Ruiz & Smart IFCA Book Chapter 1. Introduction

About the Book: Washington’s Insurance Fair Conduct Act 2025

In 2014, Ruiz & Smart attorney Isaac Ruiz debuted the definitive treatise about Washington’s Insurance Fair Conduct Act (IFCA), solidifying his place as one of the leading attorneys handling insurance bad faith and IFCA cases in this state. Since then, the book has been continually updated and is used by many lawyers seeking justice for insureds.

The following is an excerpt from Isaac’s book: Chapter 1. If you’re a lawyer who needs access to this resource, reach out to Ruiz & Smart.

§ 1. This Book’s Mission

The Insurance Fair Conduct Act (IFCA) is something we need to know about to represent our insurance clients.

But our cases are not about IFCA, and our cases are not made compelling by the possibility of recovering punitive damages under the statute. The older I get, the less I think of any IFCA case like a bar exam question. I look, instead, for a compelling set of facts that cry out for justice.

Our cases are important because, at their center, they have real humans who have been betrayed by insurance companies that promised to be there when needed most. Our cases are important because insurance companies in America repeatedly treat real people—our clients—as unimportant and disposable. We know (just as well as the insurance companies know) that only a very small percentage of insureds will ever access to the kinds of lawyers (or, as is often required, teams of lawyers) who have the experience, financial resources, and persistence required to hold insurance companies accountable. To do this work, we plaintiff lawyers need all the help we can get. Therefore, I wrote this Book to be a part of your toolkit to make sure that your cases—our cases—make a bigger difference. For you, a trial lawyer, there are many other books more important than mine. But I hope this Book will help you in some meaningful way.

§ 2. Importance of Insurance

“Insurance is a contract whereby one undertakes to indemnify another or pay a specified amount upon determinable contingencies.” RCW 48.01.040.

An “insurer” is any “person engaged in the business of making contracts of insurance, other than a fraternal benefit society.” RCW 48.01.050; see also id. (further elaborating on the definition of “insurer,” including some exceptions).

“The business of insurance is one affected by the public interest, requiring that all persons be actuated by good faith, abstain from deception, and practice honesty and equity in all insurance matters.” RCW 48.01.030. “Upon the insurer, the insured, their providers, and their representatives rests the duty of preserving inviolate the integrity of insurance.” Id.

The world in which we live would be very different without insurance. When you get sick, health insurance pays the doctor’s bill so you can get better and return to work. If your house burns down, homeowners insurance pays to put a roof over your head. Life insurance helps you plan for those who depend on you, should death unexpectedly befall you. If you or your business causes an accident and injures someone, liability insurance will defend you and pay the judgment. If someone else causes a car accident that injures you, and that person has no insurance or not enough insurance, your underinsured motorist insurance will step into the shoes of the tortfeasor and compensate you for your injuries.

It is easy to see how insurance benefits “you.” The beauty of insurance is that it also benefits “us”—all of society. Life is unpredictable. None of us know when tragedy will strike. Without insurance, some people might be inclined to avoid otherwise worthwhile, but potentially ruinous, risks or to horde resources to protect against tragedy. Insurance frees us up to put ourselves and more of our money into productive use. Driving to work is always a risk. But it is a risk that we in society want each other to take. And so we have auto insurance. Health insurance means fewer sick days and longer lives so that more people are actively contributing to society. Because of homeowners insurance, we don’t have more burned-out houses blighting neighborhoods. Liability insurance compensates innocent victims who suffer catastrophic losses because of negligence or the bad acts of others. Because of insurance, personal tragedies don’t always have to turn into financial tragedies or societal tragedies.

Consider a world without insurance. Where would we turn when disaster struck? To our families? Our friends? The government? Arranging to have the protection of insurance is an important act of individual responsibility. Everyone—from the poorest auto driver to the richest corporation—depends on insurance. But it all depends on having rules that require insurance companies to pay valid claims and strong incentives for insurance companies to follow the rules.

§ 3. Insurer Accountability

Consider another important institution. When the government abuses its power—think of governmentally mandated segregation in the past or unlawful takings of property—we often look to the judicial system for a remedy. Someone wronged by an act of government can bring a civil rights lawsuit. Recognizing that many victims of government abuse can’t afford a lawyer, the law provides that a civil rights plaintiff who prevails in her lawsuit can also recover the reasonable cost of having to hire an attorney. Without the promise of a fee recovery to mitigate the risks and expenses of litigation, many civil rights lawsuits would never see the inside of a courtroom, and many governmental wrongs would go unremedied. A successful civil rights lawsuit, in which the claimant has the right to conduct civil discovery overseen by a court of law, creates a remedy for the victim, brings to light governmental abuses, and deters future misconduct. It is one of the ways we keep government honest.

Companies and individuals turn to the justice system in an analogous way when the abuse is committed by an insurer. A case against an insurer isn’t a “civil rights” case per se, but there are parallels between the two. The institution of insurance, like government, exists to provide services that individuals generally can’t provide for themselves. Insurance, like government, ideally promotes societal stability and supports a platform for growth. Insurance, like government, has vast resources and immense power at its disposal—dwarfing the resources and power of individuals and families who depend on it. In the case of insurance, as in the case of government, this immense power is susceptible to abuse. In both cases, abuse of power undermines public confidence in the institutions.

§ 4. Insurance Rights

Constitutions, statutes, regulations, and court cases define the powers of government and the rights of citizens. Similarly, there is a body of law that defines the responsibilities of insurers and the rights of policyholders. These laws are meant to curb abuses and promote confidence that insurance companies will do what they are supposed to do when a loss occurs. Foremost is the insurance company’s duty of good faith.

The fundamental duty of good faith, which has roots both in the Insurance Code and in common law, sets insurance apart from many profit-motivated businesses. RCW 48.01.030; Tank v. State Farm Fire & Cas. Co., 105 Wn.2d 381, 385, 715 P.2d 1133 (1986). A used car dealer will try to get the best deal for himself, which may mean a worse deal for you. You can be quite sure where the loyalties lie. If you don’t like how the car dealer behaves, you can take your business elsewhere. Insurance is different. Once you’ve suffered the loss for which you purchased insurance, it’s too late to go out and buy new insurance if your insurance company decides to play “hard ball” with you. E.I. DuPont de Nemours & Co. v. Pressman, 679 A.2d 436, 447 (Del. 1996). You’re stuck with the insurance you have, while the insurer has an obvious economic incentive to pay you as little as it can get away with or to delay payouts due under the policy.

To address that inherent conflict, the law requires that the insurance company behave in some ways like a fiduciary. According to this quasi-fiduciary duty, an insurer must tell the insured the truth, have a lawful purpose, deal fairly with the insured, and give equal consideration to the insured’s interests. Tank, 105 Wn.2d at 385–86. It is also said that an insurer falls short of “good faith” when its conduct toward the insured is unreasonable, frivolous, or unfounded. Smith v. Safeco Ins. Co., 150 Wn.2d 478, 485, 78 P.3d 1274 (2003). In the words of the Supreme Court of Washington, “Such a relationship exists not only as a result of the contract between insurer and insured, but because of the high stakes involved for both parties to an insurance contract and the elevated level of trust underlying insureds’ dependence on their insurers.” Tank, 105 Wn.2d at 385.

§ 5. Example of Abusive Insurer Behavior

If insurers live up to their duty of good faith, then society experiences the compensatory benefits and stability that the institution of insurance is meant to provide. Unfortunately, it’s a fact of life that insurers fall short of good faith from time to time. Not all insurers behave poorly all the time. But some insurers that think they can “get away with it” may try to do just that in the pursuit of profits; the link between paying less in claims, or delaying payment, and making more money is just too obvious and too tempting.

The risk of insurer abuse is not merely theoretical. A real-life example can be found in the Supreme Court case of State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408, 123 S. Ct. 1513, 155 L. Ed. 2d 585 (2003). State Farm implemented a program in the late 1970s with the explicit purpose of using the claims adjustment process as a profit center. Id. at 431 (Ginsburg, J., dissenting). The program was nothing less than a scheme to deny benefits owed to consumers “by paying out less than fair value in order to meet preset, arbitrary payout targets designed to enhance corporate profits.” Id. at 431–32 (quotation omitted). In a Utah trial, State Farm employees told of “intolerable” and “recurrent” pressure to pay insureds less than the fair value of their claims. Id. at 432.

