The Washington Court of Appeals just decided an important issue in insurance disputes: confirming the policyholder can sue the individual insurance adjuster as well as the insurance company itself. In Keodalah v. Allstate Insurance Company and Smith, No. 75731-8-I, the court ruled: “we hold that an individual insurance adjuster may be liable for bad faith and CPA violations.” This significant ruling has several implications for future insurance bad faith litigation.
The underlying insurance claim arose when Mr. Keodalah was in a car wreck and made an uninsured motorist (“UIM”) claim with his insurer Allstate. Allstate’s internal investigation and the police report uniformly established the motorcyclist was solely at fault for the collision. Allstate’s adjuster, Ms. Smith, nevertheless insisted Keodalah was 70 percent at fault, made up facts about the collision she later admitted were false, and refused to pay the full claim.
Keodalah sued Allstate as well as Smith individually, asserting claims for bad faith, violations of the Consumer Protection Act (“CPA”), and violations of the Insurance Fair Conduct Act (“IFCA”). The trial court dismissed Keodalah’s claims against Smith without a trial, ruling that insureds can’t sue individual adjusters for insurance bad faith.
On appeal, the Court of Appeals decided the trial court was wrong and that policyholders like Keodalah can sue individual insurance adjusters as well as the insurance company. The court relied on Washington insurance law which imposes a duty of good faith on “all persons” engaged in the business of insurance, including specifically “the insurer…and their representatives.” (emphasis added). Because Ms. Smith, as an insurance adjuster, “was engaged in the business of insurance and was acting as an Allstate representative,” the appeals court had no difficulty concluding Smith owed Keodalah a duty of good faith and could be sued for breaching that duty. The court also distinguished several other Washington and federal court decisions the adjuster relied on.
Keodalah has several potential implications for future insurance disputes. Obviously, the adjuster’s personal exposure adds a significant dimension to the dispute. And foreign insurers employing Washington adjusters could likely be sued in state court without removal to federal court (which is typically more favorable to the insurer), because federal courts typically only have diversity in insurance disputes where all the parties are citizens of different states.
So you’ve had a loss – perhaps a tree fell on your house, your car was wrecked or you became injured or disabled – and it’s time to dust off that insurance policy to see if you’re covered. Maybe you already made a claim but your insurer denied it for reasons that don’t make sense – or, perhaps even more frustrating, the insurer refuses even tell you whether they’re going to pay your claim or not. Or maybe you’ve just recently purchased a policy and want to know your rights.
This cheat sheet is a list of some issues you may want to consider. It tells you (1) the basic information you need; (2) some of your basic rights under Washington law; and (3) some helpful tips and “best practices.”
This is only a summary – your rights and obligations depend on the specific circumstances. If you think you might have a claim or dispute involving insurance, it’s wise to consult a lawyer. Insurance is complex and it is easy to accidentally put yourself in a disadvantage or even lose your rights entirely.
Basic Information You Need
Do I Have The Policy Documents? The insurance policy is absolutely critical. It states your coverage, your rights, and the insurer’s rights. It likely includes provisions requiring you to take certain action – like notifying your insurer of a claim within a certain period of time – in order to preserve your rights.
Many people are surprised to learn that their declarations page, summary plan description, or brochure explaining their coverage isn’t the policy. An insurance policy virtually always consists of a collection of multiple separate documents. For instance, a life insurance policy might consist of an application, a policy contract, and several addenda, riders or attachments. There are often additional documents such as annual statements that are also critical to understanding your rights under the policy.
Did I Get The Policy Through My Employer? Insurance policies you acquired through or in connection with your employer are different from regular policies. Employer-related policies are subject to a federal law called the Employee Retirement Income Security Act (ERISA for short). ERISA can apply even if the policy was issued by an insurance company that’s not your employer, and even if your employer doesn’t pay your premium. ERISA is very different from the law governing normal insurance policies; it’s complex and imposes special rules and deadlines. If you think your policy might be subject to ERISA, it’s important to pay extra close attention and consult a qualified attorney.
Do I Have All The Facts? If you have a claim or think you might want to make a claim, it’s crucial you know the facts. Make sure you obtain all the documents that are potentially relevant. If it’s a health or disability claim, have all the relevant medical records. If it’s a car crash, have the police report.
Know Your Rights
Here are some of the basic rights you have as a Washington policyholder:
You Have The Right To Be Treated Fairly. Washington law imposes a duty on insurers to act in “good faith.” Good faith generally means the insurer must treat you honestly, made decisions on your claim based on adequate information, and never put their interests over yours. (Remember that policyholders also have to act in good faith, so be sure you’re always honest when dealing with your insurer).
You Have The Right To Have The Insurer Follow The Policy. The policy is a contract between you and the insurer. The insurer has to follow it. The insurer can’t try to re-write the policy after you make a claim.
You Have The Right To Prompt Claim Responses. Washington law requires your insurer to respond to your claim within a specific time – often ten days – and acknowledge that they received your claim. Beyond the initial claim, insurers generally have to respond to your communications about the claim in a reasonable time. The insurer must also tell you whether or not they will pay the claim within a reasonable time after you provide the documentation they need to made a decision.
You Have The Right To A Full Investigation. Insurers have to decide whether to pay claims based on a reasonable investigation. That means your insurer has to make a reasonable effort to look for evidence that’s relevant to your claim. They can’t just consider the evidence that supports denying the claim.
Below are some helpful best practices to keep in mind when dealing with a possible insurance claim.
Keep A Paper Trail. Make sure you document everything that’s relevant to the policy or your claim. It’s especially critical to document all your communications with the insurer or with third parties (doctors, mechanics, potential witnesses, etc.). Communicate via email or hard copy mail when practical. If you have a phone call or in-person meeting with an adjuster, take notes, then send them an email summarizing your understanding of the discussion and inviting them to correct you if they think you got it wrong. If you lose money or have other harm because your insurer isn’t doing what they’re supposed to, document it. If it’s not on paper, it never happened.
Cooperate With Reasonable Requests. If your insurer makes a reasonable request for information or similar assistance with your claim, comply promptly. Remember you have a duty to act in good faith, and your policy may affirmatively require you to cooperate in making a claim. That doesn’t mean bending over backwards, but you should comply with reasonable requests. If you wind up in court, you want to be sure that it’s your insurer and not you who the judge sees as being unreasonable.
Be Proactive. Procrastination will never improve your position and it can make you lose your rights entirely if you miss a deadline. Promptly notify your insurer if you think you have a claim. Include as much information about the claim as possible. Follow up with the adjuster if they are slow in getting back to you. Reach out to third parties who might have relevant information. Generally, delay in processing your claim benefits your insurer – not you.