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What Is The Time for Responding to a Defense Tender?

An insurer has 10 working days to acknowledge the receipt of a claim and must complete its investigation within 30 days, unless it cannot be completed in that time. Wash. Admin. Code  284-30-360 and 284-30-370.

An insurer must accept or deny a claim within 15 working days of receipt of proof of loss. Wash. Admin. Code 284-30-380.  If more time is needed to determine whether insurer will accept or deny the claim, the insurer has 15 days of its receipt of proof of loss to inform the insured of that fact. Wash. Admin. Code 284-30-380. If the investigation is incomplete, the insurer shall within 30 days of the initial notice of claim, and every 45 days thereafter send the insured a letter setting forth the reasons additional time is needed. Wash. Admin. Code 284-30-380.

Does Reserving Rights Create a Conflict of Interest?

Not necessarily. A reservation of rights that raises issues that may be determinative of tort liability create a “enhanced obligation of fairness toward the insured” but does not require the insurer to pay for separate counsel selected by the insured. No actual conflict of interest necessarily exists in a reservation of rights. Johnson v. Continental Casualty Co., 57 Wash. App. 359, 361 (1990).

Does a Reservation of Rights Create Additional Duties?

Yes. This enhanced obligation of good faith on the part of the insurer means that it must: (1) thoroughly investigate the claim; (2) retain competent defense counsel for the insured and both the retained counsel and the insurer must understand that the only the insured is the client; (3) inform the insured of the reservation of rights defense and all developments relevant to policy coverage and progress of the lawsuit; and (4) refrain from any activity that would show a greater concern for its own monetary interest than for the insured’s financial risk. Tank v. State Farm Fire & Cas. Co., 105 Wash.2d 381, 390 (1986).

What Must Be Done If A Conflict of Interest Exists?

Washington does not require the insurer pay for separate independent counsel simply because a potential conflict of interest exists between the insurer and insured. If an insurer fulfills its enhanced obligation of fairness, it is not obligated to pay fees of attorney independently hired by insured to represent him on noncovered claims. Johnson v. Continental Casualty Co., 57 Wash. App. 359, 361 (1990).

Who Is Responsible for Fees of Independent Counsel?

Insurer not responsible for independent counsel. See above.

What Are Independent Counsel’s Obligations?

Insurer not responsible for independent counsel. See above.

What Settlement Duties Exist?

Insurer has duty to include insured in settlement discussions. Hamilton v. State Farm Mut. Auto Ins. Co., 9 Wash. App. 180 (1973).

What Actions May Result in a Claim for Bad Faith?

An insurer’s bad faith can give rise to two related causes of action under Washington law: (1) a cause of action for bad faith sounding in tort, and (2) a cause of action for unfair trade practices pursuant to the Washington Consumer Protection Act.  Overton v. Consolidated Ins. Co., 145 Wash. 2d 417, 433-434 (2002); Wash. Rev. Code § 19.86.020.

In order to recover for the tort of bad faith the insured must prove that: (1) its insurer breached the duty of good faith, and (2) the insured was harmed by its insurer’s breach of the duty of good faith. Coventry Associates v. American States Ins. Co., 136 Wash.2d 269, 276 (1998).

The following acts or omissions have been held to constitute bad faith: (1) Failure to conduct a reasonable claims investigation, Griffin v. Allstate Ins. Co., 108 Wash. App. 133, 146-147 (2001); (2) Failure to negotiate in good faith, Tyler v. Grange Ins. Association, 3 Wash. App. 167, 179 (1970); (3) Failure to settle within policy limits, Chaussee v. Maryland Cas. Co., 60 Wash. App. 504, 509 (1991); (4) Failure to defend, Truck Ins. Exchange v. Vanport Homes, Inc., 147 Wash. 2d 751, 764-765 (2002); or (5) Wrongful denial of coverage. Id.

