By Kevin Clonts
On October 3, the Washington Supreme Court held that employee claims adjusters are not personally liable for bad faith and Consumer Protection Act (CPA) causes of action. In doing so, the court reversed the Court of Appeals, which had held that individual insurance professionals could be held liable.
Keodalah, Allstate’s insured, was injured when his car and an uninsured motorcycle collided. Keodalah demanded the full limits of underinsured motorist (UIM) coverage under the Allstate policy, but Allstate refused. Allstate produced an employee adjuster for deposition, and she testified that Keodalah had contributed to his injuries, but she later recanted that testimony. After a jury found the motorcyclist to be 100% at fault, Keodalah filed a bad faith and CPA suit against Allstate and the adjuster.
The trial court dismissed the causes of action against the adjuster, but the Court of Appeals reversed, holding that individual insurance employees could be held liable.
The Supreme Court reversed the Court of Appeals. Regarding the bad faith cause of action, the court analyzed Washington statute RCW 48.01.030, which mandates that “all persons” in the “business of insurance” act in good faith. The court held that the statute does not, in itself, create a private right of action against “all persons” in the insurance industry, noting that other statutes include specific enforcement mechanisms and the statute is, by its own terms, for the benefit of the general public, not for particular claimants.
The court also rejected the ability to pursue CPA claims against individual insurance professionals, noting that insurance regulations apply to “the insurer,” not to employees.
Interestingly, the majority opinion did not address the viability of Keodalah’s common law bad faith cause of action, and the dissenting opinion would have allowed the common law claim to proceed. (To be fair, the dissenters also would have allowed the CPA claim against the employee).
In sum, since March 2018, when the Court of Appeals ruled on the case, insurance carriers and their employees had been working under the assumption that individual employees could be exposed to liability for bad faith or CPA claims. The Washington Supreme Court now has clarified that though the insurance carrier may face liability, the employee adjuster is not susceptible to suit.