On December 6, 2007, the Insurance Fair Conduct Act became effective as Washington law. The Insurance Fair Conduct Act provides that a policyholder has a claim against his or her insurance company if the policyholder is “unreasonably denied a claim for coverage or payment of benefits.” RCW 48.30.015. If the policyholder is successful, then they are entitled to the following remedies: (1) actual damages; (2) court costs; and (3) reasonable attorney fees, expert witness fees, and litigation costs. But the real threat the Insurance Fair Conduct Act presents to insurance companies is treble damages.
The trial court or the jury can increase the total damages up to three times the actual damage amount (there is some uncertainty whether the treble damages is for the court or the jury). Although insurance companies in Washington have long dealt with “increased damages” in the consumer protection arena, they have never dealt with treble damages that are not capped at a specific dollar amount. Indeed, the Consumer Protection Act explicitly states that “increased damages” are not to exceed $25,000. Nowhere does the Insurance Fair Conduct Act cap the treble damages to a specific dollar amount.
Interestingly, the Insurance Fair Conduct Act provides the trial court with no standards to determine if “increased damages” are warranted. Indeed, only federal district courts have interpreted the Insurance Fair Conduct Act and these courts have merely held that the Act was not retroactive (and even that is still open to debate). Simply put, this law is in its infancy and ripe for new and fresh arguments and ideas. Innovation will be the deciding factor in the coming years for actions brought under the Insurance Fair Conduct Act.