HOUSE BILL REPORT

HB 882

BYRepresentatives Nutley, Meyers, Patrick, Lux and Appelwick

Declaring certain acts to be unfair or deceptive acts and practices under the insurance code.

House Committe on Financial Institutions & Insurance

Majority Report:     The substitute bill be substituted therefor and the substitute bill do pass.  (8)

     Signed by Representatives Lux, Chair; Crane, Dellwo, Grimm, P. King, Meyers, Niemi and Nutley.

Minority Report:     Do not pass.  (5)

     Signed by Representatives Zellinsky, Vice Chair; Betrozoff, Chandler, Day and Winsley.

House Staff:John Conniff (786-7119)

AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE

MARCH 5, 1987

BACKGROUND:

Insurance companies, agents, and purchasers of insurance are required to deal with one another in "good faith".  For insurers and their agents, this requirement is enforced in two ways.

First, the insurance code specifically prohibits certain practices and authorizes the Insurance Commissioner to prohibit other practices.  The commissioner has adopted rules prohibiting certain acts or practices in settling insurance claims. Repeated violations of the rules constitute unfair practices. Second, the consumer may charge the insurer with an unfair or deceptive act under the Consumer Protection Act.

The Washington State Supreme Court, in two recent cases, has limited the application of the Consumer Protection Act to the insured and made claims against insurers under the Act more difficult to prove. Generally, a third party claimant - the person who was injured because of the insured's negligence - may not sue an insurer for unfair practices in settling a claim.

SUMMARY:

SUBSTITUTE BILL:  Insurers are prohibited from engaging in certain acts or practices in settling insurance claims. These prohibitions are patterned after the Insurance Commissioner's Unfair Claims Settlement Practices regulations.

Any insured or claimant who is damaged by an insurance company's unfair or deceptive practice or by an insurer's violation of the prohibitions contained in the act, may sue the insurer for actual damages and costs. The court may,in its discretion, increase the award of damages not to exceed $25,000 and shall award attorney fees to the prevailing insured or claimant.

The remedies available under the act are in addition to any remedies available under the Consumer Protection Act.

Nothing contained in the act is deemed to affect any rules adopted by the commissioner.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  Technical amendments are made and punitive damages are limited to $25,000.

Fiscal Note:    Not Requested.

House Committee ‑ Testified For:     Dennis Martin, Washington State Trial Lawyers Association.

House Committee - Testified Against: Harold Fosso, State Farm Insurance Company; and Mike Kapphahn, Farmers Insurance Company.

House Committee - Testimony For:     Insurers should be held accountable for settling insurance claims.  No insurer should be able to use practices with claimants that the insurer cannot use in settling claims with its own insured.

House Committee - Testimony Against: This act will increase costs to insurers and penalize insurers for honest mistakes.  An insurer's primary duty is to its insured not to the claimant.  The claimant has his or her own insurer to look out for the claimant's interests.