“The general rule is that violations of insurance regulations are subject to the Consumer Protection Act.”
How later courts described this case
- “The general rule is that violations of insurance regulations are subject to the Consumer Protection Act.”
- holding that an insurance company did not have a duty to provide third party liability coverage to renters who expressly rejected the option to purchase that coverage
- in evaluating whether conduct constituted a bad faith denial of coverage, holding that “an insurer’s denial of coverage, without reasonable justification, constitutes bad faith”
- where the insured asserted a bad faith denial of coverage, holding that “[d]enial of coverage due to a debatable question of coverage . . . is not bad faith giving rise to a [CPA] violation”
Written by the judges who cited it.
The opinion
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IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
STAN SCHIFF, M.D., Ph.D., on behalf
of himself and a class of similarly DIVISION ONE
situated providers,
No. 82554-2-I (consol. with
Respondent/Cross-Petitioner, No. 82558-5-I)
v. PUBLISHED OPINION
LIBERTY MUTUAL FIRE INSURANCE
CO. and LIBERTY MUTUAL
INSURANCE COMPANY, foreign
insurance companies,
Petitioners/Cross-Respondents.
DWYER, J. — Washington’s insurance code and regulations prohibit
persons engaged in the business of insurance from engaging in unfair methods
of competition or in unfair or deceptive acts or practices in that business. In our
state’s Consumer Protection Act1 (CPA), our legislature expressly provided that
violations of that prohibition subject insurers to liability pursuant to the consumer
protection law. In the first party insurance context, we recently held that an
insurer engages in an unfair practice in violation of the insurance regulations and
the CPA by failing to conduct an individualized assessment of the
reasonableness of a medical provider’s bill and, instead, relying solely on a
mechanistic, formulaic approach that compares charges within a geographic area
to determine if the amounts billed are reasonable.
1 Ch. 19.86 RCW.
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No. 82554-2-I/2
Here, the insurer engaged in the precise conduct that we have recently
determined constitutes an unfair practice. Because the plaintiff challenging the
lawfulness of the insurer’s conduct has additionally established the other
elements of a CPA claim, we conclude that he is entitled to entry of summary
judgment on that claim.
In addition, we reject the insurer’s assertion that it is exempt from liability
for this conduct pursuant to the CPA’s exemption provision. Such a reading of
that provision would contravene our legislature’s clear intent that an insurer is
subject to CPA liability for actions prohibited by the insurance code and
regulations. Moreover, because there is no “good faith” defense to the claim
presented here, we additionally reject the insurer’s contention that such a
defense shields it from liability. Accordingly, we conclude that the insurer is
subject to CPA liability for the unfair practice challenged here.
I
Stan Schiff, M.D., Ph.D., is a neurologist who practices in Shoreline.
Schiff sometimes treats patients insured by Liberty Mutual personal injury
protection (PIP) and “med pay” automobile insurance policies.2 Schiff submitted
to Liberty Mutual two bills for treating its insureds, in September 2015 and
October 2016, that the insurer did not pay in full. Instead, Liberty Mutual,
pursuant to the applicable insurance policy language, determined that the full
amount of the charges was not “reasonable.” To make this determination, the
insurer relied solely on the FAIR Health database, a computer database that
2 The appellants/cross-respondents Liberty Mutual Fire Insurance Company and Liberty
Mutual Insurance Company are herein referred to collectively as Liberty Mutual.
2
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No. 82554-2-I/3
compares billed charges to the charges submitted by other medical providers
within the same broad geographical area. Because the charges billed by Schiff
exceeded the 80th percentile of charges in the FAIR Health database for the
same services within the same geographical area, Liberty Mutual reduced its
payment on the bills to the 80th percentile amount (the 80th percentile practice).3
In May 2017, Schiff filed a class action lawsuit against Liberty Mutual,
asserting that the insurer’s 80th percentile practice violates provisions of
Washington’s insurance code and insurance regulations defining unfair claims
settlement practices. Schiff further asserted that the 80th percentile practice
constitutes an unfair act pursuant to the CPA. In the complaint, Schiff requested
certification of the class, an award of actual damages to be established at trial,
an award of treble damages pursuant to the CPA, and an award of attorney fees
and costs, prejudgment interest, and reasonable litigation expenses. Schiff
subsequently amended his complaint to additionally request that the trial court
enjoin Liberty Mutual from continuing to reduce the amount paid on medical
providers’ bills using the 80th percentile practice.
In January 2020, the trial court ruled that an Oregon class action
settlement agreement and the judgment approving that agreement (the Froeber
settlement) barred Schiff from asserting the class action and injunctive relief
claims pleaded in his complaint. See Froeber v. Liberty Mut. Ins. Co., 193 P.3d
999 (Or. Ct. App. 2008); Froeber v. Liberty Mutual Ins. Co., 2003 WL 25854983
(Circuit Court of Oregon, Marion County). However, the trial court ruled that the
3 Liberty Mutual acknowledges in its briefing to us that the 80th percentile practice is its
sole means of determining whether a medical provider’s bill is “reasonable.”
3
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No. 82554-2-I/4
Froeber settlement does not bar Schiff from pursuing the individual CPA claim for
monetary damages based on the September 2015 and October 2016 billing
incidents. Thus, the trial court dismissed Schiff’s “class action claims and
injunctive claims” and denied Schiff’s motion for class certification.
Schiff thereafter filed a motion for partial summary judgment on CPA
liability, asserting that Liberty Mutual’s 80th percentile practice violates the CPA
as a matter of law pursuant to our decision in Folweiler Chiropractic, PS v. Am.
Fam. Ins. Co., 5 Wn. App. 2d 829, 429 P.3d 813 (2018). In its response in
opposition to Schiff’s motion, Liberty Mutual asserted that, even if the challenged
practice violates the CPA, Schiff’s claim is barred by so-called “safe harbor”4 and
“good faith” affirmative defenses. In February 2020, the trial court ruled that it
was undisputed, on the current record, “that Liberty Mutual did not do the kind of
individualized investigation” required by our Folweiler decision. The trial court
nevertheless denied Schiff’s motion for partial summary judgment, ruling that
disputed facts remained regarding the defenses asserted by Liberty Mutual.
In June 2020, in response to Liberty Mutual’s motion to dismiss Schiff’s
third amended complaint, the trial court again ruled that the Froeber settlement
bars Schiff from asserting CPA class action and injunctive relief claims. The trial
court thus ruled, for a second time, that Schiff can pursue only his individual CPA
claims for monetary relief allegedly sustained as a result of the September 2015
and October 2016 billing incidents. The trial court denied Liberty Mutual’s motion
for summary judgment regarding Schiff’s individual claims.
4 Liberty Mutual refers to the CPA’s regulated industries exemption, RCW 19.86.170, as
providing a “safe harbor” defense.
4
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No. 82554-2-I/5
The parties thereafter filed the cross motions for summary judgment that
are the basis of this discretionary review. In a hearing on the motions, the trial
court ruled that issues of fact remained regarding Liberty Mutual’s asserted
affirmative defenses. Accordingly, on April 8, 2021, the trial court denied the
parties’ motions for summary judgment.
Both Schiff and Liberty Mutual filed motions for discretionary review of the
trial court’s April 2021 orders. Our commissioner granted the parties’ motions.
The commissioner ruled that, to the extent the parties disagreed regarding the
appropriate scope of review, they could present such argument in their merits
briefing.
II
Schiff asserts that Liberty Mutual’s 80th percentile bill review practice
constitutes an unfair practice pursuant to the CPA. This is so, he contends,
because the practice violates provisions of the insurance code and regulations
promulgated by the insurance commissioner. Liberty Mutual disagrees, asserting
that its practice was approved by the Office of the Insurance Commissioner
(OIC), and, thus, that this court’s Folweiler decision is inapplicable. In addition,
Liberty Mutual contends that Schiff has not demonstrated the injury and
causation elements of his CPA claim.