The Washington Consumer Protection Act created a statutory cause of action to protect against “unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.” Wash. Rev. Code § 19.86.020. The following practices demonstrate that the insurer has engaged in an unfair or deceptive act or practice for purposes of a statutory claim: (1) Misrepresenting pertinent facts or insurance policy provisions; (2) Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies; (3) Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies; (4) Refusing to pay claims without conducting a reasonable investigation; (5) Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed;  (6) Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear. In particular, this includes an obligation to effectuate prompt payment of property damage claims to innocent third parties in clear liability situations. If two or more insurers are involved, they should arrange to make such payment, leaving to themselves the burden of apportioning it; (7) Compelling insureds to institute or submit to litigation, arbitration, or appraisal to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in such actions or proceedings; (8) Attempting to settle a claim for less than the amount to which a reasonable man would have believed he was entitled by reference to written or printed advertising material accompanying or made part of an application; (9) Making claims payments to insureds or beneficiaries not accompanied by a statement setting forth the coverage under which the payments are being made; (10) Asserting to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration; (11) Delaying the investigation or payment of claims by requiring an insured, claimant, or the physician of either to submit a preliminary claim report and then requiring subsequent submissions which contain substantially the same information; (12) Failing to promptly settle claims, where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage; (13) Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement; (14) Unfairly discriminating against claimants because they are represented by a public adjuster; (15) Failure to expeditiously honor drafts given in settlement of claims. A failure to honor a draft within three working days of notice of receipt by the payor bank will constitute a violation of this provision. Dishonor of any such draft for valid reasons related to the settlement of the claim will not constitute a violation of this provision; (16) Failure to adopt and implement reasonable standards for the processing and payment of claims once the obligation to pay has been established. Except as to those instances where the time for payment is governed by statute or rule or is set forth in an applicable contract, procedures which are not designed to deliver a check or draft to the payee in payment of a settled claim within fifteen business days after receipt by the insurer or its attorney of properly executed releases or other settlement documents are not acceptable. Where the insurer is obligated to furnish an appropriate release or settlement document to an insured or claimant, it shall do so within twenty working days after a settlement has been reached; (17) Delaying appraisals or adding to their cost under insurance policy appraisal provisions through the use of appraisers from outside of the loss area. The use of appraisers from outside the loss area is appropriate only where the unique nature of the loss or a lack of competent local appraisers make the use of out-of-area appraisers necessary; (18) Failing to make a good faith effort to settle a claim before exercising a contract right to an appraisal; (19) Negotiating or settling a claim directly with any claimant known to be represented by an attorney without the attorney’s knowledge and consent.  This does not prohibit routine inquiries to an insured claimant to identify the claimant or to obtain details concerning the claim. Wash. Rev. Code § 19.86.020.

Are Attorney’s Fees Recoverable in Insurer-Insured Dispute?

Insureds are entitled to reasonable attorney’s fees if they are compelled to assume the burden of legal action to obtain the benefit of their insurance contract. Olympic S.S. Co. v. Centennial Ins. Co., 117 Wash.2d 37, 54 (1991); Absher Constr. Co. v. Kent School Dist., 841, 847 (1995). 

Under, the Washington Consumer Protection Act, insureds may be liable on a bad faith claim for economic damages of up to $10,000, attorney’s fees, fines and penalties, cease and desist orders, and the denial, suspension or revocation of the insurer’s license. Hayden v. Mutual of Enumclaw Ins. Co., 141 Wash.2d 55, 63 (2000). 

Are Punitive Damages Recoverable in Insurer-Insured Dispute?

No cases found that suggest punitive damages are recoverable.

Alternative Coverage Options

The insurer may file a declaratory judgment action at any time in order to determine coverage. Truck Ins. Exchange v. VanPort Homes, Inc., 147 Wash.2d 751, 761 (2002).

Relevant Statutes

Declaratory Judgment – Wash. Rev. Code § 6-7.24.010. 

“Courts of record within their respective jurisdictions, shall have power to declare rights, status, and other legal relations, whether or not further relief is or could be claimed.  No action or proceeding shall be open to objection on the ground that a declaratory judgment or decree is prayed for.  The declaration may be either affirmative or negative in form and effect; and such declarations shall have the force and effect of a final judgment or decree.” 


Washington Consumer Protection Act  – Wash. Admin. Code 284-30-330.



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