Effective July 21, 2007, Washington State’s new "insurance fair conduct act" ("Act") will expand the range of private claimants’ remedies against an insurer for a proven "bad faith" denial of coverage. Statutory penalties, including un-capped treble damages, are made available under the Act for (1) an insurer’s unreasonable denial of a "claim for coverage or payment of benefits," or for (2) an insurer’s proven violation of several identified Washington Administrative Code ("WAC") provisions.

Our Alert! of March 7, 2007 discussed the Act’s provisions before several amendments were made, some in connection with its initial passage on the Senate floor on March 13, 2007, and others in connection with its passage in the House on April 5, 2007. The Act was then signed by the Governor on May 15, 2007. As amended, the Act eliminated a proposed "negligence" standard for bad faith claims, which had appeared in earlier-introduced versions. As with all prior versions, the Act adds provisions to Revised Code of Washington ("RCW") 48.30.010 regarding private litigation against insurers.

The Act prohibits "unreasonably" denying "a claim for coverage or payment of benefits to any first party claimant," and contains a broadly-sweeping definition of who is a "first party claimant" entitled to the Act’s enhanced remedies. If individuals or legal entities are "asserting a right to payment as a covered person under an insurance policy … arising out of the occurrence of the contingency or loss covered," they are eligible claimants under the Act. From an insurer’s perspective, this definition arguably excludes assignees as claimants under the Act, and excludes all underlying plaintiffs who may have sued the policyholder, because they would not be a "covered person" under any insurance policy. Except for "a health plan offered by a health carrier," no particular type of insurance policy is excluded on the face of the Act. The Act’s penalties and enhanced remedies are made available for proven violations of certain WAC provisions as well. Those provisions are listed in the Act as follows:

"(a)WAC 284-30-330, captioned ‘specific unfair claims settlement practices defined’;

(b)WAC 284-30-350, captioned ‘misrepresentation of policy provisions’;

(c)WAC 284-30-360, captioned ‘failure to acknowledge pertinent communications’;

(d)WAC 284-30-370, captioned ‘standards for prompt investigation of claims’;

(e)WAC 284-30-380, captioned ‘standards for prompt, fair and equitable settlements applicable to all insurers’; or

(f) An unfair claims settlement practice rule adopted under RCW 48.30.010 by the insurance commissioner intending to implement this section."

The Act prescribes a mandatory award of reasonable attorneys’ fees, and "actual and statutory litigation costs, including expert witness fees" in addition to the damages sustained by a successful claimant in Superior Court of the State of Washington.

The Superior Court also "may" enter a further award, after finding either the "unreasonable denial" or violation of the WAC rules as referenced above, of triple the actual damages without a cap.

At least 20 days before filing a lawsuit, the claimant must provide written notice to the insurer and Washington State’s Office of the Insurance Commissioner. Alawsuit may be brought under the Act without further notice, "[i]f the insurer fails to resolve the basis for the action within the twenty-day period after the written notice."

As signed into law, the Act’s effective date is July 21, 2007.

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