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Home / Washington Business - September/October 2007 / Legal Matters: Referendum 67 unnecessary and expensive |
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Legal Matters: Referendum 67 unnecessary and expensive |
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Written On: September/October 2007 |
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Written By: by Jason W. Anderson |
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Jason W. Anderson is an insurance litigator at Carney Badley Spellman PS in Seattle.
With a referendum measure to expand legal remedies against insurance companies awaiting a public vote in November, the Washington State Supreme Court’s July decision concerning a joke-playing dentist couldn’t be more timely, or more divisive.
The justices themselves were almost evenly divided.
In a 5-4 decision, the court ruled in favor of Dr. Robert Woo, an Auburn, Wash., oral surgeon who, as a practical joke, temporarily put fake boar tusks in his dental assistant’s mouth while she was under general anesthesia for a dental procedure. He took photographs that were later shown at an office party, much to the embarrassment of the dental assistant.
Concluding that a premeditated and humiliating practical joke was not a part of the practice of dentistry, the dentist’s insurer denied a defense and coverage. The dentist eventually settled with the woman for $250,000, and then sued his insurance company.
The Supreme Court ruled that the dentist’s insurer had a duty to defend him because he played the joke during a medical procedure. The court upheld a judgment that included reimbursement of the $250,000 Woo paid to settle his former assistant’s claim plus an additional $750,000 for his emotional distress. He also was awarded attorney’s fees plus interest on the judgment.
In dissent, Justice James M. Johnson wrote that the majority opinion "rewards the perpetrator for his unprofessional behavior—giving Woo more payment from the insurer for unsubstantiated damages than the real victim received for her documented trauma. Because insurance spreads risks and costs—subject to investment return—Washington’s dentist professionals and their patients will ultimately pay the bill."
The decision would have garnered less attention if not for Referendum 67, a measure voters will consider on Nov. 6. Under R-67, the dentist’s damages award could have been tripled. For those who want to see R-67 rejected, this case is a poster child.
R-67 would establish the lowest standard in the nation for recovery of punitive damages against an insurer. The measure makes it unlawful for an insurance company to "unreasonably" deny coverage and allows a court to award up to triple damages, plus mandatory attorney fees. In other states that allow recovery of punitive damages, a plaintiff must prove culpable conduct such as a willful, knowing, or malicious act by the insurer.
R-67 excludes most health care insurance and the government.
Claims against insurers would undoubtedly be more common if R-67 were the law. This would increase the stakes on every claim and potentially lead insurers to overpay doubtful claims. Increased fraud may also result. All of this adds up to increased costs for insurers, which are passed on to consumers in the form of higher premiums.
The reasons for R-67 should be less than clear to the average voter. There is no apparent crisis that the law answers. In fact, existing laws allow consumers to file suits for bad faith and breach of contract, plus seek recovery under the Consumer Protection Act, which usually permits recovery of attorney’s fees and triple damages up to $10,000.
In addition, the state’s insurance commissioner oversees and disciplines insurance companies, imposing fines and penalties for infractions both large and small. The commissioner reported to the Legislature that 88 percent of consumers who contacted his office with an insurance company complaint were pleased with his efforts.
The commissioner’s statistics also show that problems with insurance companies are relatively rare. For example, although upward of 200,000 claims are made each year under automobile policies, only 0.1 percent result in complaints filed with the Office of the Insurance Commissioner.
The joke-playing dentist case was decided under existing law and demonstrates that Washington consumers already have adequate remedies against insurance companies. Considering the remedies provided under existing law, the lack of a widespread problem, and the potential economic consequences, voters should query why they need R-67.
Jason W. Anderson maintains a blog on insurance law at www.washingtoninsurancelaw.com.
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