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Bad-faith litigation has long been a contentious — and big-dollar — issue for insurers.

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Bad-faith liability increases. A lower-court ruling exposes individual adjusters and investigators to the risk of being sued for violating Washington state’s bad-faith law. (Photo: Shutterstock)

Never known as an insurer-friendly venue, the state of Washington could potentially rewrite the law books to impose individual bad-faith liability on insurer adjusters. The decision could have a dampening impact on fraud investigations around the U.S.

The case is Keodalah v. Allstate Insurance Company. The chilling lower-court ruling exposes individual adjusters, investigators — and potentially any other insurer employee handling a claim — to the risk of being sued personally for violating the state’s bad-faith law. The fraud-fighting community should be concerned about the decision’s possible expansion to other jurisdictions.

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