MOUN KEODALAH and AUNG KEODALAH, husband and wife, Petitioners,
ALLSTATE INSURANCE COMPANY, a corporation, and TRACEY SMITH and JOHN DOE SMITH, wife and husband, Respondents.
court accepted Moun Keodalah's request for discretionary
review of the trial court's dismissal of his bad faith
and Consumer Protection Act (CPA) claims against Tracey Smith,
the Allstate insurance adjustor who handled his claim. RCW
48.01.030 imposes a duty of good faith on all persons engaged
in the business of insurance, including individual adjusters.
And the CPA does not require that a contractual relationship
exist between the parties. Thus, we hold that an individual
insurance adjuster may be liable for bad faith and CPA
violations. We reverse and remand for further proceedings
consistent with this opinion.
and a motorcyclist collided in April 2007. After Keodalah
stopped at a stop sign and began to cross the street in his
truck, a motorcyclist struck him. The collision killed the
motorcyclist and injured Keodalah. Keodalah had purchased
auto insurance from Allstate Insurance Company.
Keodalah's insurance policy provided underinsured
motorist (UIM) coverage. The motorcyclist was uninsured.
Seattle Police Department (SPD) investigated the collision.
The SPD determined the motorcyclist was traveling between 70
and 74 m.p.h. in a 30 i m.p.h. zone. SPD reviewed
keodalah's cell phone records. They showed that Keodalah
was not using his cell phone at the time of the collision.
also investigated the collision. Allstate interviewed several
witnesses who said the motorcyclist was traveling faster than
the speed limit, had proceeded between cars in both lanes,
and had "cheated" at the intersection. Allstate
hired an accident reconstruction firm, Traffic Collision
Analysis Inc. (TCA), to analyze the collision. TCA found that
Keodalah stopped at the stop sign, the motorcyclist was
traveling at a minimum of 60 m.p.h., and the
motorcyclist's "'excessive speed'"
caused the collision.
asked Allstate to pay him the limit of his UIM policy, $25,
000. But Allstate refused. It offered $1, 600 to settle the
claim based on an assessment that Keodalah was 70 percent at
fault. After Keodalah asked Allstate to explain its
evaluation,  Allstate increased its offer to $5, 000.
sued Allstate, asserting a UIM claim. Allstate designated
Smith as its CR 30(b)(6) representative. Although Allstate
possessed both the SPD report and TCA analysis, Smith claimed
that Keodalah had run the stop sign and had been on his cell
phone. Smith later admitted, however, that Keodalah had not
run the stop sign and had not been on his cell phone. Before
trial, Allstate offered Keodalah $15, 000 to settle the
claim. Keodalah refused and again requested the $25, 000
policy limit. The case proceeded to a jury trial.
trial, Allstate contended that Keodalah was 70 percent at
fault. The jury determined the motorcyclist to be 100 percent
at fault and awarded Keodalah $108, 868.20 for his injuries,
lost wages, and medical expenses.
filed a second lawsuit against Allstate and included claims
against Smith. These included IFCA violations, insurance bad
faith, and CPA violations. Allstate and Smith moved to
dismiss the complaint under CR 12(b)(6). The trial court
granted the motion in part. It dismissed Keodalah's
claims against Smith and certified the case for discretionary
review under RAP 2.3(b)(4).
court granted discretionary review of the three issues: (1)
whether IFCA creates a private cause of action for violation
of a regulation, (2) whether an individual insurance adjuster
may be liable for bad faith, and (3) whether an individual
insurance adjuster may be liable for violation of the CPA.
Later, our Supreme Court decided Perez-Crisantos v. State
Farm Fire & Casualty Insurance Co.. which forecloses
Keodalah's IFCA claim. We now decide the other two issues
involving bad faith and the CPA.
issues before this court present unresolved legal questions
on which courts have divided. We review legal questions de
we must decide whether insureds may bring bad faith claims
against individual insurance adjusters. RCW 48.01.030 imposes
a duty of good faith on "all persons" involved in
insurance, including the insurer and its representatives.
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
person who violates this duty may be liable for the tort of
bad faith.RCW 48.01.070 defines "person" as
"any individual, company, insurer, association,
organization, reciprocal or interinsurance exchange,
partnership, business trust, or corporation." Smith was
engaged in the business of insurance and was acting as an
Allstate representative. Thus, under the plain language of
the statute, she had the duty to act in good faith. And she
can be sued for breaching this duty.
Three used this analysis in Merriman v. American
Guarantee & Liability Insurance Co. Merriman
interpreted the insurance bad faith statute to permit claims
against corporate insurance adjusters. The court
RCW 48.01.030 unambiguously applies to "[t]he business
of insurance, " imposing requirements on "all
persons, " and rests the duty of preserving inviolate
the integrity of insurance on, among others, "[the]
representatives" of the insurer. "Person" is
defined by RCW 48.01.070 to mean "any individual,
company, insurer, association, organization, reciprocal or
interinsurance exchange, partnership, business trust, or
corporation." As an adjuster contracted by American
Guarantee to act as its claims administrator, York was, at
all relevant times, a "person" engaged in "the
business of insurance" and a representative of American
Lease Crutcher Lewis WA, LLC v. National Union Fire
Insurance Co.,  a federal district court judge applied a
similar analysis. The Lease court reasoned,
The insurance code of Washington applies to "all
insurance transactions... and all persons having to do
therewith [RCW 48.01:020].- "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.
Lease went on to observe that the plaintiff alleged
that the corporate adjuster "acted on behalf of and with
authority from" the insurer.
attempts to distinguish our case. She correctly notes that it
involves an individual insurance adjuster while
Merriman and Lease involved third-party
companies adjusting claims. We do not find this distinction
significant. Both Merriman and Lease relied
on the broad statutory definition of "person" to
decide that corporate adjusters owe a duty of good faith. The
code's broad definition of "person" includes
both individuals and corporations and does not make any
distinction between the duties they owe. Nothing in the
statute limits the duty of good faith to corporate insurance
adjusters or relieves individual insurance adjusters from
this duty. The duty of good faith applies equally to
individuals and corporations acting as insurance adjusters.
relies on Garoutte v. American Family Mutual Insurance
Co.There, a different federal district court
judge reached a different conclusion. Garoutte does
not persuade us. Garoutte specifically relied on the
following sentence: "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
this sentence makes clear that it does not create a cause of
action against representatives of insurance companies;
otherwise, it would also create a cause of action for bad
faith against "'the
insured.'" But Washington courts have expressly
stated that the statute does impose a duty of good faith on
both the insureds and the insurer. Garoutte also
found the distinction between a corporate adjuster and
individual employee adjuster significant. But the court did
not explain this significance and merely stated that
Lease "explicitly confined its reasoning to the
duties of third-party corporate entities, not to individuals
directly employed by insurers." Lease stated
that it need not decide "whether [RCW 48.01.030] gives
rise to a bad faith claim against individuals directly
employed by the insurer." But the reasoning in
Lease applies equally to claims against individuals.
Lease determined that insurance adjusters are
representatives, who owe a duty of good faith under RCW
48.01.030. Just as corporate insurance adjusters
are representatives, so too are individual employee insurance
urges us to use the Washington Administrative Code (WAC) to
interpret the relevant statutory language. She contends that
the regulations apply only to "insurers" and if the
legislature had meant the duty of good faith to apply to
employees it could have said so. We agree that the
regulations focus on insurers. But the insurance code is
broader and expressly applies to "all persons"
having to do with insurance transactions. In addition,
the regulations specifically state, "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 ...