That is just the tip of the iceberg. There are other insurers and other corrupt claims handling programs. This book neither endeavors to catalog examples of bad faith nor to fully describe the extent to which other participants in the insurance process owe duties (such as a common law duty of good faith or a duty of ordinary care) to insureds.

§ 6. Effectiveness of Remedy

The purpose of an insurance lawsuit is to bring justice. What kind of justice? In the case of an insurance company that has betrayed its insured, the first goal is to address the harm that the insurance company caused. But insurance lawsuits are also a way to keep insurers honest on claims in general. Insurance companies are in the business of risk; an idealist view is that if an insurance company views the prospect of a successful insurance bad faith case as a real risk to its business, the insurance company will devote resources and deliberateness to ensuring it complies with all legal requirements and makes good on its promises. A more realistic view considers that a policyholder who brings a successful lawsuit against an insurer not only wins compensation for the wrong but benefits society by bringing the misconduct to light, educating judges, policyholders, and the bar about the state of the insurance industry, prevalent abuses, and the best ways to address harms from insurance bad faith.

It ought to be an uncontroversial assertion, considering the individual and societal interests at stake, that when an insurer acts unfairly and harms its insured, the insured ought to have an effective way to redress the harm. An ineffective remedy—one that discourages meritorious cases or that inadequately compensates the insured for the actual harm caused by the insurer’s misconduct—is likely to lead at least some insurance companies to craft claims handling practices based not on what good faith requires but on what they can get away with.

A practitioner who is evaluating whether to take a case on behalf of an insurance claimant will want to know several things: What do I have to prove to win the case? What damages can I recover for the client? Can the client afford the legal fees and costs associated with litigation? The answers to these questions can be complicated and unclear. In Washington, the law has developed over many years, with a gradual addition of statutes and judicial interpretations to the insurance lawyer’s arsenal and a gradual broadening of remedies. It continues to develop today. Each of the different causes of action requires its specific elements of proof and promised its specific types of damages.

§ 7. Breach of Contract

On a breach of contract theory, the claimant can obtain the amount of the coverage. But that theory will generally not win the claimant compensation for other harm that stems from the insurer’s breach—consequential economic harm like damage to a business or noneconomic damage like the aggravation the insurance claimant experienced. Cf. Alejandre v. Bull, 159 Wn.2d 674, 682, 153 P.3d 864 (2007) (no tort damages); Restatement (Second) of Contracts § 353 (1981) (generally no noneconomic damages).

The claimant may be entitled to attorney fees under Olympic Steamship Co. v. Centennial Insurance Co., 117 Wn.2d 37, 51–53, 811 P.2d 673 (1991), but not always because there are exceptions, see Dayton v. Farmers Ins. Group, 124 Wn.2d 277, 281, 876 P.2d 896 (1994), distinguished by Winters v. State Farm Mut. Auto. Ins. Co., 144 Wn.2d 869, 882, 31 P.3d 1164 (2001). In a pure breach of contract case, there are no prospects for enhanced (or punitive) damages. Dailey v. N. Coast Life Ins. Co., 129 Wn.2d 572, 575, 919 P.2d 589 (1996) (describing the Court’s longstanding rule prohibiting punitive damages without express legislative authorization).

§ 8. Consumer Protection Act

A claimant can bring a claim under the Consumer Protection Act (CPA), RCW 19.86.010 to .920. The elements of a private CPA claim are (1) an unfair or deceptive act or practice (2) occurring in trade or commerce, (3) affecting the public interest, (4) injury to a person’s business or property, and (5) causation. Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wn.2d 778, 784–85, 719 P.2d 531 (1986).

There are two kinds of CPA claims: a per se CPA claim and a traditional, non-per-se claim.

The legislature delegated to the Insurance Commissioner the obligation to promulgate regulations defining specific acts and practices that constitute an unfair or deceptive act or practice. RCW 48.30.010. Pursuant to that delegation, the Insurance Commissioner adopted “The Unfair Claims Settlement Practices Regulation,” which is a series of regulatory provisions found in Chapter 284-30 of the Washington Administrative Code. WAC 284-30-330 et seq. A plaintiff who proves a violation of one of the regulations automatically establishes the first two elements of a CPA claim. RCW 19.86.093. This is known as a per se claim.

An insurer’s breach of the duty of good faith also constitutes a per se violation of the CPA. Cincinnati Specialty Underwriters Ins. Co. v. Milionis Construction, Inc., No. 2:17-CV-00341-SMJ, 2018 WL 6492956, at *2 (E.D. Wash. Dec. 10, 2018).

But a regulatory violation is not essential; a plaintiff will nonetheless recover under the CPA if the evidence otherwise establishes the elements. Klem v. Wash. Mut. Bank, 176 Wn.2d 771, 784–87, 295 P.3d 1179 (2013). This is called a traditional, non-per-se CPA claim.

Regardless of whether the claim is per se or traditional, damages are a mixed bag. A successful claimant can recover damage to business or property, injunctive relief, and attorney fees. RCW 19.86.090. The CPA provides no avenue for obtaining compensation for personal injury or noneconomic harm, like the emotional distress and aggravation that can result from insurer misconduct. Ambach v. French, 167 Wn.2d 167, 173, 216 P.3d 405 (2009); Wash. State Physicians Ins. Exch. & Ass’n v. Fisons Corp., 122 Wn.2d 299, 317–18, 858 P.2d 1054 (1993). On the other hand, CPA damages include unpaid insurance benefits, even if those benefits are for personal-injury damages. Peoples v. United Servs. Auto. Ass’n, 194 Wn.2d 771, 781, 452 P.3d 1218 (2019). Expenses incurred by the plaintiff to investigate a deceptive act or practice are also cognizable injuries and damages. Id at 782. But see Hopkins v. Integon Gen. Ins. Co., No. C18-1723 MJP, 2020 WL 3000629, at *2 (W.D. Wash. June 4, 2020) (discussing conflict between Coventry Associates v. American States Ins. Co., 136 Wn.2d 269, 961 P.2d 933 (1998), and Lock v. American Family Ins. Co., 12 Wn. App. 2d 905, 460 P.3d 683 (2020), relating to recoverable expenses).

There is also an enhanced damages option, capped at $25,000. RCW 19.86.090 (authorizing treble damages up to a statutory maximum).

§ 9. Bad Faith

Among lawyers who represent policyholders, “bad faith case” generally refers to any lawsuit challenging the way defendants handled an insurance claim. A bad faith case can include claims for breach of contract, violation of the CPA, violation of IFCA, negligent claims handling, and insurance bad faith. The term, “bad faith,” in addition to describing the overall kind of case, is a specific legal theory. It is another way of saying that the defendant violated its duty of good faith. It has roots in statute and common law.

“Bad faith” is a misnomer, though. In common English usage, “bad faith” means an intention to deceive. But that is not what bad faith means in insurance law. To prevail on a bad faith claim, the insurance claimant does not have to prove intent, malice, or dishonesty. The claim must prove, simply, that the insurer’s conduct was unreasonable, frivolous, or unfounded. Smith v. Safeco Ins. Co., 150 Wn.2d 478, 485, 78 P.3d 1274 (2003). An “innocent mistake” or an “unintentional error”: These are not defenses to a bad faith claim.

The insurer’s duty of good faith is not delegable. Kosovan v. Omni Ins. Co., 19 Wn. App. 2d 668, 690, 496 P.3d 347 (2021).

The insured can also prove liability with evidence that the insurer violated one of the claims handling regulations. Tank v. State Farm Fire & Cas. Co., 105 Wn.2d 381, 386, 715 P.2d 1133 (1986) (“In addition, the Insurance Commissioner, pursuant to legislative authority under RCW 48.30.010, has promulgated regulations defining specific acts and practices which constitute a breach of an insurer’s duty of good faith. See Washington Administrative Code 284-30-300 et seq.”); Freeman v. State Farm Mut. Auto. Ins. Co., No. C11-761RAJ, 2012 WL 2891167, at *2 (W.D. Wash. July 16, 2012).

The bad faith theory lets the claimant recover some of the damages over those that are available in a pure contract case or a CPA case. The Supreme Court of Washington has recognized that the insurance relationship carries with it benefits beyond the monetary coverages—benefits like a full and fair investigation of the claim at the insurer’s expense—and that the insured suffers harm when the insurer fails to provide those benefits. Coventry Assocs. v. Am. States Ins. Co., 136 Wn.2d 269, 279–80, 961 P.2d 933 (1998). A claimant may even sue for the bad faith failure to investigate when the investigation would ultimately have shown no coverage for the loss. Id.

