The Office of the Insurance Commissioner (OIC) administers the Washington Insurance Code (code) and oversees insurance companies and insurance professionals conducting business in the state. As part of its enforcement authority, the OIC may prosecute an action in any court of competent jurisdiction to enforce an order by the commissioner pursuant to any provision of the code. If the OIC has cause to believe that any person is violating or is about to violate any provision of the code or any regulation or order of the commissioner, the OIC may issue a cease and desist order or bring an action to enjoin the person from continuing the violation or doing any action in furtherance thereof.
An authorized insurer is an insurer transacting insurance in the state through a certificate of authority issued by the OIC. In imposing disciplinary actions against an authorized insurer, the OIC is authorized to levy a fine in addition to or in lieu of suspending, revoking, or refusing to review the insurer's certificate of authority. The amount of the fine may not be less than $250 and may not be more than $10,000.
Authority to Order Restitution. In addition to its authority to issue cease and desist orders and bring actions for injunctive relief, the OIC may also order the payment of restitution after a hearing under the Administrative Procedure Act or with the consent of the person owing an obligation.
Restitution is limited to only demonstrated economic damages due to another person, excluding a provider. A provider is defined as any entity providing a service to the person entitled to restitution, including, but not limited to, a health care provider, a restoration or mitigation contractor, or an auto body repair shop.
Restitution must be paid with 8 percent simple interest from the date the obligation arose. It must be paid to the person to whom it is due within 30 days of the date of the order.
The bill defines the date the obligation arose as:
The bill provides that the restitution provisions do not interfere with the dispute resolution process under the Balance Billing Protection Act.
Authorized Insurer Fines. The OIC may levy fines against authorized insurers of up to $10,000 per violation, rather than $10,000 total.
The committee recommended a different version of the bill than what was heard. PRO: It is critical that we have pathways for consumers to receive restitution if they have been harmed by an insurer rather than going through the court system. This bill strengthens consumer protections by giving the state Office of the Insurance Commissioner additional enforcement tools if an insurance company is violating the law. This bill is designed to address bad actors only. Most insurers and producers do the right thing by their policyholders and cooperate with the OIC when a mistake is made, but not every one of them does. When OIC imposes a fine, it incentivizes the insurer or individual to come back into compliance and helps deter them from harming future consumers. But the fine goes to the General Fund and not to the policyholders, and that is why we need the authority to institute restitution. The fine schedule for property and casualty insurers has not been updated since 1980. Every other insurer in our state and producer is held to a per-violation standard except for property and casualty insurers. It's time to put them on parity with the rest of the insurers in the state. We have worked with the industry on an amendment to address all concerns but one, that is a cap imposed on fines. The Independent Insurance Agents and Brokers of Washington supports the bill to go after bad actors, such as an agent who takes a premium but fails to remit it to the insurer or an agent who fails to remit a refund from an insurer to the customer.
OTHER: We appreciate the target of the bill is toward bad actors, but the good actors are covered by this bill, and so we want to make sure that the definitions are tight as referenced around restitution and who this applies to. Under the current consent order process, property and casualty insurers routinely pay fines well in excess of $10,000 and pay restitution in the form of refunding premiums or taking other actions to reimburse policyholders who can show they have been harmed. The problem comes in when an insurer challenges the OIC before an administrative law judge (ALJ). This bill goes beyond that because it doesn't just address fines in the ALJ process. A per-violation standard for fines is a hammer. It provides opportunity for the insurance regulator to apply more pressure on insurers in the consent order process as well as issue fines it can't issue in the ALJ process. We are working with the OIC in tightening the language. Of the 35 or so states that have per-violation standards, it's very common to have one or more of aggregate caps, distinctions, or tiered impositions based on intent, willfulness, or inadvertence. The overarching concern with the penalties provision is the risk of unfair treatment of good actors.