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Class Action Against Auto Insurers for Witholding Money Due Clients

By William S. Bailey

In the 18 months since the Washington Supreme Court held in Mahler v. State Farm Mutual Automobile Ins. Co. , 135 Wn.2d 398, 957 P.2d 632 (1998) (“ Mahler ”), that State Farm violated both the express terms of its policy and the equitable requirements of Washington law when it did not pay its share of legal expenses associated with recovering PIP payments from third parties at fault, all major insurance carriers in Washington have changed their PIP auto claims practices. Initially, the post- Mahler situation was something of an insurance industry version of musical chairs, with a scramble among the various companies for fallback positions. For a time, a number of carriers refused to pay attorney fees to their insured's counsel on PIP recovery from third parties, stating some variation of the “Our policy language is different” gambit. As time has gone by, thanks to a number of subsequent decisions from the Washington Courts of Appeal (to be discussed infra ), a solid wall of case law now exists that insurance companies have to give credit for attorney's fees and costs when the insured's attorney recovers subrogation money from the third party at fault.

As one of the attorneys representing the Mahlers, the author looked to extend the reach of Mahler case back in time after the decision was handed down. In that the Supreme Court stated that Washington law always mandated a credit for PIP amounts recovered due to the efforts of an insured's attorney in a third party case, there was no reason why this principle should not be extended to all similarly situated people over the preceding six years (due to the six year contract statute of limitations).

There was compelling justification for this retroactive application of Mahler . Insurance companies should not be allowed to profit from past wrongdoing, effectively depriving thousands of injured Washington residents out of millions of dollars of compensation. After consulting with experienced class action counsel, who determined that all the requirements of CR 23 were met for Washington insureds who received PIP benefits, retained an attorney, got a recovery from the third party and repaid the PIP benefits, a series of individual class action lawsuits for each company were filed in the King County Superior Court. The current defendants are:

• Allstate;

• Dairyland Group;

• Farmers;

• Geico;

• Hartford ;