For Disputed Insurance Claims, Don’t Forget the Three R’s: Washington Insurance Rules, Regulations and Remedies Aid Businesses when Claims are Delayed or Wrongly Denied (Article by Paul R. Raskin)
With the disruption and hardship many have recently encountered, prompt and successful resolution of insurance claims can be critical to business and individual claimants. Lending aid, Washington rules, regulations, and remedies are favorable to insureds when a claim is delayed or denied. Washington insurance rules require that exclusions be strictly and narrowly construed and any ambiguity in coverage be interpreted in favor of the insured, among others. Regulations prohibit delay, low-ball settlement offers, and other misconduct historically employed to limit or deny claims. Remedies includes attorney’s fees and, when an insurer unreasonably denies a claim or fails to pay benefits, treble damages. The “Three R’s” – Rules, Regulations, and Remedies – can be instrumental to obtaining best results for insurance claimants.
Washington Insurance Policy Interpretation Rules Favor Insureds
Washington law applies rules of insurance policy interpretation favorable to insureds that can make the difference between coverage and denial. Chief among these is that ambiguity must be construed in favor of the insured. Under this rule, where there are two reasonable interpretations of an insurance clause, the meaning and construction most favorable to the insured must be applied. Other policy interpretation rules prevent insurers from broadly construing exclusions or imposing narrow or technical interpretations to avoid or limit coverage:
· “Exclusions from insurance coverage are contrary to the fundamental protective purpose of insurance,” and courts “will not extend them beyond their clear and unequivocal meaning.”
· Insurance policies should be given “the kind of reasonable and sensible construction … that the average person purchasing insurance would give.”
· Insurance policies should be given a “practical” interpretation, not a “strained or forced construction that leads to an absurd conclusion, or that renders the policy nonsensical or ineffective.”
· Undefined terms in an insurance policy are given their ordinary and common meaning, not their legal, technical meaning.
Washington Regulations Protect Insureds
Washington Administrative Code (“WAC”) regulations impose strict requirements on insurers during the claims and settlement process. These claims handling regulations are codified at WAC Chapter 284-30. They contain “standards for prompt investigation of claims,” define specific “unfair settlement practices,” and address “insurer misrepresentation of policy provisions” and other insurer conduct. Violations of such regulations constitute “per se” violations of the Consumer Protection Act (“CPA”) and evidence of bad faith.
The regulations require prompt action by insurers and preclude foot-dragging. Insurers should generally respond to insurer communications within ten working days and complete claim investigations within 30 days:
· WAC 284-30-360(3) (requiring response to “communications from claimant” within ten working days for individual insurance policies or 15 working days for group policies).
· WAC 284-30-370 (“Every insurer must complete its investigation of a claim within thirty days after notification, unless the investigation cannot reasonably be completed within that time”).
· WAC 284-30-330 (2) (requiring insurers to acknowledge and act reasonably promptly upon communications with respect to claims).
· WAC 284-330(5) (requiring insurers to affirm or deny coverage of claims within a reasonable time after completed proof of loss documentation has been submitted).
Insurers are required to fully disclose all benefits and coverages applicable to a claim, and provide written explanation of the basis for any denial:
· WAC 284-30-350(1) (“No insurer shall fail to fully disclose to first party claimants all pertinent benefits, coverages or other provisions of an insurance policy under which a claim is presented”).
· WAC 284-30-330(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” is unfair and deceptive act).
The regulations also prohibit commonly employed unfair settlement practices, including low-ball settlement offers, refusing to pay claims without reasonable investigation, and other insurer misconduct. For example:
· WAC 284-330(4) (“Refusing to pay claims without a reasonable investigation”).
· WAC 284-30-330(7) (“Compelling a first party claimant to initiate or submit to litigation by offering less than the amounts ultimately recovered”).
· WAC 284-30-330(6) (“Not attempting in good faith to effectuate a prompt, fair and equitable settlement of claims in which liability has become clear”).
· WAC 284-30-350(5) (“No insurer shall request a first party claimant to sign a release that extends beyond the subject matter that gave rise to the claim payment”).
Treble Damages, Attorney’s Fees and Other Remedies
Washington law affords substantial relief to insureds where an insurer unreasonably denies coverage or fails to pay benefits. The Insurance Fair Conduct Act (“IFCA”), RCW 48.30.015, provides that an insured may be awarded up to three times its actual damages plus attorney’s fees. IFCA’s treble damages provision applies for the benefit of all first-party claimants, including both businesses and individuals. Only health plans are excluded. IFCA has been instrumental to resolving disputed insurance claims, sometimes without litigation.
Exemplary damages and attorney’s fees also may be recoverable under Washington’s Consumer Protection Act (“CPA”) where an insurer violates WAC regulations or otherwise acts in bad faith.
Separate from IFCA and the CPA, attorney’s fees are also recoverable by an insured under common law where the insured is required to litigate to obtain coverage. In other words, if an insured is forced to file suit to obtain coverage and prevails, the insured is entitled to have its legal fees paid by the insurer irrespective of whether the insurer’s actions were reasonable. If the insurer acted unreasonably, the insurer may also be liable under IFCA for three times the insured’s damages.
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Facing a disputed insurance claim? Don’t forget the “Three R’s.” Engaging experienced counsel with a thorough understanding of the insurance policy and applicable law can be essential to obtaining best results.
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Paul Raskin represents business and individual insureds in disputed claims and insurance coverage, bad faith and IFCA litigation. Paul is listed in Super Lawyers, Best Lawyers and rated AV Preeminent.