Bad Faith, Consumer Protection Claims Dismissed Where Insured Committed Fraud against Insurer

 

In Ki Sin Kim v. Allstate Ins. Co., Inc., 2009 WL 4043373 (Wash.App. Div. 2), Ki Sin Kim was injured when a vehicle driven by an uninsured motorist crossed the center line and collided with her vehicle. Kim filed claims requesting coverage for her medical bills and wage loss under the PIP and UIM provisions of her Allstate insurance policy. Allstate investigated and denied coverage because Kim had misrepresented the nature and extent of her injuries and her ability to work. Kim sued Allstate for nonpayment, arguing that it acted in bad faith and in violation of the Consumer Protection Act (CPA) when it refused to pay her emergency room bills and when it “merged” her UIM and PIP files.

 

Allstate moved for summary judgment arguing that under the “void for fraud” provision of the policy Kim's material misrepresentations voided the policy. Kim filed a cross-motion for summary judgment on the issues of bad faith and violation of the CPA. Finding that there were material issues of disputed fact, the trial court denied Allstate's summary judgment motion but it granted Kim's summary judgment motion on her bad faith and CPA claims.

The court granted Allstate's motion for discretionary review.

 

The Court of Appeals of Washington reversed and directed entry of summary judgment in Allstate's favor as to Kim's bad faith and CPA claims. The court accepted Allstate's argument that, if Kim intentionally misrepresented a material fact to Allstate, her claims for bad faith and violation of the CPA must fail. In addition, the court agreed that the evidence established that Kim misrepresented the nature and extent of her injuries and her ability to work.

The court affirmed, however, the trial court's denial of Allstate's summary judgment motion as to the lack of coverage for Kim's emergency room bills, finding that a question of fact existed as to whether the misrepresentations were material in light of “equivocal” language in Allstate's policy. The void for fraud provision did not state that the entire policy was void in the event of fraud, but instead that Allstate “may not provide coverage for any insured who has made fraudulent statements or engaged in fraudulent conduct in connection with any accident or loss for which coverage is sought under this policy.” According to the court, this left open to interpretation the extent of Allstate's obligation with respect to Kim's emergency room visit because there was no evidence that Kim made misrepresentations during that visit and because the use of the word “may” made it unclear the circumstances under which Allstate would deny coverage.

 

Editor's Note: Although an insurer is required give the insured's interests equal consideration to its own with regard to its liability coverage, the insurer may require an insured to submit to an IME as a condition of requiring coverage under either a PIP or UIM policy.