In Keodalah v. Allstate Insurance Company,1 a Washington appellate court held insurance adjusters may be liable for bad faith and violating Washington’s Consumer Protection Act.
Keodalah’s truck was struck in an intersection by an uninsured motorcyclist; the motorcyclist died. The Seattle Police Department (SPD) determined the motorcyclist was traveling between 70 and 74 m.p.h. in a 30 m.p.h., zone and Keodalah was not using his cell phone at the time of the collision.
Keodalah made a claim under his UIM coverage with Allstate. Allstate retained an accident reconstruction firm, Traffic Collision Analysis Inc. (TCA), who found Keodalah stopped at the stop sign and the motorcyclist’s “excessive speed” caused the collision. Keodalah’s demanded the UIM policy limit of $25,000. Allstate instead asserted Keodalah was 70% at fault and offered $5,000.
Keodalah sued Allstate. Allstate designated Tracey Smith, an Allstate insurance adjustor, as its 30(b)(6) representative. Although Allstate possessed the SPD report and TCA analysis, Smith claimed Keodalah ran the stop sign and was talking on his cell phone. Later, Smith acknowledged this was not true. The jury found the motorcyclist to be 100% at fault and awarded Keodalah $108,868.20.
Keodalah then sued Allstate and Smith for insurance bad faith and violations of the Consumer Protection Act (CPA). Smith moved to dismiss for failure to state a claim and the trial court granted the motion.
The Washington State Court of Appeals granted discretionary review of three issues:
- whether IFCA creates a private cause of action for violation of a regulation,2
- whether an individual insurance adjuster may be liable for bad faith, and
- whether an individual insurance adjuster may be liable for violation of the CPA.
The appellate court found under RCW 48.01.070, Smith had a duty to act in good faith, since she was engaged in the business of insurance as an Allstate representative. The court held that the duty to good faith applies not only to third-party companies adjusting insurance claims, but also to individual adjusters. The court declined to follow Garoutte,3 which held that the duty of good faith did not apply to individual adjusters. Instead, the court relied upon the analysis in Merriman4 and Lease,5 which found Washington’s insurance bad faith statutes permit claims against corporate insurance adjusters.
The Washington appellate court’s finding on the issue is contrary to most courts, which have “determined an insured cannot bring a negligence claim against an independent insurance adjuster because an independent insurance adjuster owes the insured no duty of care.”6 Washington found otherwise, and that RCW 48.01.030 imposes a duty of good faith on corporate and individual insurance adjusters.
Consumer Protection Act
CPA prohibits “[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.” The CPA serves to deter unfair or deceptive acts or practices, protect the public, and foster fair and honest competition. To prevail on a CPA claim, a plaintiff must show:
- An unfair or deceptive act or practice,
- that act or practice occurs in trade or commerce,
- a public interest impact,
- injury to the plaintiff in his or her business or property, and
- a causal link between the unfair or deceptive act and the injury.7
Smith, relying on International,8 argued a contractual relationship must exist between the parties for liability under the CPA. The court, however, found Smith’s argument to be inconsistent with the Washington Supreme Court’s finding in Panag.9 In conclusion, individual insurance adjusters can be liable for a violation of the CPA.
1 Keodalah v. Allstate Ins. Co., 413 P.3d 1059 (Wash. App. 2018).
2 The Washington Supreme Court’s later ruling in Perez-Crisantos v. State Farm Fire & Cas. Ins. Co., foreclosed Keodalah’s IFCA claim.
3 Garoutte v. American Family Mutual Ins. Co., 2013 WL 231104 (W.D. Wash. Jan. 22, 2013).
4 Merriman v. American Guarantee & Liab. Ins. Co., 198 Wash. App. 594, 396 P.3d 351 (Wash. App. 2017).
5 Lease Crutcher Lewis WA, LLC v. National Union Fire Ins. Co., No. C08-1862, 2009 WL 3444762 (W.D. Wash. Oct. 20, 2009).
6 Tippett v. Ameriprise Ins. Co., No. 14-4710, 2015 WL 1345442 *4 (E.D. Pa. March 25, 2015) (predicting Pennsylvania law to follow “[t]he majority of state supreme courts to rule on the issue [which] have determined an insured cannot bring a negligence claim against an independent insurance adjuster because an independent insurance adjuster owes the insured no duty of care”).
7 Hangman Ridge Training Stables, Inc., v. Safeco Title Ins. Co., 105 Wash.2d 778, 719 P.2d 531 (Wash. 1986).
8 International Ultimate, Inc., v. St. Paul Fire & Marine Ins. Co., 122 Wash. App. 736, 87 P.3d 774 (Wash. App. 2004).
9 Panag v. Farmers Ins. Co. of Washington, 166 Wash. 2d 27, 204 P.3d 885 (Wash. 2009).