Washington Supreme Court Rules on Wrongful Denial of PIP Benefits

December 10, 2019

Wrongful Denial of Personal Injury Protection (PIP) Benefits Actionable Under Washington's Consumer Protection Act

In the recent case of Peoples v. United Services Automobile Association, -- Wn.2d --, -- P.3d -- (2019), the Supreme Court of Washington clarified that the wrongful denial of personal injury protection (“PIP”) benefits by an insurance company constitutes an actionable injury to “business or property” under Washington’s Consumer Protection Act (“CPA”), Chapter 19.86 RCW.  By way of background, PIP insurance is designed to provide an insured with an immediate source of payment for out-of-pocket medical expenses resulting from a car accident, regardless of fault.  In Peoples, the insureds alleged that their insurance companies refused to pay PIP medical bills based upon a computerized review process that did not conduct an individual investigation and terminated PIP benefits whenever an insured reached a “Maximum Medical Improvement.” 

The CPA is a powerful legal tool that may be used by an insured who is wrongfully denied coverage by his or her insurer (i.e., insurance company).  To recover damages in a CPA action, a plaintiff must prove (1) an unfair or deceptive act or practice (2) occurring in trade or commerce (3) which affects the public interest (4) and causes injury to the plaintiff’s business or property.  In the insurance arena, it is well established that an insured may bring a CPA action against his or her insurance company for breach of the duty of good faith or for violations of Washington insurance regulations.  However, historically Washington courts have denied the recovery of personal injury damages in CPA actions—and personal injury damages are exactly what PIP insurance is designed to cover. 

The Peoples Court clarified that the wrongful denial of PIP benefits constitutes an injury to “business or property” under the CPA.  According to the Peoples Court, “the plaintiffs do not seek to hold their insurance companies liable for their underlying personal injuries.  Instead, they seek to hold their insurance companies liable for benefits owed under contract.”  2019 WL 6336407, at *3.  The Court also reasoned that an insured “has a legally protected property interest in benefits due under the contract and a related right to insurance dealings free from bad faith.”  Id. at *4.  In other words, an insured pays money for the premiums associated with an insurance contract and the wrongful denial of bargained for benefits is detrimental to the insured’s financial position.  Additionally, the Peoples Court provided that recoverable damages for the wrongful denial of PIP benefits includes not only out-of-pocket medical expenses, but also lost time attempting to obtain coverage. 

Although the holding of Peoples is consistent with the purpose of the CPA, it will have a wide impact on insurance coverage litigation in Washington.  From a practical perspective, the CPA allows for the recovery of triple damages and statutory attorneys’ fees by an insured against an insurance company.  Prior to Peoples, triple damages (up to a $25,000 increase over actual damages) and attorneys’ fees would not be clearly recoverable by an insured in a lawsuit against an insurance company relating to the wrongful denial of PIP benefits.  The possibility of triple damages and having the insurance company pay attorneys’ fees not only increases the value of a case, but is leverage when attempting to obtain coverage, or damages from an insurance company after coverage has been wrongfully denied.  

This article does not constitute legal advice and does not create an attorney-client relationship.  In the event you believe you may have a claim against your insurance company for the wrongful denial of benefits, please contact Andrew M. Wagley or any of the other attorneys at Etter, McMahon, Lamberson, Van Wert & Oreskovich, P.C. who specialize in commercial litigation.