In any bad faith case, the claimant may recover consequential economic and noneconomic damages, including emotional-distress damages. Anderson v. State Farm Mut. Ins. Co., 101 Wn. App. 323, 333, 2 P.3d 1029 (2000); Schreib v. Am. Family Mut. Ins. Co., 129 F. Supp. 3d 1129, 1139 n.9 (W.D. Wash. 2015). The Supreme Court has never come out and said in the clearest terms that a prevailing bad faith claimant is entitled to an award of attorney fees. McGreevy v. Or. Mut. Ins. Co., 128 Wn.2d 26, 37, 904 P.2d 731 (1995) (suggesting that fees may be recoverable based on equity in a bad faith case). As with a contract case, enhanced (punitive) damages are unavailable. See Dailey v. N. Coast Life Ins. Co., 129 Wn.2d 572, 575, 919 P.2d 589 (1996).

§ 10. Interplay of Causes of Action

In addition to breach of contract, bad faith, and violation of the CPA, a claimant has a cause of action for negligent claims handling, which is similar to a bad faith claim in elements of proof and available damages. See Safeco Ins. Co. v. Butler, 118 Wn.2d 383, 398–99, 823 P.2d 499 (1992); First State Ins. Co. v. Kemper Nat’l Ins. Co., 94 Wn. App. 602, 612–13, 971 P.2d 953 (1999); Naxos, LLC v. Am. Family Ins. Co., No. C18-1287 JLR, 2020 WL 777260, at *23 (W.D. Wash. Feb. 18, 2020) (citing cases).

Again, the term “bad faith case” is used generally to describe a case in which a claimant brings extracontractual claims—whether for bad faith, under the CPA, for negligent claims handling, constructive fraud, under IFCA, or some combination of these theories. Counsel for claimants face a significant challenge in drafting coherent instructions and verdict forms that allow a reasonable juror to understand how these theories relate to each other. Each cause of action has its own requirements of proof, types of available relief, and jury instructions. The kind of damage one may recover depends upon the theory upon which one prevails at trial.

Before IFCA, a major problem involved the absence of a universal attorney fee right for prevailing claimants. Insurance claimants who prevailed on a breach of contract claim sometimes faced arguments that their contract claim wasn’t the right kind of contract claim to warrant an award of attorney fees. And the Supreme Court of Washington has never clearly held that judges could award attorney fees to an insured who prevails on a bad faith claim.

The absence of a comprehensive attorney fee right disproportionately disadvantaged less-resourced claimants and those with smaller claims. It amounted to an access-to-justice issue. These individuals and businesses couldn’t afford to pay a lawyer by the hour and, if they could, the fees could easily consume the total recovery. True, many lawyers represent insurance claimants on a contingent fee. But, without the likelihood of fee shifting, lawyers were less likely to take smaller damage cases on a contingent-fee basis because the amount of legal work and litigation costs that would be required would often dwarf the percentage fee that can be charged from a judgment. Suing your insurance company is expensive. The danger was that many meritorious cases might never see the inside of the courtroom.

§ 11. Legislative History of IFCA

§ 11.1. Introduction of Legislation

At the time of passage in 2007, IFCA was known as Engrossed Substitute Senate Bill 5726. That bill originated in the Senate Committee on Consumer Protection and Housing. At the same time as Senate Bill 5726 was introduced, however, the House Committee on Insurance, Financial Services, and Consumer Protection was considering a companion bill, House Bill 1491. Eventually, it was the Senate bill that carried the day.

Senate Bill 5726 received its first reading in the Senate Consumer Protection & Housing Committee on January 29, 2007. The substantively identical House Bill 1491 was first read in the House Financial Service & Consumer Protection Committee on January 22, 2007.

The Senate bill, as originally introduced, provided in part:

(1) Any insured or beneficiary to a policy of insurance who is unreasonably or negligently denied a claim for coverage or payment of payment of benefits by an insurer may bring an action in the superior court of this state to recover the actual damages sustained, together with the costs of the action, including reasonable attorneys’ fees and litigation costs, as set forth in subsection (3) of this section.

The bill also provided that the superior court was required to award the claimant reasonable attorney fees and costs, and had discretion to award treble damages, “after a finding that an insurer has acted unreasonably or negligently in denying a claim for coverage or payment of benefits or has violated the Washington Administrative Code, increase the total award of damages to an amount not to exceed three times the actual damages.”

§ 11.2. Substitute Bills

The Senate Committee on Consumer Protection & Housing held a hearing and took testimony on the proposal on February 8, 2007. February 8, 2007 Senate Committee Hearing, SB 5726. On February 15, 2007, the Senate committee approved an amendment to limit a right of action to first party claimants. February 15, 2007 Senate Committee Hearing, SB 5726.

Substitute Senate Bill 5726 was introduced on March 13, 2007. Gone was the reference to a “beneficiary to a policy of insurance,” which was replaced by “first party claimant.” The bill now read in part:

(1) Any insured or first party claimant to a policy of insurance who is unreasonably or negligently denied a claim for coverage or payment of benefits by an insurer may bring an action in the superior court of this state to recover the actual damages sustained, together with the costs of the action, including reasonable attorneys’ fees and litigation costs, as set forth in subsection (3) of this section.

The attorney fees and treble damages provisions remained as before.

Meanwhile, House Committee on Insurance, Financial Services, and Consumer Protection held hearings on February 1, 2007, and February 27, 2007. February 1, 2007 Committee Hearing, HB 1491; February 27, 2007 Committee Hearing, HB 1491. On February 27, the House committee adopted a Substitute House Bill. The Substitute House Bill read, in relevant part:

(1) Any first party claimant to a policy of insurance who is unreasonably or negligently denied a claim for coverage or payment of benefits by an insurer may bring an action in the superior court of this state to recover the actual damages sustained, together with the costs of the action, including reasonable attorneys’ fees and litigation costs, as set forth in subsection (3) of this section.

Unlike the Substitute Senate Bill, the Substitute House Bill contained no reference to “any insured.” As with the Substitute Senate Bill, the attorney fees and treble damages provisions remained intact.

Both the Substitute Senate Bill and the Substitute House Bill were reported out of their respective committees with “do pass” recommendations.

The Senate Bill Report summarized the bill as follows:

Insurers may not unreasonably or negligently deny insurance coverage for payment of benefits. Insureds or beneficiaries under an insurance policy may sue insurers for unreasonable or negligent denial of coverage or payment of benefits.

The court must award the following damages to insureds or beneficiaries upon a finding that the insurer unreasonably or negligently denied a claim or benefits or upon a finding that the insured violated the Washington Administrative Code: (1) actual damages sustained; (2) reasonable attorney’s fees; and (3) actual and statutory litigation costs, including expert witness fees.

The court may also increase the total award of damages to an amount that does not exceed three times the actual damages suffered by the insured or beneficiary.

Senate Bill Report, SB 5726 at 2. The Senate Bill Report also summarized the effect of the changes in the substitute bill:

EFFECT OF CHANGES MADE BY RECOMMENDED SUBSTITUTE AS PASSED COMMITTEE (Consumer Protection & Housing): Only insureds and first party claimants may bring a cause of action against an insurer for unreasonable or negligent denial of coverage.

It is clarified that a violation of the Washington Administrative Code is not sufficient on its own to justify an award of treble damages; rather, the violation must also be negligent or unreasonable.

Id. The House Bill Report described matters somewhat different. It stated, in part:

An insurer may not unreasonably or negligently deny a claim for coverage or payment of benefits to any first party claimant.

Any first party claimant who is unreasonably or negligently denied a claim for coverage or payment of benefits by an insurer may bring an action in the superior court to recover the actual damages sustained, together with the costs of the action, including reasonable attorneys’ fees and litigation costs.

If the insurer has acted unreasonably or negligently in denying a claim for coverage or payment of benefits or has violated Title 284 of the Washington Administrative Code, the superior court must award reasonable attorneys’ fees and actual and statutory litigation costs, including expert witness fees, to the first party claimant.

If the insurer has acted unreasonably or negligently in denying a claim or has violated Title 284 of the Washington Administrative Code, the superior court may increase the total award of damages to an amount not to exceed three times the actual damages.

