In the seventh episode of Ted Lasso, Season 4,1 Coach Chilton sets out to become a better coach (and person) by learning to more frequently say “yes.” Not to anything in particular. To everything. She has taken this advice from an online self-help guru, and she commits to it with the enthusiasm of someone who thinks they have found a magic bullet.
She hasn’t. When her new technique doesn’t work on the pitch, Coaches Lasso and Beard explain why, borrowing a rule from improv. The rule isn’t “yes,” they tell her. It’s “yes, and.” Saying “yes” is an easy first step, but standing alone it seldom solves the problem. The harder part comes after the comma, when commitments are made.
This June, Washington’s Court of Appeals reached much the same conclusion in deciding whether an insurance company had resolved the basis for a policyholder’s claim under the Insurance Fair Conduct Act, or “IFCA.”
Basics of the Insurance Fair Conduct Act
First, a primer. IFCA lets a policyholder who has been “unreasonably denied” coverage or policy benefits sue its insurer. On the table, if the policyholder wins, are attorney fees and up to three times the policyholder’s actual damages, unbounded by policy limits. Before filing, the policyholder must send the insurer and Washington’s Insurance Commissioner a written notice spelling out the insurer’s IFCA violations. The insurer then has 20 days to “resolve the basis for the action,” and if the insurer does so, no IFCA action can be brought.
Some insurers argued that this allowed them to avoid IFCA liability simply by reversing an unreasonable denial and accepting coverage without more. In short, they thought they’d found a magic bullet.
They hadn’t.
IFCA in the Courts
The first hint of trouble (for the insurers) came in Leahy v. State Farm Mutual Automobile Insurance Co. In that 2018 decision, the Court of Appeals allowed an IFCA claim to proceed after the insurer paid its policy limits, but only after a jury verdict required it to do so.
Meanwhile, federal trial courts in Washington had split on whether an insurer could cure an unreasonable denial simply by saying “yes” to coverage. Best representing one camp is Young v. Safeco Insurance Co. There the insurer accepted coverage inside the 20-day window without addressing the harm its denial had already caused. The court ruled that this “yes” had cured the “initial” coverage denial, while the insurer’s subsequent payment of “the claimant’s full demand” fatally undercut the policyholder’s claim that the insurer had denied payment. Representative of the other camp is Cohodas v. Continental Insurance Co., where the insurer paid its policy limits in full. The court refused to treat that payment as a categorical bar to the insured’s IFCA claim.
Which brings us to Labeaume v. First National Insurance Company of America. Jane Labeaume was injured by an at-fault driver whose liability limits couldn’t cover her damages, so she turned to her own underinsured motorist coverage—the insurance that picks up where the other driver’s leaves off. Her insurer refused to pay her anything. She sued, and only after an arbitrator determined what Labeaume was owed did First National pay the award.
Labeaume then served an IFCA notice and amended her complaint to add an IFCA claim. First National moved for summary judgment on what looked like an unanswerable argument: it had paid every dollar the arbitrator awarded, and it had paid before the notice even arrived. What was left to cure?
Quite a bit, as it turns out.
Washington Court of Appeals' Labeaume Holding
The Washington Court of Appeals held that paying the full amount of benefits does not automatically cure an IFCA violation, agreeing with Cohodas and Leahy that such claims can survive full payment in at least some circumstances. Then it said, in one sentence, what a cure actually takes: “Having received an IFCA notice after payment of insurance benefits, an insurer can cure the violation by paying the amount of extracontractual damages caused by its initial unreasonable denial.”
Read that again with the improv rule in mind. Accepting coverage or paying the benefits is the “yes.” Necessary, but not sufficient. The “and” is everything the denial cost the policyholder along the way: interest and collection charges on bills she couldn’t pay while she waited, emotional distress, and the fees and costs of the litigation the denial forced her to incur.
The court’s reasoning was practical. If writing a check for policy benefits always cured the violation, then “an insurer could always block an insured from recovering any damages under IFCA by paying the full amount of benefits claimed or due within the cure period.” The cure provision would no longer present a good faith opportunity to fix a mistake. It would instead become a get-out-of-jail-free card that allowed an insurer to violate IFCA with impunity and without consequence..
The court also turned away the insurer’s fallback argument, which was that a policyholder must serve its IFCA notice soon after the initial denial, reasoning that this would compel insureds to itemize their damages before they were in a practical position to do so and, possibly, before they had suffered any damages at all.
Impact of Labeaume on an Insurers’ Ability to Evade IFCA Liability
So what does “yes, and” require in the IFCA context? For an insurer, it means saying what its “yes” covers, what it doesn’t, and what the company will do to remedy all harm from its earlier misconduct. A bare coverage acceptance does none of these and hence, as Labeaume teaches, is insufficient.
Policyholders, meanwhile, will continue to be best served not by vague demands to accept coverage, but by well-crafted IFCA notices that specifically identify both the wrongful conduct and the concrete steps that an insurer must take to resolve the problem.
Put another way, well before the insurer has the chance to say “yes,” an IFCA notice should already supply, in clear and unmistakable terms, the “and . . .”
1 SPOILER ALERT! At this point, my esteemed editor, who had not viewed Episode 7 before reviewing a draft of this post, has urged me to alert readers that what follows might constitute a spoiler. This footnote is my “yes and” to her request.
This article is provided for informational purposes only—it does not constitute legal advice and does not create an attorney-client relationship between the firm and the reader. Readers should consult legal counsel before taking action relating to the subject matter of this article.
