Washington Fed. Courts Split on IFCA

A judge in the Eastern District of Washington, expressly rejecting the holdings in a series of cases from the Western District of Washington, recently found that an insured could establish a claim under the Insurance Fair Conduct Act (IFCA) by showing the insurance company violated one of the Washington Administrative Code (WAC) provisions set forth in RCW 48.30.015(5).  The case, captioned Langley v. GEICO Gen. Ins. Co., No. 14-cv-3069-SMJ, 2015 WL 778619 (E.D. Wash. Feb. 24, 2015), relied on a series of recent cases from the Eastern District and its conclusion that the IFCA created an implied cause of action under Washington law.

The litigation involved an insurance claim for a recreational vehicle (RV).  A dealer had purchased the RV with a salvaged title for $50,500, allegedly restored the vehicle, and sold it to the insured for $270,000.  After the insured purchased it, in June 2013, the RV was completely destroyed by fire.  The insurance company offered to pay the original purchase price for the salvage title RV of $50,500.  The insured filed suit against the insurance company in May 2014 alleging, among other things, a claim for violation of the IFCA.

The insurance company moved for summary judgment on the insured’s IFCA claim.  The basis of the insurance company’s motion was that the IFCA claim was not viable because there was no denial of coverage or benefits.  The parties conceded that Washington case law makes clear that under RCW 48.30.015(1) a party can maintain an IFCA claim by establishing that there was an unreasonable denial of coverage or payment of benefits.  The insured argued, however, that a third cause of action exists under the IFCA.  Specifically, the insured asserted that RCW 48.30.015(5)—which sets forth a number of Washington Administrative Code (WAC) provisions—provides an independent basis for maintaining a claim under the IFCA, regardless of coverage or benefits.  The insurance company responded with a series of federal district court decisions from the Western District of Washington rejecting the argument.

The court first analyzed the authorities from the Western District.  It then pointed to the line of recent authority from the Eastern District of Washington that “has begun to reject the precedent set by the Western District.”  Citing to the opinions issued by the Eastern District in Merrill v. Crown Life Ins. Co., No. 13-cv-110-TOR, 2014 WL 2159266 (E.D.Wash. May 23, 2014); Hell Yeah Cycles v. Ohio Sec. Ins. Co., 16 F.Supp.3d 1224, 1235-36 (E.D. Wash. 2014); and Hover v. State Farm Mut. Auto. Ins. Co., No. cv-13-5113-SMJ, 2104 WL 4239665 (E.D. Wash. Aug. 26, 2014), the court concluded that it was “not persuaded that an IFCA cause of action requires a denial of coverage or benefit.”

The court further reasoned that its conclusion was supported by its conclusion that the IFCA created an implied cause of action under Washington law.  In particular, it determined that RCW 48.30.015(5) satisfied the requirements of Washington case law to create such a cause of action.  The court concluded: (1) the insured was with the “protected class” of the IFCA, (2) the legislative intent behind the statute supported creating such a claim; and (3) that the implied remedy was consistent with the purpose of IFCA.  Based on those findings, the court found that “at a minimum, an independent implied cause of action exists under the IFCA for a first party claimant to bring suit of violation of the enumerated WAC provisions in RCW 48.30.015(5)” and expressly rejected the line of cases from the Western District of Washington reaching another conclusion.

The attorneys at Maloney Lauersdorf Reiner routinely represent clients in litigation involving claims under the Insurance Fair Conduct Act.  Please contact us with any questions about this case or any other matter you see addressed on the MLR Blog.

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