House Bill Report, HB 1491 at 2–3. Comparing the substitute bill language to the original, the House Bill Report stated:

The definition section in the original bill is removed. A definition of “first party claimant” is added and used throughout the substitute bill. References to the Washington Administrative Code are narrowed to Title 284 WAC.

Id. at 3.

That was the end of the line for House Bill 1491, which never went to the full House of Representatives for a vote.

§ 11.3. Amendments to Substitute Senate Bill

As for Substitute Senate Bill 5726, a series of proposed amendments followed in the full Senate. Senator Weinstein proposed a successful amendment making it explicitly unlawful to delay an insurance claim. 5726-S AMS WEIN S2651.1 at 2. Moments thereafter, Senators Berkey and Weinstein successfully proposed to amend the bill by striking references to delays and by inserting the words, “as a covered person” after “payment.” 5726-S AMS BERK S2868.1 at 1. An amendment by Senator Honeyford that would have stricken the treble damages provision was rejected. 5726-S AMS HONE S2676.1 at 1. Senator Brandland proposed an unsuccessful amendment that would have made attorney fee awards discretionary; would have denied treble damages and attorney fees for WAC violations that did not amount to unreasonable denials of coverage; and would have imposed a “reasonableness” limitation on litigation costs to prevailing plaintiffs. 5726-S AMS BRAN S2867.1 at 1.

§ 11.4. Engrossed Substitute Senate Bill Passed by Senate

As amended, the Engrossed Substitute Senate Bill 5726 read as follows, in relevant part:

(1) Any first party claimant to a policy of insurance who is unreasonably denied a claim for coverage or payment of benefits by an insurer may bring an action in the superior court of this state to recover the actual damages sustained, together with the costs of the action, including reasonable attorneys’ fees and litigation costs, as set forth in subsection (3) of this section.

(2) The superior court may, after finding that an insurer has acted unreasonably in denying a claim for coverage or payment of benefits or has violated rules under the Washington Administrative Code adopted by the commissioner under RCW 48.30.010(2), increase the total award of damages to an amount not to exceed three times the actual damages.

(3) The superior court shall, after a finding of unreasonable denial of a claim for coverage or payment of benefits, or after a finding of a violation of rules under the Washington Administrative Code adopted by the commissioner under RCW 48.30.010(2), award reasonable attorneys’ fees and actual and statutory litigation costs, including expert witness fees, to the first party claimant of an insurance contract who is the prevailing party in such an action.

(4) The remedies set forth in this chapter are separate from the remedies prescribed by RCW 19.86.090 of the consumer protection act.

(5) “First party claimant” means an individual, corporation, association, partnership, or other legal entity asserting a right to payment as a covered person under an insurance policy or insurance contract arising out of the occurrence of the contingency or loss covered by such a policy or contract.

Engrossed Substitute Senate Bill 5726 at 3. The bill passed on March 13, 2007, by a count of 30 to 17, with 2 senators excused from voting and none reported absent.

§ 11.5. Engrossed Substitute Senate Bill’s Journey in the House

Engrossed Substitute Senate Bill 5726 went to the House Committee on Insurance, Financial Services, and Consumer Protection. The committee took testimony on March 22, 2007. March 22, 2007 House Committee Hearing, ESSB 5726. Another hearing occurred March 29, 2007, during which a series of proposed amendments were taken up. Representative Rodne unsuccessfully attempted to amend the bill by stripping the treble damages provision. March 29, 2007 House Committee Hearing, ESSB 5726 at 3–4.

Representative Rodney unsuccessfully attempted to remove the mandatory nature of attorney fees awards. Id. at 4–5. Representative Kelly unsuccessfully proposed and amendment to transform the bill’s attorney fee provision into a two-sided provision—in contrast to the bill language, which authorized awards to prevailing first party claimants only. Id. at 8–9. Representative Santos proposed a successful amendment that for the first time enumerated regulations covered by the bill—namely, WAC 284-30-330, 284-30-350, 284-30-360, 284-30-370, and 284-30-380. Id. at 6–8. With that change, ESSB 5726 emerged from committee on a 5 to 3 vote. Id. at 16.

On the floor of the House, the first amendment taken up was the amendment approved by the Committee on Insurance, Financial Services, and Consumer Protection, involving enumeration of the regulations covered by the bill. After that amendment, subsections (2), (3), and (5) read:

(2) The superior court may, after finding that an insurer has acted unreasonably in denying a claim for coverage or payment of benefits or has violated a rule in subsection (5) of this section, increase the total award of damages to an amount not to exceed three times the actual damages.

(3) The superior court shall, after a finding of unreasonable denial of a claim for coverage or payment of benefits, or after a finding of a violation of a rule in subsection (5) of this section, award reasonable attorneys’ fees and actual and statutory litigation costs, including expert witness fees, to the first party claimant of an insurance contract who is the prevailing party in such an action.

. . .

(5) A violation of any of the following is a violation for the purposes of subsections (2) and (3) of this section:

(a) WAC 284-30-330, captioned “specific unfair claims settlement practices defined”;

(b) WAC 284-30-350, captioned “misrepresentation of policy provisions”;

(d) WAC 284-30-370, captioned “standards for prompt investigation of claims”;

(e) WAC 284-30-380, captioned “standards for prompt, fair and equitable settlements applicable to all insurers”; or

(f) An unfair claims settlement practice rule adopted under RCW 48.30.010 by the insurance commissioner intending to implement this section. The rule must be codified in chapter 284-30 of the Washington Administrative Code.

5726-S.E AMH IFCP H3265.2 at 2–3.

A successful amendment by Representative Ericks introduced the requirement of a pre-suit notification. 5726-S.E AMH ERIM HEDE 056 at 1.

A successful amendment by Representative Hunter provided that the bill would not apply to health plans offered by health carriers (as those terms are defined in RCW 48.43.005). 5726-S.E AMH IFCP HEDE 054 at 1.

An effort by Representative Roach to replace the entire bill with a mandate that the insurance commissioner study “existing statutes and case law regarding remedies and cause of action related to claims practices of insurers” failed, 5726-S.E AMH ROAD H3418.1 at 1, as did Representative Roach’s proposed amendment to delete the treble damages remedy. 5726-S.E AMH ROAD H3419.1 at 1.

Representative Rodne unsuccessfully sought to amend the bill by limiting treble damages to cases in which the plaintiff showed by clear and convincing evidence that that acts giving rise to actual damages occurred with such frequency as to indicate a general business practice that the acts were willful, wanton, or malicious, or that they were in reckless disregard for the rights of first party claimants. 5726-S.E. AMH RODN H3417.1 at 1–2.

Finally, Representative Rodne unsuccessfully attempted to amend the bill by making awards of attorney fees optional and by limiting awards of actual litigation costs to those that were “reasonable.” 5726-S.E AMH RODN H3420.1 at 1.

§ 11.6. Final Bill Text; Approval in Both Houses

The final text of what would become the Insurance Fair Conduct Act was now set. As amended by the House, Engrossed Substitute Senate Bill 5726 added the following subsection (7) to RCW 48.30.010:

(7) An insurer engaged in the business of insurance may not unreasonably deny a claim for coverage or payment of benefits to any first party claimant. “First party claimant” has the same meaning as in section 3 of this act.

A new section would be added to Chapter 48.30 of the Revised Code of Washington:

(4) “First party claimant” means an individual, corporation, association, partnership, or other legal entity asserting a right to payment as a covered person under an insurance policy or insurance contract arising out of the occurrence of the contingency or loss covered by such a policy or contract.

(5) A violation of any of the following is a violation for the purposes of subsections (2) and (3) of this section:

(a) WAC 284-30-330, captioned “specific unfair claims settlement practices defined”;

(b) WAC 284-30-350, captioned “misrepresentation of policy provisions”;

(d) WAC 284-30-370, captioned “standards for prompt investigation of claims”;

(e) WAC 284-30-380, captioned “standards for prompt, fair and equitable settlements applicable to all insurers”; or

(6) This section does not limit a court’s existing ability to make any other determination regarding an action for an unfair or deceptive practice of an insurer or provide for any other remedy that is available at law.

(7) This section does not apply to a health plan offered by a health carrier. “Health plan” has the same meaning as in RCW 48.43.005. “Health carrier” has the same meaning as in RCW 48.43.005.

(8)

(a) Twenty days prior to filing an action based on this section, a first party claimant must provide written notice of the basis for the cause of action to the insurer and office of the insurance commissioner. Notice may be provided by regular mail, registered mail, or certified mail with return receipt requested. Proof of notice by mail may be made in the same manner as prescribed by court rule or statute for proof of service by mail. The insurer and insurance commissioner are deemed to have received notice three business days after the notice is mailed.

