In April 2007, Moun Keodalah and an uninsured motorcyclist collided in an intersection in Washington. After Keodalah stopped at a stop sign and entered the intersection, the motorcyclist collided with Keodalah’s truck. Keodalah was injured and the motorcyclist perished. Keodalah carried underinsured motorist (UIM) coverage with Allstate.
Police investigated and determined the motorcycle was traveling approximately 70 mph in a 30 mph zone. Police also reviewed Keodalah’s cell phone records and confirmed that he was not using his phone at the time of the collision. Allstate also investigated. Witnesses and an accident reconstructionist confirmed that the motorcycle was speeding and concluded that speed caused the collision.
Keodalah asked Allstate for the $25,000 UIM policy limit. Allstate offered $1,600 to settle the claim, finding that Keodalah was 70 percent at fault. Keodalah asked Allstate to explain its evaluation and Allstate increased its offer to $5,000.
Allstate was in possession of both police and reconstructionist evaluations. Allstate designated Tracey Smith as its 30(b)(6) representative. Smith claimed Keodalah had run the stop sign and was using his cell phone at the time of collision. Smith later admitted she was in error. Allstate offered Keodalah $15,000 to settle prior to trial. Keodalah refused.
A jury awarded Keodalah $108,868.20 in damages. The trial court entered judgment against Allstate for $25,302.95. Keodalah filed a second lawsuit against Allstate and included claims against Smith, including allegations of violation of Washington Insurance Fair Conduct Act (IFCA), insurance bad faith, and CPA violations. The trial court granted dismissal of claims against Smith under 12(b)(6). Keodalah appealed.
The Court of Appeal analyzed (1) whether IFCA creates a private cause of action for violation of a regulation; (2) whether an individual insurance adjuster may be liable for bad faith; and (3) whether an individual insurance adjuster may be liable for violation of the CPA. The Court of Appeal ruled against Keodalah on his IFCA claim and reversed the trial court’s CR 12(b)(6) dismissal. Smith filed a petition for review.
The court focused on the statutory duty it found in RCW 48.01.030, which provides:
The business of insurance is one affected by the public interest, requiring that all persons be actuated by good faith, abstain from deception, and practice honesty and equity in all insurance matters. Upon the insurer, the insured, their providers, and their representatives rests the duty of preserving inviolate the integrity of insurance.
The court used the three prong test articulated in Bennett v. Hardy, 113 Wn.2d 912, 784 P.2d 1258 (1990), to analyze the statute. Bennet examined (1) whether the plaintiff is within the class for whose benefit the statute was enacted, (2) whether legislative intent, explicitly or implicitly, supports creating or denying a remedy, and (3) whether implying a remedy is consistent with the underlying purpose of the legislation.
The first Bennet factor was not met. Plaintiffs must establish they fall within the class of persons intended to be protected by a statute. If the statute serves the general public instead of an identifiable class of persons, there is no duty to any individual unless a specific exception applies. RCW 48.01.030 specifically states it protects the public interest and its purpose is to protect the integrity of insurance.
In similar fashion, the second Bennet factor was also not met. RCW 48.01.030 expressly recognizes a “duty,” but it fails to provide an express cause of action based on violations of that duty. The court looked to the insurance code for clarification. The presence of such specific provisions for enforcement of the insurance code suggested that the legislature’s omission of a provision creating a private cause of action for violations of RCW 48.01.030’s duty of good faith was intentional.
Last, the third Bennet factor was not met as well. Plaintiff’s cause of action must be consistent with the legislature’s purpose in enacting RCW 48.01.030. The legislature’s purpose was to support the insurance code’s specific enforcement mechanisms and the existing common law cause of action for insurance bad faith as a matter of policy.
Given the above, the Bennet factors are not conducive to an implied cause of action in this case. Therefore, the court held RCW 48.01.030 does not create an implied cause of action for insurance bad faith.
Keodalah alleged that the adjuster Smith committed per se CPA violations, as defined in the Washington Administrative Code (WAC), by engaging in bad faith. Keodalah alleged various violations found in the WAC. The alleged violations all pertain to “practices of the insurer.” The court held that the CPA claims against Smith, which were premised on regulatory violations, were properly dismissed.
Keodalah’s CPA claim based on RCW 48.01.030 fails for a similar reason as does his tort claim. The court limited bad-faith tort claims to the context of the insurer-insured relationship and limited CPA claims based on breach of the statutory duty of good faith.
In sum, this case stands for the propositions that Keodalah has rights of action against Allstate, his insurance company, arising out of its conduct in regard to the subject claim, but not against the claim representative of Allstate, (Smith). Employee adjusters are not subject to personal liability for insurance bad faith or per se claims under the CPA.