Will 2026 Bring Meaningful Regulatory Updates to Washington Policyholders?

Washington’s Office of the Insurance Commissioner has been working on updates to our state insurance regulations since July 2025. The coming year may see these updates become final.

Washington State’s insurance regulations help level the playing field between consumers and insurance companies. When a loss happens, the consumer is typically struggling with property damage or injury, and doesn’t understand the mechanics of the claims process or the insurance policy fine print. The company, on the other hand, has the resources, knowledge, and expertise. This puts the policyholder at a disadvantage.

The proposed regulatory updates could help fix this. First, they formally define an insurance “claim.” You might think that whether a person has made an insurance “claim” would be basic. But basic doesn’t always mean easy to define (as anyone who’s watched NFL referees struggling to define a “catch” can confirm!). What often happens is the insured has a loss, calls their insurer in confusion, and then thinks they have a claim open only to find out, months later, that the insurer never actually opened the claim. This can lead to problems like damage getting worse, evidence being lost, and even unscrupulous insurers leveraging the delay against the policyholder. At least one court has held that policyholders have no legal recourse unless they explicitly demand their insurance benefits using the right “magic words.”

The proposed regulation properly places the onus to recognize and investigate claims on the party with superior resources: the insurer. 

Second, the proposed rules require transparency when insurers use databases to estimate losses. Computerized databases and estimating software can help in calculating the cost to repair property following a loss—when properly used as one tool that is a part of a comprehensive and fact-based investigation. But, too often, these databases are used as the end of the carrier’s investigation, not a starting point, resulting in a claims payment divorced from the facts, lacking the benefit of a complete investigation or the judgment of appropriate experts. Time and again, attorneys are approached by policyholders whose insurer insisted on paying only the amount generated by an arbitrary and opaque database even though no local contractor can complete the work for that price. This practice shifts the burden of investigating to the insured, who must now work with their contractor and appropriate experts to itemize the reasons why the work cannot be performed for the price in the insurer’s database. It delays making the insured whole after a loss. It pressures insureds to accept less than the policy entitles them to. 

OIC’s proposal would fix this by specifying that a reasonable investigation does not consist solely of blind reliance on database pricing and by requiring insurers who use these databases to disclose their data.

Third, the new rules would require insurance companies to promptly approve emergency mitigation. Homeowners’ insurance policies typically require the homeowner to perform emergency mitigation and can permit the insurer to terminate coverage for losses that are made worse by the insured’s failure to do so. When insurers drag their feet in approving emergency mitigation, the policyholder risks a loss of coverage, further damage to their property, and paying out of pocket for work that their carrier may later refuse to cover.

Requiring insurers to approve emergency mitigation promptly avoids placing the vulnerable and unsophisticated insured in the position of making important decisions without the benefit of the insurer’s superior expertise and resources. 

Fourth, the Insurance Commissioner’s new regulation would require insurance companies to share their documents about a claim with the policyholder. Attorneys routinely see insurer claim files kept secret from the insured only to be revealed during discovery in litigation.

Requiring transparency during the claim permits the insured to address issues before claims reach the point of a lawsuit. A consumer in full possession of the facts can point out problems while there is still time to fix them, provide missing information the carrier overlooked, and otherwise protect their interests.

Hopefully, the Office of the Insurance Commissioner will make finalizing these updates a priority in 2026.

Washington Legislature Passes New Protections for Mental Health Insurance Coverage

We’ve often discussed how difficult it is to get insurance companies to cover intensive mental health treatment. Insurers often find reasons to deny this treatment given it can be expensive and protracted. There are existing mental health parity rules intended to combat this problem, but they have been interpreted extremely narrowly by courts.

The Washington State Legislature is attempting to change that. In 2025, the legislature passed important amendments to our state’s mental health insurance parity laws. These amendments make several important changes to protect patients’ access to mental health coverage and treatment.

First, the legislature expressly declares that: “Access to mental health and substance use disorder treatment is critical to the health and well-being of individuals with these conditions.” It further declares that “access to appropriate care is important to reducing preventable emergency department visits [and] hospitalizations.” This recognizes that untreated mental health conditions can escalate and become emergencies.

The legislature also recognizes that health insurance coverage is “essential” to access to mental health care.

Therefore, the amendments declare that the legislature intends to increase acces to mental health treatment by removing certain roadblocks that insurers have placed to coverage for this treatment.

Second, the legislature addresses some of these roadblocks. One battle in procuring mental health treatment coverage concerns the phrase “medically necessary.” Virtually all health plans cover treatment that is medically necessary. This is often a ground for the insurance company to deny coverage.

One big problem for patients is that insurers often deny that treatment is medically necessary using secret and Byzantine internal guidelines.