(b) If the insurer fails to resolve the basis for the action within the twenty-day period after the written notice by the first party claimant, the first party claimant may bring the action without any further notice.

(c) The first party claimant may bring an action after the required period of time in (a) of this subsection has elapsed.

(d) If a written notice of claim is served under (a) of this subsection within the time prescribed for the filing of an action under this section, the statute of limitations for the action is tolled during the twenty-day period of time in (a) of this subsection.

ESSB 5726.PL at 2–4.

The Final Bill Report summarized the Engrossed Substitute Senate Bill as follows:

Summary: Insurers may not unreasonably deny insurance coverage of payment of benefits. First party claimants to an insurance policy may sue insurers for unreasonable denials of coverage or payments of benefits.

First party claimant is defined as an individual, corporation, association, partnership or any other legal entity who asserts the right to payment as a covered person under the insurance policy at issue.

Damages are available to plaintiffs upon a finding that the insurer unreasonably denied coverage or payment. A plaintiff may also recover damages upon a finding that the insurer violated one of five rules adopted by the Office of the Insurance Commissioner (OIC) and codified in chapter 284-30 of the Washington Administrative Code (WAC) or any additional rules that the OIC adopts that are intended to implement this act. The five WAC rules regulate insurers’ actions in the following areas: (1) specific unfair claims practices; (2) misrepresentation of policy provisions; (3) failure to acknowledge pertinent communications; (4) standards for prompt investigation; and (5) standards for prompt fair, and equitable settlements.

Upon finding a violation of the act, the court must award: (1) the actual damages sustained; (2) reasonable attorney’s fees; and (3) actual and statutory litigation costs, including expert witness fees. The court has the discretion to also increase the total award of damages to an amount that does not exceed three times the actual damages suffered by the plaintiff. A court’s ability to make any other determination regarding unfair or deceptive practices or to provide any other available remedy is not limited.

Health plans offered by health carriers are exempt from this bill.

A claimant must provide 20 days written notice to both the insurer and the OIC before filing suit under this section. The notice must provide for 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 any further notice to the insurer.

Final Bill Report, ESSB 5726 at 1–2.

The House of Representatives passed the bill on April 5, 2007, by a vote of 59 to 38, with one representative excused. On April 14, 2007, the Senate concurred in the House amendments by a vote of 31 to 18. The Speaker of the House signed the bill on April 18, and the Governor signed the bill into law on May 15, 2007.

§ 11.7. Referendum 67 and the Attorney General’s Explanatory Statement

Originally, the effective date of the Insurance Fair Conduct Act was to be July 22, 2007. The Insurance industry gathered sufficient signatures to place IFCA on that November’s ballot as a referendum measure, Referendum 67 (R-67).

Under law, the Thurston County Superior Court prepares the official ballot title for a referendum. Voter’s Pamphlet at 13. The attorney general is required by law to prepare an “explanatory statement” for voters, which is revised by the court. Id. In the case of R-67, the official ballot title was as follows:

The legislature passed Engrossed Substitute Senate Bill 5726 (ESSB 5726) concerning insurance fair conduct related to claims for coverage or benefits and voters have filed a sufficient referendum petition on this bill.

This bill would make it unlawful for insurers to unreasonably deny certain coverage claims, and permit treble damages plus attorney fees for that and other violations. Some health insurance carriers would be exempt.

Should this bill be:

Approved [ ] Rejected [ ]

Id.

The attorney general’s explanatory statement read, in full:

The law as it presently exists:

The state insurance code prohibits any person engaged in the insurance business from engaging in unfair methods of competition or in unfair or deceptive acts or practices in the conduct of their business. Some of these practices are set forth in state statute. The insurance commissioner has the authority to adopt rules defining unfair practices beyond those specified in statute. The commissioner has the authority to order any violators to cease and desist from their unfair practices, and to take action under the insurance code against violators for violation of statutes and regulations. Depending on the facts, the insurance commissioner could impose fines, seek injunctive relief, or take action to revoke an insurer’s authority to conduct insurance business in this state.

Under existing law, an unfair denial of a claim against an insurance policy could give the claimant a legal action against the insurance company under one or more of several legal theories. These could include violation of the insurance code, violation of the consumer protection laws, personal injuries or property losses caused by the insurer’s acts, or breach of contract. Depending on the facts and the legal basis for recovery, a claimant could recover money damages for the losses shown to have been caused by the defendant’s behavior. Additional remedies might be available, depending on the legal basis for the claim.

Plaintiffs in Washington are not generally entitled to recover their attorney fees or litigation costs (except for small amounts set by state law) unless there is a specific statute, a contract provision, or recognized ground in case law providing for such recovery. Disputes over insurance coverage have been recognized in case law as permitting awards of attorney fees and costs. Likewise, plaintiffs in Washington are not generally entitled to collect punitive damages or damages in excess of their actual loss (such as double or triple the amount of actual loss), unless a statute or contract specifically provides for such payment.

The effect of the proposed measure, if approved:

This measure is a referral to the people of a bill (ESSB 5726) passed by the 2007 session of the legislature. The term “this bill” refers here to the bill as passed by the legislature. A vote to “approve” this bill is a vote to approve ESSB 5726 as passed by the legislature. A vote to “reject” this bill is a vote to reject ESSB 5726 as passed by the legislature.

ESSB 5726 would amend the laws concerning unfair or deceptive insurance practices by providing that an insurer engaged in the business of insurance may not unreasonably deny a claim for coverage or payment of benefits to any “first party claimant.” The term “first party claimant” is defined in the bill to mean an individual, corporation, association, partnership, or other legal entity asserting a right to payment as a covered person under an insurance policy or insurance contract arising out of the occurrence of the contingency or loss covered by such a policy or contract.

ESSB 5726 would authorize any first party claimant to bring a lawsuit in superior court against an insurer for unreasonably denying a claim for coverage or payment of benefits, or violation of specified insurance commissioner unfair claims handling practices regulations, to recover damages and reasonable attorney fees, and litigation costs. A successful plaintiff could recover the actual damages sustained, together with reasonable attorney fees and litigation costs as determined by the court. The court could also increase the total award of damages to an amount not exceeding three times the actual damages, if the court finds that an insurer has acted unreasonably in denying a claim or has violated certain rules adopted by the insurance commissioner. The new law would not limit a court’s existing ability to provide other remedies available at law. The claimant would be required to give written notice to the insurer and to the insurance commissioner’s office at least twenty days before filing the lawsuit.

ESSB 5726 would not apply to a health plan offered by a health carrier as defined in the insurance code. The term “health carrier” includes a disability insurer, a health care service contractor, or a health maintenance organization as those terms are defined in the insurance code. The term “health plan” means any policy, contract, or agreement offered by a health carrier to provide or pay for health care services, with certain exceptions set forth in the insurance code. These exceptions include, among other things, certain supplemental coverage, disability income, workers’ compensation coverage, “accident only” coverage, “dental only” and “vision only” coverage, and plans which have a short-term limited purpose or duration. Because these types of coverage fall outside the definition of “health plan,” ESSB 5726’s provision would apply to these exceptions to “health plans.”

Id. at 14.

The Voter’s Pamphlet also included statements in favor of and opposed to R-67 from interested stakeholders. Supporters argued that R-67 “simply requires the Insurance Industry to be fair and pay legitimate claims in a reasonable and timely manner.” Id. at 15. Opponents argued that R-67 would lead to a spike in frivolous lawsuits and higher insurance rates. Id.

Washington voters approved IFCA in November 2007. The statute took effect December 6, 2007.

§ 12. Text of IFCA

Most of IFCA can be found in section 48.30.015 of the Insurance Code:

(5) A violation of any of the following is a violation for the purposes of subsections (2) and (3) of this section:

(a) WAC 284-30-330, captioned “specific unfair claims settlement practices defined”;

(b) WAC 284-30-350, captioned “misrepresentation of policy provisions”;

(d) WAC 284-30-370, captioned “standards for prompt investigation of claims”;

(e) WAC 284-30-380, captioned “standards for prompt, fair and equitable settlements applicable to all insurers”; or

(8) (a) Twenty days prior to filing an action based on this section, a first party claimant must provide written notice of the basis for the cause of action to the insurer and office of the insurance commissioner. Notice may be provided by regular mail, registered mail, or certified mail with return receipt requested. Proof of notice by mail may be made in the same manner as prescribed by court rule or statute for proof of service by mail. The insurer and insurance commissioner are deemed to have received notice three business days after the notice is mailed.

