Earlier this year, the Washington State legislature passed an insurance bad faith bill that allowed for treble damages when an insurer was found to have acted unreasonably. Washington has never had punitive damages, so this legislation provided a significant remedy for policyholders damaged as a result of insurance company misconduct and a penalty for those insurance companies violating it. The Act also allowed the award of the policyholders’ attorneys’ fees. Immediately after Governor Christine Gregoire signed the bill, the insurance industry filed a referendum to have Washington citizens decide whether the Act would be struck down or upheld.
The insurance industry reportedly spent about $11M to defeat the Act. During the campaign the insurance industry accused those who supported the Act of lying and said that it would lead to frivolous lawsuits. Despite spending such a significant amount towards this propaganda, the insurance industry lost–badly. The Act was upheld by a vote of 57% to 43%. This is a major defeat for the insurance industry. Reportedly, Washington voters even approved the act in what are commonly considered "conservative" counties.
A decade ago, two Washington lawyers, Pat Lepley and Karen Koehler, were at the forefront of policyholder representation. I had just taken over as Chair of ATLA’s Bad Faith litigation group from Pat. He and Karen were practicing law together and bringing claims practice cases in a jurisdiction which seemingly allowed for little chance of extra-contractual recovery. Often, they were forced to creatively argue that the law from the insurance company’s home office applied to provide some type of remedy and punishment when insurer misconduct occurred. Ever the creative leaders, Pat and Karen worked daily on getting the initial billed passed by the Washington legislature. I was surprised at their success because it represented such a substantial change in law. The effect would be that insurers choosing to act wrongly could finally be held accountable for their conduct. They both worked very hard seeing that the Act was approved by popular vote. Pat and Karen deserve everyone’s profound gratitude.
While I am certain that insurance defense lawyers and insurance adjusters will never publicly admit it, I am certain that they are happy that the bill was passed and legislation approved. After all, why would any reputable insurer or individual not want to have insurance companies that are behaving badly and paying claims slowly not held accountable for their deeds?