Yes, You Can Sue Your Own Insurance Company
In 2007, voters in Washington state approved a special law by the initiative process, protecting Washington residents from unfair claims practices by insurance companies. This law is called the Insurance Fair Claims Act or “IFCA” for short. In a nutshell, this law allows Washington residents to sue their own insurance company when their insurance company unreasonably denies a claim or engages in unfair claims practices.
While the law always held insurance companies responsible for the coverages in their policies, IFCA levels the playing field between consumers of insurance and the companies that provide the insurance. It does so by creating a special cause of action against insurance companies for unreasonable denial of a claim and allowing the insureds to recover up to three times their actual damages as well as attorney’s fees and the costs of litigation when successful in pursuing a claim against their own insurance company.
Before IFCA, an insured could bring a claim against their insurance company but would have to pay a lawyer to pursue it and could only recover what they might be entitled to under the policy in the first place. The treble damage clause, as well as the attorney’s fee clause, gives the consumer needed leverage to resolve claims without extensive litigation and make them whole when successful in court.
IFCA applies only to first party insurance claims. This means that in order to use the benefits of this law the claim must be against a person’s own insurance company or it must be against an insurance company the person is deemed an “insured” under. The major exception is that it does not apply to claims against health insurers. This is a major exception which unfortunately was felt necessary in order to obtain the political support in passage of IFCA in the initiative process.
There are cases in which a person is considered an “insured” under a policy of insurance even though that person did not purchase the policy. For example, if you are riding in your friend’s car you will probably be considered an “insured” under the medical benefits of your friend’s car insurance policy. Similarly, if you are visiting your friend’s home you will probably be considered an “insured” under the medical benefits of your friend’s homeowner’s policy.
Other than these limited exceptions, IFCA claims can only be brought against insurance policies that you or some family member has purchased. For example, an IFCA claim cannot be brought against another driver’s insurance company that caused an accident where you were injured.
The courts are still defining what it means to “unreasonably deny” a claim. This is frequently a question of fact and is dependent on a number of factors, including what information the insurance company had to evaluate the claim, whether the denial of the claim was done in good faith and with a reasonable basis, and whether the value of the claim eventually proved to be much more than the insurance company offered.
In addition, there is a long list of possible unfair practices by insurance companies which, when proven, provides a basis for an IFCA violation. For example:
An insurance company CANNOT do the following:
Disregard or misrepresent pertinent facts or policy provisions; refuse to pay a claim without conducting a reasonable investigation; compel or threaten to compel an arbitration or trial by its insured if the insured does not accept a lowball offer; attempt to settle claims for less than what a reasonable person might expect the claim to settle for; delay investigations in order to get the insured to accept a lower offer; or ask its insured to sign a release for benefits under one part of the policy while paying benefits for another part of the policy.
An insurance company MUST do the following:
Establish reasonable standards for investigation of claims made against it under its policies; have reasonable procedures to consider and resolve claims properly and fairly; acknowledge receiving notification of the claim approximately 10 working days after receiving notification; and provide the necessary claim forms to make a claim under its policy.
Generally speaking, an insurance company must investigate a claim and provide a response within 30 days. If an insurance company needs more time to make a determination of the claim, it must provide a claimant notice of this within 15 working days after receipt of the proof of loss.
IFCA requires that before filing a lawsuit against an insurance company, a claimant must send a pre-suit notice to the insurance company, providing a copy of that notice to the State Insurance Commissioner. A lawsuit cannot be filed until after the 20 days has expired. If you think you might have an IFCA claim, you should contact Abeyta Nelson Injury Law.
-blog written by attorney Rodney K. Nelson, Abeyta Nelson Injury Law