Washington Supreme Court Ruling May Limit Suits Under Insurance Fair Conduct Act


WASHINGTON STATE, Feb. 2 – Washington state’s Supreme Court has potentially limited insured’s rights to sue insurers under the state’s Insurance Fair Conduct Act.

In Perez-Santos v. State Farm, the state Supreme Court held that State Farm could not be held liable based on alleged unfair conduct in handling claims for medical bills arising out of a car accident.  The Court ruled that the IFCA does not create an independent right of action for regulatory missteps, but allows a right of action when an insurer unreasonably denies or delays benefits.

Practitioners in the state say that the ruling, however, may raise more questions than it answers, according to a recent report in Law360.com.

In the case, the insured,  Perez-Crisantos, was in a car accident in November 2010 and alleged more than $50,000 in medical bills. State Farm agreed to pay the $10,ooo in first party personal injury protection (PIP) benefits. The insurer denied, however, the insured’s  underinsured motorist(UIM) claim, after concluding the claims included bills for excessive chiropractic treatment and unrelated shoulder surgery.

Perez-Crisantos sued State Farm in Washington state court, and  ultimately won another $24,000 from the insurer on his UIM claim in an arbitration.  Thereafter,
Perez-Crisantos amended the state court civil complaint alleging State Farm’s violation of a Washington Administrative Code provision prohibiting insurers from forcing a first-party policyholder to litigate to recover “amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in such actions.”

A state judge granted State Farm’s motion to dismiss, concluding there was no evidence of “some sort of incentive program to ‘lowball claims.'”

On appeal to the state Supreme Court,  Perez-Crisantos argued regulatory violation alone could support an IFCA claim, but the justices disagreed. The Supreme Court, in an opinion written by  Justice Steven C. Gonzalez, found  no indication that the Washington state Legislature intended to create an independent cause of action under the statute solely for regulatory violations.   “Instead, IFCA makes regulatory violations relevant to the apportioned attorneys’ fees and damages associated with that derivative violation,” Gonzalez wrote.

IFCA permits courts to award successful claimants attorneys’ fees and authorizes courts to award triple damages.

Washington Justice Debra L. Stephens wrote in a concurring opinion that she favored affirmed the judgment in favor of State Farm without tackling the issue of whether a regulatory violation gives rise to an independent cause of action under the IFCA. She wrote, “I fear that the majority’s gratuitous ‘holding’ on IFCA will lead to confusion and will frustrate the intent of this remedial statute.”

Perez-Santos v. State Farm (Wash. Feb. 2, 2017)



Washington: No Water Damage Coverage For Unoccupied Building


WASHINGTON, June 9 – The Supreme Court of the state of Washington has ruled that there is no coverage under a property insurance policy for water damage to a vacant building, rejecting  the policyholder’s claims that provisions relating to vacancy and building occupation were ambiguous.

Essex Insurance Company issued a property insurance policy to Kat Suen and May Far Lui . The insureds had evicted the building tenant, but did not provide notice to Essex that the building was no longer occupied.  Subsequently, water damage was caused on the property after a a sprinkler pipe froze and burst.

After issuing  payments totaling $293,598.05, Essex discovered that the building had been unoccupied for almost 60 days at the time of the loss. Essex sent a denial letter to the Luis, referencing a policy provision which suspended coverage when the insured property was vacant or unoccupied.

Essex offered the Luis not to recoup the $293,598.05 paid if the Luis waived additional payment on the claim, which the Luis contended was  $758,863.31 in total.  The Luis declined, and sued Essex to recover the full claimed amount plus bad faith damages. In doing so, they claimed that the vacancy exclusion did not apply because the property was not vacant for  60 consecutive days.  That was not disputed by either side.

The trial court denied Essex’s summary judgment motion but an appeals court reversed.  In a unanimous opinion, the Washington Supreme Court affirmed an appeals court’s finding of no coverage, and held that a typical insured would understand that the policy in question substantially limited coverage from the first day an insured structure became vacant, and suspended coverage altogether if the building stays vacant for 60 days, calling the language plain and unambiguous.  The Court further found that water damage was a coverage which was restricted after the first day the insured building became vacant, concluding therefore that  there was no coverage for the water damage.

The Supreme Court rejected the insured’s argument that the vacancy provisions of the policy were vague and ambiguous, finding that such arguments ignored the plain meaning of the provisions and would create an unresolvable contradiction between the vacancy provisions which, in the opinion of the Court, simply did not exist.

Lui v. Essess Ins. Co., (Wash. June 9, 2016)Lui v. Essex Ins. Co., (Wash. June 9, 2016)

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