Schiff’s analysis of the questions presented is the more compelling. The
undisputed and pertinent facts indicate that Liberty Mutual’s 80th percentile
practice is indistinguishable from the practice we held unlawful in the Folweiler
decision. Because we also conclude that the additional elements of Schiff’s
5
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No. 82554-2-I/6
individual CPA claim have been established, Schiff is entitled to summary
judgment for liability on that claim.
A
We review de novo orders on motions for summary judgment, performing
the same inquiry as the trial court. Jones v. Allstate Ins. Co., 146 Wn.2d 291,
300, 45 P.3d 1068 (2002). “All evidence must be considered in the light most
favorable to the nonmoving party, and summary judgment may be granted only
where there is but one conclusion that could be reached by a reasonable
person.” Cornish Coll. of the Arts v. 1000 Virginia Ltd. P’ship, 158 Wn. App. 203,
216, 242 P.3d 1 (2010) (citing Lamon v. McDonnell Douglas Corp., 91 Wn.2d
345, 349-50, 588 P.2d 1346 (1979)). Summary judgment is properly granted
when the pleadings, affidavits, depositions, and admissions on file demonstrate
“that there is no genuine issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law.” CR 56(c).
B
Washington’s CPA makes unlawful “[u]nfair methods of competition and
unfair or deceptive acts or practices in the conduct of any trade or commerce.”
RCW 19.86.020. The CPA provides for a private right of action whereby
individual citizens may bring suit to enforce the statute. Hangman Ridge Training
Stables, Inc. v. Safeco Title Ins. Co., 105 Wn.2d 778, 784, 719 P.2d 531 (1986);
RCW 19.86.090. A plaintiff must establish five elements to prevail in a private
CPA action: (1) an unfair or deceptive act or practice, (2) occurring in trade or
commerce, (3) with public interest impact, (4) an injury to the plaintiff’s business
6
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No. 82554-2-I/7
or property, and (5) causation. Hangman Ridge, 105 Wn.2d at 780. A CPA
claim “may be predicated upon a per se violation of statute, an act or practice
that has the capacity to deceive substantial portions of the public, or an unfair or
deceptive act or practice not regulated by statute but in violation of public
interest.” Klem v. Wash. Mut. Bank, 176 Wn.2d 771, 787, 295 P.3d 1179 (2013).
An act or practice is per se unfair or deceptive if it violates a statute
declaring the conduct to be an unfair or deceptive act or practice in trade or
commerce. Hangman Ridge, 105 Wn.2d at 786. However, only an insured may
bring a per se action for insurance-related violations of the CPA. Tank v. State
Farm Fire & Cas. Co., 105 Wn.2d 381, 394, 715 P.2d 1133 (1986). “If a
defendant’s act or practice is not per se unfair or deceptive, the plaintiff must
show the conduct is ‘unfair’ or ‘deceptive’ under a case-specific analysis of those
terms.” Rush v. Blackburn, 190 Wn. App. 945, 962, 361 P.3d 217 (2015).
“Because the act does not define ‘unfair’ or ‘deceptive,’” our Supreme Court “has
allowed the definitions to evolve through a ‘gradual process of judicial inclusion
and exclusion.’” Saunders v. Lloyd’s of London, 113 Wn.2d 330, 344, 779 P.2d
249 (1989) (quoting State v. Reader’s Digest Ass’n, 81 Wn.2d 259, 275, 501
P.2d 290 (1972)).
Whether a party in fact committed a particular act is reviewable
under the substantial evidence test. However, the determination of
whether a particular statute applies to a factual situation is a
conclusion of law. Consequently, whether a particular action gives
rise to a [CPA] violation is reviewable as a question of law.
Leingang v. Pierce County Med. Bureau, Inc., 131 Wn.2d 133, 150, 930 P.2d 288
(1997). Accordingly, we review de novo whether conduct constitutes an unfair
7
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No. 82554-2-I/8
act or deceptive trade practice pursuant to the CPA. Robinson v. Avis Rent A
Car Sys., Inc., 106 Wn. App. 104, 114, 22 P.3d 818 (2001).5
“The injury element under the CPA is broadly defined.” Folweiler, 5 Wn.
App. 2d at 839. It is met “upon proof the plaintiff’s ‘property interest or money is
diminished because of the unlawful conduct even if the expenses caused by the
statutory violation are minimal.’” Panag v. Farmers Ins. Co. of Wash., 166 Wn.2d
27, 57, 204 P.3d 885 (2009) (quoting Mason v. Mortg. Am., Inc., 114 Wn.2d 842,
854, 792 P.2d 142 (1990)). Both pecuniary losses resulting from inconvenience
and unquantifiable damages are sufficient. Panag, 166 Wn.2d at 57-58. Even “a
mere delay in use of property or receiving payment is an injury under the CPA.”
Folweiler, 5 Wn. App. 2d at 839. To demonstrate causation in a CPA claim, the
plaintiff must show that the injury was caused “‘by a violation of RCW
19.86.020.’” Hangman Ridge, 105 Wn.2d at 793 (quoting RCW 19.86.090).
Mirroring the language of the CPA, our state’s insurance code prohibits
any person in the business of insurance from engaging in “unfair methods of
competition or in unfair or deceptive acts or practices in the conduct of such
business,” as such acts or practices are defined in regulations promulgated by
the insurance commissioner. RCW 48.30.010(1), (2). In the insurance
regulations, the commissioner has defined several unfair methods of competition
and unfair or deceptive acts or practices in the business of insurance, as set forth
in WAC 284-30-330. Starczewski v. Unigard Ins. Grp., 61 Wn. App. 267, 272,
5 Here, the parties have stipulated that there is no dispute of fact regarding Liberty
Mutual’s challenged conduct. Thus, whether that conduct constitutes an unfair act or practice
“can be decided by this court as a question of law.” Leingang, 131 Wn.2d at 150.
8
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No. 82554-2-I/9
810 P.2d 58 (1991). As relevant here, an insurer engages in an unfair claims
settlement practice by “[f]ailing to adopt and implement reasonable standards for
the prompt investigation of claims arising under insurance policies,” WAC 284-
30-330(3), or by “[r]efusing to pay claims without conducting a reasonable
investigation.” WAC 294-30-330(4).6 Additionally, our state requires automobile
insurance policies to offer minimum PIP coverage, including “[m]edical and
hospital benefits of ten thousand dollars.” RCW 48.22.095(1)(a). “‘Medical and
hospital benefits’ means payments for all reasonable and necessary expenses
incurred by or on behalf of the insured for injuries sustained as a result of an
automobile accident.” RCW 48.22.005(7) (emphasis added).
“[Our] legislature has made actions prohibited by the insurance laws
subject to the CPA’s enforcement provisions.” Peoples v. United Servs. Auto.
Ass’n, 194 Wn.2d 771, 778, 452 P.3d 1218 (2019) (citing RCW 19.86.170).
While exempting from CPA liability some conduct of entities engaged in
regulated industries, RCW 19.86.170 explicitly provides “[t]hat actions and
transactions prohibited or regulated under the laws administered by the
insurance commissioner shall be subject to the provisions of RCW 19.86.020 and
all sections of [the CPA] which provide for the implementation and enforcement
of RCW 19.86.020.” Our Supreme Court has explained that this language “spells
out the relationship between the CPA and violations of the insurance code.”
6 Schiff also alleged in his complaint that Liberty Mutual’s practice violates WAC 284-30-
395. However, the standards set forth therein “apply to an insurer’s consultation with health care
professionals when reviewing the reasonableness or necessity of treatment.” WAC 284-30-395.
The regulation “applies only where the insurer relies on the medical opinion of health care
professionals to deny, limit, or terminate medical and hospital benefit claims.” WAC 284-30-395.
