Washington courts have imposed a duty of good faith practices on insurance companies for more than half a century. This duty of good faith has been codified by the legislature. The insurance commissioner pursuant to authority vested by the legislature has promulgated regulations defining specific acts and practices which constitute a breach of an insurer’s duty of good faith.

In 2007 voters in Washington approved Referendum 67 (“R67″) and the Washington Insurance Fair Conduct Act.

The Insurance Fair Conduct Act gives first party claimants a cause of action for unreasonable denial of coverage or payment of benefits by an insurer. The act authorizes recovery of actual damages, reasonable attorney’s fees, litigation costs, and punitive damages at the discretion of the court.

A first party claimant is someone who is “asserting a right to payment as a covered person”. By case law PIP and UIM beneficiaries under an auto insurance policy are first party claimants. [1]

Third party insurance beneficiaries may be entitled to punitive damages under already existing Washington case law. [2]

Also, both first and third party insureds may have the possibility to pursue damages, including a capped punitive damages claim, under the Washington Consumer Protection Act. [3]

To pursue a claim under the Insurance Fair Conduct Act a claimant must serve notice on the insurance company and the insurance commissioner twenty days before filing an action in court.

An insurance carrier’s denial of a claim is not, in and of itself, bad faith. The law of good faith insurance practices has evolved over a long period of time and is complex.

This article is a short summary of the law of insurance claims practices in Washington and is not a substitute for legal advice. If you have questions about insurance claims practices you should consult an attorney.

[1] Rones v. Safeco Ins.Co., 119 Wn.2d 650, 835 P.2d 1036 (1992).

[2] Safeco v. Butler, 188 Wn.2d 383, 823 P.2d 499 (1992), Kirk v. Mt. Airy Ins. Co., 134 Wn.2d 1124 (1998).

[3] RCW 19.86.090.