An insurance policy is a contract between the insurer and the insured. If the insurance company fails or refuses to pay a claim which should be paid under the terms of the policy, it is in breach of the contract, and the insured can pursue all available legal remedies for the breach. This usually involves filing a lawsuit against the insurance company. If successful, the insured will be able to recover its damages, which will at least equal the amount the insurer should have paid under the terms of the policy. In Washington, damages may also include other expenses that were incurred because of the breach as well as costs of the lawsuit.

     BAD FAITH

     All insurance policies contain an implied obligation applicable to the insurance company of good faith and fair dealing towards its insured. When a claim is presented, this implied obligation means that an insurance company cannot simply look for reasons not to pay. Instead, the company must make a thorough investigation of the claim, must consider all reasons and circumstances that might support the claim, and must give as much consideration to the financial interest of the insured as it gives to its own financial interest.

     If an insurance company refuses to pay a claim that should be paid or offers to settle a claim for less than it knows the claim is worth or denies a claim without adequate investigation, this could give rise to a so-called bad faith claim against the insurance company. i.e., a claim that the company has breached its implied obligation of good faith and fair dealing. If the company is found to have acted in bad faith in its handling of a claim, the insured is entitled to all damages resulting from that action, including types of damages that would not be available just for breach of contract. In Washington State a bad faith breach of contract is also a violation of the Washington Consumer Protection Act (RCW 19.86). Under this statute, an insured may also be entitled to treble damages up to $10,000 as well as court costs and attorney fees.

     Because of the complexity of insurance policies and because the resolution of coverage disputes often depends on careful analysis of the unique facts and circumstances of each case in light of applicable state law, the assistance of an attorney experienced in the handling of insurance coverage matters is strongly advised.

     If you have questions about your insurance coverage or feel you have been treated unfairly by your insurance company call The Law Offices of Charles J. Brocato at (253)851-9164 or e-mail for a no cost consultation.