After many years of favoring arbitration (informal, out-of-court trial) as a method of resolving coverage disputes, some insurance companies are now requiring their customers to file a lawsuit to resolve the dispute. Why would they do that, you ask? They must have realized that…
they were paying too much in arbitration awards. And since a very small percentage of people actually want to file lawsuits and go to court (the vast majority settle), they could force some of their clients to walk away. Following is my recent response to this tactic (minus the P.S.):
Dear Ms. Smith:
I regret to inform you that my client is unable to accept your offer of $0 to settle his claim for his underinsured motorist benefits. My client was surprised when I told him that his insurance policy requires him to file a lawsuit against his own insurance company to pursue his damages rather than negotiate a settlement in good faith. I informed him that because you are his insurer, you have a duty of good faith to resolve his claim and a “sue us” clause may be contrary to your duty. See Tank v. State Farm Fire and Casualty Co., 715 P. 2d 1133. Although I couldn’t reconcile your duty of good faith with the fact that you are requiring him to sue you, I did advise my client that he should be willing to participate in binding, pre-litigation arbitration, and he agreed. Please let me know if you are willing to arbitrate this matter.
I have also advised my client that because his claim is contractual, he has six years from the denial of coverage to pursue benefits. See RCW 4.16.040. I have further advised him that I believe that a judge or a jury would find that you have acted in bad faith in your offer of settlement and your failure to remedy this violation would subject your company to payment of attorney’s fees and costs, including expert witness fees and an award of up to three times the actual damages. See RCW 48.30.015.
Attorney at Law
[P.S. At trial, I am going to submit this letter to the jury and ask them to compare and contrast with the “we’re such a good insurance company” commercials they see on Prime Time.]
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