Thus, it is not applicable here.
9
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No. 82554-2-I/10
Indus. Indem. Co. of the Nw., Inc. v. Kallevig, 114 Wn.2d 907, 921-22, 792 P.2d
520 (1990). “A violation of WAC 284-30-330 constitutes a violation of RCW
48.30.010(1), which in turn constitutes a per se[7] unfair trade practice by virtue of
the legislative declaration in RCW 19.86.170.” Kallevig, 114 Wn.2d at 923.
Here, Schiff asserts that Liberty Mutual’s 80th percentile practice, relying
solely on its use of the FAIR Health database to determine the reasonableness of
medical provider bills, is an unfair practice pursuant to the insurance regulations
and the CPA. To be clear, Liberty Mutual acknowledges that this practice is its
sole means of determining whether a medical provider’s charges are
“reasonable.” For instance, by declaration, a claims manager for the insurance
company stated that Liberty Mutual has determined that a “reasonable” charge
for treatment in the relevant policies “will not exceed the 80th percentile of
provider charges” for the same medical billing code and the same geographical
region, as determined using the FAIR Health database. Liberty Mutual does not,
he stated, “manually review each provider’s education, credentials, or overhead
costs.” In deposition, the claims manager further explained:
Q. . . . [W]hen the payment is made at the eightieth
percentile, there’s no individualized investigation to the provider’s
fee as to whether it’s reasonable or not?
A. Correct.
Q. Liberty Mutual doesn’t look, for example, at the
background of the provider, their years of experience or their
credentials or any of that information to determine whether what
they’re actually charging for the services is reasonable, correct?
A. That is correct.
7 In Kallevig, an insured sought damages for breach of an insurance contract and
violations of the CPA against an insurance company. 114 Wn.2d at 909-10. Because Schiff is
not an insured, he may not here bring a per se CPA claim against Liberty Mutual. See Tank, 105
Wn.2d at 394.
10
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No. 82554-2-I/11
Specifically, here, Liberty Mutual has stipulated that it “did not individually
investigate Dr. Schiff’s background, credentials, board certifications, years of
practice, or any other justification for the rates charged by Dr. Schiff” before
processing and paying the September 2015 and October 2016 bills. Schiff
asserts that, pursuant to our Folweiler decision, Liberty Mutual’s conduct
constitutes an unfair practice in violation of the insurance regulations and the
CPA. Schiff is correct.
C
In Folweiler, we considered the very allegations made here by Schiff.
There, Folweiler Chiropractic (Folweiler) filed a class action complaint against
American Family, alleging that its practice of utilizing the FAIR Health computer
database to assess whether medical provider bills were reasonable, and
reducing the amount of those bills pursuant to the 80th percentile of charges,
violated the CPA. Folweiler, 5 Wn. App. 2d at 832-33. Folweiler alleged, as
Schiff does here, that the insurer’s claims settlement process, in failing to
“independently evaluate the identity, background, credentials, or experience or
any personal characteristic of the individual provider,” violated the duty to
conduct an individualized assessment. Folweiler, 5 Wn. App. 2d at 838. Thus,
Folweiler asserted that the insurer’s practice “violated the PIP statute, RCW
48.22.005(7) and RCW 48.22.095, and the regulations defining unfair claims
settlement practices in WAC 284-30-330.” Folweiler, 5 Wn. App. 2d at 834.
We concluded that RCW 48.22.095(1)(a) and RCW 48.22.005(7) require
“an individualized assessment rather than substituting a formulaic approach that
11
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No. 82554-2-I/12
pays only 80 percent of the average charge for a large geographic area.”
Folweiler, 5 Wn. App. 2d at 838. In addition, we held that, reading WAC 284-30-
330(3) and (4) together, the regulations “unequivocally establish[] a duty to
actually investigate and conduct a reasonable investigation of claims.” Folweiler,
5 Wn. App. 2d at 839. This requires, we explained, “an individualized
assessment and not simply applying a geographic based formula to each claim
regardless of the individual circumstances.” Folweiler, 5 Wn. App. 2d at 839.
We concluded that the allegations set forth therein were sufficient to establish an
unfair act in violation of the CPA “based on a violation of the public interest
embodied” in the PIP statutes and insurance regulations. Folweiler, 5 Wn. App.
2d at 838.
Thus, based on our holding in Folweiler, the statutory and regulatory
authority relied on by Schiff here require “an individualized assessment” to
determine the reasonableness of medical provider bills. Folweiler, 5 Wn. App. 2d
at 838-39. A “formulaic approach”—such as the 80th percentile practice
employed by Liberty Mutual—is not alone sufficient. See Folweiler, 5 Wn. App.
2d at 838-39. Accordingly, pursuant to our decision in Folweiler, Schiff has
established an unfair practice in violation of the CPA.8
8 Liberty Mutual asserts that the procedural posture of the Folweiler case renders our
decision inapplicable here. We disagree. In Folweiler, we clearly held that the precise practice in
which Liberty Mutual is engaged violates the CPA.
We also reject Liberty Mutual’s assertion that our Folweiler decision is distinguishable
because, here, Liberty Mutual’s practice was “approved” by the OIC. Liberty Mutual submitted to
the trial court a declaration of Toni Hood, the deputy insurance commissioner of the legal affairs
department of the OIC. Hood stated therein that Liberty Mutual’s practice was approved in OIC
filings and complies with WAC 284-30-330. “This court indeed gives substantial weight to an
administrative agency’s interpretations in its area of expertise.” Durant v. State Farm Mut. Auto.
Ins. Co., 191 Wn.2d 1, 13, 419 P.3d 400 (2018). Nevertheless, “[w]hile an opinion of the
Insurance Commissioner is afforded substantial weight, whether an insurance contract . . .
12
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No. 82554-2-I/13
D
Liberty Mutual asserts, however, that even if its 80th percentile practice
constitutes an unfair practice, Schiff cannot demonstrate the injury and causation
elements of his CPA claim.9 This is so, according to Liberty Mutual, because
Schiff cannot demonstrate that the billed amount was “reasonable” and,
therefore, that the insurer was required to pay a greater amount than it did. We
disagree.
To establish injury in a CPA claim, “[t]he injury involved need not be
great.” Hangman Ridge, 105 Wn.2d at 792. Somewhat perversely, were we to
adopt Liberty Mutual’s argument, the insurer would be permitted to rely on its
own unlawful conduct to evade liability. The parties do not dispute that Liberty
Mutual paid less than the full amount of the September 2015 and October 2016
charges based on its unlawful use of its 80th percentile practice. As we did in
Folweiler, 5 Wn. App. 2d at 839-40, we conclude that Schiff has established both
the injury and causation elements of his CPA claim.
The facts regarding Liberty Mutual’s conduct are undisputed. The insurer
relied solely on its 80th percentile practice in declining to pay the charged
amounts on two bills submitted by Schiff. Such conduct constitutes an unfair
practice pursuant to the CPA. Folweiler, 5 Wn. App. 2d at 838-39. Moreover,
violates public policy is ultimately a question of law for the courts.” Leingang, 131 Wn.2d at 154.
There is a difference, however, between deference and fealty. Moreover, just as took place here,
the insurance policy at issue in Folweiler was required to be filed with and approved by the OIC.
See RCW 48.18.100(1). We decline to overrule our precedent on this basis.
9 The parties do not dispute that two elements of Schiff’s CPA claim—that the practice
occurred in trade or commerce and has public interest impact—are met here. Our decision in
Folweiler would foreclose any argument that these elements have not been established. See 5
Wn. App. 2d at 838-39.
13
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No. 82554-2-I/14
the undisputed facts demonstrate that Schiff has established the remaining
elements of his CPA claim. Accordingly, absent any applicable defense, we
conclude that Schiff has established CPA liability arising from Liberty Mutual’s
refusal to pay in full the September 2015 and October 2016 bills.
