The opinion of the court was delivered by: Robert S. Lasnik United States District Judge
ORDER GRANTING IN PART MOTION TO DISMISS
This matter comes before the Court on "AIG Domestic Claims, Inc.'s Motion for Rule 12 Dismissal." Dkt. # 18. Defendant seeks dismissal of all of plaintiff's claims on the ground that AIG Domestic Claims, Inc., owed no duty to plaintiff and/or cannot be liable under the claims asserted. Having reviewed the memoranda and exhibit submitted by the parties and having heard the arguments of counsel, the Court finds as follows:
Plaintiff Lease Crutcher Lewis WA, LLC (hereinafter, "Lease Crutcher") was the general contractor on a construction project in Bellevue, Washington, known as the Tower 333 project. On November 16, 2006, a tower crane at the site collapsed, causing significant damage to adjacent sites and killing a tenant in one of the neighboring buildings. When Lease Crutcher was sued in King County Superior Court, it tendered the defense of the litigation to its insurer, defendant National Union Fire Insurance Company of Pittsburgh, PA. National Union accepted the tender and assigned the claim to a sister company, AIG Domestic Claims, LLC, for handling.
Plaintiff claims that AIG Domestic Claims, acting on behalf of and with the authority of National Union, implemented a claim settlement strategy that allowed National Union to recover from a third party amounts paid under the insurance policy before its insured was made whole. Plaintiff alleges that this conduct (1) constitutes bad faith and a breach of defendants' fiduciary duties to Lease Crutcher; (2) violated the Insurance Fair Conduct Act; (3) breached the insurance contract; (4) violated the Consumer Protection Act; and (5) converted funds that rightly belonged to Lease Crutcher. Plaintiff also seeks a declaration that Lease Crutcher has a right to be made whole that is superior to any right National Union might have to recover funds from other liable parties or insurers. AIG Domestic Claims seeks dismissal of all of plaintiff's claims against it pursuant to Fed. R. Civ. P. 12(b)(6) and 12(c).
A. Liability of Insurance Adjusters -- General
The theory underlying AIG Domestic Claims' motion to dismiss is that an independent adjuster, hired by an insurance company to handle a claim, owes no duty and has no personal liability to an insured for actions taken on behalf of the insurer. Defendant has not presented, and the Court has not found, any authority for this broad proposition. Under Washington law, employees and agents are regularly held liable for their individual participation in wrongful conduct, even if that conduct were performed for the benefit of its principal and could impose liability on the principal as well. Dodson v. Econ. Equip. Co., Inc., 188 Wn. 340, 343 (1936) ("The liability of an officer of a corporation for his own tort committed within the scope of his official duties is the same as the liability for tort of any other agent or servant. That the agent acts for his principal neither adds to nor subtracts from his liability."); Deep Water Brewing, LLC v. Fairview Resources Ltd., ___ Wn. App. ___, 215 P.3d 990, 1009-1012 (2009) (holding president of homeowner's association personally liable, along with association itself, for bad faith violations of restrictive covenants in which he participated). No distinct body of legal principles governs the liability of adjusters to insureds for their acts or omissions while handling a claim: the Court will therefore evaluate each theory of liability and the law pertaining thereto before determining whether plaintiff has stated a viable cause of action against AIG Domestic Claims. Thomas R. Malia, Annotation, Liability of Independent or Public Insurance Adjuster to Insured for Conduct in Adjusting Claim, 50 A.L.R.4th 900 (1986).
B. Bad Faith and Breach of Fiduciary Duty Claim
Lease Crutcher alleges that AIG Domestic Claims had an obligation to act in good faith toward plaintiff and/or a fiduciary duty that required it to protect plaintiff's financial interests even at the expense of its own monetary concerns. Plaintiff further alleges that AIG Domestic Claims breached these duties when it conditioned settlement of the claims against Lease Crutcher on a third party's payment of available insurance funds to National Union. AIG Domestic Claims argues that only the insurer, not its agent or adjuster, owes a duty of good faith toward, or has a fiduciary relationship with, the insured.
In order to prevail on a bad faith claim, the insured must prove a duty, breach of that duty, and damages arising from the breach. Smith v. Safeco Ins. Co., 150 Wn.2d 478, 485 (2003). Plaintiff argues that the laws of Washington and the common law impose a duty of good faith on third-parties hired by an insurer to perform basic insurance functions. Plaintiff's statutory argument is well-taken. The insurance code of Washington applies to "all insurance transactions . . . and all persons having to do therewith . . . ." RCW 48.10.020. "Persons" is defined to include corporations such as AIG Domestic Claims. RCW 48.01.070. More importantly, the legislature has expressly imposed an obligation of good faith on those who represent insurers and insureds. RCW 48.01.030 states:
The business of insurance is one affected by the public interest, requiring that all persons be actuated by good faith, abstain from deception, and practice honesty and equity in all insurance matters. Upon the insurer, the insured, their providers, and their representatives rests the duty of preserving inviolate the integrity of insurance.
Lease Crutcher alleges that AIG Domestic Claims acted on behalf of and with authority from National Union in its dealings with the insured. National Union delegated one of the basic functions of an insurer -- claims handling and adjustment -- to a separate but related corporate entity. AIG Domestic Claims acted as National Union's representative and played a significant role in the insurance transaction which gave rise to this litigation. The statutory duty of good faith set forth in RCW 48.01.030 is easily broad enough to encompass AIG Domestic Claims' conduct in these circumstances.
Defendant argues that "RCW 48.01.030 cannot be read in isolation" and, relying on the Washington Administrative Code and Rice v. State Farm Mut. Auto. Ins. Co., 2005 WL 2487975 (W.D. Wash., Oct. 7, 2005), maintains that "[n]othing in [the statutory] language imposes liability on an agent of an insurance company. . . ." Motion at 5-6. Although courts regularly consider administrative rules when resolving ambiguities in a statute, they "should not defer to an agency's interpretation of a statute if that interpretation conflicts with the statutory mandate." Bostain v. Food Exp., Inc., 159 Wn.2d 700, 727 (2007). In this case, the statute is unambiguous: both the insurer and its representative must act in good faith toward the insured. If the regulations stated otherwise, the administrative agency would have exceeded its power by promulgating rules that amend or change the legislative enactment. Wash. Pub. Ports Ass'n v. Dep't of Revenue, 148 Wn.2d 637, 646 (2003). The issue is inapposite, however, because the regulations do not, in fact, contradict the statutory mandate. Although the administrative agency has chosen to focus its regulations on the conduct of insurers,*fn1 at least one regulation expressly governs the conduct of an insurer's agent (WAC 284-30-350(2)). In addition, the ...