Washington insurance law quick reference guide
By Jerret E. Sale
A. FIRST-PARTY CLAIMS
What is a "claim" under Washington law?
A claim does not have to be in writing unless a specific insurance policy so requires. If the claimant provides information sufficient to allow the insurer to frame an intelligent estimate of its rights and liabilities, the Washington administrative Code and Washington case law deem that a proper "claim" has been made. Moreover, the claim can be made directly to the insurer or to the insurer's agent. (WAC 284-30-320(7); RCW 48.18.460; Towney v. New York Life Ins. Co., 27 Wn.2d 829, 180 P.2d 815 (1947).)
How fast must an insurer respond to a claim,and what information must be provided?
Within 10 business days of receiving notice of claim, an insurer must acknowledge receipt of the claim, preferably in writing.The insurer must also promptly provide all necessary forms, instructions, and "reasonable assistance" so that first-party claimants can present their claim in compliance with all applicable policy provisions. (WAC 284-30-360.)
How much time is permitted to investigate a first-party claim?
An insurer must complete its investigation of a first-party claim within 30 days after notification of claim, and then either accept or deny the claim. In situations where the investigation cannot reasonably be completed within 30 days, the insurer must notify the claimant within 15 business days after receipt of claim and give the reasons why more time is needed. If the investigation remains incomplete, the insurer must, within 45 days of the initial notice of claim, send the claimant a letter with the reasons why additional time is needed. A similar letter should also go to the claimant within every subsequent 30-day period thereafter, until such time as the investigation is completed and a coverage determination is made. (WAC 284-30-370;WAC 284-30-380(3).)
What is required in accepting or denying a claim?
Usually, unless a longer period of investigation is required, insurers have 15 business days from receiving notice of loss to accept or deny a first-party claim. If a claim is denied, the denial must (a) be in writing, (b) be made within 15 business days after the insurer's receipt of the claimant's properly executed proofs of loss, (c) provide a reasonable explanation of the bases for denial, and (d) specifically list all policy provisions, conditions, or exclusions that the insurer is relying upon in denying the claim. If a claim is timely accepted, then payment must be made within a "reasonable time" after proof of loss statements have been completed, and the payment should be accompanied by reference to the specific coverage(s) under which the payment is being made. (WAC 284-30-330(5);WAC 284-30-330(9); WAC 284-30-330(13);WAC 284-30-380(1).)
What constitutes unfair claims practices in Washington?
A number of WAC provisions describe "unfair methods of competition and unfair or deceptive acts or practices in the business of insurance." (WAC 284-30-330;WAC 284-30-380; WAC 284-30-390;WAC 284-30-395).The prohibited practices include (not a complete list):
- Misrepresenting facts or policy provisions to insureds or claimants;
- Failing to acknowledge and act reasonably promptly upon communications;
- Failing to adopt and implement reasonable standards for the prompt investigation and processing of claims;
- Failing to effectuate prompt, fair and equitable settlements of claims in which an insurer's liability has become reasonably clear;
- Failing, upon payment of a claim, to inform insureds or beneficiaries of the coverage under which payment was made;
- Failing to provide a reasonable explanation for a coverage denial; and
- Refusing to pay a claim without first conducting a reasonable investigation.
In Washington, an insurer can be found to have acted in "bad faith" even when correctly denying a claim—if the denial was made without a reasonable investigation first. (Coventry Assocs. v.Amer. States Ins. Co., 136 Wn.2d 269, 961 P.2d 933 (1998).)
What should an insurer know about releases?
If a whole or partial settlement is made under a specific coverage, the release may not contain language releasing the insurer from broader liability. No release may extend beyond the event giving rise to the claim payment, and all releases must reference the specific coverage(s) under which payment is made.The insurer must furnish the release to the claimant or insured within 20 business days after settlement is reached. (WAC 284-30-330(9);WAC 284-30-330(12); WAC 284-39-330(16).)
What if a claim is made under an automobile policy?