III
Liberty Mutual asserts that, even if the challenged conduct constitutes an
unfair practice, that conduct is exempt from CPA liability pursuant to the statute’s
regulated industries exemption, RCW 19.86.170. According to Liberty Mutual,
because insurers are prohibited from issuing insurance policies prior to obtaining
regulatory approval of those policies, conduct arising therefrom is “permitted”
pursuant to the CPA’s exemption provision. Thus, this argument goes, RCW
19.86.170 exempts any such conduct from CPA liability. This argument,
however, is contrary to our legislature’s clear mandate—within that very statutory
provision—that violations of the insurance regulations are subject to CPA liability.
Liberty Mutual’s assertion is also contrary to Washington decisional authority
interpreting the pertinent statutory provision. Accordingly, we find Liberty
Mutual’s argument unavailing.
A
Consistent with federal antitrust laws, our legislature “has ‘shielded
various activities from the rigors of competition’ by exempting them from the
provisions of the [CPA].” Martha V. Gross, The Scope of the Regulated
Industries Exemption under the Washington Consumer Protection Act, 10 GONZ.
L. REV. 415, 415 (1975) (footnote omitted) (quoting 1955 REPORT OF THE
14
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No. 82554-2-I/15
ATTORNEY GENERAL’S NATIONAL COMMITTEE TO STUDY THE ANTITRUST LAWS 261).
The CPA’s regulated industries exemption, set forth in RCW 19.86.170, provides
in full:
Nothing in this chapter shall apply to actions or transactions
otherwise permitted, prohibited or regulated under laws
administered by the insurance commissioner of this state, the
Washington utilities and transportation commission, the federal
power commission or actions or transactions permitted by any other
regulatory body or officer acting under statutory authority of this
state or the United States: PROVIDED, HOWEVER, That actions
and transactions prohibited or regulated under the laws
administered by the insurance commissioner shall be subject to the
provisions of RCW 19.86.020 and all sections of chapter 216, Laws
of 1961 and chapter 19.86 RCW which provide for the
implementation and enforcement of RCW 19.86.020 except that
nothing required or permitted to be done pursuant to Title 48 RCW
shall be construed to be a violation of RCW 19.86.020: PROVIDED,
FURTHER, That actions or transactions specifically permitted
within the statutory authority granted to any regulatory board or
commission established within Title 18 RCW shall not be construed
to be a violation of chapter 19.86 RCW: PROVIDED, FURTHER,
That this chapter shall apply to actions and transactions in
connection with the disposition of human remains.
RCW 9A.20.010(2) shall not be applicable to the terms of
this chapter and no penalty or remedy shall result from a violation
of this chapter except as expressly provided herein.
RCW 19.86.170 (emphasis added).
The statutory and regulatory context in which the CPA’s exemption
provision operates is instructive in analyzing its scope. In creating our state’s
insurance regulatory scheme, “the Legislature and the Insurance Commissioner
did not intend to provide protection or remedies for individual interests, but rather
only intended to create a regulatory mechanism for the Insurance
Commissioner.” Escalante v. Sentry Ins. Co., 49 Wn. App. 375, 389, 743 P.2d
832 (1987). Indeed, the purpose of the regulations promulgated by the
15
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No. 82554-2-I/16
commissioner is to “define certain minimum standards which, if violated with such
frequency as to indicate a general business practice, will be deemed to constitute
unfair claims settlement practices.” WAC 284-30-300. Violations “may result in
the issuance of fines, orders to cease and desist, or suspension or revocation of
an insurer’s certificate of authority.” Escalante, 49 Wn. App. at 389 (citing RCW
48.30.010, RCW 48.05.140(1), WAC 284-30-400). However, neither the
insurance code nor the regulations demonstrate an intent to provide for a private
cause of action. See RCW 48.30.010, WAC 284-30-400; see also Escalante, 49
Wn. App. at 389-90.
This regulatory scheme confers upon the insurance commissioner less
expansive authority than that granted to the utilities and transportation
commission and the federal power commission. These public utilities agencies
are “charged with administering, in the public interest, pervasive regulatory
schemes which affect almost every phase of activity of their respective regulated
businesses.” Gross, supra, at 423. Their authorizing statutes set forth
comprehensive enforcement and remedial provisions, which include the authority
to “regulate, restrict, and control the budgets of each company, investigate
complaints, award damages to injured consumers and assess penalties against
violators.” Gross, supra, at 424 (footnotes omitted) (citing RCW 80.04.220, .230,
.300-.330, .405). In contrast, “[t]he type of regulation exercised by the insurance
commissioner is less comprehensive,” including that the commissioner lacks the
authority “to assess penalties against violators” or to “require the payment of
damages to an injured customer.” Gross, supra, at 425.
16
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No. 82554-2-I/17
Accordingly, the scope of the immunity provided in the CPA’s regulated
industries exemption is broader for entities subject to the laws administered by
the public utilities agencies than those subject to the laws administered by the
insurance commissioner.10 Whereas the primary exemption provision exempts
from liability “actions or transactions otherwise permitted, prohibited or regulated
under laws administered by” any of these agencies, RCW 19.86.170 also
includes a proviso applicable solely to entities subject to regulation under the
insurance code. This proviso, the first proviso of the statute, states
[t]hat actions and transactions prohibited or regulated under the
laws administered by the insurance commissioner shall be subject
to the provisions of RCW 19.86.020 and all sections of chapter 216,
Laws of 1961 and chapter 19.86 RCW which provide for the
implementation and enforcement of RCW 19.86.020 except that
nothing required or permitted to be done pursuant to Title 48 RCW
shall be construed to be a violation of RCW 19.86.020.
RCW 19.86.170.
Thus, while “[i]nsurers enjoy the same broad exemption as public utilities
for those actions which would otherwise violate [RCW] 19.86.030-.060,” “the
exemption for violations of [RCW] 19.86.020 is limited to those actions required
or permitted to be done pursuant to [the insurance code].”11 Gross, supra, at 425
(emphasis added). In other words, as to those actions regulated by the
10 See Gross, supra, at 423 (explaining that the “exemption categories” in RCW
19.86.170 “reflect the federal scheme of allowing highly regulated industries a broader immunity
from liability under the Act” and that “[t]he degree, nature and purposes of agency control of each
exemption category provide clues as to the parameters of the exemption provided under each
category”).
11 RCW 19.86.020 declares unlawful “[u]nfair methods of competition and unfair or
deceptive acts or practices in the conduct of any trade or commerce.” The CPA additionally
makes unlawful agreements and conspiracies to restrain trade, monopolies and attempted
monopolies, transactions and contracts that lessen competition, and stock acquisitions to lessen
competition. RCW 19.86.030-.060.
17
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No. 82554-2-I/18
insurance commissioner that would otherwise violate RCW 19.86.030-.060, the
insurance commissioner has “exclusive” authority, whereas the commissioner
has “concurrent [authority] with the courts” over actions that would violate RCW
19.86.020.12 Gross, supra, at 425-26. Indeed, in promulgating the applicable
regulations, the insurance commissioner employed language that “precisely
echoes the language of the CPA.” Blaylock v. First Am. Title Ins. Co., 504
F.Supp.2d 1091, 1098 (W.D. Wash. 2007). See RCW 19.86.020 (declaring
unlawful “[u]nfair methods of competition and unfair or deceptive acts or
practices”); WAC 284-30-330 (defining “unfair methods of competition and unfair
or deceptive acts or practices of the insurer in the business of insurance”).
