On October 29, 2013, Judge Marsha Pechman of the Western District of Washington issued an opinion denying-in-part and granting-in-part an insurance company’s motion for summary judgment on claims for insurance bad faith and violations of the Washington Consumer Protection Act (CPA) and Insurance Fair Conduct Act (IFCA) in Bird v. American Family Mut. Ins. Co., 2013 WL 5816497 (W.D. Wash., Oct. 29, 2013).  The case involved an insured making claim under the personal injury protection (PIP) provisions of his automobile insurance policy following three separate automobile accidents.  Following the initial accident, the insurance company paid for the insured’s medical treatment for approximately four months before it terminated PIP benefits following an independent medical examination (IME).  After the second and third accidents, the insurance company paid for the insured’s medical treatment pursuant to the PIP provisions of the policy and closed the files after treatment was complete.  Throughout the entire period, the insured complained of low back pain that he attributed to the initial accident.  The insured eventually received three spinal surgeries and was unable to work as a result of his injuries.

Following the surgeries, the insured’s attorney forwarded the medical treatment bills and claimed lost wages to the insurance company.  The attorney also requested that the insurance company re-open the insured’s PIP claims and tender the appropriate benefits.  In response, the insurance company advised that it would not re-open the PIP claims.  The insured’s attorney again insisted the claims be re-opened, and the insurance company continued to insist that it would not consider additional PIP payments.  The insured filed an action asserting claims for breach of contract, bad faith, breach of fiduciary duty, and violations of the CPA and IFCA.

Citing Malbco Holdings LLC v. AMCO Ins. Co., 546 F.Supp.2d 1130, 1133 (E.D. Wash. 2008), the insurance company argued that the insured’s IFCA claim relating to the initial accident should be dismissed because the “precipitating event,” the termination of PIP benefits, occurred prior to the effective date of the IFCA, which is not retroactive.  The district court rejected the insurance company’s argument on the basis that the insured’s claim was not based on the initial denial; rather, it was based on the insurance company’s refusal to re-open the PIP claims.  The court likewise rejected the insurance company’s statute of limitations argument, which was predicated on the same assertion that the precipitating event occurred upon termination of benefits following the first accident.

The insurance company also argued that the IFCA claim should be dismissed because there was no “unreasonable denial” as required under the statute.  In support, the insurance company analogized to the holding in Country Preferred Ins. Co. v. Hurless, 2012 WL 2367073 (W.D. Wash., June 21, 2012).  In the Hurless case, the district court held that the insurance company’s delay in paying the insured arose from a reasonable dispute about the amount of coverage, not whether the insured was covered at all.  The Bird court found the analogy inapplicable, however, because the insurance company was not reasonably disputing the amount of benefits.  It disputed whether the claim was covered at all.

With respect to the insured’s bad faith and CPA claims, the insurance company argued that its actions were reasonable under the circumstances and requested the court enter summary judgment in its favor.  The district court refused, finding there were disputed issues if fact.  In particular, the court found that there were issues concerning whether the insurance company’s conduct was reasonable and amounted to “unfair or deceptive” as required under the CPA.

Finally, the insurance company argued that the insured’s claimed damages were not recoverable under the CPA because they did not constitute “injury to business or property.”  Citing Keyes v. Bollinger, 31 Wn.App. 286, 298, 640 P.2d 1077 (1982), the district court agreed to the extent the insured claimed damages for mental or emotional distress.  However, the court rejected the insurance company’s argument that the insured was barred from pursuing out-of-pocket medical expenses and lost wages.  The district court distinguished Hiner v. Bridgestone/Firestone, 91 Wn.App. 778, 959 P.2d 1158 (1998) which stands for the proposition that an insured cannot recover for personal injuries under the CPA.  In Bird, the court found that the insured was not alleging damages as a result of his personal injuries; instead, he was seeking damages resulting from the insurance company’s alleged failure to adhere to the terms of the contract.