In Nikfard v. State Farm Fire & Cas. Co., No. C19-6001RSL 2021 WL 3620277 (W.D. Wash. August 16, 2021), a fire damaged a rental house owned by the plaintiff policyholder. After he made a claim for the damage, his "first-party property insurance" carrier accepted coverage and recommended that the policyholder contact a certain insurance restoration specialist, which he did.
The insurance restoration specialist was a general contractor. The g.c. prepared a preliminary estimate of what it would take to restore the house, using a computerized program called Xactimate. The program is familiar to insurance companies and to coverage practitioners.
In this case, the evaluation was only intended to be preliminary. It was never intended to be the basis for the g.c. (or, apparently, anyone else) to perform the restoration work. The preliminary evaluation was $149,900.86. Nikfard, 2021 WL 3620277, at *1. The carrier seized upon this figure and this computer report and never let go. Even though the evidence showed that the repairs would realistically take at least $100,000.00 more than that before restoration was finished on this particular house.
In fact, the restoration project ultimately cost $334,470.00. Before the project ended, the carrier paid $174,071.94.
The policyholder sued, alleging several claims. First and foremost, he sued for breach of contract and was awarded the difference between what the carrier paid and what the restoration ultimately and actually cost, which was a difference of $160,398.06. Nikfard, 2021 WL 3620277, at *4.
He also alleged a pair of claims which were unsuccessful, for one reason or another, for the "tort of bad faith in insurance claim handling" and for alleged violation of IFCA the Washington State Insurance Fair Conduct Act. Nikfard, 2021 WL 3620277, at *5.
The policyholder's final claim, brought under the Consumer Protection Act in Washington, was successful in providing the basis for an award of his attorney's fees. He proved his CPA claim in part by proof of a violation of an Unfair Claim Settlement Practices Regulation which has the force of law in Washington, and generally if not identically follows the Uniform Unfair Claim Settlement Practices Acts promulgated by the National Association of Insurance Commissioners and in force across the country. See 2 Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith §§ 9:14 (Express statutory causes of action) and 9:15 (Implied statutory causes of action) (3d Edition Thomson Reuters West, with 2021 Supplements). (The effects of the UCSP Acts in third-party or liability insurance cases are discussed in Volume 1 of id., § 3:28.)
The policyholder's attorney's fees in this case were awarded in the amount of $261,964.00 and his costs were awarded in the amount of $7,339.26.
The homeowner's carrier's continued reliance on a preliminary computerized restoration evaluation of just under $150,000.00 in this case, ultimately cost it $429,702.32.
The moral of the story? Well, one moral to draw is that basing a final position on a preliminary investigation is never a wise thing to do, even if the preliminary evaluation was done on a computer. What's important is that it was preliminary, that it was not the final word, regardless of the involvement of computer software.
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