(c) The first party claimant may bring an action after the required period of time in (a) of this subsection has elapsed.

RCW 48.30.015. IFCA also amends section 48.30.010—the statute that prohibits unfair methods of competition and unfair or deceptive practices in insurance—to add a new subsection (7) providing, “An insurer engaged in the business of insurance may not unreasonably deny a claim for coverage or payment of benefits to any first party claimant. ‘First party claimant’ has the same meaning as RCW 48.30.015.”

§ 13. Anatomy of IFCA

The vast majority of the statute appears in section 48.30.015 of the Insurance Code, which contains eight subsections. Subsection (1) is the introductory provision. It states that a first party claimant to a policy of insurance who is unreasonably denied a claim for coverage or payment of benefits by an insurer may bring an action in the superior court of this state to recover the actual damages sustained, together with the costs of the action, including reasonable attorneys’ fees and litigation costs. RCW 48.30.015(1). See Chapter 2 of this Book for an overview of an IFCA claim.

Subsection (2) authorizes the court to increase the total award of damages to an amount not to exceed three times the actual damages “after finding that an insurer has acted unreasonably in denying a claim for coverage or payment of benefits or has violated a rule in subsection (5).” RCW 48.30.015(2). See Chapter 6 of this Book for a discussion of punitive damages.

Subsection (3) requires the court to award reasonable attorney fees and costs to the first party claimant of an insurance contract who is the prevailing party in such an action, again, “after a finding of unreasonable denial of a claim for coverage or payment of benefits, or after a finding of a violation of a rule in subsection (5) of this section.” RCW 48.30.015(3). See Chapter 7 of this Book for a discussion of attorney fees and costs.

Subsection (4) defines “first party claimant” as “an individual, corporation, association, partnership, or other legal entity asserting a right to payment as a covered person under an insurance policy or insurance contract arising out of the occurrence of the contingency or loss covered by such a policy or contract.” RCW 48.30.015(4). See Chapter 3 of this Book for a discussion of the meaning of “first party claimant.”

Subsection (5) identifies claims handling regulations, the violation of which will be deemed “a violation for purposes of subsections (2) and (3) of this section.” RCW 48.30.015(5). See Chapter 4 of this Book for a discussion of the relationship between claims-handling regulations and the IFCA statute.

Subsection (6) provides that prior causes of action remain intact. “This section does not limit a court’s existing ability to make any other determination regarding an action for an unfair or deceptive practice of an insurer or provide for any other remedy that is available at law.” RCS 48.30.015(6).

Subsection (7) exempts from IFCA’s application “a health plan offered by a health carrier.” RCW 48.30.015(7). “‘Health plan’ has the same meaning as in RCW 48.43.005.” Id.

Subsection (8) sets out the steps that first party claimants must follow before filing an IFCA lawsuit. Generally, the first party claimant must provide written notice for the basis of the cause of action to the insurer and Office of the Insurance Commissioner at least 20 days before filing the IFCA action. RCW 48.30.015(8). See Chapter 8 for a discussion of the pre-suit notification requirement.

§ 14. IFCA’s Relationship to Pre-Existing Causes of Action

IFCA is in some ways a hybrid of contract, bad faith, and CPA theories. See Seaway Properties, LLC v. Fireman’s Fund Ins. Co., No. C13-633RAJ, 2014 WL 1612696, at *10 (W.D. Wash. Apr. 22, 2014) (“Bad faith claims, insurance-related CPA claims, and IFCA claims are similar.”). Consider subsection (1), the introductory provision:

Any first party claimant to a policy of insurance who is unreasonably denied a claim for coverage or payment of benefits by an insurer may bring an action in the superior court of this state to recover the actual damages sustained, together with the costs of the action, including reasonable attorneys’ fees and litigation costs, as set forth in subsection (3) of this section.

RCW 48.30.015(1). Here, one gets a flavor of a contract claim in the phrase “denied a claim for coverage,” and the flavor of a bad faith claim in “unreasonably” and “benefits.” The attorney fee provision, subsection (3), reads:

The superior court shall, after a finding of unreasonable denial of a claim for coverage or payment of benefits, or after a finding of a violation of a rule in subsection (5) of this section, award reasonable attorneys’ fees and actual and statutory litigation costs, including expert witness fees, to the first party claimant of an insurance contract who is the prevailing party in such an action.

RCW 48.30.015(3). Subsection (2), which authorizes an award of punitive damages, tracks much of that language:

The superior court may, after finding that an insurer has acted unreasonably in denying a claim for coverage or payment of benefits or has violated a rule in subsection (5) of this section, increase the total award of damages to an amount not to exceed three times the actual damages.

RCW 48.30.015(2). The rules identified in subsection (5) are from Washington’s claims handling regulations, RCW 48.30.015(3), and so one gets the flavor of a per se CPA claim as well. In IFCA, we see evidence of a strong public policy for compliance with the regulations.

Everyone agrees that IFCA is an important evolution in Washington insurance law. But from the face of the statute it seems that IFCA makes no insurer conduct illegal that was lawful the day before the statute took effect. Incorrect denials of coverage gave rise to contract liability before IFCA; if the denial of coverage or benefits was unreasonable, then it amounted to bad faith. Smith v. Safeco Ins. Co., 150 Wn.2d 478, 485, 78 P.3d 1274 (2003). Violations of the claims handling regulations gave rise to a CPA claim, RCW 19.86.093; Indus. Indem. Co. v. Kallevig, 114 Wn.2d 907, 925, 792 P.2d 520 (1990), and supported a bad faith claim, Tank v. State Farm Fire & Cas. Co., 105 Wn.2d 381, 386, 715 P.2d 1133 (1986); Freeman v. State Farm Mut. Auto. Ins. Co., No. C11-761RAJ, 2012 WL 2891167, at *2 (W.D. Wash. July 16, 2012).

IFCA is a hybrid of the theories that preceded it and, as such, promises to be a more comprehensive cause of action. As Judge Richard Jones states in Oganessova v. Mutual of Omaha Life Ins. Co., No. C13-1443RAJ, 2014 WL 5782260, at *9 (W.D. Wash. Nov. 6, 2014):

Bad faith claims and IFCA claims are similar. An insured’s assertion of bad faith against her insurer is a tort claim. Safeco Ins. Co. of Am. v. Butler, 118 Wn.2d 383, 823 P.2d 499, 503 (1992). A denial of coverage is in bad faith if it is unreasonable, frivolous, or unfounded. Overton, 38 P.3d at 329–30. Violation of Washington’s insurance regulations is evidence of bad faith. See Coventry Assocs. v. Am. States Ins. Co., 136 Wn. 2d 269, 961 P.2d 933, 935 (1998). IFCA gives a cause of action to a first-party insured against an insurer who “unreasonably denie[s] a claim for coverage or payment of benefits.” RCW § 48.30.015(1).

See also Oung v. Allstate Fire & Cas. Ins. Co., No. C16-1200RSL, 2017 WL 5455369 (W.D. Wash. Nov. 14, 2017) (“Although the elements of these causes of action vary slightly, at its core, they center on the reasonableness of Allstate’s actions in handling Mr. Oung’s UIM claim.”).

The statute is more comprehensive in how the insured can prove liability and in the kinds of damages the insured can recover. If the insured proves liability, attorney fees are now mandatory. RCW 48.30.015(3). Punitive damages, which are discretionary, are more comprehensive in the sense that the insured need only prove liability to qualify, F.C. Bloxom Co. v. Fireman’s Fund Ins. Co., No. C10-1603RAJ, 2012 WL 5992286, at *6 (W.D. Wash. Nov. 30, 2012)—again, liability embraces a wider range of conduct—and in the sense that the ceiling on such an award is higher than under the CPA, compare RCW 48.30.015(2) (capping punitive damages at three times the actual damages) with RCW 19.86.090 (limiting enhanced damages to $25,000).

