§17.2 - Washington State Insurance Commissioner Regulations Governing Environmental Claims Handling

• Jurisdiction: Washington

§17.2 Washington State Insurance Commissioner Regulations Governing Environmental Claims Handling

The Washington insurance commissioner has adopted regulations governing procedures for handling environmental claims. This section summarizes those regulations from the insurers point of view, noting that Washingtons federal court judges have concluded that once an insurance coverage matter is in litigation, the litigants should be governed by substantive and procedural rules applicable in court instead of the administrative regulations. SeeBronsink v. Allied Prop. & Cas. Ins. Co., No. C09-751MJP, 2010 WL 2342538 at *7 (W.D. Wash. June 8, 2010).

(1) Stated purpose and scope

The regulations governing environmental claims handling, WAC 284-30-900 through -940, state that they are based on the states substantial public interest in the timely, efficient, and appropriate resolution of environmental claims involving policyholders liabilities for contaminated sites located in the state. Moreover, the regulations are based on the stated public interest of reducing costs incurred in connection with environmental claims and expediting the resolution of such claims. WAC 284-30-900(1). The regulations are also designed to address issues related to lost policies, which arise because environmental damage frequently involves long-term operations with multiple owners. Thus, lost policies present challenging evidentiary problems as well as potential difficulties in locating witnesses. WAC 284-30-900(2).

The regulations set the minimum standards for the conduct of insurers and policyholders in presenting and resolving environmental claims. WAC 284-30-900(4). The claims-handling regulations apply to environmental claims arising under general liability insurance policies issued to Washington residents and concerning sites located in the state of Washington. WAC 284-30-905(1). Furthermore, these regulations are not exclusive, and the insurance code and other regulations thereunder continue to govern. WAC 284-30-905(2).

Comment: The regulations purport to further prompt resolution of environmental claims involving the liability of insureds at polluted sites in this state. However, a policyholders liability is an issue to be resolved in the underlying environmental remediation action. The regulations are really addressed to questions of coverage under general liability insurance policies, not to a policyholders liability, in the first instance, for alleged contamination.

(2) Procedures governing lost-policy disputes

Procedures for lost-policy disputes may be governed by state regulations or cases, as discussed below.

(a) The regulations

The regulations pertaining to environmental claims handling contain specific definitions pertinent to that procedure. WAC 284-30-910(1)-(4). The regulations declare it an unfair act or practice or an unfair method of competition for an insurer to fail to investigate, thoroughly and promptly, all claims of lost policies. WAC 284-30-920. Additionally, it is an unfair practice or an unfair method of competition for an insurer to fail to provide to a policyholder facts known or discovered during an investigation concerning the issuance and terms of a policy, including copies of documents establishing such facts. Id. A single violation of the section may be deemed, by the commissioner, to be an unfair act or practice or an unfair method of competition. Id.

The regulations set forth a procedure for reconstructing a lost policy. However, the procedure does not create a presumption of coverage once the contract is reconstructed. WAC 284-30-920.Within 15 working days after receiving notice of a lost policy, an insurer is required to begin an investigation into its records, including its computer records, to determine whether it issued the allegedly lost policy. If the insurer determines that it did issue the policy, it is required promptly to commence an investigation into the policy terms and conditions relevant to the environmental claim. WAC 284-30-920(1).

Notice of a lost policy, within the meaning of the regulations, means written notice of the lost policy in sufficient detail to identify the person or entity seeking coverage, including information concerning the name of the alleged policyholder, if known, together with material facts known to the insured concerning the lost policy. WAC 284-30-920(1)(a).

The regulations require insurers and policyholders fully to cooperate in the investigation of lost policy issues. Cooperation includes each providing to the other facts known or discovered during an investigation. This requirement includes providing the identity of any witnesses with knowledge of facts related to the issuance or existence of a lost policy. WAC 284-30-920(1)(b)(i). Cooperation also requires each party to provide the other with copies of documents establishing facts related to the lost policy. However, neither an insurer nor a policyholder is required to produce material protected by the attorney-client privilege or by the work-product doctrine or to produce confidential claims documents provided by the insurer to another policyholder. WAC 284-30-920(b)(ii), (iii).

The regulations then establish a procedure to be followed should an insurer discover information tending to show the issuance of a policy applicable to the environmental claim. If the insurer is able to determine the terms...