Professional Negligence Law Reporter

A federal district court held that Washington law does not recognize the defense of comparative bad faith by an insured.

Wendy Curtis was injured in a motor vehicle collision allegedly caused by another driver. State Farm Mutual Automobile Insurance Co., which provided underinsured motorist (UIM) coverage to Curtis, offered her $5,000 to settle her claim for medical expenses and lost income. Curtis’s attorney rejected this offer and later demanded policy limits of $250,000. State Farm subsequently offered $67,000 and $80,000 before Curtis submitted an Insurance Fair Conduct Act notice with the state’s insurance commissioner. The following month, Curtis sued State Farm, alleging breach of contract, bad faith, and consumer protection violations. The defense, which removed the case to federal court, asserted three affirmative defenses to the bad faith claim, arguing, in part, that the plaintiff’s lawyer had refused to negotiate in good faith and that her damages resulted from her own negligence.

The plaintiff moved for a summary judgment determination that the affirmative defenses were not valid under Washington law.

Granting the motion, the district court considered whether a jury may apportion fault to an insured for engaging in “comparative bad faith” regarding the insured’s bad faith claim against an insurer, noting that no Washington court has addressed the issue. The court noted that when entering into an insurance contract, both the insurer and the insured have a common law duty of good faith and fair dealing. Moreover, the court said, the insurer’s duty of good faith derives from both the insurance contract and the quasi-fiduciary relationship it has with its insured. Citing case law, the court added that this relationship implies a broad obligation of fair dealing and a responsibility to give equal consideration to an insured’s interests.

The court concluded that adopting a comparative bad faith defense would wrongfully require a trier of fact to compare an insured’s contractual breach of the insurance policy with an insurer’s tortious breach of its quasi-fiduciary duty. Additionally, under the state’s comparative fault law, a trier of fact is not authorized to assign fault to a party that has breached a mere contractual obligation, the court said. Finding that at least two state high courts have rejected the comparative bad faith defense, the court concluded that adopting such a defense in Washington would require fact finders to compare “apples and oranges.” Consequently, the court held that the defense was precluded from asserting its so-called comparative bad faith affirmative defenses against the plaintiff.

Citation: Curtis v. State Farm Mut. Auto. Ins. Co., 2023 WL 4201667 (W.D. Wash. June 27, 2023).

Plaintiff counsel: AAJ members Fred Rabb and Gemma N. Zanowski, both of Seattle.