Q & A on Referendum 67

With Election Day about a week away, if you live in Washington State or are involved in Washington’s insurance industry, you have probably seen and heard a lot about Referendum 67 but still have questions. Here are answers to some basic questions about R-67, including a few answers you may not have seen elsewhere.

How would R-67 change Washington law if approved?

The most fundamental change to existing law would be to permit recovery of up to three times the amount of actual damages in certain actions by policyholders against their insurers. Although tripling the damages would be discretionary for the court, the text of R-67 offers no guidance on when to do so.

An award of litigation costs, attorney’s fees, and expert witness fees to the prevailing plaintiff would be mandatory under R-67. Under existing law, litigation costs and attorney's fees are recoverable under the Washington Consumer Protection Act, along with triple damages up to $10,000.

What would be the standard for liability under R-67?

A violation of R-67 would occur if an insurer were to “unreasonably” deny a claim for coverage or payment of benefits or violate any of several regulations pertaining to claims handling. Most states require a finding of intentional, willful, or malicious conduct by the insurer to impose punitive damages.

Would premium rates increase?

Premium rates depend on many factors, but one respected actuarial firm has predicted that premium rates would rise if R-67 were approved. View the report here.

Does Washington law prohibit insurers from considering amounts paid to satisfy bad faith judgments in their rate filings?

Washington has no statute or regulation excluding extra-contractual payments from rate-filing calculations.

Who would be allowed to sue under R-67?

R-67 would allow suit by a “first party claimant,” which is defined as “an individual, corporation, association, partnership, or other legal entity asserting a right to payment as a covered person under an insurance policy or insurance contract arising out of the occurrence of the contingency or loss covered by such a policy or contract.” It is anticipated that claims would be asserted with respect to most types of insurance coverage.

Would claims under R-67 be assignable?

In general, a cause of action that allows recovery of a penalty (such as triple damages) is not assignable. However, this issue will be litigated if R-67 is approved.

Who would be subject to suit under R-67?

Every “insurer” transacting insurance in Washington State might be sued under R-67, with the exception of a “health plan offered by a health carrier.” A “health carrier” includes disability insurers, health care service contractors, and HMOs. A “health plan” is a “policy, contract, or agreement offered by a health carrier to provide, arrange, reimburse, or pay for health care services,” however, there are several exceptions including long-term care insurance, Medicare supplemental insurance, disability insurance, worker’s compensation insurance, employer-sponsored self-funded health plans, dental-only, and vision-only coverage.

When would R-67 become effective if approved?

If approved by a majority vote of the voters, the new law would become effective on the 30th day after the election, December 6, 2007.

Would R-67 apply retroactively to claims predating the effective date of the Act?

Washington statutes are presumed to apply prospectively only. So-called “remedial” legislation may apply retroactively, but not if it imposes a penalty. In 1975, the Washington Supreme Court held that the Washington Consumer Protection Act, which permits an award of treble damages subject to a cap, does not apply retroactively. However, this issue will be litigated if R-67 is approved.