In a decision issued last week, the Washington Supreme Court narrowed the possible relief available to policyholders who are harmed by insurer misconduct, holding that a claim cannot be brought under the Insurance Fair Conduct Act based on claims handling, unless there has been an actual denial of coverage.

In 2007, Washington enacted the Insurance Fair Conduct Act (the “IFCA”) which gives insureds a statutory “bad faith” cause of action against insurers who unreasonably deny coverage. On its face, the IFCA broadly addresses unfair insurer practices. Since enactment, however, Washington courts have been split as to the scope of the law. Policyholders and insurers have hotly contested whether unfair claims-handling practices and regulatory violations are actionable under the IFCA, or whether the law requires an unreasonable denial of coverage. In its recent decision, Perez-Crisantos v. State Farm Fire & Casualty Co., the Washington Supreme Court answered the question in favor of insurers, holding that the IFCA creates a private cause of action only when an unreasonable denial of coverage has occurred.