Thus, our legislature, cognizant that the insurance code provides no
remedy for consumers when an insurer violates its provisions, provided for such
a remedy in RCW 19.86.170. See State v. Conte, 159 Wn.2d 797, 808, 154 P.3d
194 (2007) (recognizing that “the legislature is ‘presumed to have full knowledge
of existing statutes affecting the matter upon which they are legislating’” (internal
quotation marks omitted) (quoting Martin v. Triol, 121 Wn.2d 135, 148, 847 P.2d
471 (1993))). Consistent with this legislative intent, Washington courts have
12 The law review article cited discusses the authority of the commissioner and the courts
as jurisdictional. See Gross, supra, at 425 (explaining that the insurance commissioner has
“exclusive jurisdiction” regarding violations of RCW 19.86.030-.060 and “concurrent jurisdiction
with the courts” regarding violations of RCW 19.86.020). Whether a court has subject matter
jurisdiction in a matter “is often confused with a court’s ‘authority to rule in a particular manner,’
leading to ‘improvident and inconsistent use of the term [jurisdiction].’” In re Marriage of
McDermott, 175 Wn. App. 467, 480, 307 P.3d 717 (2013) (internal quotation marks omitted)
(quoting Marley v. Dep’t of Labor & Indus., 125 Wn.2d 533, 539, 886 P.2d 189 (1994)). “Superior
courts are granted broad original subject matter jurisdiction by Wash. Const. art. IV, § 6,”
discretion that “‘cannot be whittled away by statutes.’” McDermott, 175 Wn. App. at 481 (quoting
Shoop v. Kittatas County, 108 Wn. App. 388, 396, 30 P.3d 529 (2001)). Here, the correct
terminology in discussing whether the lawfulness of actions is determined by the commissioner or
the courts is “authority,” not “jurisdiction.”
18
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No. 82554-2-I/19
repeatedly held that violations of the insurance regulations are subject to our
consumer protection law.13 Indeed, quoting the first proviso of RCW 19.86.170,
our Supreme Court has determined that the legislature “expressly provided that
violations of the insurance regulations are subject to the CPA.” Kallevig, 114
Wn.2d at 922. There, the court rejected the argument that, because the
insurance code provision defining unfair or deceptive acts or practices was
enacted prior to the enactment of the CPA, a violation of that statute does not
afford CPA liability. Kallevig, 114 Wn.2d at 925. In so doing, the court reasoned
that adopting such an argument would “eviscerate the plain language of RCW
19.86.170 which makes RCW 48.30.010 subject to the CPA.” Kallevig, 114
Wn.2d at 926; see also Leingang, 131 Wn.2d at 152 (“The general rule is that
violations of insurance regulations are subject to the Consumer Protection Act.”).
However, in addition to providing that violations of the insurance
regulations are generally subject to the CPA, the first proviso also carves out its
own exception—that “nothing required or permitted to be done pursuant to Title
48 RCW” is a violation of RCW 19.86.020. RCW 19.86.170 (emphasis added).
Thus, “actions and transactions prohibited or regulated” under the insurance
code are subject to liability pursuant to RCW 19.86.020, but those “required or
permitted” by the code are exempt from such liability. RCW 19.86.170. It is this
statutory language on which Liberty Mutual relies in asserting that its challenged
13 See, e.g., Perez-Cristanos v. State Farm Fire & Cas. Co., 187 Wn.2d 669, 685, 389
P.3d 476 (2017); Courchaine v. Commonwealth Land Title Ins. Co., 174 Wn. App. 27, 45, 296
P.3d 913 (2012); Van Noy v. State Farm Mut. Auto. Ins. Co., 98 Wn. App. 487, 496, 983 P.2d
1129 (1999); Urban v. Mid-Century Ins., 79 Wn. App. 798, 805-06, 905 P.2d 404 (1995); Kallevig,
114 Wn.2d at 921-23.
19
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No. 82554-2-I/20
conduct is exempt from the general rule of liability for violations of RCW
19.86.020.
B
According to Liberty Mutual, its 80th percentile practice is set forth in the
insurance policy that it submitted to the OIC for regulatory approval pursuant to
RCW 48.18.100. That statute provides that “[n]o insurance policy form . . . may
be issued, delivered, or used unless it has been filed with and approved by the
commissioner.” RCW 48.18.100(1). The OIC’s approval of the policy, Liberty
Mutual contends, constitutes “permission” pursuant to the insurance code to
engage in the challenged practice. We disagree.
Washington decisional authority forecloses Liberty Mutual’s proposed
interpretation of RCW 19.86.170. Moreover, even were the regulatory approval
of an insurance policy sufficient to exempt from liability the insurer’s actions
pursuant to that policy, the specificity of “permission” required for exemption
exceeds that found here. Finally, Liberty Mutual’s interpretation of RCW
19.86.170 would exempt broad swaths of insurer conduct from CPA liability, in
direct contravention of our legislature’s express intention that such conduct be
subject to our state’s consumer protection law. For each of these reasons, we
decline to adopt Liberty Mutual’s reading of the CPA’s exemption provision.
1
As an initial point, we have previously rejected the contention that the first
proviso of RCW 19.86.170 exempts from CPA liability alleged violations arising
from individual insurance contracts. Rounds v. Union Bankers Ins. Co., 22 Wn.
20
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No. 82554-2-I/21
App. 613, 615, 590 P.2d 1286 (1979). In that case, the parents of an insured
child alleged fraud and bad faith of an insurance sales agent for inducing the
parents to subscribe to insurance that did not provide coverage for the child’s
actual condition by intentionally misnaming the condition. Rounds, 22 Wn. App.
at 614. The parents sought, among other remedies, an award of treble damages
pursuant to the CPA. Rounds, 22 Wn. App. at 614. We noted that our Supreme
Court had previously held that the CPA’s protections applied in breach of duty to
use good faith and fair dealing cases with private individuals, as “a private
insurance contract affects the public interest.” Rounds, 22 Wn. App. at 615.
However, prior to our decision in Rounds, no Washington court had considered
an insurer’s contention “that RCW 19.86.170 expressly exempts actions arising
from individual insurance contracts from the Act’s application.” 22 Wn. App. at
615. Applying the principles of statutory construction, we rejected this
contention: “Recognizing the general purposes of the Consumer Protection Act
and the insurance code, and reading and considering them together, we find no
difficulty in concluding that the legislative intent was to provide a remedy for an
insured who suffers due to conduct such as [the insurer’s] alleged actions.”
Rounds, 22 Wn. App. at 616.14
14 In all relevant respects, the version of RCW 48.18.100 in effect when we issued the
Rounds decision is the same as the version of the statute applicable here. See former RCW
48.18.100(1) (1947). Accordingly, as here, the insurance policy at issue in Rounds was required
to have been “filed with and approved by the commissioner” prior to issuance. Former RCW
48.18.100(1) (1947).
21
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No. 82554-2-I/22
2
In addition, our Supreme Court has declined to determine that insurers are
exempt from CPA liability merely because the OIC has approved the insurance
policy language pertinent to the alleged violation. See Durant v. State Farm Mut.
Auto. Ins. Co., 191 Wn.2d 1, 12-13, 419 P.3d 400 (2018). In Durant, the
insureds alleged that State Farm’s use of the maximum medical improvement
(MMI) standard violated insurance regulations and the CPA. 191 Wn.2d at 7.
Throughout its briefing to the court, State Farm “relie[d] on the assertion that its
auto policy containing the MMI provision has been repeatedly approved by the
OIC.” Durant, 191 Wn.2d at 12. The insurer therein urged the court to “defer to
the OIC’s expertise on the issue.” Durant, 191 Wn.2d at 12-13. Of note,
however, the OIC had submitted an amicus brief stating that it had informed the
insurer that the policy provision violated the insurance regulations. Durant, 191
Wn.2d at 13. In deciding the case, as relevant here, the court declined to hold
that the OIC’s approval of an insurance policy shielded the insurer from liability
for actions engaged in pursuant to that policy.
