The Washington State Court of Appeals has further tipped the scales in favor of insureds in insurance bad faith and Consumer Protection Act (CPA) litigation. The Court of Appeals held in Keodalah v. Allstate Ins. Co., that (1) RCW 48.01.030 imposes a duty of good faith on “all persons” engaged in the business of insurance, and (2) the CPA does not require a contractual relationship to exist between the parties in order for a claim to be valid. In other words, bad faith and CPA claims against an individual insurance adjuster will be viable.
In Keodalah, the insured (Keodalah) sustained injuries in a car accident when he was struck by another motorist, who was speeding and uninsured. Keodalah’s insurance policy through Allstate provided underinsured motorist coverage with a policy limit of $25,000. Thus, Keodalah requested that Allstate pay him the policy limit of $25,000. Allstate refused and offered $1,600 to settle all claims. Keodalah asked Allstate to explain its evaluation, and Allstate responded by raising the offer to $5,000. Tracey Smith was the Allstate adjuster who handled Keodalah’s claim.
Prior to Keodalah’s policy limit demand, Allstate investigated the incident and hired an accident reconstruction specialist to apportion responsibility for the accident. During the investigation, witnesses uniformly stated the uninsured motorist was speeding and ran the stop sign. Likewise, the accident reconstruction specialist also determined that the uninsured motorist was speeding and that Keodalah had stopped at the stop sign. Keodalah’s cell phone records confirmed Keodalah was not using his phone during the incident. Notwithstanding the evidence to the contrary, Allstate refused Keodalah’s policy limit demand, alleging Keodalah was responsible for 70% of the accident.
Keodalah ultimately sued Allstate asserting an Uninsured Motorist Claim . Keodalah deposed Allstate, and Smith testified on Allstate’s behalf. Smith claimed that it was Keodalah who ran the stop sign and that he was talking on his phone during the incident. Smith later admitted that this testimony was not true. During trial, Allstate maintained that Keodalah was 70% at fault – but the jury disagreed. The jury found that the uninsured motorist was 100% at fault and awarded Keodalah $108,868.20 for his injuries, lost wages, and medical expenses.
The Second Lawsuit
Keodalah filed a second lawsuit against Allstate and Smith, alleging insurance bad faith and CPA claims against both. The Court analyzed RCW 48.01.030 in determining whether insurance bad faith claims could be brought against an insurance adjuster personally. The Court stated that RCW 48.01.030 “imposes a duty of good faith on ‘all persons’ involved in insurance, including the insurer and its representatives…A person who violates this duty may be liable for the tort of bad faith.” The Court further stated that the RCW defines “person” as “any individual…” and that “[n]othing in the statute limits the duty of good faith to corporate adjusters or relieves individual insurance adjusters from this duty. The duty of good faith applies equally to individuals and corporations acting as insurance adjusters.” Thus, the Court held that under the plain language of the statute, Smith had a duty to act in good faith and could be sued for breaching that duty. The Court similarly found that nothing in the CPA required a contractual relationship to exist between the parties for Keodalah to bring a CPA claim.
Under Keodalah, bad faith and CPA claims will not end with the insurance companies—and instead, individual adjusters can be held liable for bad faith and CPA violations. One result of this ruling may be that out of state insurers with in state adjusters might be precluded from removing lawsuits to federal court. The more obvious benefit of this ruling is that it adds additional protection for policy holders from dishonest insurers.
 3 Wn. App.2d 31, 413 P.3d 1059 (2018).
 Id. at 36.
Id. at 37.