The U.S. District Court for the Western District of Washington recently issued an opinion addressing an insured’s claims for bad faith and violation of the Insurance Fair Conduct Act (IFCA) and Consumer Protection Act (CPA). In Wilson v Austin Mut. Ins. Co., 2014 WL 3534053 (W.D. Wash., July 15, 2014), the court found that an insured was unable to establish that the insurance company acted unreasonably by relying on its medical expert’s opinion about the insured’s need for additional treatment. Based on that finding, the court granted the insurance company’s motion for summary judgment and dismissed each of the insured’s extra-contractual claims.
The case involved an insured that was injured in a head-on collision that was caused by the negligence of a third party. The insured eventually settled for the $100,000 liability limits available under the at-fault driver’s insurance policy. The insured’s policy included $35,000 in personal injury protection (PIP) benefits and $100,000 in underinsured motorist (UIM) coverage. In addition to the settlement with the at-fault driver, the insurance company paid approximately $30,000 in PIP benefits for the insured’s medical expenses. The insurance company, relying on the results of an independent medical examination (IME), refused to pay for an additional claim of $3,075 in expenses. The insured also sought payment of the full $100,000 UIM policy limits. The insurance company offered $15,000 in “new money” to settle the remaining claims. The insured rejected the offer and filed suit.
In the lawsuit, the insured claimed that the insurance company breached the insurance contract and was liable for extra-contractual damages because, in violation of the Washington Administrative Code (WAC) it compelled litigation of the action by making an unreasonably low settlement offer and failed to pay all benefits it owed. The insurance company moved for summary judgment on the extra-contractual claims. The basis of the insurance company’s motion was that, while there was a bona fide dispute about the value of the insured’s underlying UIM claim, the extra-contractual claims lacked merit because the insurance company’s position was reasonable under the circumstances. The insured argued that the insurance company acted in bad faith and violated the IFCA and CPA because it refused to pay all of the claimed PIP benefits and made a low offer of $15,000 on the UIM claim.
The court granted the insurance company’s motion, finding that the insured failed to present evidence establishing that the insurance company’s position was unreasonable. The court pointed to the fact that both parties were able to present credible medical evidence supporting their respective positions. According to the court, the insured failed to provide evidence showing that the insurance company’s reasoning for denying additional benefits and making its settlement offer—which was based on the medical evidence—was unreasonable under the circumstances. Additionally, the court determined that the $15,000 UIM offer by the insurance company was not “substantially less than the amounts ultimately recovered” and, therefore, not in violation of the WAC 284-30-330(7). Based on the finding that the insured was unable to establish that the insurance company acted unreasonably, the court dismissed each of the insured’s extra-contractual claims.
The attorneys of Maloney Lauersdorf Reiner regularly litigate claims for insurance bad faith and violations of the Insurance Fair Conduct Act and Consumer Protection Act. Please contact us with any questions about this case or any other matter you see addressed on the MLR Insurance Coverage Blog.