Washington State's Insurance Fair Conduct Act - One Year Anniversary l Seattle Personal Injury Attorney

This time last year, Washington State citizens passed Referendum 67, the pro-consumer insurance legislation.  If you recall, the insurance industry spent approximately $12 Million dollars to defeat this law.  Fortunately, the voters passed the measure by an extremely wide margin (57% to 43%).

Referendum 67 is now called the Washington Insurance Fair Conduct Act (IFCA).  IFCA created a process for consumers who feel their insurance companies have not promptly and fairly settled a valid claim. The Act requires insurance companies to act "reasonably" when settling claims, or risk having to pay a policyholder triple damages if the company ends up losing the case in court.

So far, about 900 people have notified the Washington State Insurance Commissioner's office that they plan to sue their insurance companies under IFCA.  Under the Act, a policyholder is required to give the insurance company 20 days prior notice of the intent to sue.  This is supposed to give the carrier one last chance to resolve the claim. 

Washington Insurance Commissioner Mike Kreidler says, "If that's one of the outcomes of Referendum 67, that is very positive from the standpoint of consumers – that they're dealing with better-trained adjusters who are going to make the determination on their particular claim."

Although the insurance industry fought the passage of IFCA by saying the law would raise insurance rates and create more lawsuits, Kreidler says these claims don't appear to have come true.

The Insurance Commissioner's office is tracking the numbers and types of cases and will do some random follow-ups in the coming year. For now, Commissioner Kreidler says he's pleased with the Insurance Fair Conduct Act for giving consumers more clout with their insurance companies.

In my own practice, IFCA has helped tremendously, especially in the smaller claims where it was not cost-effective to litigate against the insurance company.  In those cases, it would cost much more to litigate than what the claim was worth (usually those claims which are valued at $30,000 and under).

Insurance Company Rules - Watch this Video!!

People often ask me what it's like dealing with insurance companies all day, each week, and every month.  Well, the words that come to mind are: frustrating, irritating, disheartening, disappointing, and blood-boiling, just to name a few.  Most of my clients, particular those who have had to file lawsuits, can certainly relate.

But here's a video that really captures what it's like to deal with an insurance company when it comes time to work out a settlement.  Enjoy it, I certainly did!!  Insurance Company Rules.

From Good Hands to Boxing Gloves: How Allstate Has Earned Billions by Shortchanging Policyholders & Claimants

The book From Good Hands to Boxing Gloves: The Dark Side of Insurance (2008) by David J. Berardinelli, discusses how Allstate revolutionized the claims handling process by implementing policies to deliberately reduce benefits and claim payouts by intentionally paying out less than the true value of the claim. 

Mr. Berardinelli states that our insurance system is founded on two key rules: the indemnity principle and the fiduciary principle. Together these principles are intended to level the playing field between the insurance company and the policyholder. These principles balance the insurer’s legitimate goal of being profitable while allowing the insured policyholders to get prompt and fair payment for covered losses.

Mr. Berardinelli states that casualty insurance is a unique insurance product. It’s different from other kinds of insurance like life insurance. Life insurance pays a set benefit when you die regardless of the cause or consequences of your death. But casualty insurance is indemnity coverage. It doesn’t pay a set benefit. It pays as much as the policyholder needs, up to the policy’s limit, "to restore an insured to the same financial position after the loss that he or she was in prior to the loss."  To indemnify someone means to make them whole again. That means the insured doesn’t get paid more than the actual loss. It also means the insured shouldn’t get paid less than what it takes to make the insured whole again. The insurance company's duty is to pay the full amount the policy holder needs to be put back in the same position he or she was in before the loss.  This is called the indemnity principle.

Mr. Bernadelli states that Allstate implemented a program to intentionally pay out less than the true value of claims.  Essentially, Allstate intentionally violated the indemnity principle, leaving policyholders and claimants much less than the insurance coverage they were entitled to receive.

How did Allstate accomplish this?  Well Allstate often deliberately delays paying legitimate claims by asking for useless information or demanding more proof than it really needs. It would delay payment or force policyholders to jump through needless hoops, in hopes they’ll give up or take less than the full and fair amount of the benefits they’re owed under the policy. Allstate paid for studies which showed that nearly 85% of claimants would accept whatever lowball offer Allstate made, and not bother with the hassle.  When you are talking about hundreds of thousands of claims, this adds up to hundreds of millions saved for Allstate.

Another tactic Allstate uses is to pressure policyholders who are in a financial bind into accepting a quick payment that’s far less than what they need to make them whole. It forces policyholders to file needless, expensive, and time consuming lawsuits as the only way to get what they need to fully restore them to where they were before the loss. Again, Allstate found that most people will not bother to go through the hassle of hiring a lawyer and filing a lawsuit.  More money saved for Allstate.

Mr. Bernadelli found that Allstate repeatedly violated the important principles which are necessary to protect people who purchase insurance.  Yet Allstate continues to get away with its tactics.  Allstate continues to put its own financial interests ahead of their insured’s needs, and now the system is no longer fair. The playing field is no longer level and an insured either accepts less than they receive or seeks legal counsel to level the field.