§16.9 - Insurer Conduct and Claims Handling


Insurer conduct may in certain instances lead to awards of attorney fees or be violations of acts and duties to the insured, as discussed below.

(1) Attorney fees

An insured "who is compelled to assume the burden of legal action to obtain the benefit of its insurance contract is entitled to attorney fees." Olympic Steamship Co. v. Centennial Ins. Co., 117 Wn.2d 37, 54, 811 P.2d 673 (1991). To be entitled to an award of fees, the right to coverage—as opposed to the value of a loss the insurer agrees is covered—must be at issue, and the insured must substantially prevail. Dayton v. Farmers Ins. Grp., 124 Wn.2d 277, 280, 876 P.2d 896 (1994). The award should also include necessary litigation expenses, such as expert fees. Panorama Vill. Condo. Owners Ass'n v. Allstate Ins. Co., 144 Wn.2d 130, 144, 26 P.3d 910 (2001). Olympic Steamship also benefits an insured's assignees if they are compelled to sue the insurer to obtain coverage. Polygon Nw. Co. v. Am. Nat'l Fire Ins. Co., 143 Wn.App. 753, 795, 189 P.3d 777 (2008) (quoting McRory v. N. Ins. Co. of N.Y, 138 Wn.2d 550, 556, 980 P.2d 736 (1999)).

Failure to comply with a policy's conditions may extinguish the right to Olympic Steamship fees: "We cannot authorize the imposition of attorney fees, however, when an insured has indisputably failed to comply with express coverage terms, and the noncompliance may extinguish the insurer's liability under the policy." Pub. Util. Dist. No. 1 v. Int'l Ins. Co., 124 Wn.2d 789, 815, 881 P.2d 1020 (1994) (PUD No. 1). The "noncompliance" at issue in PUD No. 1 was failure to comply with the voluntary-payments provision of the policy. Although the insurance company was not prejudiced as a result, the noncompliance was clear and uncontested.

Comment: Even prior to Olympic Steamship, Washington law permitted recovery of attorney fees by an insured suing for breach of the duty to defend. Farmers Ins. Co. of Wash. v. Rees, 96 Wn.2d 679, 638 P.2d 580 (1982) PUD No. 1 does not affect this result.

(2) Unfair Claims Settlement Practices Act

Washington has adopted an unfair claims settlement practices regulation, Chapter 284-30 WAC, under the Unfair Claims Settlement Practice Act, Chapter 48.30 RCW. The regulation specifically defines "unfair methods of competition and unfair or deceptive acts or practices of the insurer in the business of insurance ...." WAC 284-30-330. An insurer's violation of one provision of the Unfair Claims Settlement Practices Act constitutes a per se unfair trade practice, Indus. Indem. Co. v. Kallevig, 114 Wn.2d 907, 923, 792 P.2d 520 (1990), and affects the public...

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