IFCA Notice Update

Click one of the links below to view a list of notices filed with the Office of the Insurance Commissioner (OIC) pursuant to the Insurance Fair Conduct Act (IFCA).

April 23, 2008 - May 9, 2008
Sorted by Date
Sorted by Insurer Name

May 22, 2007 - May 9, 2008 (almost a year)
Sorted by Date
Sorted by Insurer Name

Note: The receipt of an IFCA notice by the OIC does not mean that the claim has merit or that the insurance company has violated any laws. It serves only as evidence that the claimant has notified the OIC and the insurer pursuant to IFCA that the claimant intends to file suit against the insurer if the alleged basis for the claim is not resolved within 20 days. Accuracy of the information is not guaranteed.

IFCA Notice Update (3/31/08 - 4/22/08)

Click one of the links below to view a list of the most recent notices filed with the Office of the Insurance Commissioner (OIC) pursuant to the Insurance Fair Conduct Act (IFCA). About 62 notices were received by the OIC from March 31, 2008, through April 22, 2008.

List sorted by date
List sorted by insurer name

Note: The receipt of an IFCA notice by the OIC does not mean that the claim has merit or that the insurance company has violated any laws. It serves only as evidence that the claimant has notified the OIC and the insurer pursuant to IFCA that the claimant intends to file suit against the insurer if the alleged basis for the claim is not resolved within 20 days. Accuracy of the information is not guaranteed.

The Problem of an Excess Insurer’s Liability When the Primary Insurer Is Insolvent

Polygon Northwest Co. v. American Nat’l Fire Ins. Co. (Div. I, April 7, 2008).

The homeowners association of a condominium development sued the builder, Polygon Northwest, for construction defects arising before 1996 and continuing through 2000. Polygon had primary and excess liability insurance with various carriers during the relevant policy periods. United Capitol Insurance Company, which issued $2 million of primary coverage for 1998-2000, became insolvent in 2000. Great American Insurance Company was the excess insurer for the years when United Capitol was the primary insurer. Assurance Company of America and Commercial Underwriters Insurance Company provided primary coverage in other years, and Assurance and Ohio Casualty Insurance Company provided excess coverage in those years.

Polygon settled with the homeowners association for $7.8 million -- $6,314,000 for damages and $1,486,000 for litigation costs. Each insurer except Great American participated in funding the settlement. Assurance and Ohio Casualty sought equitable contribution from Great American.

Great American argued that someone had to actually pay the full limits of United Capitol’s policies before Great American’s excess coverage became available. Otherwise, it argued, it would be forced to “drop down” and cover United Capitol’s obligations. The trial court ruled that Great American was required to contribute to the settlement, but allocated liability for the $2 million “gap” in coverage created by United Capitol’s insolvency equally among the three excess insurers.

The court of appeals upheld Great American’s obligation to contribute to the settlement, reasoning, “Nothing in Great American’s policies stated that Great American’s liability was contingent on the actual payment of the limits of its underlying insurance.” The court distinguished Rees v. Viking Insurance Co., 77 Wn. App. 716 (1995), where the excess insurer was not liable after the plaintiffs released the primary insurer for less than its policy limit but purported to agree that the plaintiffs could seek additional funds from the excess insurer. The court observed that, unlike the settlement in Rees, the Polygon settlement was “substantially greater” than the limits of United Capitol’s primary policies.

The court of appeals reversed the trial court’s equal allocation of the settlement obligations among the excess insurers. The court held that Great American would not be required to “drop down” to cover United Capitol’s obligations. Great American’s policy addressed the insolvency of a primary insurer by providing that the excess coverage would apply as if the primary coverage were “valid and collectible.” The court reasoned, "Washington law does not, in fact, force insurers to pay for losses that they have not contracted to insure." The court observed that the trial court's role was "not to distribute among the various excess insurers the 'gap' in coverage created by United Capitol's insolvency but, rather, was to define each insurer's liability for the covered loss according to the terms of its policy or policies."

Among other things, the court also held that attorney’s fees were not payable under a supplementary payments provision that covered “costs taxed against the insured” and that the Olympic Steamship rule for attorney’s fees did not extend to equitable contribution claims between insurers.

Two More Federal District Court Judges Hold IFCA Is Not Retroactive

This blog previously reported on Magistrate Judge James P. Donohue’s decision in ESS Enterprises, LLC v. AMCO Insurance Co. (W.D. Wash. 2008) that the Insurance Fair Conduct Act (IFCA) does not apply to conduct predating the effective date of the Act, December 6, 2007. Two federal district court judges have recently followed suit.

1. Malbco Holdings, LLC v. AMCO Insurance Co. (E.D. Wash. 2008)

On March 11, 2008, Chief Judge Robert H. Whaley of the United States District Court for the Eastern District of Washington denied an insured’s motion to amend its complaint to allege an IFCA claim based on conduct occurring before the effective date of the Act.

