s unauthorized demands?
This case turned on the meaning of injury to “business or property” in the CPA. The CPA prohibits unfair or deceptive practices in trade or commerce. The legislature expressly declared the insurance business is one “affected by the public interest” and has prohibited insurers from engaging in unfair or deceptive acts as defined by the legislature or the insurance commissioner. The Washington Supreme Court has held a violation of an insurance regulation is a per se unfair or deceptive act or practice.
Plaintiffs in this case do not seek to hold their insurance companies liable for underlying personal injuries. Instead, they seek to hold their insurance companies liable for benefits owed under contract. Previous case law has not addressed CPA claims for benefits owed under contract and the Washington Supreme court found the legislature intended for insureds to be able to enforce Washington insurance regulations regardless of the type of benefits secured by their policies. As such, the Washington Supreme Court concluded the deprivation of contracted-for insurance benefits is an injury to “business or property,” regardless of the type of benefits secured by the policy.
An insured in these circumstances may recover actual damages, if proved, including out-of-pocket medical expenses covered, but denied, and can seek injunctive relief, such as compelling payment of the benefits to medical providers. Other business or property injuries, apart from the wrongful denial of benefits, caused by an insurer’s mishandling of a PIP claim are also cognizable under the CPA.
This new case law brings a new level of cognizance to handling firsts-party claims in Washington. Insurers have typically been cautious when handling first-party claims, due to potential allegations of bad faith. Now, the addition of potential claims under the CPA demand a heightened case analysis when determining the validity of demands for PIP benefits.