We won! On October 3, 2019, in a 5 to 4 decision, the Washington Supreme Court held in Keodalah v. Allstate Insurance Company, No. 95867-0 that “employee adjusters are not subject to personal liability for insurance bad faith or per se claims under the CPA [Consumer Protection Act].” The decision, which has been closely monitored across the nation, protects claims professionals, insurance agents, experts, and lawyers who represent insurers from being drawn into disputes between insureds and insurers as parties.

The insured, Moun Keodalah, was injured in an accident where a motorcyclist struck his truck while crossing an intersection. The facts uncovered by the Seattle Police Department (“SPD”) investigation, Allstate’s witness interviews, and the accident reconstruction firm hired by Allstate to analyze the collision all suggested that the motorcyclist was at fault and that his “excessive speed” caused the collision. Keodalah made a claim under his underinsured motorist (“UIM”) coverage and requested that Allstate pay him the $25,000 limit. Allstate refused, finding Keodalah to be 70 percent at fault, and made a series of offers to settle the claim.

Keodalah filed suit asserting a UIM claim. During discovery, an adjuster employee of Allstate was designated as Allstate’s corporate representative for a Civil Rule 30(b)(6) deposition. The adjuster contradicted the conclusions reached by the SPD and Allstate’s accident reconstruction analysis by testifying, for example, that Keodalah had run the stop sign and had been on his cell phone at the time of the accident. At trial, Allstate continued to contend that Keodalah was 70 percent at fault. The jury determined that the motorcyclist was 100 percent at fault and awarded Keodalah $108,868.20 for his injuries, lost wages and medical expenses.

Keodalah then filed a second lawsuit against Allstate that included claims against the adjuster for bad faith and CPA violations. Allstate moved to dismiss the claims on the pleadings under CR 12(b)(6). The trial court dismissed the claims against the adjuster and certified the issue for interlocutory appeal. The Court of Appeals disagreed with the trial court and concluded that the bad faith and CPA claims against the adjuster could proceed. The Court of Appeals found that a Washington statute, RCW 48.18.030, imposes a duty of good faith on an individual adjuster, not just the insurance company, and applies equally both to individuals and to corporations acting as insurance adjusters. The Court of Appeals similarly found that the adjuster could be liable for a CPA violation even absent a contractual relationship between them.

The Washington Supreme Court reversed the Court of Appeals and reinstated the trial court’s dismissal of claims against the adjuster. In its analysis, the Court applied Washington’s three-pronged test for an implied statutory right of action under Bennett v. Hardy, 113 Wn.2d 912, 784 P.2d 1258 (1990) to determine whether RCW 48.01.030 includes an implied cause of action against an adjuster for bad faith. The Court held:

    [A]pplication of the Bennett factors does not support the imposition of an implied cause of action here. In light of RCW 48.01.030’s plain language, indicating that the statute is intended to benefit the general public, and the broader statutory and historical context in which the statute appears, we hold that RCW 48.01.030 does not create an implied cause of action for insurance bad faith.

Next, the Court held that an insured cannot sue an adjuster under the CPA. The Court explained that Keodalah’s CPA claim based on RCW 48.01.030 failed because CPA claims based upon a breach of the statutory duty of good faith are limited to the context of the insurer-insured relationship. Thus, although Keodalah may sue his insurer under the CPA, he cannot sue the adjuster:

    Because Keodalah claims a breach of the duty of good faith by someone outside the quasi-fiduciary relationship, his CPA claim based on RCW 48.01.030 was properly dismissed.
    The majority decision will prevent plaintiffs from bringing specious claims against insurance adjusters and other insurance professionals for purposes of intimidation and to destroy diversity jurisdiction.

Soha & Lang, P. S. attorneys Paul Rosner and Geoff Bedell co-authored an amicus brief on behalf of Washington Defense Trial Lawyers (WDTL). Based upon questions by the court during oral argument, the WDTL brief appears to have helped sway the Washington Supreme Court to make the right decision.

Disclaimer: Any opinions expressed in this blog are those of the author and do not necessarily reflect those of Soha and Lang, P.S. or its clients.