In 2004, a hotel owner filed an insurance claim with two insurers for water damage to the hotel. The insurers denied the claims. In 2005, the hotel began to collapse from the water damage, which led the hotel owner to re-tender the claims in 2006. Both insurers again denied the claims in March and September 2007. The hotel owner filed suit in October 2007.

In January 2008, the hotel owner moved to amend its complaint to add claims under IFCA. The court ruled, “It is apparent from the language of the IFCA that the Legislature did not provide for retroactivity, it is not curative, and it is not remedial. The Washington Legislature has not expressed an intent to apply the IFCA retroactively, and indeed the statute is worded in present and future tenses.” The court noted that the property damage, insurance claims, and denials “all occurred well before the enactment of the IFCA,” and further that resubmitting claims after IFCA became effective does not constitute a new or continuing violation because this “would allow an end run around the Legislature’s intent.”

2. Aecon Buildings, Inc. v. Zurich North America (W.D. Wash. 2008)

On March 28, 2008, Judge Marsha Pechman of the United States District Court for the Western District of Washington similarly denied an insured’s motion to amend its complaint to allege an IFCA claim based on conduct that occurred before the effective date of the Act.

Aecon Buildings, Inc., a general contractor, settled an owner’s claims against Aecon and then tendered a request for indemnification to certain subcontractors’ insurers in 2006. Aecon filed suit against the insurers in April 2007.

In February 2008, Aecon moved to amend its complaint to add an IFCA claim. Aecon contended that IFCA is retroactive because it is “remedial.” The court ruled, “Although [IFCA] relates to remedies -- it provides for actual and treble damages, costs, and attorneys’ fees -- it also affects substantive rights by creating an entirely new right of action for first party insurance claimants unreasonably denied their claims.” The court also reasoned that IFCA cannot be applied retroactively because it provides for recovery of a penalty and “is couched in forward-looking language.”

The Malbco and Aecon rulings, like HSS Enterprises, are not binding on state courts in Washington. However, they represent a clear rejection of retroactivity arguments in federal court, and their reasoning is likely to be followed in state court.

IFCA Notice Update (3/11/08 - 3/28/08)

Click one of the links below to view a list of the most recent notices filed with the Office of the Insurance Commissioner (OIC) pursuant to the Insurance Fair Conduct Act (IFCA). About 48 notices were received by the OIC from March 11, 2008, through March 28, 2008.

List sorted by date
List sorted by insurer name

Note: The receipt of an IFCA notice by the OIC does not mean that the claim has merit or that the insurance company has violated any laws. It serves only as evidence that the claimant has notified the OIC and the insurer pursuant to IFCA that the claimant intends to file suit against the insurer if the alleged basis for the claim is not resolved within 20 days. Accuracy of the information is not guaranteed.

Looking Ahead: Insurance Law Cases in the Washington Supreme Court

At least three cases involving insurance law issues are pending in the Washington Supreme Court:

1. St. Paul Fire & Marine Insurance Co. v. Onvia, Inc. The issue is whether an insured has a cause of action against its liability insurer for bad faith based on violation of claims handling regulations or the Consumer Protection Act even though a court has held that the insurer has no contractual duty to defend, settle, or indemnify the insured. The court will answer a certified question from the United States Court of Appeals for the Ninth Circuit. Oral arguments in this case were heard on February 28, 2008.

2. Mutual of Enumclaw Insurance Co. v. U.S.F. Insurance Co. The issue is whether insurers who settled with an insured on a liability claim and were assigned the insured’s rights may make a late tender of the claim to a nonsettling coinsurer and receive the benefit of the late tender rule to maintain an action for contribution against the nonsettling insurer. The court is reviewing a decision by the Washington State Court of Appeals, Division One. Oral arguments in this case were heard on March 20, 2008.

3. Cornhusker Casualty Insurance Co. v. Brooks Samples. The issue is whether notice of an insurance policy cancellation sent by certified mail satisfied the “mailed” requirement of former RCW 48.18.290 (1997) where the insured did not receive the notice. The court will answer a certified question from the United States Court of Appeals for the Ninth Circuit. The date for oral arguments in this case has not been set.

The Washington State Insurance Law Blog will report on the court’s decisions in these cases once they are filed.

IFCA Notice Update (2/11/08 - 3/10/08)

Click on one of the links below to view a list of the most recent notices filed with the Office of the Insurance Commissioner (OIC) pursuant to the Insurance Fair Conduct Act (IFCA). About 93 notices were received by the OIC from February 11, 2008, through March 10, 2008.

List sorted by date
List sorted by insurer name

Note: The receipt of an IFCA notice by the OIC does not mean that the claim has merit or that the insurance company has violated any laws. It serves only as evidence that the claimant has notified the OIC and the insurer pursuant to IFCA that the claimant intends to file suit against the insurer if the alleged basis for the claim is not resolved within 20 days. Accuracy of the information is not guaranteed.

