In Keodalah v. Allstate Ins. Co., the Washington Court of Appeals reviewed an action against an insurer and an adjuster employed by the insurer for statutory insurance bad faith and violation of the state’s Consumer Protection Act, concerning the allegedly improper settlement of an underinsured motorist claim. The trial court dismissed the statutory bad faith and consumer protection act claims against the adjuster, on the grounds that such claims could not be pursued against employees of the insurer.

The Court of Appeals began its analysis by noting that the Washington insurance bad faith statute imposes a duty of good faith on “all persons” involved in the business of insurance. For purposes of the statute, “persons” is defined to include “individuals.” Furthermore, the bad faith statute specifically states that the duty of good faith applies to insurers and their representatives. As the defendant insurance adjuster was involved in the business of insurance and was a representative of the insurer, the Court held that a statutory bad faith claim could be pursued against the adjuster. In so doing, the Court rejected the adjuster’s contention that she cannot be held liable in tort for conduct within the scope of her employment. The Court recognized that such a general rule exists, but observed that it does not apply when an employee breaches a duty owed to an injured party. As the adjuster owed a duty of good faith to the plaintiff under Washington law, the Court concluded that the adjuster could be held liable for bad faith.

With regard to the plaintiff’s cause of action under the Consumer Protection Act, the Court noted that pursuant to a Washington Supreme Court decision, the CPA does not require that a plaintiff have a contractual or business relationship with the defendant. The Court therefore held that the absence of a contractual relationship between the plaintiff and the insurance adjuster was not fatal to the CPA claim against the adjuster.

For these reasons, the Court of Appeals reversed the trial court’s dismissal of the insurance bad faith and Consumer Protection Act claims against the adjuster.

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