While a majority of the orders coming out of Federal Court regarding IFCA continue to contain language that is either disappointing for plaintiffs or a mixed bag, examining these orders with an eye towards mining the small wins inside them, may help you with your next IFCA case.

Judge Jones recently wrote a footnote that has punch. Footnote 3 of Freeman v. State

Farm Mutual Auto. Ins. Co., states:

State Farm insists that it did not deny coverage because it never denied that Mr. Freeman was entitled to UIM benefits, it merely disagreed about the amount of those benefits. For purposes of an insured’s extracontractual claim, a failure to pay the amount the insured requests is a denial of coverage. Were it otherwise, an insurer could avoid extracontractual liability merely by conceding coverage, paying its insured one dollar, and refusing to pay any more.

Freeman v. State Farm Mut. Auto. Ins. Co., C11-761RAJ, 2012 WL 2891167, *3 (W.D. Wash. July 16, 2012).

This provides a foothold for arguing that low ball offer by UIM carriers made without reasonable investigation can be a denial of the payment of benefits and therefore subject to IFCA. In Freeman, the IFCA claim was dismissed on notice grounds, serving as a reminder that IFCA has specific notice provisions as a pre-requite to an IFCA cause of action.

Other recent Federal Court orders have recognized that IFCA claims include the actual amounts that should have been paid under the insurance policy—presumably under the unreasonable failure to pay benefits section. Tavakoli v. Allstate Prop. & Cas. Ins. Co., C11- 1587RAJ, 2012 WL 6677766 (W.D. Wash. Dec. 21, 2012); Yancey et al v. The Auto. Com. Hartford, case # 2:11-CV-01329 RAJ (Docket 68, 10/23/12)1.

These pronouncements have great import for statute of limitations issues and for the kinds of damages subject to trebling. Judge Jones, in Tavakoli v. Allstate Prop. & Cas. Ins. Co., a UIM case, stated the following:

IFCA provides yet another way to recover damages. Any first-party insured “who is unreasonably denied a claim for coverage or payment of benefits,” can sue to recover “the actual damages sustained ….“ The actual damages sustained from an “unreasonbl

[e] deni[al]” of benefits necessarily include (but are not necessarily limited to) the benefits that were unreasonably denied. Thus, unlike a plaintiff with a bad faith claim, an IFCA claimant can recover policy benefits, subject only to the policy’s limit

Tavakoli v. Allstate Prop. & Cas. Ins. Co., C11-1587 RAJ, 2012 WL 6677766 (W.D. Wash. Dec. 21, 2012) (emphasis added).

DAMAGES: This appears to be one of the only citable announcements of some of the recoverable types of damages under IFCA. IFCA allows for “actual damages” and for those “actual damages” to be trebled. RCW 48.30.015. This recent order suggests that a successful UIM plaintiff, under IFCA, could recover up to three times the claim amount subject to the policy limits (ie, $100,000 policy, prove $90,000 damage, could recover up to $270,000 on this aspect of damage under IFCA), suggesting that IFCA is unlike bad faith and CPA cases where the policy benefits are not normally items of recoverable damage. This is in addition to other proved IFCA damages, attorney fees, and costs. The ability to cite to a case that states the potential to treble the policy limits has import in any insurance claim, making the risk to the defense even higher when they continue to inevitably refuse to pay what is reasonable.

STATUTE OF LIMITATIONS: Many insurance policies have one-year statute of limitations. Most extra-contractual damages do not include the insurance policy benefits (3rd party assignment of rights is an exception). This means that if your client has a homeowner fire, the fire damage caused $100,000 in loss, your client has a $100,000 policy, if the typical 1 year statute of limitations runs to sue under the homeowner policy, your client cannot get the

$100,000, even if you sue for bad faith, CPA damages, etc. You need to show that the extra- contractual damages are caused by the bad faith/CPA violations, rather than the fire itself. You may be able to get damages, but those will have to be those damages that were caused by the bad faith/CPA violations.

Assuming that the statute of limitations for IFCA is longer than the one year limitations clause found in many insurance policies, IFCA may preserve as a damage item the benefits under the insurance contract, whether based on a denial in full or based on partial payment. This is an apparent take away from the two recent decisions by Judge Jones. See Yancey and Tavakoli Supra. This is because Tavakoli explicitly acknowledges that an IFCA claim can include the value of the benefits under the policy and Yancey acknowledges the IFCA claim where the breach of contract claim was dismissed for being filed outside the one-year contractual suit limitations period.

IMPACT AND MEANING OF “STAND IN THE SHOES” IN UIM CASES: “Stand in the Shoes” is a catchall phrase used by defense counsel and some judges to suggest that a UIM claim is really just like a third party claim–that is, no real additional duties are owed to the first party insured. This type of loose language is found in Washington cases like Ellwein v. Hartford Accident & Indem. Co., 15 P.3d 640, 646 (Wash. 2001) overruled on other grounds by Smith v. Safeco Ins. Co., 150 Wn.2d 478, 78 P.3d 1274 (2003) (holding that the “enhanced obligation” of Tank v. State Farm is unworkable in the UIM context because the insurer stands in the shoes of the tortfeasor.).

Some Washington Courts take a rather dim view of the duties available. For example, in Edmonson v. Popchoi, 155 Wn. App. 376, 385, 228 P.3d 780, 785 (2010) aff’d, 172 Wash. 2d 272, 256 P.3d 1223 (2011), the court states the following in a citation parenthetical: “(Petersen–

Gonzales, 120 Wn. App. at 633, 86 P.3d 210 (observing that though the insurer need not put the insured’s interest above its own in the UIM relationship, a minimum duty of good faith and fair dealing survives . . . .)”

Words like minimum and survive do not paint a very helpful picture for plaintiffs.

However, recently the Western District of Washington has categorized that same duty as follows:

On the other hand, even though the duty of good faith applies differently in the UIM context, it does not cease to exist. Ellwein, 15 P.3d at 547. An insurer must “deal in good faith and fairly as to the terms of the policy and not overreach the insured, despite its adversary interest.” Id. (emphasis added) (quoting Hendren v. Allstate Ins. Co., 672 P.2d 1137, 1141 (N. Mex. Ct. App. 1983)). Thus, while the insurer is free to be adversarial in the context of assuming the uninsured driver’s role in response to its insured’s claims, it is not free to be adversarial in the context of fulfilling its policy obligations or other duties that apply to it as an insurer….

(Emphasis added) Tavakoli v. Allstate Prop. & Cas. Ins. Co., C11-1587RAJ, 2012 WL 6677766 (W.D. Wash. Dec. 21, 2012).

This language more accurately describes the duties that should exist between the first- party UIM/UM insurer and its insured.

This is also important in the context of the interplay between IFCA and the UIM claim. The “unreasonable” standard of IFCA can be much more effectively contrasted to the insurer’s policy obligations and first party duties in general than some sub-set of “minimum” duties.

Hopefully additional headway can continue to be made regarding the Federal Courts application of IFCA.


1. Yancey does not currently appear in Westlaw. It is unclear at this point whether it is citable but it is retrievable through PACER/ECF and is instructive.