On February 2, 2017 the Washington Supreme Court provided its first decision concerning the Insurance Fair Conduct Act (hereinafter “IFCA”), Perez-Crisantos v. State Farm Fire & Cas. Co., 92267-5, 2017 WL 448991 (Wash. Feb. 2, 2017). The Court held that a first-party claimant may not sue under RCW 48.30.015 on the basis of an insurer’s regulatory violation for unfair claims settlement practices without a concurrent unreasonable denial of coverage or payment of benefits: “IFCA does not create an independent cause of action for regulatory violations.” Id at *1. 
According to the Court, relying on RCW 48.30.015(1) (the granting provision), “IFCA does not state it creates a cause of action for first party insureds who were unreasonably denied a claim for coverage or payment of benefits or ‘whose claims were processed in violation of the insurance regulations listed in (5).’” Perez-Crisantos, 92267-5, 2017 WL 448991, at *4. The Court rejected the theory of an implied cause of action for WAC violations. The Court viewed the statute as ambiguous but determined that the extrinsic evidence of the legislative intent did not, on balance, support a “WAC alone” IFCA claim. The Court determined that the legislature intentionally included references to the insurance regulations in the remedial section of IFCA, but not its granting provision. 
Whether the Court’s holding was “right” or “wrong” is beyond the scope of this article. Bad faith claims and CPA claims are also outside the scope of this article. Our goal in this article is to assess what we have lost, what the opinion preserved, and how best to move forward successfully handling IFCA claims for our clients in the PIP and UIM arena.

What Have We Arguably Lost?
After Perez-Crisantos, a first-party claimant may not maintain a cause of action under IFCA (RCW 48.30.015) for bare violations of Washington’s fair claims practices regulations, WAC 284-30-330, et. seq. A cause of action under IFCA must be premised on an unreasonable coverage denial or an unreasonable denial of the payment of benefits.
For example, if an insurer pays fair value for a claim reasonably promptly but fails at some point to respond to pertinent correspondence, WAC 284-30-360(3) does not support an IFCA lawsuit. If an insurer promptly pays fair and reasonable PIP benefits but fails to “se[t] forth the coverage under which the payment is made,” then WAC 284-30-330(9) alone does not support an IFCA lawsuit. These are illustrative, but likely trivial examples since these facts would permit only a relatively frail lawsuit.
The opinion’s most profound effect is arguably related to WAC 284-30-330(7), which declares “Compelling a first party claimant to initiate or submit to litigation, arbitration, or appraisal to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in such actions or proceedings” to be an “unfair metho[d] of competition and unfair or deceptive ac[t] or practic[e].” Perez-Crisantos involved State Farm’s offering to pay no UIM bodily injury benefits, the insured’s suing for breach of contract and IFCA, substantially prevailing in a damages arbitration while the IFCA claim was on hold, and then alleging an IFCA violation based solely on an alleged WAC 284-30-330(7) violation. But if a WAC 284-30-330(7) violation cannot support an IFCA claim, then what can? Don’t panic – keep reading.

What Did Perez-Crisantos Preserve?
Despite disappointment among policyholder attorneys and strong rhetoric from the defense bar overreacting to the opinion, Perez-Crisantos preserved the core of a meaningful IFCA lawsuit. The majority clearly endorsed denial of payment of benefits as adequate for an IFCA claim even if the insurer did not deny coverage: “The insured must show that the insurer unreasonably denied a claim for coverage or that the insurer unreasonably denied payment of benefits. If either or both acts are established, a claim exists under IFCA.” Perez-Crisantos, 92267-5, 2017 WL 448991, at *6 (citing Ainsworth v. Progressive Cas. Ins. Co., 180 Wn. App. 52, 79, 322 P.3d 6 (2014)) (emphasis in the original). 
The opinion did not strip from first-party claimants the right to sue for unreasonable low ball offers or for unreasonably delayed claims handling, particularly where the insured alleges that the insurer failed to conduct a reasonable investigation. The opinion did not address what constitutes a “denial of payment of benefits” or whether unreasonable delays constitute effective denials. The opinion did not address, and therefore did not narrow, the scope of “benefits” to which an insured is entitled; it did not limit an insured’s discovery rights in IFCA litigation; and it did not address or limit “actual damages,” e.g., for emotional distress. The opinion did not discuss whether a policyholder in a third party case is a first party claimant under IFCA. Most importantly, Perez-Crisantos did not hold, or even suggest, that an insurer’s violation of the fair claims practices regulations was immaterial to IFCA liability.

What We Still Don’t Know?
With respect to regulatory violations the Court specifically stated: 

Instead, IFCA makes regulatory violations relevant to the apportioned attorneys’ fees and damages associated with that derivative violation. See Mut. of Enumclaw Ins. Co. v. Myong Suk Day, No. 75633-8-I, 2016 WL 7210718, at *8 (Wash. Ct. App. Dec. 12, 2016) (apportioning attorney fees based on the issues prevailed upon at appeal). This interpretation is consistent with our canons of statutory construction prohibiting us from reading language into subsection (1) that the legislature expressly omitted and from rendering any portion of subsections (2) and (3) superfluous.

Perez-Crisantos, 92267-5, 2017 WL 448991, at *6.
The Court told us that its statutory interpretation did not “rende[r] any portion of subsections (2) and (3) superfluous,” but RCW 48.30.015(2) and (3) both refer to the Court’s authority to award extra-contractual damages for an unreasonable denial of coverage or payment of benefits or for a violation of a fair claims handling regulation. If an insured must prove the former to win an IFCA lawsuit in the first place, under what circumstances would a Court ever rely on the latter to support the remedy?

