In a decision for Division One of the Washington Court of Appeals, Moun Keodalah, et al. v. Allstate Ins. Co., et al., No. 75731‑8-I, 2018 WL 1465526 (Wash. Ct. App. Mar. 26, 2018), the court held that a policyholder may directly sue an insurance claims adjuster for insurance bad faith and violations of the Washington Consumer Protection Act (“CPA”), even if the adjuster is acting within the course and scope of his or her employment. Prior to this decision, Washington courts permitted an insurance adjuster to be named individually in cases alleging bad faith or CPA violations only if they were employed by a third party independent adjusting firm.
The underlying case which resulted in the Keodalah decision involved a motorcycle accident where the insured, Keodalah, was hit by an uninsured motorcyclist while both were driving. The motorcyclist died and Keodalah suffered injuries. Keodalah had UIM insurance through Allstate.
A police investigation determined that the motorcyclist was speeding and that Keodalah was not on the phone during the time of collision. Allstate’s own investigation also revealed that motorcyclist was speeding and splitting lanes at the time of the accident and that the motorcyclist’s excessive speed caused the collision.
Keodalah requested that Allstate pay its $25,000 UIM limits. Allstate denied, offering $1,600 to settle the claim based on its assessment that Keodalah was 70% at fault. After Keodalah asked Allstate to explain its basis for its position, Allstate increased its offer to $5,000.
Keodalah then sued Allstate, asserting a UIM claim. Allstate designated Tracey Smith, an Allstate insurance adjuster on the claim, as its 30(b)(6) representative. Smith claimed that Keodalah ran the stop sign and was on his cell phone, despite the fact that Allstate had the investigative reports showing the opposite. Smith later admitted that her statements were untrue.
Before trial, Keodalah rejected Allstate’s offer of $15,000 to settle the claim. The case proceeded to trial where the jury determined the motorcyclist was 100% at fault and awarded Keodalah $108,000.
Keodalah then filed suit against Allstate and Smith. Keodalah alleged IFCA violations, insurance bad faith, and CPA violations. After the trial court dismissed Keodalah’s claims against Smith, the Washington Court of Appeals granted discretionary review on two issues.
First, the court looked at whether an individual insurance adjuster may be liable for bad faith, concluding that this is permissible. It reasoned that the pertinent statute, RCW 48.01.030, required that “all persons” involved in insurance act in good faith. The term “person” was defined to include an individual. Therefore, the court determined that under the plain language of the statute, insurance representatives, as individuals, had a duty to act in good faith and could be sued if they breach that duty. The court also cited to two Washington decisions for support – one in federal district court and one in Division Three of the Washington Court of Appeals – which similarly held that the same statute unambiguously applies to corporate insurance adjusters based on the statute’s plain language. The difference in Keodalah was that the insurance adjuster was an individual adjuster employed by the insurer, while the prior cases involved third-party corporate adjusters.
The second issue was whether an individual insurance adjuster could be liable for violation of the CPA, which prohibits “[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.” RCW 19.86.020. The court answered this question in the affirmative, rejecting Smith’s argument that a contractual relationship is required in order for there to be liability under the CPA.
The court did hold that the plaintiff was foreclosed from suing the insurance adjuster under the Washington Insurance Fair Conduct Act (“IFCA”) due to the recent decision in Perez-Cristantos v. State Farm Fire & Casualty Insurance Co, 187 Wn.2d 669, 672 (2017), which held that the IFCA does not create an independent cause of action against insurers for regulatory violations.
At this time, no petition has been filed yet seeking review of this decision by the Washington Supreme Court.