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Adjusters Escape Personal Liability (WA)
October 9, 2019
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<p style="text-align: justify;">In <em><a href="https://www.wcmlaw.com/wp-content/uploads/2019/10/Keodalah-v.-All-State-1.pdf">Keodalah v. All State,</a></em> the Washington Supreme Court narrowly held that an Allstate claims adjuster cannot be sued in her individual capacity for her alleged wrongful handling of a driver’s accident claim in violation of state law. By reversing the lower court 5-4, the holding can put the insurance industry, at least temporarily, at ease from the fear that policyholders across the country would seek to expand adjusters’ personal liability in their claims handling.</p>
<p style="text-align: justify;">As background, the insured, Moun Keodalah, was struck by an uninsured motorcyclist while driving his truck. The motorcyclist was killed. Keodalah’s policy with Allstate included underinsured motorist (UIM) coverage. The Seattle PD’s investigation, as well as Allstate’s internal investigation, revealed that the motorcyclist was traveling above the speed limit and had sped into the intersection, hitting Keodalah, who was stopped at a stop sign. Allstate refused Keodalah’s request to pay the $25,000 UIM coverage and instead offered $1,600 to settle the claim. Keodalah then sued Allstate seeking the full UIM limit. Despite possessing both the Seattle PD report as well as its own investigatory findings, Allstate’s adjuster asserted that Keodalah had run the red light and was on his cell phone at the time of the accident. At trial, Allstate contend that Keodalah was 70% at fault. The jury, however, found the motorcyclist to be 100% at fault and further awarded Keodalah over $100,000 for his injuries and expenses.</p>
<p style="text-align: justify;">Following the jury’s award, Keodalah filed a second suit against Allstate that included claims against the adjuster. Specifically, Keodalah alleged that the adjuster violated Washington’s Consumer Protection Act (CPA) and Insurance Fair Conduct Act (IFCA), RCW 48.01.030. The trial court dismissed the insured’s claims against the adjuster, but the Washington Court of Appeals held that the statutory duty of good faith imposed by RCW 48.01.030 applied to individual insurance adjusters and that a breach of that duty could serve as a basis for Kaeodalah’s bad faith and CPA claims against Smith.</p>
<p style="text-align: justify;">The Washington Supreme Court reversed the appellate court and held that RCW 48.01.30 did not create a private cause of action against an insurer. As the Court noted, that statute is written to protect the “public interest” and the “integrity of insurance.” Thus, reckoning that the statute was intended to protect the “general public” and reviewing the broader context of the statute, the Court held that there was no implied cause of action for an insurance bad faith claim.</p>
<p style="text-align: justify;">Further, the court held that Keodalah could not assert CPA claims based on the adjuster’s alleged unfair settlement practices and bad-faith conduct. The Court held that because Washington law defines unfair settlement practices to be applicable only against “insurers,” the adjuster did not owe a duty under the CPA, and Keodalah cannot seek to enforce a claim against the adjuster on that basis. Finally, the Court held that Keodalah could not bring a bad-faith claim against the adjuster because the adjuster was “someone outside the quasi-fiduciary relationship” that serves as the basis for a CPA claim. Notably, the dissent argued that the majority (and the appellate court) failed to address Keodalah’s common law bad-faith claim. After reviewing relevant law from around the county, the dissent would have recognized Keodalah’s common law claim against the adjuster.</p>
<p style="text-align: justify;">Despite the narrow vote, <em>Keodalah </em>represents a significant win for the insurance industry. The appellate court ruling had sent shock waves through the industry, and an affirmation by the Washington Supreme Court could have resulted in extensive personal liability for individual adjusters. While this is certainly not the last time this issue will be litigated around the country, at least for now, the industry has avoided what could have been a troubling outcome.</p>
<p style="text-align: justify;">Thanks to Douglas Giombarrese for his contribution to this post. Please contact <a href="mailto:gcoats@wcmlaw.com">Georgia Coats</a> with any questions.</p>