These disputes often look like this:

Patient: Please cover this treatment. My doctor says I need it to manage my symptoms. Without it, my condition could get worse. I might not be able to keep working. In an extreme worst-case scenario, I might have to be hospitalized.

Insurance Company: Sorry, that’s not “medically necessary.”

Patient: How can it be not medically necessary? My doctor says I need it!

Insurance Company: We don’t really care what your doctor says. We have our own checklist for what’s medically necessary. And our checklist says we don’t have to pay for your treatment. Sorry!

Patient: Will you show me the checklist, so I can review it with my doctor and find out how to get my treatment covered?

Insurance Company: The checklist is secret. Have a great day!

Part of the new law aims to fix this problem. It requires that medical necessity decisions for certain mental health treatment must be made based on “criteria from nonprofit professional associations.” In other words, insurers now have to decide medical necessity for these kinds of treatment based on objective critera from doctors or providers with real-world experience. They can’t simply make up their own criteria.

Further, it requires insurers to disclose meaningful information about coverage denials for medical necessity. The carrier must provide “full details” about “the relevant criteria” used in the decision to the patient and their health care provider.

Additionally, the new law empowers Washington State’s Insurance Commissioner to review any internal criteria health insurance companies use to decide whether to pay for the treatment at issue.

Insurance coverage for mental health treatment will probably be a battle for many years. But these amendments should be a step in the right direction.

Ninth Circuit Establishes Pro-Employee Test for Releasing ERISA Rights

The Ninth Circuit Court of Appeals recently decided the question of whether and how employees can be induced to give up their right to sue under ERISA.

In Schuman v. Microchip Technology, Inc., the Ninth Circuit (the court that hears appeals from federal trial courts in Washington and the west coast) reversed the trial court’s dismissal of ERISA claims by two employees who participated in the defendant’s ERISA plan.

The ERISA plan was unusual. Most employees who participate in ERISA plans receive what we think of as the “normal” benefits of employment: health insurance, disability or life insurance, etc.

The Plan in Schuman was created especially for the purpose of providing severance benefits to employees who might be laid off following an anticipated merger. One employer was about to merge with another, and wanted to offer the understandably anxious employees some reassurance about their job security. If an employee was deemed redundant after the merger, they would receive severance benefits from the ERISA plan.

Or so the employees thought. Unsurprisingly, this became a point of contention when the merger was consummated and layoffs ensued without the promised severance.

Schuman was fired without cause by the new employer shortly after the merger. Like most layoffs, Schuman’s involved an offer of some cash (much less than the ERISA plan had promised) in exchange for signing a standard severance agreement releasing all of Schuman’s claims against the company.

Critically, the employer told Schuman and others that the benefits promised under the ERISA plan were no longer available, claiming the plan had “expired.” Confronted with this all-or-nothing proposition, Schuman signed the release.

Schuman and other employees later filed a class action lawsuit. They alleged that the employers violated ERISA by, basically, lying to them about the availability of severance benefits under the ERISA plan to induce them to sign a release that gave up those benefits in favor of substantially smaller severance payments. The lawsuit sought benefits under the ERISA plan for severance. It also sought to void the releases signed by Schuman and other workers.

The trial court held the releases were valid. It dismissed the lawsuit.

The Ninth Circuit reversed. First, the appellate court established the test for whether an ERISA plan participant’s release of claims is valid.

Such a release, the court said, is valid only if it survives “special scrutiny.” That is because Congress enacted ERISA for the special purpose of protecting employees’ benefits. Employers are “fiduciaries” under ERISA. They have to put the interests of their plan participants first.

The appellate court therefore stated that the test for whether a release of claims under an ERISA plan is valid depends on the “totality of the circumstances” including, importantly, whether the company that procured the release is accused of improper conduct. The court listed the circumstances that should be considered as part of this decision, including the employee’s sophistication and knowledge of their rights, how the payment for the release compares to the value of the benefits the employee is giving up by signing, and whether the employer improperly induced the employee to sign.

Having formulated this test, the Ninth Circuit sent the case back to the lower court to apply it.

This recognizes the reality that allowing employers to seduce their workers into signing away their rights under the employer’s ERISA plan is like letting the fox guard the henhouse. The Ninth Circuit’s test helps ensure that employers cannot deceive their workers into releasing claims under the statute designed to protect them from just this sort of manipulation.

Health Plan Must Pay For Child’s Medically Necessary Mental Health Treatment, Says Ninth Circuit

Health insurance coverage for mental health treatment is contentious. Insurers historically resist covering these diganoses. Their treatment can be expensive and protracted. Legislation here in Washington State and federally has tried to push back on this, but the problem of getting insurers to cover mental health treatment remains.

A recent Washington Supreme Court ruling compounded the problem by limiting claimants’ ability to rely on legislation that was intended to improve access to coverage for mental health treatment. There’s still a lot of work to be done legislatively to give people tangible, systemic protections for mental health coverage.

