Mother, Don’t Let Your Child Become an Adjuster in Washington State

Statute Makes Individual Adjuster Liable for Tort of Bad Faith

The state of Washington, in an attempt to protect consumers, has acted in a way to drive insurers and their employed adjusters out of the state. This case makes it financially dangerous to be an insurance adjuster in Washington state.  I have railed against the tort of bad faith on this blog for several years and the case that follows proves why it should be done away with even if the insured was treated badly.

In Moun Keodalah and Aung Keodalah, husband and wife v. Allstate Insurance Company, a corporation, and Tracey Smith and John Doe Smith, wife and husband, No. 75731-8-I, Court Of Appeals Of The State Of Washington Division One (March 26, 2018) the Court of Appeals found that an adjuster could be personally liable for tort damages incurred by an insured as a result of what the state found to be bad faith conduct.

Moun Keodalah, unhappy with Allstate’s treatment of his uninsured motorist claim, sued Allstate and  Tracey Smith, the Allstate insurance adjustor who handled his claim. Washington state statute RCW 48.01.030 imposes a duty of good faith on all persons engaged in the business of insurance, including individual adjusters.


Keodalah and a motorcyclist collided in April 2007. After Keodalah stopped at a stop sign and began to cross the street in his truck, a motorcyclist struck him. The collision killed the motorcyclist and injured Keodalah. Keodalah had purchased auto insurance from Allstate Insurance Company. Keodalah’s insurance policy provided underinsured motorist (UIM) coverage. The motorcyclist was uninsured.

The Seattle Police Department (SPD) determined the motorcyclist was traveling between 70 and 74 m.p.h. in a 30 m.p.h. zone. SPD reviewed Keodalah’s cell phone records. They showed that Keodalah was not using his cell phone at the time of the collision.

Allstate also investigated the collision. Allstate interviewed several witnesses who said the motorcyclist was traveling faster than the speed limit, had proceeded between cars in both lanes, and had “cheated” at the intersection. Allstate hired an accident reconstruction firm, Traffic Collision Analysis Inc. (TCA), to analyze the collision. TCA found that Keodalah stopped at the stop sign, the motorcyclist was traveling at a minimum of 60 m.p.h., and the motorcyclist’s “‘excessive speed'” caused the collision.

Keodalah asked Allstate to pay him the limit of his UIM policy, $25,000. But Allstate refused. Keodalah sued Allstate, asserting a UIM claim. Allstate designated Smith as its representative. Although Allstate possessed both the SPD report and TCA analysis, Smith claimed that Keodalah had run the stop sign and had been on his cell phone. Smith later admitted, however, that Keodalah had not run the stop sign and had not been on his cell phone. Before trial, Allstate offered Keodalah $15,000 to settle the claim. Keodalah refused and again requested the $25,000 policy limit. The case proceeded to a jury trial.

At trial, Allstate contended that Keodalah was 70 percent at fault. The jury determined the motorcyclist to be 100 percent at fault and awarded Keodalah $108,868.20 for his injuries, lost wages, and medical expenses.

Keodalah filed a second lawsuit against Allstate and included claims against Smith. These included IFCA violations, insurance bad faith, and CPA violations. Allstate and Smith moved to dismiss the complaint and the trial court granted the motion in part. It dismissed Keodalah’s claims against Smith and certified the case for discretionary review.


Bad Faith

Washington statute RCW 48.01.030 imposes a duty of good faith on “all persons” involved in insurance, including the insurer and its representatives.

The business of insurance is one affected by the public interest, requiring that all persons be actuated by good faith, abstain from deception, and practice honesty and equity in all insurance matters. Upon the insurer, the insured, their providers, and their representatives rests the duty of preserving inviolate the integrity of insurance.

A person who violates this duty may be liable for the tort of bad faith. Smith was engaged in the business of insurance and was acting as an Allstate representative. Thus, under the plain language of the statute, she had the duty to act in good faith. And she can be sued for breaching this duty.

The code’s broad definition of “person” includes both individuals and corporations and does not make any distinction between the duties they owe. Nothing in the statute limits the duty of good faith to corporate insurance adjusters or relieves individual insurance adjusters from this duty. The duty of good faith applies equally to individuals and corporations acting as insurance adjusters.

Washington courts have expressly stated that the statute does impose a duty of good faith on both the insureds and the insurer. Just as corporate insurance adjusters are representatives, so too are individual employee insurance adjusters.

RCW 48.01.030 imposes a duty of good faith on corporate and individual insurance adjusters alike.


The CPA prohibits “[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce.”  The CPA serves to deter unfair or deceptive acts or practices, protect the public, and foster fair and honest competition.

To prevail on a CPA claim, a plaintiff must show (1) an unfair or deceptive act or practice, (2) that act or practice occurs in trade or commerce, (3) a public interest impact, (4) injury to the plaintiff in his or her business or property, and (5) a causal link between the unfair or deceptive act and the injury.

The CPA itself, the purposes for which it was enacted, and precedent do not support the argument that a CPA claim must be predicated on an underlying consumer or business transaction. The CPA allows “[a]ny person who is injured in his or her business or property by a violation” of the act to bring a CPA claim. Nothing in this language requires that the plaintiff must be a consumer or in a business relationship with the actor.

Keodalah need not show the existence of a contractual relationship with Smith to establish a CPA claim against her.

The Court of Appeal concluded that an individual employee insurance adjuster can be liable for bad faith and a violation of the CPA.


Insurance adjusters who are not parties to the contract of insurance cannot breach the covenant of good faith and fair dealing because they are not a party to the contract, except in the State of  Washington. No reasonable person would agree to be an adjuster unless the insurer agrees, in writing, to defend and indemnify the adjuster for any claim or judgment of bad faith made against the adjuster. This opinion will devastate the insurance industry’s ability to retain well trained and experienced adjusters in Washington state.

© 2018 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at and

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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