Are insurance company claims adjusters happy when their independent adjusters and attorneys deny a claim on their behalf? Does it matter if the decision to deny was based on incorrect facts because a flawed investigation was done? A property insurance company sued its claims administrator and its attorney for wrongfully denying a property insurance claim in Washington.1
This lawsuit follows the policyholder’s lawsuit, which claimed:
Sirius unreasonably denied the association’s insurance claim without making an intrusive investigation of the hidden damage at the Northgate Plaza Condominium. Pursuant to the IFCA, the Association provided written notice to Sirius on March 5, 2020, explaining why Sirius̵7; denial of coverage was unreasonable. The association’s IFCA letter explained that, among other deficiencies, Sirius’ denial was unreasonable because its reasons for denying coverage ignored relevant Washington case law that previously interpreted identical policy provisions in favor of coverage. Sirius did not respond in time to the association’s IFCA letter.
Sirius must have agreed to some of these allegations regarding the wrongful denial because it settled the policyholder’s claim and then brought this action, alleging in part:
29. Defendant PRM breached its agreement with Sirius when it conducted an unreasonable investigation of the Association’s claim by failing to adequately investigate the damage to the Northgate Property when it only took photographs, failed to attend the follow-up investigation and contested the Association’s claim. based solely on the external investigation of the Northgate Property.
30. The Agreement provides that Sirius shall have the right to make a final decision on denial of coverage.
31. Defendant PRM breached its agreement with Sirius when it did not allow Sirius to make a final decision regarding the denial of coverage to the association.
Note that the insurance company claims that what we have said is required for an insurance company to do in good faith – to conduct a full investigation of all available facts.
Insurance attorneys have obligations to their insurance clients. Regarding the malpractice, the insurer argued:
41. Dynan owed Sirius because Dynan’s services were intended to benefit him through
PRM, Sirius. Dyn was required to adhere to the standard of care for lawyers.
42. Dynan breached this duty when it issued the rejection letter to the association without ensuring that such rejection was in accordance with applicable laws and regulations. Dynan’s actions fell within the scope of a reasonable, prudent and prudent practicing attorney.
I’m sure many readers of this blog will say that the insurance attorney acted in the most standard manner that insurance defense attorneys tend to do. The claim was denied without the insurer requiring a good faith investigation that would have found facts supporting coverage.
Unfortunately, a subsequent order has sent the dispute between the adjusters and the insurer to arbitration. We will keep readers updated on any significant developments regarding the pending action for irregularities.
Your most dissatisfied customers are your greatest source of learning.
1 Skyward Specialty Ins. Group v. Precision Risk ManagementCase No. 3:21-05553 (WD Wash. 2022).