Appeals court weighs whether insurer's post‑award payment bars IFCA and extra‑contractual claims

An appellate panel on the morning docket heard extended argument over whether the Insurance Fair Conduct Act (IFCA) can be pursued after an insurer pays policy limits following arbitration or settlement.

The dispute centers on whether a post‑award payment extinguishes an IFCA claim and related extra‑contractual claims — such as bad faith and consumer protection claims — or whether an insurer’s conduct that forces litigation can still give rise to damages even after payment. The case is listed as 603802, Levrone v. First National Insurance Company of America.

Counsel arguing for First National told the court that IFCA authorizes damages only when an insurer has “unreasonably denied a claim for coverage or payment of benefits,” and emphasized that the statute and its 20‑day notice‑and‑cure provision distinguish denial from delay. The attorney argued that because the insurer paid the arbitration award before the IFCA notice and cause of action were filed, “there was no denial” under the statute and the IFCA claim should not proceed.

The bench pressed that counsel on several points, asking whether an insurer’s lowball offer or conduct that forces a claimant into litigation could amount to an “effective” or “temporary” denial under some federal authorities. The judge observed that some federal cases treat delay or inadequate payments as effectively denying coverage in practice, and asked whether IFCA should reach conduct that imposes litigation costs on an insured.

Rafael Eriquia, counsel for respondent Jane LeBombe, argued that permitting an insurer to defeat IFCA claims simply by paying policy limits after prolonged litigation would “make no sense.” He told the court that payment after an adverse award should not automatically cure alleged wrongful conduct and that such issues — including whether an insurer’s handling of a claim was reasonable — are often factual questions for a jury. Eriquia pointed to Washington decisions (including Leahy v. State Farm and Anderson v. State Farm) and a recent federal decision (Cohortas v. Continental Insurance Co.) in support of the proposition that payment of policy limits does not necessarily foreclose extra‑contractual claims.

Counsel for both sides acknowledged factual variations that could distinguish cases: for example, whether the claimant provided the statutory 20‑day notice and whether a payment was made as a genuine settlement or as a curative act within the statutory cure period. The bench also asked whether collateral estoppel or res judicata could bar extra‑contractual claims if an earlier arbitration or settlement conclusively fixed the insured’s recoverable contract damages.

Petitioner’s counsel replied in a brief rebuttal that allowing a temporary‑denial theory would circumvent the statute’s language and undo the notice‑and‑cure mechanism the legislature enacted.

The court did not rule from the bench. The presiding judge thanked counsel, said the remainder of the court’s cases would be considered without further oral argument, and adjourned.

What happens next: The panel will issue a written opinion after internal deliberations. The arguments focused on statutory construction of IFCA, the proper role of the 20‑day notice‑and‑cure provision, and whether questions about reasonableness and extra‑contractual damages are factual matters for a jury rather than appropriate to decide on summary judgment.