Similarly, a federal district court in Washington has rejected the contention
that an insurer’s submittal of title insurance rates for OIC review exempts the
insurer from liability premised on the rates charged.15 Blaylock, 504 F.Supp.2d
1091. The insureds therein alleged that, in violation of Washington’s insurance
code and regulations, First American paid inducements to lenders, real estate
agents, and others to obtain their referrals. Blaylock, 504 F.Supp.2d at 1094.
15 Federal court decisions applying the CPA are not binding on this court; however, they
provide guiding authority. Panag, 166 Wn.2d at 47.
22
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No. 82554-2-I/23
First American asserted that its conduct was exempt from CPA liability pursuant
to the first proviso of RCW 19.86.170. Blaylock, 504 F.Supp.2d at 1104. It
argued that, because its rates were submitted to the insurance commissioner,
and because it was required to charge only the rates filed, the “act of charging
the filed rates cannot be construed to be a violation of the CPA.” Blaylock, 504
F.Supp.2d at 1104.
In rejecting that contention, the district court held that the insurer had
“misconstrue[d] the conduct being challenged”—it was the unfair and deceptive
expenditures, not the rates charged, that was at issue. Blaylock, 504 F.Supp.2d
at 1104. Thus, the challenged conduct was not “‘required or permitted to be
done’” under the insurance code, but instead was “specifically prohibited.”
Blaylock, 504 F.Supp.2d at 1104 (quoting RCW 19.86.170).
In addition, the court further held that, even if it construed the challenged
conduct as the insurer urged, RCW 19.86.170 would still not exempt that conduct
from liability. Blaylock, 504 F.Supp.2d at 1105. “Washington courts,” the district
court noted, “have long interpreted [RCW] 19.86.170 to shield only conduct
affirmatively authorized by the agency,” not conduct “that is merely acquiesced to
by a regulatory agency.” Blaylock, 504 F.Supp.2d at 1104. Because the
insurance code did not require the OIC to review title insurance rates prior to
approval, this “superficial review” did not indicate that the agency had “given its
‘specific permission,’ or executed any ‘overt affirmative act’ of approval.” 16
Blaylock, 504 F.Supp.2d at 1105.
16 The statute relied on by the insurer therein provides that each title insurer must “file
with the commissioner a schedule showing the premium rates to be charged by it” and that
23
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No. 82554-2-I/24
The same is true here. Although no Washington court has concluded that
an insurer’s conduct was “permitted” under the first proviso of RCW 19.86.170,
the scope of such permission has been defined in the context of the exemption’s
other provisions.17 Our Supreme Court has held that an agency must take “overt
affirmative actions specifically to permit the actions or transactions” engaged in
by the regulated entity. In re Real Est. Brokerage Antitrust Litig., 95 Wn.2d 297,
301, 622 P.2d 1185 (1980). Indeed, the exemption provision “does not exempt
actions or transactions merely because they are regulated generally. [It] applies
only if the particular practice found to be unfair or deceptive is specifically
permitted, prohibited or regulated.” Vogt v. Seattle-First Nat’l Bank, 117 Wn.2d
541, 552, 817 P.2d 1364 (1991). Here, of course, where the challenged practice
is subject to the laws administered by the insurance commissioner, the particular
practice must be not only “regulated,” but specifically “required or permitted to be
done” pursuant to the insurance code, for the exemption to apply. See RCW
19.86.170 (first proviso).
additions or modifications of the schedule “shall likewise be filed with the commissioner, and no
such addition or modification shall be effective until expiration of fifteen days after [the] date of
such filing.” RCW 48.29.140(2). See Blaylock, 504 F.Supp.2d at 1096 (“Although the rates are
submitted, and the Commissioner has 15 days in which review could occur before the rates go
into effect, the Code does not actually mandate review.”).
17 Liberty Mutual asserts that our Supreme Court’s decision in Washington Osteopathic
indicates that “[t]he safe harbor [provision] applies to practices approved by the OIC.” Br. of
Appellant/Cross-Resp’t at 38 (citing Wash. Osteopathic Med. Ass’n v. King County Med. Serv.
Corp., 78 Wn.2d 577, 580, 478 P.2d 228 (1970)). However, that case is inapposite. There, an
osteopathic medical association and its members alleged a conspiracy to exclude osteopathic
physicians and surgeons from participating in a plan for prepaid medical and health care. Wash.
Osteopathic, 78 Wn.2d at 578. The plaintiffs characterized the defendants’ activities “as being in
restraint of trade (RCW 19.86.030), monopolistic (RCW 19.86.040), and in violation of the act’s
prohibition against tying agreements (RCW 19.86.050).” Wash. Osteopathic, 78 Wn.2d at 578.
They did not allege violation of RCW 19.86.020. Accordingly, the activities challenged there were
not subject to the first proviso of the CPA’s exemption provision, which applies only to violations
of RCW 19.86.020. See RCW 19.86.170. Here, Schiff alleges violation of RCW 19.86.020, and,
thus, the first proviso of the exemption provision applies.
24
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No. 82554-2-I/25
Contrary to Liberty Mutual’s assertion, the OIC’s approval of the insurance
policy does not constitute specific permission to engage in the particular practice
challenged by Schiff. The statute on which Liberty Mutual relies provides that
“[n]o insurance policy form . . . may be issued, delivered, or used unless it has
been filed with and approved by the commissioner.” RCW 48.18.100(1). Thus,
the only specific action permitted by the statute is, following approval by the
commissioner, the issuance, delivery, or use of the insurance policy. Our
legislature has made clear its mandate that courts “liberally construe the CPA so
that ‘its beneficial purposes may be served.’” Robinson, 106 Wn. App. at 111
(quoting RCW 19.86.920). Accordingly, we “narrowly construe the scope of the
exemption provisions of the CPA.” Robinson, 106 Wn. App. at 111.18 As our
Supreme Court has recognized, “[o]verly broad construction of ‘permission’ may
conflict with the Legislature’s intent that the Consumer Protection Act be liberally
construed so that its beneficial purposes may be served.” Vogt, 117 Wn.2d at
552. Reading RCW 48.18.100(1) to specifically permit not only the issuance of
an insurance policy, but also any conduct engaged in by the insurer premised
upon that policy’s language, would contravene our legislature’s clear mandate.
Furthermore, the plain language of RCW 48.18.100 undermines Liberty
Mutual’s contention that the regulatory approval of an insurance policy
necessarily demonstrates that the OIC has deemed lawful each provision of that
policy. Instead, as in Blaylock, 504 F. Supp. 2d at 1102-03, 1105, RCW
18 Further evidencing its intent that the exemption provisions of the CPA be narrowly
construed, our legislature has twice amended the exemption provision to narrow the scope of the
immunity provided for therein. See Gross, supra, at 433.
25
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No. 82554-2-I/26
48.10.100 allows for default policy approval. The statute distinguishes between
policy filings that contain “a certification” and those that do not. When the filing
contains “a certification, in a form approved by the commissioner, . . . attesting
that the filing complies with [the insurance code and regulations],” it may be used
by the insurer “immediately after filing with the commissioner.” RCW
48.18.100(2). However, if the filing does not contain a certification, it must be
submitted to the commissioner “not less than thirty days in advance of issuance,
delivery, or use.” RCW 48.18.100(3). Affirmative approval by the OIC is not
required. Rather, “[a]t the expiration of the thirty days, the filed form shall be
deemed approved unless prior thereto it has been affirmatively approved or
disapproved by order of the commissioner.” RCW 48.18.100(3).19 Such “[m]ere
nonaction” does not constitute specific permission as required by the exemption
provision. In re Real Est. Brokerage Antitrust Litig., 95 Wn.2d at 301.20
3
Additionally, even were the OIC’s approval of an insurance policy
sufficient to constitute “permission” pursuant to the exemption provision, the
policy language approved here does not describe the specific challenged
19 The commissioner may also extend the period for an additional fifteen days. In such
circumstances, “[a]t the expiration of the period that has been extended, and in the absence of
prior affirmative approval or disapproval, the form shall be deemed approved.” RCW
48.18.100(3).
