Wrongful Denial of PIP Benefits Can Give Rise to Washington Consumer Protection Act Claim

Unfortunately, in some cases, a Washington car accident victim’s biggest adversary may be his or her own insurance company.  Washington automobile insurers must offer personal injury protection (PIP) coverage to their policyholders.  PIP provides no-fault coverage for the insured’s medical expenses arising from an automobile accident.  Insurers must conduct a reasonable investigation before they deny claims.  Additionally, Washington law provides that it is an unfair practice for a PIP carrier to deny benefits for reasons other than medical bills that are not reasonable, necessary, related to the accident, or incurred within three years of the accident.  Sadly, it is not uncommon for an insurer to wrongfully deny the claims of its own insured.

In a recent case, the plaintiffs pursued class actions in federal court against their insurers, including claims under the Consumer Protection Act (CPA) for wrongfully denying their PIP benefits.  One plaintiff alleged that the insurer refused to pay medical bills if a computerized review determined that the bill exceeded a predetermined amount.  The plaintiff alleged that the insurer failed to investigate or make an individualized assessment of the charges before denying them.  The plaintiff argued that this practice constituted unfair practices under Washington insurance law.  WAC 284-30-330 and WAC 284-30-395. She further argued that the practice resulted in a routine failure to pay reasonable medical expenses in violation of Washington insurance law.

The second plaintiff argued that his insurer terminated PIP benefits once an insured reached Maximum Medical Improvement, which he alleged was an unfair practice under WAC 284-30-395. He argued that this practice resulted in the routine failure to pay reasonable medical expenses in violation of RCW 48.22.005.

Both insurers moved to dismiss the Consumer Protection Act claims, arguing that the plaintiffs were not “injured in [their] business or property.” The federal court consolidated the cases to ask the Washington Supreme Court to determine if the allegations supported a CPA claim.

Washington law has allowed CPA claims against insurers for violations of Washington insurance regulations or breaches of the duty of good faith.  The defendants argued that a wrongful denial of PIP benefits did not constitute an injury to “business or property,” so a CPA claim was not available to the plaintiffs.  The Washington Supreme Court held that depriving an insured of the insurance benefits for which he or she contracted does constitute an injury to “business or property.”

Personal injury claims are generally not considered to be within the scope of the CPA.  The court distinguished the wrongful denial of insurance benefits from the underlying personal injury case, however.  The plaintiffs here were seeking to recover the insurance benefits to which they were entitled pursuant to their insurance contracts. The court found that there was “a legally protected property interest” in the insurance benefits and “insurance dealings free from bad faith.”  A wrongful denial of benefits infringes on that property interest.

The court further held that the mishandling of a PIP claim should be evaluated under the ordinary CPA principles to determine if investigation costs or lost time are business or property injuries under the CPA.  Washington courts have held that investigation costs resulting from bad faith may be recoverable under the CPA.  Additionally, having to take time away from one’s business to respond to an insurer’s unfair practices may constitute an injury under the CPA.

This case makes it clear that an insured may pursue a claim under the CPA for a wrongful denial of insurance benefits.  Although this case was specific to PIP benefits, the court indicated that a claim could be available under other types of insurance.

An experienced Washington car accident attorney can help accident victims pursue all potential avenues of recovery.  If you have been injured by someone else’s negligence, call Blair & Kim, PLLC, at (206) 622-6562 to set up a consultation.

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