Court Holds Bad Faith Claim Accrues When Final Judgment Is Entered against Insured

Moratti v. Farmers Insurance Co. of Wash. (Wash. Ct. App. Division One, July 5, 2011)

The Court of Appeals held that, for purposes of the statute of limitations, a bad faith claim against an insurer accrues when the underlying judgment against the insured becomes final.  The court held this was true even where the alleged handling of the claim in bad faith occurred more than three years earlier, when the insurer denied the third party claim without investigating, which eventually led the insured to stipulate to a $17 million judgment in exchange for a covenant not to execute.