Insurer Beware: Failure to Defend Ends With Hefty Verdict

Insurers have more incentive to show up, after IFCA


Served with a lawsuit that you turned over to your insurer? Insurer refusing to defend you? Well, find some hope in this news. Washington’s IFCA has the claws to ensure that insurers perform their duties.


Contractors heavily rely on the defense provisions of their Commercial General Liability (CGL) policies. In construction, a legal dispute can easily rear its head when you least expect it. Luckily, Washington registered contractors are required to maintain CGL insurance. That insurance often provides contractors with adequate legal defense in the event that they are sued.


But, what if your insurer turns down the defense request? They might be staring at massive damages. A current Reiser Legal client, Australia Unlimited, Inc., recently won a large verdict against Hartford Insurance, after the insurer unreasonably denied their claim. The firm who represented Australia Unlimited Inc. in that case, Hackett Beecher and Hart, were successful in procuring a $5.43 Million verdict


One of the claims made by Australia Unlimited in that lawsuit was that Hartford violated the Insurance Fair Conduct Act, or IFCA. The IFCA was enacted in 2007, after voters of Washington State adopted it by Referendum R-67. The IFCA provides legal remedies for policyholders, including the ability to seek punitive damages in court if their insurance company unreasonably denies their claims or violates regulations governing unfair claims settlement practices.


Although it was enacted nearly four years ago, this appears to be the first lawsuit resulting in damages worth more than a few thousand dollars. According to a press release issued after the trial’s conclusion, Attorney Brent Beecher opined on why we don’t see many IFCA suits:


“Many people have speculated about that, but one very reasonable hypothesis is that the threat of triple damages and attorney fees has worked – that is to say, insurers in this state may have actually been properly incentivized by the new law to avoid the kind of behavior exhibited by Hartford in this case.”


I think that this result is incredibly valuable to contractors. For many, the struggle to turn a case over to their insurer is long and arduous. Hopefully, verdicts such as this one will ensure that insurers appropriately represent their insureds.



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