Until that happens, most people faced with their health plan’s denial of critical mental health treatment will have no choice but to go to court. That’s what happened to the family of a nine-year-old child known in court filings as “R.C.” (Court filings typically use initials, rather than full names, in cases involving minor children in order to protect the family’s privacy).

In a May 14, 2025 decision, the Ninth Circuit Court of Appeals upheld R.C.’s success in a lawsuit against his health insurance plan.

R.C.’s parents sued their health plan after it denied coverage for his residential mental health treatment. R.C. had serious behavioral health problems. He threatened to hurt or kill others. He wielded objects like weapons. It’s easy to imagine that his parents wanted to provide him with effective treatment.

But the health plan claimed residential treatment wasn’t “medically necessary.” The court had two problems with this claim.

First, the court found that the treatment was “medically necessary” under the health plan’s own criteria. This boiled down to the plan’s claim that R.C. wasn’t a danger to himself or others. The court listed examples, including: stabbing his own mouth, threatening to kill other children, describing in detail how he intended to use household objects to murder others, and starting fistfights.

Second, the court found that the health plan failed to tell R.C.’s parents what they had to prove in order for the plan to cover residential treatment. Before the court, the plan claimed that R.C.’s parents failed to prove that outpatient treatment had been tried and failed, but the plan never told R.C.’s parents that this was a requirement when it was handling the claim.

In other words, the plan’s denial was wrong on the merits (R.C.’s treatment really was medically necessary) and procedurally unfair (the plan didn’t give the parents a fair shake at proving the treatment was needed). So the parents won. The health plan will have to pay for R.C.’s treatment. That’s a win, right?

Not exactly. The tail of the Ninth Circuit’s ruling declined to award R.C.’s parents any relief beyond the belated reimbursement for his treatment. The court ruled that R.C. could not force the plan to change its practices to make sure that the erroneous denial of benefits wasn’t repeated with other people with similar health claims.

This underscores the systemic problem. It took R.C.’s parents almost five years to get this ruling. During that time, they presumably had to pay for R.C.’s treatment out of pocket. And they had to hire lawyers and deal with the emotional rollercoaster of litigation. They received no compensation for this. It’s easy to imagine that many people with health insurance claims won’t have that kind of time or resources.

Unfortunately, absent sytemic reform, health insurance plans will remain incentivized to wrongfully deny claims with little reprecussion.

Washington Court of Appeals Enforces Insurance Protections for Domestic Violence Victims

Since 1998, Washington State has had legislation on the books protecting the rights of domestic violence victims when it comes to insurance. Among other things, the law prohibits insurers from excluding coverage for losses based on intentional or fraudulent acts that result from domestic violence. Intentional acts exclusions are common in insurance.

For example, most homeowner’s insurance would be unlikely to cover a fire intentionally started by the insured. Given the interpersonal dynamic of domestic abuse, restricting the insurance company’s ability to exclude losses from coverage because they arose from an abusive family member’s actions is necessary to prevent domestic abuse from becoming an unfair limitation on insurance coverage.

Washington’s Court of Appeals applied this law in its September 3, 2024 ruling in Welch v. PEMCO Mutual Insurance Company.

In that case, Welch had been married to her husband Morgan and owned a home together. When they divorced, the court awarded the family home to Morgan and the two shared custody of their child.

After the divorce, Morgan attacked Welch when she arrived at the family home to collect their child. During the attack, Morgan set the home on fire. The house was destroyed. A jury later found Morgan guilty of attempted murder and arson.

Welch still owned part of the home at the time of the attack because the couple was still in the process of untangling their assets following the divorce. The home was covered under property insurance issued by PEMCO. Welch and Morgan were both named as insureds.

PEMCO denied coverage. It pointed to the insurance policy’s exclusion for any loss caused by intentional acts, which included Morgan’s arson.

As required by law, the insurance policy stated that the intentional acts exclusion did not apply to losses resulting from acts of domestic violence by family members. But PEMCO claimed that this did not apply. Since Welch and Morgan had been divorced, they were no longer married and not “family.” (The legislature has since amended the law to provide that domestic violence among any intimate partner cannot be excluded from insurance coverage by “intentional acts” exclusions).

The Court of Appeals ruled for Welch. It agreed that the historical definition of “family” did not apply. Welch and Morgan were divorced, and Welch lived with a new partner at the time of the attack.

But the court held that the more modern definition of “family” was more appropriate. Recognizing changing times, modern dictionaries define “family” to include two parents rearing children together even if not married.

Under that definition, the court had little trouble determining that the rule limiting insurance exclusions for domestic violence victims applied, and that PEMCO could not exclude the loss.

The ruling is “unpublished,” meaning it is not binding precedent. But it is a good illustration of the impact of Washington State’s protections for insurance policyholders who are victims of domestic violence.