Insurance Fair Conduct Act Held Not Retroactive

HSS Enters. v. AMCO Ins. Co. (W.D. Wash. 2008)

On February 1, 2008, a United States Magistrate Judge held that the Insurance Fair Conduct Act (IFCA) does not apply retroactively.

The plaintiff submitted a claim to the defendant insurer after its building was damaged in a fire. The plaintiff filed suit in September 2006 alleging that the insurer had made only partial payment for the loss and failed to pay for the “vast majority” of the claimed loss. Washington voters approved the IFCA in November 2006, and it became effective on December 6, 2007. After providing the required notice to the Office of the Insurance Commissioner and the insurer, the plaintiff moved for leave to amend its complaint to add a claim for relief under the IFCA.

The plaintiff contended that the IFCA applies retroactively and, even if it does not, the plaintiff should be permitted to assert claims arising from the insurer’s post-December 6, 2007, conduct.

The court ruled that the IFCA does not apply retroactively. Applying a presumption of non-retroactivity, the court reasoned that the legislature “has not expressed an intent to apply [the IFCA] retroactively, and plaintiff offers no authority suggesting otherwise. Furthermore, the statute is couched in present and future tenses.” The court rejected the plaintiff’s argument that the IFCA is a “remedial” statute and therefore retroactive, stating, “The IFCA concerns more than ‘procedure or forms of remedies,’ and does more than create a ‘supplemental remedy for enforcement of a preexisting right.’” The court further concluded that the IFCA would not be retroactive even if it were remedial because the statute creates a new cause of action and imposes a penalty. The court stated, “The fact that plaintiff’s IFCA claim might arise out of the same factual scenario as his other claims is of no moment.”

The court ruled that the plaintiff could not allege claims based on the insurer’s conduct after the IFCA effective date. The court reasoned that such claims would necessarily be based on “pre-IFCA enactment conduct as grounds for a present -- and allegedly a continuing -- IFCA violation.” The court ruled, “Such an argument not only raises serious continuing tort and statute of limitations concerns, but it also invokes the same retroactivity position the Court has already rejected.”

This decision most likely will not be the last word on the retroactivity of the IFCA. The federal court decision is not binding on state courts in Washington. However, they are likely to reach similar conclusions for similar reasons.

House Passes Bill that Would Allow More to Sue for Wrongful Death

Last week, the Washington State House of Representatives passed E3SHB 1873, a bill that would amend Washington's wrongful death and survival statutes. The most significant change would be to expand the class of persons who may recover in a wrongful death action.

Under present law, there are two tiers of potential beneficiaries of a wrongful death action. In the first tier are the decedent's spouse or domestic partner and any children. In the second tier are parents and siblings. Second tier beneficiaries may recover only if they are U.S. residents, they were substantially dependent on the decedent for financial support, and there are no first-tier beneficiaries. In addition, a parent may sue for the wrongful injury or death of a minor child if the parent regularly contributed to the child's financial support or an adult child if the parent was substantially dependent on the child for financial support.

E3SHB 1873 would expand the second tier beneficiaries to include the parents of an adult child not only if they were financially dependent upon the child but if they had "significant involvement in the adult child's life." Second tier beneficiaries would also include "an individual who is the sole beneficiary of the decedent's life insurance and has had significant involvement in the decedent's life." "Significant involvement" would be defined as "support of an emotional, psychological, of financial nature within the relationship at or reasonably near the time of death, or at or reasonably near the time of the incident causing death."

The bill has faced significant opposition from groups such as the Washington Defense Trial Lawyers, the Association of Washington Cities, the Association of Washington Counties, the Office of the Attorney General, the Washington State Medical Association, and the Washington Society of Healthcare. Nevertheless, several proposed amendments to the bill that would have narrowed the scope of the changes failed.

Next for E3SHB 1873 are hearings in the Senate. A similar bill passed in the House last year but failed in the Senate Judiciary Committee when too few committee members would sign the committee report. E3SHB 1873 has been referred instead to the Senate Government Operations and Elections Committee. Click here for the bill as it passed the House. Click here to view the history, bill reports, and other information.

Update: This bill failed after the Senate amended it significantly and the House declined to approve the amendments.

IFCA Notice Update (1/7/08 - 2/8/08)

Click on one of the links below to view a list of the most recent notices filed with the Office of the Insurance Commissioner (OIC) pursuant to the Insurance Fair Conduct Act (IFCA). About 125 notices were received by the OIC from January 7, 2008, through February 8, 2008.

List sorted by date
List sorted by insurer name


Note: The receipt of an IFCA notice by the OIC does not mean that the claim has merit or that the insurance company has violated any laws. It serves only as evidence that the claimant has notified the OIC and the insurer pursuant to IFCA that the claimant intends to file suit against the insurer if the alleged basis for the claim is not resolved within 20 days. Accuracy of the information is not guaranteed.