20 Liberty Mutual does not indicate whether the relevant policy here has been “certified”
by the OIC pursuant to RCW 48.18.100(2). The insurer has, however, provided a declaration by
an OIC deputy commissioner stating that its 80th percentile practice comports with the applicable
regulations. This does not, in any event, change our analysis, as we hold that any such approval
pursuant to RCW 48.10.100 does not constitute permission for purposes of the exemption
provision.
26
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No. 82554-2-I/27
practice. The pertinent policy language, set forth in the 2006 policy,21 provides
that “reasonable expenses” means “the least of:”
1. The actual charge;
2. The charge negotiated with a provider; or
3. The charge determined by us based on a methodology using a
database designed to reflect amounts charged by providers of medical
services or supplies within the same or similar geographic region.
(Emphasis added.)
Schiff’s contention is that Liberty Mutual’s 80th percentile practice violates
the insurance regulations because the insurer relies solely on the FAIR Health
database to determine the reasonableness of a medical provider’s bills. While
the policy language submitted for OIC approval indicates that Liberty Mutual may
determine “reasonable expenses” based on such a methodology, it does not
indicate that the insurer will determine reasonableness solely on this basis. Even
were the OIC’s regulatory approval sufficient to shield an insurer from CPA
liability, this policy language would not meet the specificity required for the
challenged practice to be “permitted” pursuant to the CPA’s exemption provision.
See, e.g., Vogt, 117 Wn.2d at 552 (holding that the “particular practice” must be
found to be “specifically permitted”); Dick v. Att’y Gen., 83 Wn.2d 684, 688, 521
P.2d 702 (1974) (holding that the “particular practice,” not just the business
generally, must be found to be regulated for the exemption to apply); Singleton v.
Naegeli Reporting Corp., 142 Wn. App. 598, 611, 175 P.3d 594 (2008) (holding
21 Liberty Mutual asserts that the language of the 2016 policy, which more specifically
identifies its 80th percentile practice, is relevant to whether the OIC’s regulatory approval
constitutes permission to engage in that practice. However, Schiff’s patients were treated, and
Liberty Mutual was billed, pursuant to the terms of the 2006 policy. In any event, for the reasons
set forth above, regulatory approval of language describing even the precise practice would not
exempt Liberty Mutual from liability for engaging in an unlawful practice.
27
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No. 82554-2-I/28
that, because the pertinent regulation did not address “paragraphing and tabbing”
in deposition transcripts, the changes made to the transcripts were not
specifically permitted).
Furthermore, were the submission of an insurance policy to the OIC
pursuant to RCW 48.18.100 sufficient to exempt insurers from CPA liability for
actions arising under that policy, consumer protections against unfair and
deceptive acts and practices in the insurance industry would be eviscerated.
Absent few exceptions, all insurance policies issued in our state must be “filed
with and approved by the commissioner,” RCW 48.18.100(1), even if such
policies are ultimately “deemed approved” by default. RCW 48.18.100(3).
Adopting Liberty Mutual’s preferred reading of RCW 19.86.170 would thus
contravene our legislature’s mandate that the exemption provisions of the CPA
be narrowly construed. See Robinson, 106 Wn. App. at 111. Similarly, such an
interpretation would undermine the authority of Washington courts to determine
the lawfulness of insurance industry practices, contrary to the legislature’s intent
in enacting the CPA’s regulated industries exemption. See Gross, supra, at 425
(noting that, pursuant to the language of RCW 19.86.170, the commissioner and
the courts have “concurrent” authority over actions that would violate RCW
19.86.020). Finally, adopting Liberty Mutual’s reading of the exemption provision
would induce instability into a stable area of the law. For each of these reasons,
we reject Liberty Mutual’s assertion that its conduct is exempt from CPA liability
pursuant to RCW 19.86.170.
28
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No. 82554-2-I/29
In summary, Liberty Mutual’s contention that it is shielded from CPA
liability due to the OIC’s approval of the pertinent insurance policy is unavailing.
In enacting the first proviso of RCW 19.86.170, our legislature, cognizant of the
limitations of the insurance regulatory scheme, clearly intended to subject
insurers to CPA liability for violations of RCW 19.86.020. Consistent with the
legislative mandate that CPA exemptions be narrowly construed, Washington
courts have repeatedly held that insurers are subject to liability for such
violations. Indeed, this court has rejected the contention “that RCW 19.86.170
expressly exempts actions arising from individual insurance contracts” from CPA
liability. Rounds, 22 Wn. App. at 615. As a matter of law, Liberty Mutual’s
challenged conduct is subject to the CPA.
IV
Liberty Mutual next contends that Schiff’s claim is barred because, due to
the OIC’s regulatory approval of the relevant insurance policy, Liberty Mutual had
a “good faith” belief that it was acting in compliance with the law. Schiff,
however, does not allege that Liberty Mutual acted in bad faith in denying
insurance coverage. Moreover, no decisional authority supports Liberty Mutual’s
contention that a purported “good faith” defense could be premised on the
regulatory approval of an insurance policy. Because nearly all insurance policies
must be so approved, such a defense would contravene our legislature’s clear
intent that insurers be subject to CPA liability for violation of the insurance
regulations. Accordingly, we reject Liberty Mutual’s assertion.
29
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No. 82554-2-I/30
1
It is well-established that an insurer’s reasonable conduct in denying
insurance coverage does not constitute an unfair act or practice. See, e.g.,
Kallevig, 114 Wn.2d at 916-17 (in evaluating whether conduct constituted a bad
faith denial of coverage, holding that “an insurer’s denial of coverage, without
reasonable justification, constitutes bad faith”); Villella v. Pub. Emps. Mut. Ins.
Co., 106 Wn.2d 806, 821, 725 P.2d 957 (1986) (where an insurer’s investigation
was reasonable, holding that “[a] denial of coverage, although incorrect, based
on reasonable conduct of the insurer does not constitute an unfair trade
practice”); Castle & Cooke, Inc. v. Great Am. Ins. Co., 42 Wn. App. 508, 518, 711
P.2d 1108 (1986) (holding that the insured was required to show that the insurer
acted in bad faith in denying coverage and that “[a] denial of coverage based on
a reasonable interpretation of the policy is not bad faith”); Felice v. St. Paul Fire &
Marine Ins. Co., 42 Wn. App. 352, 361, 711 P.2d 1066 (1985) (where the insured
asserted a bad faith denial of coverage, holding that “[d]enial of coverage due to
a debatable question of coverage . . . is not bad faith giving rise to a [CPA]
violation”). Indeed, “a reasonable basis for denial of an insured’s claim
constitutes a complete defense to any claim that the insurer acted in bad faith or
in violation of the [CPA].” Dombrosky v. Farmers Ins. Co. of Wash., 84 Wn. App.
245, 260, 928 P.2d 1127 (1996).
Our Supreme Court has also held that “[a]cts performed in good faith
under an arguable interpretation of existing law do not constitute unfair conduct
violative of the [CPA].” Leingang, 131 Wn.2d at 155. There, the insured
30
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No. 82554-2-I/31
asserted that the insurer failed to make a good faith investigation into the legal
validity of an uninsured motorist exclusion. Leingang, 131 Wn.2d at 154-55. The
court determined that the insurer “was relying on a reasonable interpretation of
existing law” in asserting that the exclusion was valid, as “at least four trial courts’
and two Court of Appeals’ decisions” in our state had held that the exclusion was
“clear and enforceable and not against public policy.” Leingang, 131 Wn.2d at
155 (emphasis added). Thus, the court determined that there was no evidence
to support a finding of an unfair or deceptive act. Leingang, 131 Wn.2d at 156.
