Crowthers v. Travelers: The Federal Court Gets It Right Again on IFCA

The Washington State Insurance Fair Conduct Act, commonly referred to as “IFCA”, continues to cause significant concern among insurers conducting business in the State of Washington. The lack of any decisions from the Washington State Appellate Courts interpreting or applying the statute has further compounded the uncertainty relating to IFCA.

The Federal Courts, however, have continued to issue rulings on the application of IFCA in a number of scenarios. The trend of these decisions indicates that the Federal Courts are obtaining a better grasp on how IFCA is to be applied. These decisions provide better direction to all insurers and insureds in regard to these claims.

The most recent decision from the Federal Courts is Crowthers v. The Travelers Indemnity Company, United States District Court for the Western District of Washington, 2:16-cv-00606-RSL. In Crowthers, the Honorable Robert S. Lasnik again held that a technical violation of a regulatory provision under the Washington Administrative does not necessarily constitute an IFCA violation. In issuing this holding, the Court referenced the same result reached by Judge Robart in Schreib v. American Family Mut. Ins. Co., 2015 U.S. Dist. LEXIS 118189 (W.D. Wa.). As a result, it appears that the trend in at least the Western District is that an IFCA violation requires an actual unreasonable denial benefits or of coverage, and not simply a technical violation of the regulations.

Judge Lasnik then went on to address the fact that the Plaintiff in the Crowthers case had failed to establish any “actual damages” under IFCA, as well as a lack of any damage claims asserted as to the remaining extra-contractual claims asserted by Plaintiff. The Court held that a failure to establish actual damages as to these extra-contractual causes of action also warranted dismissal of the claims on a summary judgment motion. This decision again underscores the fact that in order to prosecute an IFCA claim, a party must prove actual damages or injuries. This ruling is again consistent with the ruling in Schreib.

The Crowthers case provides excellent legal precedent for insurers to utilize in defending IFCA claims. In fact, at least one court in King County, Washington (Seattle) utilized the Crowthers decision in dismissing an IFCA claim in a separate, highly contested consent judgment case arising from an underlying commercial construction defect matter.

Lether & Associates proudly represented Travelers in the Crowthers matter. If you have any questions in regard to this case, please let us know. In the meantime, a copy of this decision is attached.

On a different note, Lether & Associates is proud to add three new attorneys to the office. Congratulations to Nicole Morrow, Matt Erickson and Ben Miller. Each of our new rising stars brings a great attitude and experience to our team. This includes adjusting experience and defense experience. Our recent growth also means we have added an attorney licensed in the State of California to better service our California client base. Welcome aboard, everyone.