No groundbreaking news here, but it’s been pretty quiet in the Washington bad faith world and I haven’t written about this issue before, so I thought I’d report on this opinion from Judge Martinez in the Western District of Washington. In it he reaffirms what other cases have previously established – that if a carrier denied a claim prior to December 6, 2007, the effective date of the date of the Insurance Fair Conduct Act (“IFCA”), a party alleging bad faith cannot also have a claim that the carrier violated the IFCA. You can see a copy of the case here.
This case arose out of a construction dispute and lawsuit in 2000. Country Casualty denied coverage and declined to defend the defendants in 2004, well before the enactment of the IFCA. The parties went to arbitration and on January 8, 2008 the plaintiffs won. The defendants then filed for bankruptcy and subsequently settled with the plaintiffs. As part of that settlement they assigned their rights under their insurance policy to the plaintiffs.
On January 21, 2011, counsel for the plaintiffs sent Country Casualty a demand letter for nearly $900,000, which Country Casualty declined to pay. Plaintiffs then filed suit, alleging among other things IFCA violations. Judge Martinez granted Country Casualty’s motion for partial summary judgment, concluding that because the refusal to defend and indemnify took place before the enactment of IFCA, plaintiffs could not assert such an IFCA claim, as other Washington federal courts had previously held. The fact that Country Casualty again rejected the claim in 2011 made no difference.
Plaintiffs also tried to argue that Country Casualty had violated the insurance provisions of the Washington Administrative Code (“WAC”) after the enactment of the IFCA. Relying upon his own prior decisions, Judge Martinez ruled that an alleged WAC violation after the enactment of the IFCA does not constitute an IFCA violation if there was not also an unreasonable denial of coverage after the enactment of IFCA. Because the denial took place in 2004, plaintiffs could not base an IFCA claim solely on the later WAC violations.
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