We have since repeatedly relied on the court’s holding in Leingang, in
each instance when determining whether an insurer’s denial of coverage was
reasonable. Shields v. Enter. Leasing Co., 139 Wn. App. 664, 667, 161 P.3d
1068 (2007) (holding that an insurance company did not have a duty to provide
third party liability coverage to renters who expressly rejected the option to
purchase that coverage); Seattle Pump Co. v. Traders & Gen. Ins. Co., 93 Wn.
App. 743, 753, 970 P.2d 361 (1999) (holding that “[a]n insurer’s denial of
coverage on the ground that the policy was cancelled prior to the loss is not
unreasonable” and did not violate the CPA); Capelouto v. Valley Forge Ins. Co.,
98 Wn. App. 7, 22, 990 P.2d 414 (1999) (where the insured asserted bad faith
and CPA claims, concluding that there was no indication that the insurer acted in
bad faith or without reasonable justification in denying the claims).
2
Liberty Mutual asserts herein that, because the OIC approved the relevant
insurance policy pursuant to RCW 48.18.100, it was acting “in good faith under
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an arguable interpretation of existing law.” Thus, according to Liberty Mutual, it is
immune from CPA liability even if its conduct constitutes an unfair practice. We
disagree.
First, Washington courts consider an insurer’s “good faith” in the context of
an insured’s claim that the insurer acted in bad faith or otherwise acted
unreasonably when denying insurance coverage. See, e.g., Leingang, 131
Wn.2d at 154-55; Kallevig, 114 Wn.2d at 916-17; Villella, 106 Wn.2d at 821;
Shields, 139 Wn. App. at 667; Seattle Pump Co., 93 Wn. App. at 753; Capelouto,
98 Wn. App. at 22; Castle & Cooke, Inc., 42 Wn. App. at 518; Felice, 42 Wn.
App. at 361. Here, Schiff asserts neither that Liberty Mutual acted in bad faith
nor that it denied insurance coverage. Rather, Schiff asserts that Liberty
Mutual’s payment of less than the full amount billed, pursuant to its 80th
percentile practice, is an unfair practice pursuant to the CPA. “Value disputes
are not coverage denials.” Lock v. Am. Fam. Ins. Co., 12 Wn. App. 2d 905, 926,
460 P.3d 683 (2020). We are not persuaded that we should extend the
application of the so-called “good faith” defense beyond the context of allegations
of bad faith denial of coverage.
Moreover, decisional authority does not support Liberty Mutual’s
contention that the regulatory approval of an insurance policy is sufficient to
establish immunity from a CPA claim. In Leingang, the insurer’s “good faith” was
pertinent to the claim that it had failed to make a good faith investigation into the
legal validity of an insurance policy exclusion. 131 Wn.2d at 154-55. Moreover,
therein, “at least four trial courts’ and two Court of Appeals’ decisions” had held
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No. 82554-2-I/33
that the exclusion was valid and did not violate public policy. Leingang, 131
Wn.2d at 155. Unlike multiple trial court and appellate court decisions, the
regulatory approval of an insurance policy—approval that is required for the
issuance of nearly every such policy—does not establish “existing law” on which
Liberty Mutual could, in “good faith,” rely.22
Liberty Mutual’s contention that it should be shielded from liability due to
its “good faith” belief that it was complying with “existing law” is clearly contrary to
our state’s decisional authority. However, additionally, we are cognizant of the
practical consequences of holding that the regulatory approval of insurance
policies insulates insurers from CPA liability. Again, because nearly every
insurance policy issued in our state must receive such regulatory approval, see
RCW 48.18.100(1), adopting Liberty Mutual’s argument would preclude nearly all
CPA actions arising from an insurer’s conduct under its policies. Such shielding
of insurers from CPA liability would directly contravene our legislature’s clear
mandate that violations of the insurance regulations are subject to the CPA.
RCW 19.86.170. See also Leingang, 131 Wn. 2d at 152; Kallevig, 114 Wn.2d at
922. Moreover, holding that the OIC’s approval of insurance policies insulates
insurers from CPA liability would undermine the authority of Washington courts to
22 Liberty Mutual’s reliance on our Supreme Court’s decision in Perry is similarly
unavailing. See Perry v. Island Sav. & Loan Ass’n, 101 Wn.2d 795, 810, 684 P.2d 1281 (1984).
There, a homeowner contended that a bank attempted to enforce a due-on-sale clause with full
knowledge that the clause was unenforceable. Perry, 101 Wn.2d at 810. Our Supreme Court,
however, concluded that “resolution of [that] issue involved some complexity” and involved
questions “of first impression” in the court. Perry, 101 Wn.2d at 810. The court thus determined
that the bank’s attempt to enforce the clause “was done in good faith under an arguable
interpretation of existing law.” Perry, 101 Wn.2d at 810. It concluded that “[s]uch conduct in a
single case attempting to determine the legal rights and responsibilities of both parties should not
be considered ‘unfair’ in the context of the consumer protection law.” Perry, 101 Wn.2d at 810
(emphasis added). Perry is inapposite here.
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No. 82554-2-I/34
determine the lawfulness of insurers’ conduct. In enacting RCW 19.86.170, our
legislature clearly intended that Washington courts possess and exercise such
authority.
Accordingly, we hold that there is no “good faith” defense against CPA
liability for an insurer based on the regulatory approval of the insurance policy
pursuant to which it acted. Such a holding would contravene Washington
decisional authority and our legislature’s clear intent that insurers are subject to
CPA liability under RCW 19.86.020 for violations of the insurance code and
regulations. Thus, the trial court erred by denying Schiff’s motion for summary
judgment regarding Liberty Mutual’s purported “good faith” defense.
V
Schiff has established that Liberty Mutual’s 80th percentile practice
constitutes an unfair practice pursuant to the CPA. Schiff has additionally
established the other four elements of his CPA claim. Liberty Mutual is incorrect
that it is shielded from liability for its unlawful conduct based on the CPA’s
exemption provision or a purported “good faith” affirmative defense. Accordingly,
we reverse the trial court’s denial of Schiff’s motion for summary judgment, and
we affirm the trial court’s denial of Liberty Mutual’s motion for summary
judgment.23
23 Schiff additionally requests that we grant injunctive relief precluding Liberty Mutual from
continuing to engage in the challenged practice. However, the trial court has ruled, on at least
two occasions, that Schiff’s claim for injunctive relief is barred by the Froeber settlement. Schiff
did not seek discretionary review of those rulings; nor does he provide argument regarding why
we should now review the trial court’s January 2020 and June 2020 orders.
“Upon accepting discretionary review, an appellate court may specify the issue or issues
as to which review is granted.” RAP 2.3(e). In other words, we may determine the scope of
discretionary review. City of Bothell v. Barnhart, 156 Wn. App. 531, 538 n.2, 234 P.3d 264
(2010), aff’d 172 Wn.2d 223, 257 P.3d 648 (2011). Here, a commissioner of our court ruled that,
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No. 82554-2-I/35
Affirmed in part, reversed in part, and remanded.
WE CONCUR:
to the extent the parties disagreed on the appropriate scope of review, they could present
argument on that matter in their merits briefing. Although Schiff presents argument regarding
why, in his view, we should grant injunctive relief, he nowhere presents argument regarding why
we should grant review of the trial court’s January 2020 and June 2020 orders.
The parties sought discretionary review only of the trial court’s April 2021 orders. In so
doing, they sought to “materially advance the ultimate termination of the litigation.” RAP
2.3(b)(4). We need not address the trial court’s injunctive relief rulings in order to decide the
issues on which discretionary review was granted; nor need we do so in order to materially
advance the ultimate termination of this litigation. Accordingly, in exercising our discretion to
determine the scope of discretionary review, we decline to review the trial court’s rulings
regarding Schiff’s injunctive relief claims.
35