Washington federal judges have held that standalone WAC violations—regulatory violations without an unreasonable denial of coverage or payment of benefits—do not trigger liability under IFCA. Departing from this majority, Judge Mendoza of the U.S. District Court for Eastern District of Washington recently held that IFCA applies to WAC violations, even if the insurer has not unreasonably denied coverage or payment of benefits. See Langley v. Geico, –F.Supp.3d–, 2015 WL 778619 (E.D.Wash. Feb. 24, 2015). The opinion relies on a novel argument that IFCA contains an implied cause of action for violating one of the enumerated WAC provisions.
By my count, 14 judges have held that a cause of action under IFCA requires an insurer to have unreasonably denied coverage or payment of benefits. We believe this majority position is consistent with the statutory language. In Langley, Judge Mendoza recognizes this majority but rejects it outright as not having considered the existence of an implied cause of action for standalone WAC violations.
The implied cause of action doctrine is generally limited to instances in which a statute protects a class of individuals but does not give those individuals an express cause of action to enforce the legislatively created protections. Judge Mendoza notes in Langley, an implied cause of action requires the court to determine “whether the plaintiff is within the class for whose ‘especial’ benefit the statute was enacted; whether legislative intent, explicitly or implicitly, supports creating or denying a remedy; and whether implying a remedy is consistent with the underlying purpose of the legislation.”
Judge Mendoza concludes that a first party claimant whose insurer violated an enumerated WAC provision is within IFCA’s class of protected individuals. Judge Mendoza cites both the statutory language and the Explanatory Statement from the IFCA Referendum as the legislative intent supporting an implied cause of action. Finally, Judge Mendoza concludes that the implied cause of action for standalone WAC violations is consistent with IFCA’s purpose. In support of this third factor, Judge Mendoza cites Trinity Universal Ins. Co. of Kansas v. Ohio Cas. Ins. Co., 176 Wn.App. 185, 201, 312 P.3d 976 (2013) (“The purpose of IFCA is to protect individual policy holders from unfair practices by their insurers.”).
We disagree with Judge Mendoza’s opinion for several reasons. First, we believe the majority of federal judges who addressed the issue are correct and should not be so easily disregarded. Second, because IFCA already creates an express cause of action, we do not believe it can also create an implied cause of action. Third, insureds already have a remedy under the CPA for standalone WAC violations. Permitting IFCA claims based on standalone WAC violations vacates the CPA limits on treble damages that would otherwise apply. There is no legislative history supporting an intent to vacate those limits.
We will be watching Washington courts to see how they treat Judge Medoza’s ruling. We hope Judge Mendoza’s opinion in Langley remains an outlier, but only time will tell.
