Insurance Bad Faith in Washington

What is Insurance Bad Faith?

Insurance bad faith is deception, dishonesty, inequity, and unfair treatment of the insured.

When you buy insurance, your agent seems to be your best friend. But when you file a claim, that friendship is nowhere to be seen. The insurance company will have you deal with the claims department. You may then encounter an outright denial of your claim, long delays in getting payment, or an offer for substantially less than you deserve. When that happens, the insurance company may be acting in bad faith.

  • Deception, dishonesty, inequity and unfair treatment are just plain wrong. You paid for an insurance policy – so you are a client and you should be treated fairly and honestly.
  • Washington State law provides that you can hold an insurance company — and in some cases, even an insurance adjuster — legally liable for bad faith claims handling if their handling of your insurance claim violates the Insurance Fair Conduct Act, RCW 48.30.015.
  • This law is a good for consumers. If your insurance company has treated you badly, you can use this law to level the playing field.

What is IFCA?

The Washington Insurance Fair Conduct Act

  • IFCA is a favorable law for insureds when they deal with an insurance claim and their own insurance company.
  • Washington IFCA law declares that 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. 
  • This means that the insurance company must deal fairly with their insureds, and they must give equal consideration to the interests of their insured.
  • The Insurance Fair Conduct Act specifically prohibits bad faith denials or bad faith payments. RCW 48.30.015

How Does IFCA Work?

Any first party claimant to a policy of insurance who is unreasonably denied a claim for coverage or payment of benefits by an insurer may bring an action in the superior court of Washington State to recover the actual damages sustained, together with the costs of the action, including reasonable attorneys’ fees and litigation costs. To file an IFCA notice and a lawsuit work with your attorney or contact the insurance commissioner.

IFCA establishes a cause of action for a person covered by an insurance policy or contract if an insurance company wrongfully denies a claim or inappropriately processes a claim. IFCA defines what types of conduct by an insurance company or adjuster constitute a violation of the law.

A successful plaintiff can recover “actual damages sustained, together with the costs of the action, including reasonable attorneys’ fees and litigation costs.” Costs include “actual and statutory litigation costs, including expert witness fees.”

In addition, the court has authority to “increase the total award of damages to an amount not to exceed three times the actual damages.”

The Washington Court of Appeals held that the IFCA requirement to act in “good faith” applies not only to the insurance company, but to the adjuster working for the insurance company as well. That means you may be able to file an IFCA claim against either or both the insurance company and the insurance adjuster.

IFCA Violations

The WAC regulations cited in the IFCA include an extensive list of specific practices that constitute unfair claims settlement practices in WAC 284-30-330. They include:

(1) Misrepresenting pertinent facts or insurance policy provisions.
(2) Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies.
(3) Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies.
(4) Refusing to pay claims without conducting a reasonable investigation.
(5) Failing to affirm or deny coverage of claims within a reasonable time after fully completed proof of loss documentation has been submitted.
(6) Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear. …
(7) Compelling a first party claimant to initiate or submit to litigation, arbitration, or appraisal to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in such actions or proceedings.
(8) Attempting to settle a claim for less than the amount to which a reasonable person would have believed he or she was entitled by reference to written or printed advertising material accompanying or made part of an application.

(12) Failing to promptly settle claims, where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage.
(13) Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement.

(16) Failing to adopt and implement reasonable standards for the processing and payment of claims after the obligation to pay has been established.

Prompt Investigation Standards

In addition, WAC 284-30-370 provides the standards for prompt investigation of a claim:

Every insurer must complete its investigation of a claim within thirty days after notification of claim, unless the investigation cannot reasonably be completed within that time.

What Does It Take To Prove an IFCA Claim?

Bad Faith will Prove an IFCA Claim

  • Failure to promptly and properly investigate claims
  • Delay in the payment process for no good reason, especially when the delay creates a financial hardship on the insured
  • Training insurance adjusters to routinely deny claims

This is not Not Enough to Prove an IFCA Claim

  • Denial of a claim alone — or an offer for less than full coverage — is probably not enough to constitute bad faith.
  • To prove a bad faith claim by an insurance company or adjuster it helps if you can show:
    • Specific unfair claims settlement practices such as your claim not promptly investigated
    • Misrepresentation of policy provisions
    • Unreasonable communication practices.

There are Additional Remedies for Mistreated Insurance Consumers!

In addition to a cause of action for insurance bad faith under the IFCA, there are situations in which you may have a claim under the Washington Consumer Protection Act for unfair and deceptive practices or a common law breach of contract claim. Your attorney can explain whether these options may also be available.

It’s Not Complicated

All insurance policy holders should be treated fairly.

If your insurance company treats you badly, then you may have an IFCA claim against them. Having an injury accident and needing to pursue an insurance claim is bad enough. If your insurance company then adds insult to injury by violating your rights, you may have an IFCA claim.

Talk to us about your rights and a possible IFCA claim.

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Chris Sharpe

Chris Sharpe

Christopher Sharpe is the go to attorney for injured persons. His law firm is helpful, honest, and knowledgeable about workers' compensation and personal injury law in the State of Washington. Chris has been helping injured Washington State workers for over 40 years. He has built his practice on thoroughly educating, honestly helping, and successfully representing workers throughout Washington State.

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