New Washington Appellate Decision Expands IFCA Risk in UIM Claims

A significant new decision from the Washington Court of Appeals, issued on June 16, 2026, is expected to have broad implications for insurers operating in the state.

The ruling addresses key issues surrounding UIM claims handling and exposure under the Insurance Fair Conduct Act (IFCA), particularly in relation to whether payment of policy benefits is sufficient to limit or eliminate statutory liability. Given its potential impact on both claims handling practices and litigation strategy, this is an important development for insurers to closely consider.

Takeaway: Essentially, the prompt payment of UIM (or policy) benefits does not foreclose IFCA exposure in Washington. Unless “cured”—a subjective term and measure—the carrier remains exposed to IFCA damages, which are up to treble of actual damages (including emotional distress) and mandatory attorney fees. And now, according to Washington’s Division 2 appellate panel, the “cure” may require insurers to address extracontractual harms caused by the initial denial, not just payment of underlying benefits.

What Do We Do?: As always, the strongest “defense” is a well-documented and thorough investigation at the front end of the claim, with the carrier’s reasoning clearly stated and supported.

Facts: In Labeaume v. First National Insurance Company of America, a Division 2 appellate published decision, the appellate court is the first to address whether payment of policy benefits cures an IFCA claim. The court answered, “No.” In Labeaume, the insured submitted a UIM claim after settling with the at-fault driver for USD 85,929 (limits were USD 100 thousand). The UIM insurer valued damages at USD 77 thousand based on the medical records, denied UIM benefits, and conducted no independent investigation. A subsequent UIM arbitration valued total damages at USD 205,590 and awarded USD 94,822.80 in UIM benefits, which the insurer promptly paid. The insured then filed an IFCA notice and pursued extracontractual claims against the insurer.

The Court of Appeals affirmed denial of summary judgment, holding, in relevant part, (1) payment of benefits does not cure IFCA liability—an unreasonably low valuation or refusal to pay without adequate investigation is an “effective denial,” and that to cure under the IFCA claim presented, the insurer must address extracontractual damages caused by its conduct; and (2) good faith valuation disputes remain protected.

What’s Next?: We are monitoring for a potential petition to the Washington Supreme Court, which the Court of Appeals suggested would be warranted. Please let us know if you would like to discuss the implications of this decision, or if you think a training/presentation/refresher on Washington claims handling and coverage would be helpful.

The full decision can be found here.

This publication is provided for informational purposes only. It is not intended to constitute, and shall not be construed as, the rendering of legal advice or professional services of any kind, nor does it create an attorney-client relationship between Clyde & Co US LLP and the recipient. The information contained in this publication may not reflect the most current legal developments and is not guaranteed to be complete, correct, or up to date.  Furthermore, nothing herein constitutes the endorsement of any particular case, principle, or proposition. You should not act on any information found here without first consulting a licensed attorney in your jurisdiction who can evaluate your specific circumstances. Clyde & Co US LLP expressly disclaims all liability for actions taken or not taken based on the content of this document.