Unfair Insurance Practices


The Insurance Fair Conduct Act

The Insurance Fair Conduct Act (IFCA) was passed by the Washington Legislature, and signed by the Governor in the spring of 2007. The insurance industry raised enough signatures to put it on the ballot for a Referendum vote (Referendum 67) that fall. The IFCA was approved by the voters in that election by a 57% to 43% margin. This happened despite the big budget advertising campaign financed by the insurance industry. The Reject 67 campaign funded virtually 100% by insurance companies under the name “Consumers Against Higher Insurance Rates” raised and spent nearly $12 million, four times what the supporters of the law raised. While the insurance industry tried mightily to frame the vote as being for or against trial lawyers, the law is a simple and fair insurance consumer protection law.

The IFCA became effective December 6, 2007. It provides practical legal remedies for policyholders, including the ability to seek punitive damages in court if a person has their claim unreasonably denied by their own insurance companies or if their own insurance company violates particular regulations governing unfair claims settlement practices. For example, insurance companies must timely acknowledge their policyholders’ letters and phone calls about their claims, must promptly investigate claims, and must promptly and fairly settle valid claims. This new law is a tool that will empower insurance consumers and enable them to stand a better chance at fair and reasonable treatment from their own insurance company. Prior to IFCA there were not any practical remedies for insured persons who were mistreated by their own insurance companies especially as to modest claims. I have invoked the remedies provided by IFCA many times since its enactment to secure fair treatment for my clients.

Consumers should be aware that the law applies only to claims made by insured people to their own insurance companies. It does not apply to claims made by one person to someone else’s insurance company. For example, if a person has been in a car accident, this law applies to a claim made by an insured under his own policy to his own insurance company such as an automobile property damage (collision coverage) claim or a homeowner’s claim. IFCA does not apply to someone making a claim against another person’s insurance company such as a claim against the insurance company for a person that negligently injures you. One area where this new law will help consumers who are injured in automobile accidents is in the area of PIP (Personal Injury Protection) coverage. PIP is no fault medical insurance coverage that must be offered by automobile insurance companies to their policy holders when they first purchase automobile insurance. I recommend that all persons purchase PIP coverage if at all possible. The same holds true for uninsured motorist (UM) coverage which covers you if you are hit by a negligent driver who does not have liability insurance coverage or does not have enough coverage. Both PIP and UM coverages are provided by your own insurance company and the protections of the Insurance Fair Conduct Act apply. Note that IFCA does not apply to health/medical insurance.

Under the law, policyholders who wish to sue their insurance company must mail written notice of the potential lawsuit to the insurance company and to the Office of the Insurance Commissioner at least 20 days before the lawsuit is to be filed. You can find more information and a form of written notice at http://www.insurance.wa.gov/index.asp the Washington State Office of the Insurance Commissioner’s website. In my opinion, the role of Mike Kreidler, our Insurance Commissioner in debunking some of the lies put forth in opposition to the IFCA was quite instrumental in the passage of IFCA.

More information on the Insurance Fair Conduct Act and the requirements for filing a complaint can be found at: IFCA along with links to the statutes and regulations that govern the insurance practices.

Insurance companies are in business to make money and they provide a valuable service by spreading risk so that even if we make a mistake and injure someone else we do not face economic ruin. In providing this service insurance companies are entitled to a fair profit; however some insurance companies, especially automobile insurers while they routinely complain about claims being out of control and so-called “run away” jury verdicts, these same insurance companies make huge profits. For example, in 2007, insurance companies reported a near-record profit of $61.9 billion. In comparison, the insurance industry’s 2004 profit was $38.7 billion, which broke all previous records. Their profits continue to rise, and unfortunately, so do the premiums charged consumers. For more information about insurance companies and their manipulative public relations campaign, go to the Washington State Association for Justice’s (WSAJ) website at: WSAJ.