Insurance Coverage Alert
May 2007
Authors:
Todd L. Nunn
+1.206.370.7616
todd.nunn@klgates.com
Marla L. Goodman
+1.206.370.7826
marla.goodman@klgates.com
K&L Gates comprises approximately
1,400 lawyers in 22 offices located in
North America, Europe and Asia, and
represents capital markets participants,
entrepreneurs, growth and middle market
companies, leading FORTUNE 100 and
FTSE 100 global corporations and public
sector entities. For more information,
please visit www.klgates.com.
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Governor of Washington Signs Insurance
Fair Conduct Act into Law
On May 15, 2007, Governor Chris Gregoire signed the Insurance Fair Conduct Act into
law.1 The bill expands the definitions of unfair insurance practices under RCW 48.30.010
and adds new remedy provisions to chapter 48.30, to allow policyholders to sue insurers
for unreasonable denials of coverage or of payments of benefits. These new bases for a
policyholder claim are in addition to the breach of contract and bad faith claims already
available. The key provisions of the bill are:
„
The new remedy is available to an individual, corporation, association, partnership or
any other legal entity who asserts the right to payment as a covered person under the
insurance policy or insurance contract at issue.
„
Damages are available upon a finding that (a) the insurer unreasonably denied
coverage or payment; or (b) the insurer violated one of five rules already adopted by
the Office of the Insurance Commissioner (OIC) to regulate insurer conduct or any
additional rules that the OIC adopts that are intended to implement the Act. The five
current rules govern insurers’ conduct in the following areas: (1) specific unfair claims
practices;2 (2) misrepresentation of policy provisions;3 (3) failure to acknowledge
pertinent communications;4 (4) standards for prompt investigation;5 and (5) standards
for prompt, fair and equitable settlements.6
„
Before suit can be filed, a claimant must provide 20 days written notice to both the
insurer and the OIC. The notice must provide the basis of the cause of action. If the
insurer does not resolve the claim during that 20-day period, the claimant may then
bring suit without further notice.
„
If a court finds the insurer violated the Act, the court must award the actual damages
sustained, reasonable attorney’s fees and actual and statutory litigation costs, including
expert witness fees.
„
The court has the discretion to also award treble damages.
„
The bill does not limit the court’s authority to make any other determination regarding
unfair or deceptive practices or to provide any other available remedy.
„
The bill exempts health plans offered by health carriers.7
The bill was sponsored by the Senate Committee on Consumer Protection & Housing.
Senators Weinstein, Kline and Franklin were the original sponsors. It will become effective
90 days from the date of signing.
1
2
3
4
5
6
7
ESSB 5726 (2007).
WAC 284-30-330.
WAC 284-30-350.
WAC 284-30-360.
WAC 284-30-370.
WAC 284-30-380.
“Health plan” and “health carrier” are defined in RCW 48.43.005.
Insurance Coverage Alert
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