Lenk v. Life Insurance Company of North America, EDWA Docket No. 2:10-cv-05018-LRS, Order on Motion for Partial Summary Judgment (December 13, 2010).
The Eastern District of Washington trial court ruled that Washington’s Insurance Fair Conduct Act (“IFCA”) was not retroactive, and would not apply if the initial denial occurred prior to the enactment of IFCA. Citing to Rinehart v. Life Insurance Company of North America, 2009 WL 529524, *1 (W.D. Wash. 2009), the court found that “even where an insurer affirmatively denies an insured’s appeal after IFCA’s effective date, the statute still does not apply so long as the initial denial occurred prior to the effective date of the statute.” The Court then went on to conclude that the undisputed facts indicated that plaintiff’s claim for disability benefits was initially denied by letter dated January 18, 2006, before IFCA was enacted . Thereafter, plaintiff’s final appeal was denied by letter dated December 11, 2006. The court concluded that “[c]onsequently, the “precipitating event,” along with all subsequent denials, occurred prior to the December 6, 2007 effective date of IFCA.” And thus the court dismissed the Plaintiff’s IFCA claim.
The Court also addressed when a cause of action for bad faith accrues and when the statute of limitations runs on such a claim. The Court agreed with the insurer and found that a cause of action for a bad faith denial “accrues as of the date of the denial. ” The court rejected the insured’s argument that bad faith was a continuing tort and that accrual should be the date of “final” denial. The court stressed, “Plaintiff’s cause of action against his insurer accrued at the time his claim for coverage was [initially] denied.” Since more than three years had elapsed between the denial and the filing of suit, the court found that the bad faith claim was barred because the statute of limitations had run.