Keodalah v. Allstate Ins. Co. , No. 95867-0, 2019 Wash. LEXIS 591 (Oct. 3, 2019) 

In a 5-4 Decision, Washington Supreme Court Holds that RCW 48.01.030 Does Not Provide A Basis for an Insured’s Bad Faith and Consumer Protection Act Claims Against Claims Adjusters 

Case: Keodalah v. Allstate Ins. Co. , No. 95867-0, 2019 Wash. LEXIS 591 (Oct. 3, 2019) 

Issue: Does RCW 48.01.030 provide a basis for an insured’s bad faith and Consumer Protection Act (CPA) claims against claims adjusters? NO 

Facts: The plaintiff, an insured truck driver, was struck by a speeding motorcyclist while stopped at a stop sign. The motorcyclist, who died as a result of the accident, was uninsured. The plaintiff’s insurer investigated the collision, ultimately concluding that the plaintiff was 70% at fault because plaintiff had run a stop sign and had been on his cell phone, both of which contradicted the reports of the Police Department and the accident reconstruction expert hired by the insurer. Plaintiff requested that the insurer pay UIM policy limits, which the insurer refused to pay. The plaintiff sued the insurer. At trial the jury found the motorcyclist was 100% at fault, awarding the plaintiff damages against the insurer for an amount just over the plaintiff’s UIM policy limit. 

The plaintiff then filed a separate lawsuit against the claims adjuster, alleging violations of the Washington Insurance Fair Conduct Act (IFCA), insurance bad faith, and CPA violations. The adjuster moved to dismiss the plaintiff’s complaint under CR 12(b)(6) for failure to state a claim. The trial court granted the motion. On review, the Court of Appeals affirmed the dismissal of the IFCA claim, but reversed the dismissal on the bad faith and CPA claims, holding that RCW 48.01.030 imposed a duty of good faith to individual insurance adjusters, the breach of which could serve as a basis for bad faith and CPA claims. The Supreme Court of Washington granted the adjuster’s petition for review, reversing the Court of Appeals holding on the bad faith and CPA claims. 

Holding & Analysis: The Court held that RCW 48.01.030 did not create a private right of action. The Supreme Court relied on the Bennett v. Hardy three-pronged test to come to their conclusion. The Bennett factors for whether a statute includes an implied cause of action are “(1) whether the plaintiff is within the class for whose benefit the statute was enacted, (2) whether legislative intent, explicitly or implicitly, supports creating or denying a remedy, and (3) whether implying a remedy is consistent with the underlying purpose of the legislation.” 

Analyzing whether RCW 48.01.030 meets the first factor of the Bennett test – whether the plaintiff is within the class protected by the statute – the Court explained that RCW 48.01.030 addresses the public at large, rather than any identifiable class of persons. This was evidenced by the legislature stating that its purpose is to protect the “integrity of insurance” and the “public interest.” Therefore, the first factor of the Bennett test was not met. 

Addressing the second Bennett factor of whether the legislature intended to create a statutory cause of action, the Court found that the legislature did not intend for RCW 48.01.030 to create a private cause of action. The Court noted that the legislature provided several specific enforcement mechanisms within the insurance code, which suggests that the “omission of a provision for a private cause of action under RCW 48.01.030 was intentional.” Thus, the statute failed to meet the second Bennett factor as well. 

Analyzing the third Bennett factor of whether implying a remedy furthers the purpose of the legislation, the Court concluded that it did not. While acknowledging that implying a cause of action could be seen as furthering the “general policy goal of ‘preserving inviolate the integrity of insurance’” of RCW 48.01.030, the cause of action could also be used by insurers against those they insure. Such a cause of action would “subject every person and entity listed in RCW 48.01.030 to liability” and would be inconsistent with the legislature’s creation of specific enforcement mechanisms, as stated above. Thus, Court held that RCW 48.01.030 does not provide for a private cause of action. 

Next, the Court addressed whether the plaintiff’s CPA claim should have been dismissed. CPA claims have five elements, all of which must be established for a CPA claim to succeed: “(1) an unfair or deceptive act or practice that (2) affects trade or commerce and (3) impacts the public interest, and (4) the plaintiff sustained damage to business or property that was (5) caused by the unfair or deceptive act or practice.” A plaintiff can establish the first two elements where the plaintiff proves the defendant violated a statute declaring that said “violation is a per se unfair trade practice.” The third element may be established based on a showing that the defendant violated a statute containing a specific legislative declaration of public interest. 

The plaintiff alleged that the claims adjuster violated WAC 284-30-330(2), (4), (6), (7), (8), and (13). The Court determined that, while violations of those statutes would be per se unfair trade practices, only insurers may violate those provisions, not claims adjusters. The plaintiff also claimed that the adjuster’s violation of RCW 48.01.030 satisfied the requirements for a CPA claim. The Court disagreed – again emphasizing that the statute applied only to insurers who breached their duty of good faith. Thus, the plaintiff failed to state a claim against the adjuster; however, the Court explicitly stated that the plaintiff could have sued the insurer. The Supreme Court reversed the Court of Appeals and reinstated the trial court’s dismissal of all the plaintiff’s claims.