Category: Insurance

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 Supreme Court Emphasizes Power of Ensuing Loss Clauses to Preserve Insurance Coverage

The Washington Supreme Court recently upheld a broad reading of so-called “ensuing loss” insurance policy language in The Gardens Condominium v. Farmers Insurance Exchange.

In that case, Farmers sold an insurance policy to The Gardens Condominium. The policy covered any direct physical loss to the condominium building.

This type of coverage is common. It’s known as “all-risk” coverage. All-risk insurance covers basically any loss that isn’t excluded. This puts the onus on the insurance company to draft specific exclusions for losses they don’t want to cover.

In the insurance policy it sold to Gardens, Farmers included some exclusions but went a step further. It added a provision that losses caused by an excluded cause of loss are excluded even if they set off a chain of events that results in a covered cause of loss. In other words, if any exclusion played any role in the loss at all, the entire loss would not be covered.

The Gardens’ insurance policy also included an “ensuing loss clause.” This is another common insurance policy term. It provides that if an excluded event caused a covered cause of loss, that loss (i.e., the ensuing loss) would be covered.

In Gardens’ case, that ensuing loss clause applied specifically to an exclusion for “faulty workmanship.” Thus, the policy said that losses caused by faulty workmanship wouldn’t be covered; but if faulty workmanship led to another covered cause of loss, that loss would be covered.

Why did this matter? It spelled the difference between coverage or no coverage for a huge loss.

In 2019, Gardens discovered damage to its building. The roof was built without proper venting. This allowed water to condense inside the roof.

Over time, that water did extensive damage to the structure. Gardens made a claim under its Farmers insurance policy.

Farmers denied the claim. It determined the faulty workmanship exclusion applied.

Gardens filed suit. It argued that the cause of the loss was the condensation, not the faulty roof directly. Condensation was a covered cause of loss.

Thus, while acknowledging that there would be no coverage for replacing the faulty roof itself because of the exclusion, Gardens asserted that the ensuing loss clause meant there was covered for the damaged caused by the condensation.

The case made its way up to the Washington Supreme Court. The court acknowledged that neither party disputed the faulty workmanship exclusion applied. The only question was whether the ensuing loss clause provided coverage as an exception to that exclusion.

The court held that it did. Farmers argued that there was no real ensuing loss. It characterized the condensation as a natural consequence of the faulty workmanship of the roof; not its own separate cause of loss.

The court disagreed. It held that Farmers’ reasoning would render the ensuing loss clause meaningless. The whole point of that clause, said the court, is to provide coverage for secondary consequences of an excluded loss.

Emphasizing that Farmers could have chosen to sell the insurance policy without the ensuing loss clause, the court stated that it would not re-write the policy after the fact.

This case is a good reminder of the strength Washington law gives to coverage language in insurance policies. Insurers selling all-risk coverage must carefully draft exclusions for specific events they don’t want to cover.

Washington Federal Court Helps Clarify Meaning of IFCA’s “Payment of Benefits” Provision

In 2007, Washington voters approved the Insurance Fair Conduct Act (“IFCA”). IFCA gives people recourse if their insurance company unreasonably refuses to pay their insurance claim. Recourse under IFCA includes important relief that consumers couldn’t previously get, including punitive damages up to three times the amount of their loss and attorneys’ fees. This was considered a big deal.

Insurers, naturally, have urged courts to read IFCA narrowly. Like any new statute, judges applying it in the first instance have to consider how the language approved by the voters applies to the facts of particular cases. So the first few batches of rulings on a new law like IFCA often have a big impact on how that law applies in the real world.

One way insurers have tried to limit IFCA’s reach is by arguing it doesn’t apply to a dispute about how much the insurance company pays on an insurance claim. The language approved by the voters states that IFCA applies to an insurance policyholder who is:

“unreasonably denied a claim for coverage or payment of benefits by an insurer[.]”

So if the company denies the claim and refuses to pay anything, IFCA obviously applies. What about where the insurer accepts the claim and then pays less than the value of the loss?

This happens frequently. For example, a homeowner has a house fire. They get a contractor’s bid to repair the home. It will cost $100,000. They make a claim to their homeowners’ insurance company. The insurance company tells them the loss is covered, but the company will only pay $50,000. Does IFCA apply?

“No”, according many insurers who have taken this issue to court. These companies’ creative lawyers have reasoned that paying less than the value of the claim isn’t the same as “denying a claim” or refusing “payment of benefits.” “After all,” the company says, “we didn’t deny coverage, and we did pay some benefits.”

A recent decision from the Washington federal court clarifies that this isn’t what the voters intended when they passed IFCA.

In the recent decision Kyu-Tae Jin v. GEICO Advantage Ins. Co., No. 2:22-cv-1714, (W.D. Wash. Nov. 2, 2023), a consumer sued their insurance company after the insurer failed to pay all of the Uninsured Motorist benefits they alleged were owed under their insurance policy.

The policyholder asked the insurer to pay the entire amount of his policy limits, which were $100,000. The insurance company offered to pay $2,000. The policyholder, as you might expect, sued for violation of IFCA, arguing the decision was unreasonable.

The insurance company asked the federal court to throw out the case before trial. The company’s argument boiled down to: “even if our decision wasn’t reasonable, we didn’t deny coverage, and we didn’t refuse to pay benefits–the policyholder just thinks we should have paid more.”

The federal court disagreed. It emphasized that paying any amount at all can’t immunize an insurer from an IFCA claim. The question for IFCA depends on whether the amount the company paid in benefits was “reasonable based on the information it had.”

So, the court reasoned, if the insurance company’s offer to pay $2,000 in response to a claim for $100,000 was unreasonable under the circumstances, the company would violate IFCA. Under the facts of the particular case, the court ruled a jury had to decide that question.

