We are frequently asked to clarify the deadlines for insurers to respond to insurance claims in Washington. Many times this is the result of the insurer’s receipt of a demand letter alleging bad faith, or imposing an extremely short deadline for the insurer’s response. But the rumors that short deadlines and alarming recoverable damages are applicable to third-party claims have been greatly exaggerated by a subset of the plaintiffs’ bar. Specifically, any statement by a third-party claimant alleging that it can collect under the Insurance Fair Conduct Act (IFCA) is false. IFCA and its treble damages provision apply only to first-party claims (i.e., claims by an insurer’s own insureds). RCW 48.30.015(1); Perez-Crisantos v. State Farm Fire & Cas. Co., 187 Wn.2d 669, 680, 389 P.3d 476, 481 (2017). However, note that insureds can assign their bad faith claims to third parties. [i]
As we’ve discussed in related articles [ii], [iii], [iv], five Washington regulations contain most of the requirements for proper acknowledgement, investigation and determination of insurance claims in Washington: WAC 284-30-330, -350, -360, -370, -380[v]] Like most administrative regulations, their language is less than clear. To add to the confusion, the regulations as a whole cover both first-party and third-party claims. We hope the attached chart can be a resource to clear up any confusion regarding insurers’ claim response deadlines:
In summary, don’t be fooled by third-party demand letters that seek your policy limits before you’ve had adequate opportunity to investigate and respond. Know your duties, document your file, and call us if you have further questions about the Insurance Fair Conduct Act (IFCA) and alleged insurer bad faith.
[i] While some courts have found that an insured breaches its duty to cooperate (in the insurance policy) when it enters into a covenant judgment, the Washington Supreme Court has held that an insured defendant has a right to independently negotiate a pre-trial settlement when his insurer refuses in bad faith to settle the plaintiff’s claims. Besel v. Viking Ins. Co., 146 Wn.2d 730, 169 P.3d 1 (2002). Assignments of bad-faith claims, covenant judgments and the “bad faith set-up” will be the subjects of an upcoming blog post.