Special rules apply to claims made under auto policies. For example, there is a separate recitation of "unfair practices" relating to vehicle insurance claims. (WAC 284-30-500.) The WAC also has specific provisions listing the standards" for "prompt, fair and equitable" settlement of automobile insurance claims and automobile PIP insurance claims. (WAC 284-30-390;WAC 284-30-395.)
What if the Washington Insurance Commissioner makes an inquiry?
Special rules also apply when an insurer must respond to inquiries from the Office of the Washington State Insurance Commissioner. For example, unless an insurer responds in writing within 15 business days to any inquiry by the Commissioner's Office, the insurer's actions are deemed "untimely." (WAC 284-30-360;WAC 284-30-650.)
Is Washington a "manifestation" state?
No. For first-party insurance claims,Washington uses the "injury in fact" trigger and deems a loss covered so long as there was at least some "minute" amount of covered damage that occurred within the stated policy period. The "continuous trigger" is also used for losses that span more than one policy period. (See, e.g., Ellis Court Apts. Ltd. Partnership ex rel.Woodside Corp. v. State Farm Fire & Cas. Co., 117 Wn. App. 807, 813-14, 72 P.3d 1086 (2002); Villella v. Public Employees Mut. Ins. Co., 106 Wn.2d 806, 814, 725 P.2d 957 (1986).)
B. THIRD-PARTY CLAIMS
How quickly must an insurer respond to a third-party claim or tender?
Washington's time limits pertaining to an insurer's acknowledgement of claims do not distinguish between first- and third-party claims, so an insurer has 10 business days to acknowledge a third-party claim. (WAC 284-30-360.) As for investigating third-party claims, the insurer has 30 days to complete its investigation unless the investigation "cannot reasonably be completed" within that timeframe. (WAC 284-30-370.)
It is important to note, however, that a written answer to a Washington state court lawsuit is due within 20 days of service. Consequently, when a third-party claimant files a state court action against an unrepresented insured, the insurer should move quickly to protect the insured from default and may have to respond before the 30-day period usually allowed for claim investigation. (CR 4(b);WAC 284-30-370.)
What must be considered in evaluating whether a defense should be provided?
In Washington, as in most jurisdictions, the duty to defend is deemed broader than the duty to indemnify. An insurer must defend if the complaint arguably or potentially states a claim that, if proven, would be a covered claim under the policy. Once triggered, the duty to defend continues throughout the course of the litigation against the insured, unless the defense is offered under a reservation of rights and the facts of the case eventually reveal that a withdrawal of the defense is appropriate. In any event, the insurer cannot withdraw its defense under circumstances that might prejudice the insured.
Does an insurer have a duty to hire independent counsel?
Even in situations where an insurer is affording its insured a defense under a reservation of rights, the insurer is not required under Washington law to hire independent counsel for the insured.The insured may, however, hire its own independent counsel at its own expense.
When is the duty to indemnify triggered?
As with most states, the duty to indemnify in Washington is narrower than the duty to defend.The duty to indemnify arises only in the event of final imposition upon the insured of covered, non-excluded liability through judgment or settlement.
Must a claimant be told that a statute of limitations will run?
Yes, but only in limited circumstances. An insurer must provide written notice that a statute of limitations or contractual suit-limitation clause is about to run if (1) the insurer is negotiating a settlement of a claim directly with the claimant, and (2) the claimant is neither an attorney nor represented by an attorney.Written notice that an applicable time period may be expiring must be given to first-party claimants 30 days and to third-party claimants 60 days before the date on which such time limit may expire. (WAC 284-30-380(5).) Absent such circumstances, or
"[a]bsent circumstances which support estoppel, an insurance company is under no duty to notify a [third-party] claimant of the impending expiration of a statute of limitations." (Marsh v. Gen. Adjustment Bureau, Inc., 22 Wn. App. 933, 935-36, 592 P.2d 676 (1979).)
This summary is not intended to constitute legal advice, nor does it create an attorney-client relationship.The laws referenced in this guide are current as of printing and may change.