Eastern district of washington breathing life into the third front of the insurance fair conduct act (“ifca”): ifca claims based upon washington administrative code (“wac”) violations
The IFCA battle has had many fronts, notably and most formidably the battle has surrounded whether IFCA applies when coverage is granted but the insurance company unreasonably denies the full amount of benefits owed under the policy. When the IFCA decisions were first coming out, this battle appeared to be heavily tipping in the insurance companies’ favor and Plaintiffs were crossing their fingers for non-removal. Cases such as, Morella v. Safeco Ins. Co. of Illinois, No. C12-0672RSL, 2013 WL 1562032, at *3 (W.D. Wash. Apr. 12, 2013)1, helped turn the battle around in the federal courts and Ainsworth v. Progressive Cas. Ins. Co., 180 Wn. App. 52, 79, 322 P.3d 6, 20 (2014) allowed plaintiffs to plant their flag in State Court.
During the coverage denial vs. non-coverage denial fights, another front of IFCA was also simultaneously being litigated but was relegated to the background while the bigger battle of whether IFCA even applied in non-coverage denial cases was being primarily fought. This is the front of whether IFCA applies for WAC violations.
So the question is, can you maintain an IFCA claim when coverage has been granted and there is no issue of whether benefits have been paid, but the insurance company violates WAC provisions in the claims handling process? If you’ve read any number of federal court opinions you may believe the answer is a resounding no.
But, if you read Langley v. GEICO Ins. Co., No. 1:14–CV–3069–SMJ, 2015 WL 778619 (E.D. Wash. Feb. 24, 2015), out of the Eastern District of Washington, you get to yes:
the Court finds that at a minimum, an independent implied cause of action exists under the IFCA for a first party claimant to bring a suit for a violation of the enumerated WAC provisions in RCW 48.30.015(5).
to maintain a cause of action under the IFCA, Plaintiff must prove either 1) an unreasonable denial of a claim for coverage, 2) an unreasonable denial of payment of benefits, or 3) a violation of WAC 284–30–330, 350, 360, 370, 380, or an unfair claim settlement practice rule adopted under RCW 48.30.010 by the insurance commissioner that is codified in chapter 284–30 of the Washington Administrative Code. RCW 48.30.015(1), (5).
See Langley supra.
In Langley Judge Mendoza rejected the lines of cases (coming out of the Western District of Washington) because in those cases the issue of whether IFCA applies to WAC violations was either not squarely addressed or at the times it was, the courts did not outline their statutory construction analysis, and they did not examine the IFCA statute under the lens of the doctrine of implied causes of action.
The doctrine of implied causes of action is premised upon the assumption that “‘the legislature would not enact a remedial statute granting rights to an identifiable class without enabling members of that class to enforce those rights.’” Langley, 2015 WL 778619, at *4 (quoting Bennett v. Hardy, 113 Wn.2d at 919–20, 784 P.2d 1258 (1990)) (other citations omitted). Under the Bennett test, a cause of action will be implied from the language of a statute when: (1) a plaintiff is “‘within the class for whose ‘especial’ benefit the statute was enacted’”; (2) explicitly or implicitly, legislative intent supports creating a remedy; and (3) implying a remedy is consistent with the legislations underlying purpose. Bennett, 113 Wn.2d at 919–20.
Applying the three-part Bennett test for implied causes of action, the Court in Langley concluded that an implied cause of action exists for IFCA claims based upon WAC violations.
the Court finds that at a minimum, an independent implied cause of action exists under the IFCA for a first party claimant to bring a suit for a violation of the enumerated WAC provisions in RCW 48.30.015(5). The Court rejects the progeny of cases from the Western District of Washington which reached a different conclusion, and concurs with the conclusion of Judge Rice’s 2014 opinions in Merrill and Hell Yeah Cycles.
Langley, 2015 WL 778619, at *6 (emphasis added).
The litigants in Langley did not outline the facts surrounding the WAC violations so this aspect of the case was not examined, but the Court did find that on the legal question of whether plaintiff could maintain an IFCA claim when there are no issues of coverage denial or payment of benefits, the answer is yes. Id. at *7
Failure to find substantive meaning in WAC violations as they relate to IFCA cause of action, would, in application, render the “or has violated a rule in subsection (5) of this section” in sections (2) and (3) the IFCA statute superfluous. It would render the ““or has violated a rule in subsection (5) of this section” superfluous because the in coverage denial or payment of benefits IFCA cases, the judge always has to award attorney fees and costs and there is always discretion to treble damages. So, what is the point of the “or has violated a rule in subsection (5) of this section”? Reading the statute as a whole, it provides nothing to a first party claimant unless it is given its own meaning—unless the “or” has life breathed into it and RCW 48.30.015(5) is allowed to stand on its own as a way to support an IFCA claim.
Remember, IFCA also provides in relevant part:
(5) A violation of any of the following is a violation for the purposes of subsections (2)