Washington State Court of Appeals Division One Holds that Individual Insurance Adjusters are Subject to Bad Faith and Consumer Protection Act Claims Under Washington Law

On Monday, March 26, 2018, Division One of the Washington State Court of Appeals issued a published opinion in Keodalah v. Allstate Insurance Co., et al.[1], holding that bad faith and Washington State Consumer Protection Act (“CPA”) claims can be pursued against individual insurance adjusters.  The case stemmed from an underinsured motorist (“UIM”) claim filed by Keodalah following an automobile accident.

After resolving the UIM claim at trial, the insured asserted that Allstate and its employee adjuster acted improperly and in bad faith in the handling of his UIM claim including, but not limited to, making settlement offers.  The trial court dismissed the claims against the adjuster and the case was certified for direct review to the Court of Appeals.

The Court of Appeals’ analysis focused first on RCW 48.01.030, which states, in part, as follows:

The business of insurance is one affected by the public interest, requiring that all persons be actuated by good faith . . . in all insurance matters.  Upon the insurer, the insured, their providers, and their representatives rests the duty of preserving inviolate the integrity of insurance.

RCW 48.01.030.

Based on this language, the Court held that an individual adjuster could be sued for bad faith because the adjuster is: 1) engaged in the business of insurance; 2) a person; and 3) a representative of an insurer.  The Court further expanded on the reasoning of both a Washington State Court of Appeals Division III opinion and a United States District Court for the Western District of Washington opinion where the courts allowed bad faith claims to proceed against corporate insurance adjusters.  The Keodalah Court also rejected the adjuster’s claim that she could not be held liable personally because she was acting in the scope of her employment.  The Keodalah Court reasoned that the adjuster still owed an independent duty of good faith to the insured under Washington law.

With respect to the CPA claim, the Keodalah Court called into doubt its prior holding in International Ultimate, Inc. v. St. Paul Fir & Marine Ins. Co., 127 Wn. App. 736, 87 P.3d 774 (2004).  Under International Ultimate, the Court of Appeals previously noted that there needed to be a contractual relationship between parties for there to be liability under the CPA.  However, the Keodalah Court noted that a more recent Washington State Supreme Court opinion had declined to require a consumer relationship between parties for a CPA claim.  As such, the Keodalah Court reasoned that the International Ultimate requirement was not valid.  Therefore, the Keodalah Court reversed the trial court and allowed the CPA claim to proceed against the adjuster individually.

[1] At this time, the official reporter version is unavailable.  The Westlaw Citation is as follows:  2018 WL 1465526.