Insurers Should Take Note of Washington Court Rulings on Bad Faith Issues
A case that originated as a claim for negligent wrongful detention against the insureds in which an insured shot at and held his victim at gunpoint became a study in potential claims of bad faith against an insurer. The plaintiff in the underlying case, filed after the statute of limitations for intentional torts expired, argued the insured’s umbrella policy with State Farm provided coverage for his claim based on negligent conduct. The linked case involved a covenant judgment settlement between the parties that the trial court deemed reasonable. The Washington Court of Appeals held an insurer is free to challenge aspects of liability, i.e. whether the insured’s conduct was intentional or negligent, that the trial court declined to address on approving a covenant judgment as reasonable. Consequently, the reviewing court concluded that the intentional shooting was not transformed into a negligent one based on the insured’s mistaken belief that it was permitted by law; thus the claimant could not avoid the applicable statute of limitations. Also of note, the court further held that, in the case of an assignment by the insured to the claimant, the claimant may have access to privileged materials in the insurer’s claim file even if the insured declines to waive the privilege.