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Vol. 8 - Issue 2
February 6, 2019


Washington’s Keodalah Decision Hits Close To Home:
Attempts Made To Hold Insurer’s Outside Counsel Liable For Bad Faith 

Much has been written about the Washington Court of Appeals’s 2018 decision in Keodalah v. Allstate Insurance Co., which held that an insurance adjuster, employed by an insurer (and not simply the insurer itself), can be liable for bad faith as well as violation of the state’s Consumer Protection Act.

Keodalah is now before the Washington Supreme Court.  So its ultimate impact is to be determined.   

In late January, Washington Defense Trial Lawyers filed an amicus brief in the case with the Washington high court.  WDTL argues that Keodalah should be reversed – but not simply because the decision is incorrect.

Instead WDTL argues that Keodalah opens Pandora’s box.  Specifically, if insurance adjusters can be sued for bad faith, then outside counsel for insurers could be next.  The strength in WDTL’s argument is that it is not being Chicken Little.  To the contrary, WDTL points out in its brief that there have already been at least two cases where outside insurer counsel has been sued for bad faith -- alleging that they were engaged in the business of insurance.  [Both filed by the same law firm.]

In Scudder v. GEICO, filed on November 7, 2018 in the Superior Court of Washington, King County, the Scudders alleged that GEICO (and the insurer’s counsel) committed bad faith in the handling of a claim under an auto policy.  WDTL states that insurer counsel was retained to represent GEICO and perform an examination under oath.  In Sharp v. State Farm, filed on November 13, 2018 in the Superior Court of Washington, King County (and removed to federal court), Sharp likewise alleged that State Farm committed bad faith in its handling of a claim under an auto policy.  WDTL states that insurer counsel was retained to represent State Farm with respect to coverage issues.  The complaints do not allege what outside counsel may have done that alleged bad faith.

In addition to arguing that, as a matter of law, an insurer’s outside counsel should not be liable for bad faith or a violation of the CPA, WDTL also sets forth a litany of adverse consequences that could flow from permitting outside insurer counsel to be sued for such things.
It’s a slippery slope as WDTL points out.  In other words, if you give a mouse a cookie… 
[If you are interested in this issue further please send me a note and I’ll send you the WDTL brief.]


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