Taking all of these concerns into consideration, the case has been appealed to the Washington Supreme Court. Oral arguments should occur at the end of February.

Original Article: April 16, 2018 The Court of Appeals of Washington, Division One decided this week that all persons engaged in the business of insurance, including individual adjusters, may be liable for bad faith and violating Washington's Consumer Protection Act, whether or not there is a contractual relationship between the parties. The case is Keodalah v. Allstate Ins. Co., No. 75731-8-I, 2018 Wash. App. LEXIS 685 (Ct. App. Mar. 26, 2018).

In 2007 the vehicle Moun Keodalah was driving collided with a motorcycle. After Kedoulah fully stopped at a stop sign, and began to cross the street in his truck, a motorcycle ran into Kedoulah's truck at a high rate of speed, injuring Keodalah and killing the motorcyclist. The Allstate insurance policy that Kedoulah had on his vehicle included underinsured motorists coverage, and the motorcyclist carried no auto insurance.

The Seattle Police Department did an investigation on the collision that revealed that the motorcyclist was travelling at or over 70 miles per hour, more than twice the legal limit in the 30mph speed zone. Seattle PD also investigated Keodalah's phone records and discovered that Keodalah was not using his cell phone at the time of the accident.

Allstate conducted its own investigation. It interviewed several witnesses who all stated that the motorcycle was travelling much faster than the speed limit, driving between the lanes to evade traffic and did not fully stop at the stop sign. Allstate also hired a third party to analyze the accident, Traffic Collision Analysis Inc. or TCA. TCA found that Keodalah had fully stopped at the stop sign, the motorcyclist was travelling at an “excessive speed”, and that the excessive speed of the motorcycle was the cause of the accident.

Keodalah asked Allstate to pay him the limits of his underinsured motorists claim, $25,000. Allstate refused and offered $1,600 to settle the claim based on an assessment that Keodalah was 70% at fault for the accident. When Keodalah asked for a statement from Allstate explaining that evaluation, Allstate raised its offer to $5,000. Still unsatisfied, Keodalah sued Allstate, with an uninsured motorists claim. Allstate designated Tracey Smith, an Allstate insurance adjuster, to handle the claim. Although Allstate had both the TCA report and the report from the Seattle PD, Smith claimed that Keodalah had run the stop sign and been on his phone at the time of the accident. Smith later admitted that neither of those facts were true. Before the trial, Allstate offered Keodalah $15,000, still $10,000 under the UIM policy limits. Keodalah refused and requested the policy limits. The case went to trial where Allstate maintained that Keodalah was 70% at fault. The jury found that the motorcyclist was 100% at fault and awarded Keodalah over $100,000 for injuries, lost wages, and medical expenses.

Keodalah filed a second suit against Allstate, this time including claims against Smith for violations of the Insurance Fair Conduct Act, insurance bad faith, and CPA violations. Smith and Allstate moved to dismiss the complaint, and the trial court granted the motion in regards to the claims against Smith.

The court of Appeals of Washington answered the question that arose, whether or not insureds may bring bad faith claims against individual adjusters. The Revised Code of Washington 48.01.030 imposes a duty of good faith on all persons involved in insurance. That definition includes the insurer and its representatives. The statute states that the business of insurance is affected by public interest, and all persons involved must be actuated by good faith, abstain from deception, and be honest and equitable in all insurance matters. When a person violates this duty they may be liable for bad faith. Since Smith was acting as a representative of Allstate, she had a duty to act in good faith. Because the duty existed, Keodalah may sue her for breaching the duty of good faith.

Most of the cases litigated that discuss this issue discuss third party companies adjusting claims, but the two that the appellate court relies upon uses the same broad statutory definition to determine that a “person” includes both individuals and corporations, and does not make any difference between the duties each entity owes.

Smith relied upon a decision from a different federal district court who came to a different conclusion. The court in that case relied upon some language from the statute. “Upon the insurer, the insured, their providers, and their representatives rests the duty of preserving inviolate the integrity of insurance.” The court stated that the text of the sentence clearly indicates that there is no cause of action against representatives of insurance companies. Their reasoning was that if a cause of action is created against the representative, one can also be created against the insured. Washington courts, though, have stated that the statute does impose a duty of good faith on both insureds and insurers.

Smith also argued that if the court uses the Washington Administrative Code to interpret the statutory language, the regulations would only apply to “insurers” and if the statute had been meant to apply to employees, the language would have expressly stated that intent. The court agrees that the regulations focus on insurers, but maintain that the code was intentionally written broadly, and include the statement “This regulation is not exclusive, and acts performed, whether or not specified herein, may also be deemed to be violations of specific provisions of the insurance code or other regulations.” Lastly, Smith argued that she was acting within the scope of employment. The court maintains that she individually owed a duty to Keodalah, and that RCW 48.01.030 imposed the duty of good faith on Smith and not just on the employer.

Editor's Note: This is the second decision in a row that has been a warning to insurers and individual representatives of the insurance company. It seems clear from the facts that Smith knew that none of the evidence supported the claims she was basing her denial of the claim off of, but she relied upon that set of facts. Be that because she was directed to by her supervisors at Allstate, or a decision of her own, the decision of the Washington Court of Appeals seems to be following a recent trend in the courts to hold individuals liable for acts they take, regardless of whether they were directed to take those actions by a supervisor. Courts are tending to give more responsibility to act in good faith to the individuals, and not allowing them to pass blame up the chain of command. A word of advice to employees across the insurance and legal industries, if you don't feel comfortable with something you have to sign your name to, tell someone, or you may be inviting legal trouble.