IFCA has its limits. For example, an insurer that erroneously denies a claim, but that acts reasonably and in compliance with the claims handling regulations, is not liable under IFCA but remains liable for breach of contract. The CPA authorizes the imposition of an injunction, RCW 19.86.090, while IFCA does not mention that kind of relief. The violation of a claims-handling regulation will establish liability for bad faith and under the CPA, but not under IFCA. Perez-Crisantos v. State Farm Fire & Cas. Co., 187 Wn.2d 669, 680, 389 P.3d 476 (2017). An insured may seek to bring claims for common law bad faith and violation of the CPA against an independent adjuster, but an IFCA claim may be brought only against the insurance company. Recently, a debate has arisen over whether IFCA “actual damages” includes emotional-distress damages, while it has long been understood that bad-faith claims support such relief. Schreib v. Am. Family Mut. Ins. Co., 129 F. Supp. 3d 1129,1139 n.9, 1141 (W.D. Wash. 2015). Moreover, IFCA does not apply to “a health plan offered by a health carrier.” RCW 48.30.015(7).

Therefore, IFCA provides that the Act “does not limit a court’s existing ability to make any other determination regarding an action for an unfair or deceptive practice of an insurer or provide for any other remedy that is available at law.” RCW 48.30.015(6). Claimants can still bring contract, bad faith, CPA, negligence, and other claims.

§ 15. IFCA’s Remedial Nature

An important rule of statutory construction holds that courts, when working with a remedial statute, will construe it liberally when necessary to effectuate its purpose. Anfinson v. FedEx Ground Package Sys., Inc., 174 Wn.2d 851, 870, 281 P.3d 289 (2012); Int’l Ass’n of Fire Fighters, Local 46 v. City of Everett, 146 Wn.2d 29, 35, 42 P.3d 1265 (2002).

In Bauman v. American Commerce Insurance Co., No. C15-1909 BJR, 2017 WL 635777, at *2 (W.D. Wash. Feb. 16, 2017), the court characterized IFCA as a “remedial insurance statute.”

In Schreib v. American Family Mutual Insurance Co., 129 F. Supp. 3d 1129, 1140 n.11 (W.D. Wash. 2015), the court observed that “IFCA’s treble enhanced damages provision makes it at a minimum unclear whether it is indeed remedial in nature.”

Sutherland’s treatise on statutory construction explains, “Remedial statutes are liberally construed to suppress the evil and advance the remedy. The policy that a remedial statute should be liberally construed in order to effectuate the remedial purpose for which it was enacted is firmly established.” 3 Sutherland Statutory Construction § 60:1 (7th ed.). This is an important rule but one that should not be overstated. Classifying a statute as “remedial” obviously does not give a court license to “read into the statute matters which are not there.” Klossner v. San Juan County, 93 Wn.2d 42, 47, 605 P.2d 330 (1980). On the other hand, even a statute that is not “remedial” is entitled to a “fair reading, one that is neither strict nor liberal, to effectuate the legislature’s intent.” Estate of Bunch v. McGraw Residential Ctr., 174 Wn.2d 425, 433, 275 P.3d 1119 (2012). Nonetheless, determining whether IFCA is “remedial” is an important exercise because there are likely to be difficult issues of statutory construction where the rule comes into play. And the exercise itself cries out for the kind of study that leads to a greater understanding of IFCA.

The Insurance Fair Conduct Act’s emphasis is undoubtedly on remedying harms. Trinity Universal Ins. Co. v. Ohio Cas. Ins. Co., 176 Wn. App. 185, 201, 312 P.3d 976 (2013) (“The purpose of IFCA is to protect individual policy holders from unfair practices by their insurers.”). It starts by creating a window in which the insurance company is encouraged to resolve the claim without court intervention. Norgal Seattle Partnership v. Nat’l Surety Corp., No. C11-0720RSL, 2012 WL 1377762, at *4 (W.D. Wash. Apr. 19, 2012) (“The twenty-day window provides the insurer with an opportunity to cure any deficiencies or violations.”). Step one for any claimant who hopes to bring an IFCA claim is to give the insurer written notice of the basis of her claim. RCW 48.30.015(8)(a). The insurer then has 20 days to “resolve the basis for the action.” RCW 48.30.015(8)(b). If, and only if, the insurance company fails to do that can the claimant bring an IFCA claim. Id. If litigation commences, the emphasis remains on remedying the victim’s harm. A claimant who wins her IFCA claim must be awarded her actual damages and her legal expenses. RCW 48.30.015(1). IFCA also authorizes the award of punitive damages. If the claimant wins her case, the court may, not must, increase the total award of damages to an amount not to exceed three times the actual damages. The issue, then, is whether this punitive-damage feature disqualifies a statute like IFCA from the rule of liberal construction.

Over the years, the Supreme Court has classified a variety of statutes as remedial. Sometimes, the classification turned on the legislature’s express statement to that effect. The Declaratory Judgment Act, for example, states: “This chapter is declared to be remedial; its purpose is to settle and to afford relief from uncertainty and insecurity with respect to rights, status and other legal relations; and is to be liberally construed and administered.” RCW 7.24.120; Clallam County Deputy Sheriff’s Guild v. Bd. of Clallam County Comm’rs, 92 Wn.2d 844, 848, 601 P.2d 943 (1979). The CPA’s legislative mandate does not use the term “remedial,” but it provides that it “shall be liberally construed that its beneficial purposes may be served.” RCW 19.86.920.

Often, the Supreme Court has deemed a statute “remedial” for purposes of liberal construction without mentioning an express direction from the legislature. Examples include

the Minimum Wage Act, RCW 49.46.005 to .920; Anfinson v. FedEx Ground Package Sys., Inc., 174 Wn.2d 851, 870, 281 P.3d 289 (2012); Bostain v. Food Express, Inc., 159 Wn.2d 700, 712, 153 P.3d 846 (2007);
the Prevailing Wage Act, RCW 39.12.010 to .900; Silverstreak, Inc. v. Wash. State Dep’t of Labor & Indus., 159 Wn.2d 868, 882, 154 P.3d 891 (2007);
the wage claim statutes (which come into play when your employer doesn’t pay you), RCW 49.48.030; Int’l Ass’n of Fire Fighters, Local 46 v. City of Everett, 146 Wn.2d 29, 34, 42 P.3d 1265 (2002); see also Lindsay v. Pac. Topsoils, Inc., 129 Wn. App. 672, 684, 120 P.3d 102 (2005); Bates v. City of Richland, 112 Wn. App. 919, 939, 51 P.3d 816 (2002); and
the Crime Victims Compensation Act, RCW 7.68.015 to .920; Sebastian v. State Dep’t of Labor & Indus., 142 Wn.2d 280, 284, 12 P.3d 594 (2000).

Based on these examples, one cannot say that the inclusion of a discretionary enhanced (treble) damages feature forecloses classification as a remedial statute. A classic “remedial” statute is RCW 49.52.070, which authorizes the award of attorney fees, costs, and punitive damages when an employer willfully deprives the plaintiff of wages. RCW 49.52.070. (Moreover, the CPA, which courts liberally construe to serve its beneficial purposes pursuant to RCW 19.86.920, authorizes enhanced damages up to $25,000.) Discussing RCW 49.52.070, the Supreme Court held, “The statute must be liberally construed to advance the Legislature’s intent to protect employee wages and assure payment.” Schilling v. Radio Holdings, Inc., 136 Wn.2d 152, 159, 961 P.2d 371 (1998). In reaching this decision, the Court emphasized the importance of an award of attorney fees and costs: “By providing for costs and attorney fees, the Legislature has provided an effective mechanism for recovery even where wage amounts wrongfully withheld may be small. Id.

Much the same can be said about IFCA. By providing a more comprehensive remedy, including a comprehensive right to recover attorney fees and costs, the legislature provided an effective mechanism for recovery even when the coverages or benefits withheld may be relatively small. And one should not overlook the obvious remedial importance of IFCA’s requirement that the claimant allow the insurance company 20 days to “resolve the basis for the action” before bringing the claim. RCW 48.30.015(8)(b). Finally, one should not take as a given the proposition that IFCA’s enhanced damages are purely punitive. The district court in F.C. Bloxom Co. v. Fireman’s Fund Insurance Co., No. C10-1603RAJ, 2012 WL 5992286, at *7 (W.D. Wash. Nov. 30, 2012), issued an interesting opinion in which it observed that treble damages are not necessarily just punitive. “Depending on the statutory scheme of which they are a part, treble damage provisions may be remedial or punitive.” Id. “The court does not decide whether IFCA’s enhanced damages remedy is punitive, remedial, or both.” Id.

