Washington Case Law Update: Insured’s Bad Faith Lawsuit is Revived after the Washington Court of Appeals Interprets Ambiguous Insurance Terms against the Insurer
From the Desk of Joshua P. Hayward: Washington law permits insureds to bring bad faith actions against insurers when claims made under their insurance policies are denied. Occasionally, these lawsuits focus on the interpretation of insurance policies and can possibly lead to increased damages if the insurer wrongfully denied claims. What if the insurance company denies coverage based on language that the court deems ambiguous? May the insurance company be subjected to bad faith? Read on to find out.
Claims Pointer: In this bad faith lawsuit, The Washington Court of Appeals interpreted an insurance policy to determine whether an insurer was required to cover the costs incurred by its insured who rebuilt a similar structure after a fire. The court of appeals found that the language relied upon to deny coverage to the insured was ambiguous. Once the court found that the language was ambiguous, it construed the language against the drafter. Accordingly, the insurer was subject to a bad faith denial of coverage. This case serves as an important reminder that Washington courts consistently favor the insured in disputes against insurers. When contemplating denying an insured’s claim, it is important to ensure that the language relied upon is unambiguous. If there is any question, seek legal advice.
Poole v. State Farm, 2018 Wash. App. Lexis 2851 (Dec. 18, 2018).
In 2014, Michael and Vicky Poole’s (“the Pooles’”) home, attached shop, and separate barn—all insured under a State Farm homeowner’s policy—burned to the ground. The Pooles began construction on replacement structures and sought compensation under their homeowner’s policy. State Farm accepted coverage for the Pooles’ replaced home and barn but denied coverage for the Pooles’ new shop. State Farm denied coverage based upon its...