When you sign your insurance policy, you have a contract with the company which they pledge to honor. There is a covenant created, whereby the company promises to settle all claims in good faith. When your insurance company refuses to settle a reasonable claim — or settle a claim reasonably — you may allege bad faith, a legal violation that exposes the company to additional liability. As a policy holder, you can sue for bad faith as a common law tort or as a violation of the Washington Consumer Protection Act.

In a bad faith claim, the policy holder must prove an act or omission that constitutes a deceptive or unfair business practice. At common law, these include:

• Failure to conduct a reasonable claims investigation
• Failure to negotiate in good faith
• Failure to settle within policy limits
• Failure to defend
• Wrongful denial of coverage

If the policy holder proves bad faith, the company must pay damages, including:

• Consequential damages — Compensation for harm the bad faith caused the policy holder, such as emotional distress.
• Coverage by estoppel — A finding of bad faith prevents the company from denying coverage. The claim must be paid.
• Costs and attorney’s fees — If bad faith compels the policy holder to litigate the case, the insurance company must pay the policy holder’s legal fees.

The WCPA expands on common law by going into greater detail regarding misrepresentation and unfair dealing. WCPA allows for actual economic damages of up to $10,000, attorney’s fees, fines and penalties, and cease and desist orders, and can even result in the revocation of the insurance company’s license.

If you’re having trouble with your insurance company, you should consider retaining legal representation. Our car accident firm has a long record of success in bad faith litigation. For a free consultation, call Rush, Hannula, Harkins & Kyler PLLC today at 253-383-5388 or contact our office online.