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.