A Strong IFCA Claim Remains Strong
Successfully suing an insurer for extra-contractual claims has always required, and still requires, a clear articulation of what the insurer owed the policyholder but didn’t provide, what damage beyond the withheld coverage or benefits the policyholder suffered (even if “actual damages” include the benefits denied), and what made the insurer’s claim decision and/or claims handling unreasonable. Even if our Supreme Court had ruled in favor of Perez-Crisantos, IFCA lawsuits lacking those elements would fail to produce a compelling claim likely to produce a successful trial outcome.
Fundamentally, we must characterize our IFCA claims as coverage issues, benefits issues, or both. We must resist an insurer’s efforts to control our narrative and allege that our claims are predicated only on regulatory violations or that they are merely good faith value disputes. An insurer may owe a policyholder coverage, first-party benefits expressed in the policy, or benefits our regulations and Courts have established as inherent in an insurer’s duty of good faith. Defense, even in the ultimate absence of liability coverage, is a valuable policy benefit – sometimes more valuable than payment of an insured’s liability exposure. An underinsured motorist or PIP valuation dispute is an agreement to the undisputed portion of the claim and a denial of benefits for the remainder. Some benefits are embedded in our regulations: an insurer’s duty to conduct a fair, full, reasonable, and prompt investigation is a legal, not contractual, benefit of buying insurance. When we face circumstances that justify an IFCA allegation or lawsuit, we can, and must, describe those facts in relation to coverage owed but not provided or benefits deserved but denied. We can, and must, use the fair claims practices regulations to demonstrate that the insurer’s conduct was unreasonable, or that the regulatory violation directly represents a benefit denied, and we must clearly discuss those regulations in the context of our primary assertion: that the carrier’s conduct raises an issue of coverage or payment of benefits.
Washington’s regulations governing insurer conduct remain essential to IFCA litigation. They establish a standard of care, and an insurer’s failure to comply with them is evidence that the coverage or payment of benefits denied was unreasonable. We are in familiar territory: a police officer will not tell a jury that a driver who failed to yield the right of way “broke the law,” but he or she may give opinion testimony that the driver engaged in unreasonably unsafe conduct. Likewise, IFCA litigation has involved and will involve both expert testimony and attorney argument, relying on the content of our regulations to explain why we are seeking something more than simply disputed policy benefits. The insurance regulations remain a linchpin to persuading an IFCA jury that our client was not simply “going through the normal (pugilistic) insurance process,” but rather suffered damage requiring extra-contractual compensation.
Whether a claims adjuster gathered all the information necessary to formulate a full and fair coverage or damages evaluation – in the context of a fire cause investigation, UIM bodily injury damages, business interruption after a physical loss or data breach, or the reasonable value of medical services owed under PIP – remains the most important question we will ask a jury to decide. Obtaining a litigation, arbitration, or appraisal outcome substantially greater than the carrier offered before that proceeding was insufficient, alone, to obtain extra contractual damages before and after Perez-Crisantos. 
Thus, while this apparent pronouncement that WAC 284-30-330(7) violation cannot support an IFCA claim is alarming, it is hard to imagine any situation where you have solid evidence of a WAC 284-30-330(7) violation and do not also have evidence of an unreasonable denial of a claim for coverage or payment of benefits. WAC 284-30-330(7) still has meaning, but we must show how, but for unreasonable claims handling, our clients would probably have received fair treatment and benefits owed but denied without adversary proceedings.

Rebutting Adjusters’ Inaccurate Allega­tions and Abuse after Perez-Crisantos
We must address a new practical daily reality outside the context of a judicial motion or jury trial. We can expect adjusters and coverage counsel to rely on Perez-Crisantos to handle first-party claims more aggressively as industry insiders hail the decision as a major blow to policyholder rights. We can expect adjusters to perceive less exposure for violating the regulations than before, even where the violation would demonstrate unreasonableness. Most disruptive will be the likely allegation that making any offer of benefits is per se adequate under IFCA even if the offer is the unreasonably low product of a mishandled investigation. Counsel responding to 20-day Notices are less likely than before to resolve potential IFCA claims even where the notice clearly characterizes the claim as a coverage or benefits issue. 
Our most promising response to this trend will be consistently framing our IFCA allegations within the scope of Perez-Crisantos and being prepared to engage insurance professionals in reasoned discussions of the opinion’s limited effect. We already face vigorous resistance to IFCA claims based on technical regulatory violations, and for good reason. Our goal must be to eventually restore the competing narratives to the status quo before the decision.

Conclusion
Federal Courts have largely been shaping the breadth, restraints and applicability of IFCA to our cases. Washington court pronouncements on IFCA have been rare. Perez-Crisantos is our Supreme Court’s first. While it narrowed the basis for a claim under IFCA, in application the opinion will likely not be the dark cloud upon our IFCA cases we feared. To win an IFCA lawsuit – or even credibly allege and resolve a claim before litigation – we must present compelling evidence of an insurance company that has failed to obey the basic rules of insurer-insured fairness, accepting funds through premiums and failing, to pay out benefits when owed, fallaciously claiming a good faith value dispute, when all the evidence points to an unreasonable denial of benefits and/or results driven coverage denial, and leaving the insured consumer to suffer unnecessarily because of careless, or even callous, insurer conduct. 

Kristine (Tini) Grelish, WSAJ EAGLE member, practices at Grelish Law pllc in Seattle and Yakima. Kristine devotes the majority of her practice to helping injured people and their families with personal injury cases, including motor vehicle / car accidents, wrongful death, and insurance bad faith.

Paul Veillon, JD, CPCU is a WSAJ EAGLE Member and solo practitioner at Galileo Law PLLC in Seattle.

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