To create the “Insurance Fair Conduct Act.” The bill would prohibit insurance companies from unreasonably or negligently denying a claim for coverage or payment of benefits to an insured. A plaintiff successfully proving a violation through a legal challenge may be awarded up to three times the original claim amount plus legal expenses. See companion HB 1491.   Official Text and Analysis.

To allow only insureds and first party claimants to bring a cause of action against an insurer for unreasonable or negligent denial of coverage. It is clarified that a violation of the Washington Administrative Code is not sufficient on its own to justify an award of treble damages; rather, the violation must also be negligent or unreasonable.

To remove provisions relating to unreasonable delays in payment of insurance benefits. Also, only a claimant who is a covered person under the relevant insurance policy may seek redress under this act.

To deletes the provision authorizing treble damages.

To make the award of attorneys' fees discretionary instead of mandatory. Neither treble damages nor attorneys' fees are available for violations of the applicable WACs that are not unreasonable denials of coverage. A court may award only "reasonable" actual litigation costs to prevailing plaintiffs.

To narrow the reference to the insurance rules that can serve as a basis for treble damages or attorneys' fees. The engrossed substitute bill referred to any rule adopted under the authority of RCW 48.30.010. The amended bill refers to five existing rules and any additional rules adopted as unfair claims settlement practice rules by the Commissioner that are intended to implement the act and codified in chapter 284-30 of the Washington Administrative Code. The five specific rules address the following areas: specific unfair claims settlement practices; misrepresentation of policy provisions; failure to acknowledge pertinent communications; standards for prompt investigation; and standards for prompt, fair and equitable settlements applicable to all insurers. The provision that states that the remedies in the bill are separate from any remedies prescribed in RCW 19.86.090 of the CPA is removed. The existing ability of a court to make any other determination regarding an unfair practice by an insurer or provide for any other remedy that is available at law is specifically not limited by the bill. This section does not limit a court's existing ability to make any other determination regarding an action for an unfair or deceptive practice of an insurer or provide for any other remedy that is available at law..

To require that a first party claimant must give written notice to the insurer and the Office of the Insurance Commissioner twenty days before filing suit. Notice is deemed to be received three business days after it is mailed. The statute of limitation is tolled for the twenty day period.

To require that the remedies available in the bill do not apply to a health plan offered by a health carrier.

To clarify that the provisions of the bill are replaced with a study by the insurance commissioner. The insurance commissioner must consult with stakeholders. The study must include a comparison of causes of action and remedies available concerning claims practices in Washington and other states. The study must review any correlation between increased liability for insurers and impacts on premiums. The insurance commissioner may make policy recommendations in the study. The study is due by December 1, 2007.

To clarify that the provision that allows a court to award up to treble the amount of actual damages is removed.

To clarify that in order to obtain treble damages, a first party claimant must show by clear and convincing evidence that an unreasonable denial of coverage or payment occurs with a frequency that it is a general business practice of the insurer and that the act was willful, wanton, and malicious or in reckless disregard of the first party claimant's rights. The court may award reasonable attorneys' fees and reasonable litigation costs to the prevailing first party claimant. The act does not create a class action suit against an insurer or their employees. The remedies provided for in this section shall be the exclusive remedies available to any party seeking recovery under this section. No other remedy, at common law or pursuant to statute, shall be awarded against an insurer with respect to a claim which is subject to this act. The damages recoverable include those damages which are a reasonably foreseeable result of a specified violation by the insurer.

To require that a court is not required to award attorneys' fees and litigation costs. A court may only award "reasonable" actual litigation costs.