Insurance Law

WA Lawyers, Official v. Insurers in Ballot Battle

The state insurance commissioner is reportedly siding with tort lawyers in a hard-fought battle to persuade Washington state voters to approve a ballot measure that would greatly increase the damages for bad-faith failure to pay a claim.

At present, no matter how egregious the insurer’s refusal to pay a legitimate claim, he can only impose a $10,000 fine—or, in extreme cases, revoke the insurer’s license to do business in the state, commissioner Mike Kreidler, a Democrat, tells the Seattle Times. Under the proposed ballot measure, policyholders could sue for treble damages.

In addition to much bigger payouts to some policyholders, the insurance industry says Referendum 67, if approved, will inevitably result in pressure to pay unjustified claims because of the threat of expensive litigation. That inevitably will result in higher rates for all policyholders. Meanwhile, the treble-damages approach isn’t necessary, because consumers already can sue for breach of contract or bad-faith refusal to pay a claim, among other avenues of redress, points out Dana Childers, a spokeswoman for Reject R-67.

But even if a bad-faith suit against an insurance company is successful, a policyholder can’t get punitive damages because Washington is one of the few states that doesn’t allow them in liability cases, says Doug Heller of the California-based Foundation for Taxpayer & Consumer Rights. “It’s like catching a bank robber and simply making them give the money back,” he contends. “That’s not justice. That gives the bank robber the ability to play the odds.”

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