Our readers may recall that Washington voters approved the Insurance Fair Conduct Act (“IFCA”) several years ago. This statute awards extra-contractual damages to insureds who prove an insurer unreasonably denied coverage or payment of benefits. On occasion, insureds have argued they are entitled to damages under IFCA when the insurer has neither denied coverage nor payment of benefits. Instead, the insured claims the carrier violated Washington’s version of the Unfair Claims Practices regulations, codified within Washington’s Administrative Code (“WAC”).
Here at the Insurance Commando Blog, we recently had the opportunity to delve into IFCA’s legislative history to defeat this argument. An insured’s counsel graciously afforded us this opportunity by using IFCA’s legislative history to argue that the insured is entitled to IFCA damages when only WAC violations are at issue. In other words, the insurer has not unreasonably denied coverage or payment of benefits. In combatting this incorrect argument, we were once again called upon to play our complementary roles as coverage commandos and coverage geeks. We thought these lessons from the trenches may be useful to others presented with similar arguments based on IFCA’s legislative history.
The statute’s plain language provides the first weapon against using IFCA’s legislative history to extend IFCA to claims involving stand-alone WAC or regulatory violations. It is black letter law that a court only considers legislative history if the statute itself is ambiguous in some regard. Washington courts have consistently concluded, without relying on legislative history, that IFCA only applies to unreasonable denials of coverage or payment of benefits. See e.g. Ainsworth v. Progressive Cas. Ins. Co., __Wn.App.2d__, 322 P.3d 6, 20 (2014); Lease Crutcher Lewis WA, LLC v. Nat. Union Fire Ins. Co. of Pittsburgh, PA, No.C08-1862RSL, 2010 WL 4272453 (W.D.Wash. Oct. 15, 2010). Therefore, when presented with an argument that IFCA’s legislative history supports an IFCA cause of action for a stand-alone WAC violation, the first counterargument must be that the statute is not ambiguous in stating that it applies only to unreasonable denials of coverage or payment of benefits. Thus a court has no need to consider IFCA’s legislative history.
If a court finds a statute ambiguous, then its legislative history may be relevant. Several important provisions within IFCA’s legislative history support arguments that IFCA’s scope is limited. We address two of them here. First, an amendment to the act deleted a cause of action for unreasonable delays thereby limiting IFCA to unreasonable denials of coverage and payment of benefits. This amendment demonstrates the legislature intended to limit IFCA to unreasonable denials of coverage or payment of benefits. Had the legislature intended IFCA to provide a cause of action for situations involving conduct other than unreasonable coverage or payment denials, it would not have limited IFCA by passing this amendment.
Second, another provision in IFCA’s legislative history indicates that a court should only consider WAC violations to increase damages caused by an unreasonable denial. Therefore, if WAC violations alone could support recovery under IFCA absent a denial, this provision within IFCA’s legislative history would not have limited the effect of a WAC violation to the increasing of damages caused by a denial.
While there are some aspects of the legislative history that creative policy holder’s attorneys have used to support their arguments for an expanded reading of IFCA, we are unaware of any instances where policy holder’s attorneys have been successful on such arguments. At the end of the day, any argument for an expanded application of IFCA that is based on the legislative history should be rejected by the court. As noted above, there is no ambiguity to warrant the consideration of the legislative history, and even if the legislative history is considered, it supports a narrow reading of the statute.
If you have any questions regarding IFCA’s legislative history or need any guidance on how best to combat such an argument, please do not hesitate to give us a call or send us an email.
–David Greenberg and Mark Mills
