The Washington Legislature recently passed and governor signed the “Insurance Fair Conduct Act” allowing first party claimants to recover treble (triple) damages and attorney fees for claims unreasonably denied. The Seattle Post Intelligencer’s story here lays out the pending battle between insurers and the trial bar. You see, the legislation is up for public vote in November and each side is scurrying to curry favor with the electorate.
Now, as an insurance consumer myself I expect high marks from my insurance company in the event of a loss. And, I have from time to time witnessed the recalcitrance of other insurers when tendering defense and indemnity to them (particularly in additional insured scenarios.) Few would disagree that insurers should promptly and cheerfully pay those claims they owe, period.
The rub here is a coverage denial need only be “unreasonable” to allow for treble (essentially, punitive) damages. Typically, punitive damages are awarded for gross negligence or willful and wanton misconduct—not simple negligence as “unreasonable” suggests. If an insurer’s coverage denial was wanton I probably would have no beef with treble damages. However, simply being wrong (as Fireman’s was found—see my last post) should not bring a windfall to the insured—simple indemnity will do nicely, thank you.
And, what’s with the attorney fees provision? Okay, so if the insured wins they get theirs paid. No problem there. If the insured loses the insurer eats their fees? What’s with that? Few will lose sleep over an insurance company bearing its own attorney fees winning its case against a little old lady’s coverage battle against her insurer. But this type of arrangement incentivizes policyholder attorneys to pursue questionable cases because if they win they get paid, if they don’t—no problem.
In the final analysis Washington voters decide. Stay posted. And, check out this blog. Attorney David Rossmiller has excellent analysis (and sharp wit to boot!) about the Washington prankster dentist’s suit against his insurer.