This interpretation would seem to make sense. It’s hard to imagine that the voters who approved IFCA in 2007 intended that an insurance company could get itself off the hook by paying $1 on a $1 million claim.

This decision helps provide some valuable clarity regarding IFCA’s scope.

Gun Rights Legal Defense Fund is “Insurance” Says Washington Court of Appeals

You might think the question “what is insurance” is an obvious one. Most Americans probably understand, basically, that insurance is the thing where you pay somebody today and, if something bad happens tomorrow, they pay you. Health, auto and life insurance are universal enough that most folks have an intuitive understanding of them. But whether something is insurance can be less straightforward out of those common contexts.

We’ve previously blogged about this question. That discussion came up in the context of “health sharing ministries,” where members of the same church agree to pool funds in case someone gets hurt or sick. The question is back in the legal news with the Washington Court of Appeals’ recent decision Armed Citizens’ Legal Defense Network v. Wash. State Ins. Commissioner.

The “Armed Citizens’ Legal Defense Network” is a good example of how an insurance relationship can exist in unexpected places. ACLDN is a group of gun owners who agree to support each other if one of them faces legal charges after using a firearm in self defense. Members pay into ACLDN’s legal defense fund. Following what is euphemistically dubbed “a self-defense incident,” the fund pays the attorneys’ fees and other costs a member incurs as a result of defending against legal proceedings. So, basically, you pay ACLDN now, and ALCDN pays you later if you need a legal defense.

Is this insurance? ACLDN doesn’t think so. And it’s up front with its members about that. Its advertising tells prospective members explicitly that benefits “are not insurance.” And it doesn’t promise any specific payments. Rather, it promises only to review the facts of your case, decide whether you were really defending yourself, and make the decision whether to provide financial support for your legal defense.

Washington’s Office Insurance Commissioner saw things differently. It issued a fine and a Cease and Desist order against ACLDN for, basically, selling insurance without a license. The case made its way to the Court of Appeals, which sided with the Insurance Commissioner.

The court rejected ACLDN’s argument that it wasn’t selling insurance because it had no contractual obligation to pay its members anything. According to ACLDN, it retains the right not to pay for a particular member’s legal defense. And, if it declines to do so, the member has no legal recourse.

But, the court pointed out, ACLDN’s right not to fund a legal defense is specifically defined. ACLDN can only refuse to defend a member if it determines the member’s use of force was not legally justified. That’s an objective test. So the court had little difficulty concluding ACLDN had an enforceable contract with its members to fund their legal defenses so long as their use of force was justified.

The court also rejected ACLDN’s argument that whether a member’s use of force was lawful isn’t objectively determinable. It pointed out that insurance companies decide whether an insured acted in legitimate self defense all the time. Liability insurance, for example, can provide a defense if you are accused of causing someone’s death–but it would exclude coverage where you used lethal force without justification.

From there, it’s easy to see how the court ruled ACLDN’s contracts promise insurance. ACLDN pays specific costs like bail or attorneys’ fees. It does so when a specific thing happens: a member uses lethal force in self defense. It’s the same procedure as your car insurance or health insurance: you pay up front and the company pays you if the bad thing happens in the future.

Climate Disasters Blamed for Increased Insurance Premiums and Claims Underpayments

Insurers are fleeing markets and raising rates to compensate for increased disaster losses. Farmers recently stopped insuring homes in Florida. This will result in cancelation of about 100,000 policies as those policies expire. Insurers are also withdrawing from California and Louisiana.

These states have a lot of differences, but they share one thing in common: increased natural disasters attributed to climate change. Warming oceans have been blamed for increasingly bad hurricane seasons in Florida and Louisiana. In 2022, 42 percent of Florida insurance claims were hurricane-related. In California, increasing wildfires are thought to relate to hotter, drier summers.

The carriers exiting these markets have been vague about their reasons, citing the need to protect trade secrets. But several reference these increasing disasters. State Farm pointed to “growing catastrophe exposure” as one reason for withdrawing from the California market. Farmers similarly identified “severe weather events” as a reason from stopping selling policies in California.

Even homeowners whose insurers remain in these markets feel the effects of increased disaster losses. Premiums in disaster-prone areas are increasing. For instance, homeowners living in hurricane-prone Florida pay an average of $6,000 annually for insurance compared to the national average of $1,700. Florida premiums have increased 100 percent over the past three years. And, when hurricane losses occur, consumers are increasingly complaining about underpaid claims that don’t fund repairs.

State insurance regulators are expressing concern about the effects on consumers from these companies withdrawing from their states. Some experts argue that a driving force behind these increases is the failure to regulate the reinsurance companies that provide insurers with extra coverage to pay for years with a high number of claims, like particularly bad hurricane or wildfire seasons. Unlike regular insurance companies, reinsurers are largely unregulated. They’ve raised rates sharply in recent years, and these costs get passed on to consumers. Part of the reason for this is the reinsurance market is global. So a bad hurricane season in Florida or monsoons in India both make insurance more costly for the rest of the planet.

Other experts blame the increase on consumers’ failure to come to terms with increased disaster risks. People keep building expensive houses on the Florida coast and in wildfire-prone areas of California even though they know there’s a large risk these properties get destroyed in disasters.

Because of this, some industry groups say the solution is to let insurers charge extra in disaster prone areas. The theory is that if it costs, say, ten times as much to insure a home on the Florida coast than inland, people will stop rebuilding in areas vulnerable to hurricanes. Other say this would perpetuate the problem by allowing wealthy homeowners to keep rebuilding while doing nothing to address the underlying problems.