In any event, things would be different if the Insurance Fair Conduct were a purely, or even a predominantly, punitive statute. The Supreme Court has held that the timber trespass statute is “penal in its nature” and that it must therefore be “strictly construed.” Broughton Lumber Co. v. BNSF Ry. Co., 174 Wn.2d 619, 633, 278 P.3d 173 (2012). The timber trespass statute provides:

Whenever any person shall cut down, girdle, or otherwise injure, or carry off any tree, including a Christmas tree as defined in RCW 76.48.020, timber, or shrub on the land of another person, or on the street or highway in front of any person’s house, city or town lot, or cultivated grounds, or on the commons or public grounds of any city or town, or on the street or highway in front thereof, without lawful authority, in an action by the person, city, or town against the person committing the trespasses or any of them, any judgment for the plaintiff shall be for treble the amount of damages claimed or assessed.

RCW 64.12.030.

The timber trespass statute exists primarily for the purpose of punishment. “The territorial legislature enacted the timber trespass statute in 1869 to (1) punish a voluntary offender, (2) provide treble damages, and (3) ‘discourage persons from carelessly or intentionally removing another’s merchantable shrubs or trees on the gamble that the enterprise will be profitable if actual damages only are incurred.’” RCW 64.12.030. Before the statute’s passage, trespass was already actionable under the common law. See Jongeward v. BNSF Ry. Co., 174 Wn.2d 586, 597–98, 278 P.3d 157 (2012). The timber trespass statute made treble damages mandatory unless the defendant shows mitigating circumstances. Broughton Lumber, 174 Wn.2d at 634 (“Further, because a plaintiff must bring a timber trespass claim under former RCW 64.12.030, the statute subjects every defendant to potential treble damages. As noted above, the burden is on the defendant to show mitigating circumstances.” (citations omitted)). IFCA is very different because its focus is on affording the policyholder a more comprehensive and effective remedy for the harm experienced from an insurance company’s failures. The Act then makes enhanced damages optional, not mandatory.

As discussed above, the recent case of Bauman v. American Commerce Insurance Co., No. C15-1909 BJR, 2017 WL 635777, at *2 (W.D. Wash. Feb. 16, 2017), characterized IFCA as a “remedial insurance statute,” while Schreib v. American Family Mutual Insurance Co., 129 F. Supp. 3d 1129, 1140 n.11 (W.D. Wash. 2015), observed that “IFCA’s treble enhanced damages provision makes it at a minimum unclear whether it is indeed remedial in nature.”

Earlier cases had the opportunity to weigh in on the issue of whether IFCA is remedial in the context of arguments over whether the statute applied retroactively to conduct before its effective date. The presumption in Washington is that statutes operate prospectively, not retroactively. But that presumption is reversed when “a statute is remedial and its remedial purpose is furthered by retroactive application.” Haddenham v. State, 87 Wn.2d 145, 148, 550 P.2d 9 (1976). The Supreme Court explained in Haddenham v. State, a retroactivity case, “Remedial statutes, in general, afford a remedy, or better or forward remedies already existing for the enforcement of rights and the redress of injuries.” Id.

In State v. McClendon, 131 Wn.2d 853, 861, 935 P.2d 1334 (1997), another retroactivity case, the Court stated, “A remedial statute is one which relates to practice, procedures and remedies and is applied retroactively when it does not affect a substantive or vested right.” Were it not for an important caveat—discussed below—IFCA would easily be considered retroactive under these definitions. The statute clearly relates to practice, procedures, and remedies. It does not take any rights away from anyone. Any conduct that gives rise to liability was already illegal before IFCA’s effective date. IFCA provides a more effective compensatory remedy.

The caveat is that, in cases discussing retroactivity, the existence of any punitive potential generally appears to render a statute prospective. That was the case with the CPA, where the punitive damages provision killed any chance of retroactive application in Johnston v. Beneficial Management Corp., 85 Wn.2d 637, 641–42, 538 P.2d 510 (1975). The Supreme Court stated “that a statute which creates a new liability or imposes a penalty will not be construed to apply retroactively.” Id. at 642. As discussed above, the availability of punitive damages does not similarly foreclose a statute’s classification as “remedial” for purposes of statutory construction. But, to the extent any court relies on IFCA’s punitive damages provision in deciding that the statute ought not be retroactive, and holds that the presumption of prospective application should apply, it is hard to disagree based purely on retroactivity law.

The following cases held that IFCA was not retroactive.

Dees v. Allstate Ins. Co., 933 F. Supp. 2d 1299, 1312 (W.D. Wash. 2013).
Ledcor Indus. (USA) v. Va. Surety Co., No. C09-1807RSM, 2011 WL 6140957, at *11 (W.D. Wash. Dec. 9, 2011).
Morris v. Country Cas. Ins. Co., No. C11-719RSM, 2011 WL 5166453, at *2 (W.D. Wash. Oct. 31, 2011).
Lenk v. Life Ins. Co., No. CV-10-5018-LRS, 2010 WL 5173207, at *1–2 (E.D. Wash. Dec. 13, 2010).
Haley v. Allstate Ins. Co., No. C09-1494 RSM, 2010 WL 4052935, at *7 (W.D. Wash. Oct. 13, 2010).
RSUI Indem. Co. v. Vision One, LLC, No. C08-1386RSL, 2009 WL 5125420, at *2 (W.D. Wash. Dec. 18, 2009).
Aecon Buildings, Inc. v. Zurich N. Am., No. C07-832MJP, 2008 WL 895978, at *2 (W.D. Wash. Mar. 28, 2008).
Malbco Holdings, LLC v. AMCO Ins. Co., 546 F. Supp. 2d 1130, 1134 (E.D. Wash. 2008).
HSS Enterprises, LLC v. AMCO Ins. Co., No. C06-1485-JPD, 2008 WL 312695, at *3 (W.D. Wash. Feb. 1, 2008).

Unfortunately, the federal courts considering the retroactivity question did not stop there. In Malbco Holdings, LLC v. AMCO Insurance Co., the United States District Court for the Eastern District of Washington’s analysis of whether IFCA is remedial was very brief. The Court quoted McClendon (although the quotation marks, brackets, and ellipses are removed here to make it easier to read): “Last, the IFCA does not have a remedial purpose, for it concerns more than practice, procedures and remedies prescribed by law to enforce a right.” Malbco Holdings, LLC v. AMCO Insurance Co., 546 F. Supp. 2d 1130, 1133 (E.D. Wash. 2008) (quoting State v. McClendon, 131 Wn.2d 853, 861, 935 P.2d 1334 (1997) (citation omitted)); see also Navigators Specialty Ins. Co. v. Christensen Inc., 140 F. Supp. 3d 1097, 1099 (W.D. Wash. 2015) (citing Malbco for the proposition that IFCA is not considered a remedial statute). The court’s assertion that “IFCA does not have a remedial purpose” is incorrect. To be sure, IFCA allows for punitive, treble damages, but IFCA’s clear focus is on remedying the harm experienced by claimants. It has a remedial purpose.

In HSS Enterprises, LLC v. AMCO Insurance Co., No. C06-1485-JPD, 2008 WL 312695 (W.D. Wash. Feb. 1, 2008). the Western District of Washington relied on the punitive damages provision and cited Johnston. But the court also stated that IFCA concerns more than “procedure or forms of remedies” because “it provides plaintiff with the right to proceed against the defendant for unreasonable conduct falling outside the scope of the other statutory causes of action set forth in plaintiff’s complaint.” Id. at *3. This is incorrect. Any conduct by an insurer that is actionable under IFCA was already unlawful—and actionable—due to RCW 48.01.030 (the duty of good faith), RCW 48.30.010 (the statute authorizing the promulgation of claims handling regulations), and RCW 19.86.010 to .920 (the CPA). IFCA is simply a new and more comprehensive remedy for conduct that was unlawful before.

§ 16. Understanding IFCA’s Place in Insurance Law

It is important to read IFCA in context with related statutes and causes of action. The Supreme Court has held that the “plain meaning” rule for reading statutes requires “examination of the statute in which the provision at issue is found, as well as related statutes or other provisions of the same act in which the provision is found.” Dep’t of Ecology v. Campbell & Gwinn, L.L.C., 146 Wn.2d 1, 10, 43 P.3d 4 (2002). If you are trying to ascertain the meaning of IFCA, and you are not also studying the rest of the Insurance Code and how it has been interpreted by the Supreme Court, you are doing it wrong.

Newsletter sign up

Share this post: