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.