What is The Insurance Fair Conduct Act?
The Insurance Fair Conduct Act (or “IFCA”) was passed by the Legislature, signed by the Governor and approved by Washington State voters (by Referendum 67) in 2007. It became effective on December 6, 2007.
According to the Office of the Insurance Commissioner, IFCA “provides legal remedies for policyholders, including the ability to seek punitive damages in court if their claims are unreasonably denied by their insurance companies or their insurance company violates particular regulations governing unfair claims settlement practices”.
In lay-person terms, that means that your own insurance company must treat you fairly. If it does not, it can be liable for “treble damages”, or three times the amount of the worth of your actual physical injuries and economic injuries put together. Damages are available to claimants upon a finding that the insurer unreasonably denied coverage or payment. A claimant may also recover damages upon a finding that the insurer violated one of five rules found in Chapter 284-30 of the Washington Administrative Code (WAC). The five WAC rules regulate insurers’ actions in the following areas: (1) specific unfair claims practices; (2) misrepresentation of policy provisions; (3) failure to acknowledge pertinent communications; (4) standards for prompt investigation; and (5) standards for prompt, fair, and equitable settlements.
If the rules are violated, a court must award: (1) the actual damages sustained; (2) reasonable attorney’s fees; and (3) actual and statutory litigation costs, including expert witness fees. The court has the discretion to also increase the total award of damages to an amount that does not exceed three times the actual damages suffered by the claimant.
Who does IFCA benefit?
IFCA applies to any policyholder in Washington State who is making a first party claim (a claim with their own insurance company, such as a PIP claim, or an Underinsured Motorist/Uninsured Motorist claim). It does not apply to third party claims (claims made by a person against someone else’s insurance company).
In what situations is IFCA of use?
IFCA applies to many types of unfair claims practices, but for our purposes it mostly comes into play with PIP payments, and Underinsured Motorist/Uninsured Motorist claims.
In the PIP situation, if the patient’s bills are not being paid on time, or the patient’s benefits are cut off improperly, or if bills simply are not being paid with no valid excuse, the patient may have an IFCA claim. For instance, if PIP payments are not timely made and it adversely affects the patient’s credit score, our office has been successful in getting the PIP carrier’s right to subrogation waived, leading to a better monetary recovery for the patient. (The traditional PIP exam followed by the “PIP cut-off letter” is still a valid way to cut off benefits, however.) IFCA is of greatest leverage in the UM/UIM scenario, however. There, the patient’s own insurance company must make a fair offer to settle the claim. If the attorney for your patient does not think that the carrier is making a fair offer, the attorney should (1) give the insurance company all the information they need to properly evaluate the claim, then (2) mail written notice to the insurance company and to the Office of the Insurance Commissioner, stating why the offer is unfair, and in what manner the insurance company has breached its duty of fairness. The Statute then gives the insurance company 20 days to “cure” the unfair offer by making a fair offer. If the insurance company does not make a fair offer within 20 days, and does not request any additional information to help them evaluate the claim (thereby technically extending their time limit), the attorney has properly set up the case for an IFCA claim.
Does it really work?
The insurance companies are taking IFCA very seriously. An IFCA letter usually gets a higher-up involved, and usually gets an increased offer from the adjuster, if the pre-letter offer really was unfair.
In practice, the IFCA letter resolves about one-half of the cases where it is necessary to send it. In the other one-half the case may proceed to litigation, which can start once the 20 days has run.
When should IFCA not be used?
The insurance companies are closely tracking every claim filed. They are hoping that it is abused, and that they will be able to get IFCA repealed in the future. Therefore, the IFCA threat should not be used when the settlement offer is simply a little low, or not quite what the patient was hoping for. It should only be used when the carrier really is not treating the patient fairly.
6. Does the Office of the Insurance Commissioner take any action?
The Office of the Insurance Commissioner simply files the 20 day notice letter in case there is a dispute about whether it was properly sent to the insurance company. The OIC takes no other action.
RESOURCES
For more information on the Insurance Fair Conduct Act, please see:
• RCW 48.30.010 - Unfair Practices in General - Remedies and Penalties
• RCW 48.30.015 - Unreasonable Denial of a Claim for Coverage or Payment of Benefits
If you have any questions about the Insurance Fair Conduct Act, please make sure to contact one of the attorneys at Graham Lundberg & Peschel.
1-800-273-5005
