Treble in the Insurance World: Noneconomic Damages and Actual Damages

From the Desk of Brian Schiewe:

In Washington, under the Insurance Fair Conduct Act (“IFCA”), insureds can recover any “actual damages” sustained from the unreasonable denial of a claim. The “actual damages” may also be trebled if the court believes it to be appropriate. But are noneconomic damages included “actual damages”? The Washington Court of Appeals answers this question in the affirmative in an issue of first impression under Washington Law.       

Claims Pointer:

The Court examined the legislative history of the IFCA statute and found that its purpose and intent are to protect insureds from unreasonable delay or denial by insurers and thus, noneconomic damages are appropriate.

Beasley v. GEICO General Insurance Company, 54997-2-II, 2022 WL 1151426 (Wash. Ct. App. Apr. 19, 2022)

Facts:

Jerymaine Beasley was injured in a car accident as a passenger in Anar Askerov’s vehicle. The accident was caused by the driver of the other car, who had policy limits of $25,000 and thus was “underinsured”. Askerov’s policy with GEICO included UIM coverage. Beasley demanded that GEICO pay the $100,000 limit of Askerov’s UIM policy. In response, GEICO offered to pay $10,000 to settle the claim with Beasley. Beasley rejected the offer but requested that GEICO pay the $10,000 as an undisputed UIM amount. GEICO did not issue the payment.

Beasley sued GEICO alleging that GEICO had violated IFCA, breached the duty of good faith, breached its fiduciary duty, and violated the Consumer Protection Act (CPA). At trial, Beasley offered various testimony from GEICO employees who testified to what undisputed benefits in UIM claims were, GEICO’s practices in regard to undisputed benefits and noneconomic damages evaluations, and whether the $10,000 settlement offer was an undisputed benefit.  

The jury found that Beasley had proven his IFCA claim and that Beasley’s damages for that claim were $84,000. The jury further found that Beasley had proved his insurance bad faith claim and that he had incurred $400,000 in noneconomic damages related to the claim. After the verdict, Beasley moved for reconsideration of the court’s exclusion of noneconomic damages under his IFCA claim. Beasley also requested the court treble the IFCA damages awarded by the jury. The trial court denied Beasley’s motion regarding the noneconomic damages under IFCA, but granted Beasley’s trebling request as to the IFCA damages. Beasley sought direct review with the Washington Supreme Court but was denied direct review and the appeal was transferred to the Washington Court of Appeals.

Law:

RCW 48.30.015 was enacted as part of IFCA and was ratified in 2007. RCW 48.30.015 provides in part:

“(1) Any first party claimant to a policy of insurance who is unreasonably denied a claim for coverage or payment of benefits by an insurer may bring an action in the superior court of this state to recover the actual damages sustained…

(2) The superior court may, after finding that an insurer has acted unreasonably in denying a claim for coverage or payment of benefits…increase the total award of damage to an amount not to exceed three times the actual damages.” (Emphasis added).
  

Analysis:

Beasley argued that the trial court erred when it ruled that noneconomic damages are not “actual damages” under RCW 48.30.015. The Washington Court of Appeals held that the term “actual damages” is ambiguous and thus not subject to plain language interpretation and further, that legislative history demonstrates that the legislature intended “actual damages” to include non-economic damages under IFCA because IFCA was intended to protect insureds.

The Court began with statutory interpretation to determine whether RCW 48.30.015 includes noneconomic damages. The Court looked to Segura v. Cabrera, 184 Wn.2d 587, 595-96, 362 P.3d 1278 (2015) which held that the term “actual damages” was ambiguous and therefore, reviewing courts would need to examine legislative intent as well as the type of interest the statute was designed to protect to determine the meaning of “actual damages”. The Court began its examination of the legislative intent of the statute with a focus on the type of interest it was intended to protect and held that “actual damages” in RCW 48.30.015 included noneconomic damages.

While nothing in the legislative history directly addresses the meaning of “actual damages”, the history shows that the statute was intended to protect insureds by creating a new remedy for insureds harmed by the unreasonable delay in payment of valid insurance claims and by encouraging insurers to honor their commitments by making it illegal to unreasonably delay or deny legitimate claims. Further, the legislative history suggests that RCW 48.30.015 was, in part, also intended to serve a punitive and deterrent purpose because it allowed for treble damages. Further nothing in IFCA specifies the type of damages envisioned by the legislature nor does it suggest any limitations on damages.

The Court weighed these factors and determined that the purpose of RCW 48.30.015 was to protect insureds by providing a new remedy without limiting the type of damages available. Thus, the broad language and legislative purpose suggest that the legislature intended “actual damages” under IFCA to be interpreted broadly and include noneconomic damages. Additionally, the allowance of noneconomic damages comports with the purpose of protecting insureds against unfair conduct by insurers.

Once the Court determined that “actual damages” included noneconomic damages, it stated that the trial court may increase the total award of damages to an amount not to exceed three times the actual damages under RCW 48.30.015(2). Thus, the trial court has the discretion to decide whether to treble Beasley’s new amount of actual damages on remand.

The Big Picture:

A plaintiff can now claim noneconomic damages under IFCA, and those damages may even be trebled if a court decides it is appropriate. Thus, insurance carriers need to be more careful now than ever when denying or delaying a claim. That denial or delay must be based on solid ground after a thorough investigation, otherwise, the insurance carrier may be vulnerable to expensive lawsuits. Additionally, since the Court held that “actual damages” is a broad and ambiguous term, various types of damages may be attempted to be recovered under IFCA in the near future, as long as the damages purport to IFCA’s purpose of protecting insureds.