First-Party Property Damage Demand Letter - Washington

FIRST-PARTY PROPERTY DAMAGE DEMAND LETTER

State of Washington

[LAW FIRM LETTERHEAD]

PRIVILEGED AND CONFIDENTIAL
SETTLEMENT COMMUNICATION - FOR RESOLUTION PURPOSES ONLY
PROTECTED UNDER ER 408 AND FED. R. EVID. 408

VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
AND VIA EMAIL TO: [________________________________]

Date: [__/__/____]

[________________________________] (Insurer)
[________________________________]
[________________________________], WA [____]

Attention: [________________________________], Property Claims Adjuster
Re: FORMAL DEMAND FOR PROPERTY INSURANCE BENEFITS - WASHINGTON LAW
Insured: [________________________________]
Insured Property: [________________________________], [________________________________], WA [____]
Policy Number: [________________________________]
Claim Number: [________________________________]
Date of Loss: [__/__/____]
Cause of Loss: [________________________________]
Applicable Coverage Limits: $[____]
Response Deadline: [__/__/____] at 5:00 p.m. Pacific Time

Dear [________________________________]:

I. INTRODUCTION AND NATURE OF DEMAND

This firm represents [________________________________] ("our client" or "your insured"), the named insured under the above-referenced property insurance policy issued by [________________________________] ("the Company"). This letter constitutes a formal demand for full payment of all first-party benefits owed under the policy for the covered loss sustained on [__/__/____] at the insured real property located in [________________________________] County, Washington.

Washington law imposes on the Company an affirmative, heightened duty of good faith toward its insured. RCW 48.01.030 ("The business of insurance is one affected by the public interest, requiring that all persons be actuated by good faith..."). That duty is not a slogan. It is enforceable under common law bad faith, the Insurance Fair Conduct Act, the Consumer Protection Act, and the detailed regulatory regime in Chapter 284-30 WAC. The Company's handling of this claim to date is inconsistent with those obligations, and this letter serves both as a settlement demand and as formal notice of the Company's potential exposure.

II. GOVERNING WASHINGTON LAW

A. Policy Construction — Against the Insurer

Washington follows long-standing rules of construction favorable to the insured:

• Ambiguities in an insurance policy are construed against the insurer that drafted it. Weyerhaeuser Co. v. Commercial Union Ins. Co., 142 Wn.2d 654, 666, 15 P.3d 115 (2000).
• Coverage provisions are interpreted broadly; exclusions are interpreted narrowly and strictly against the insurer. Quadrant Corp. v. Am. States Ins. Co., 154 Wn.2d 165, 172 (2005).
• The insured's reasonable expectations control. McDonald v. State Farm Fire & Cas. Co., 119 Wn.2d 724, 837 P.2d 1000 (1992).
• The insurer bears the burden of proving that an exclusion applies. Diamaco, Inc. v. Aetna Cas. & Sur. Co., 97 Wn. App. 335 (1999).

B. Claim-Handling Deadlines — Chapter 284-30 WAC

Washington's Unfair Claims Settlement Practices Regulation imposes specific, enforceable deadlines:

Every violation of a WAC 284-30 regulation is a per se violation of RCW 48.30.010 and a per se unfair or deceptive act under the CPA. Kallevig, 114 Wn.2d at 923.

C. Statute of Limitations

The contractual limitations period for a first-party property claim may be shortened by policy language to as little as one year after inception of the loss under RCW 48.18.200, provided the clause is conspicuous and reasonable. Otherwise, the general six-year statute of limitations for written contracts applies. RCW 4.16.040. The insured should confirm which period applies before taking any action that could toll or accelerate deadlines.

D. First-Party Bad Faith Is an Independent Tort

Washington recognizes a robust first-party bad faith cause of action. The duty of good faith exists independently of the insurance contract and is actionable in tort. Safeco Ins. Co. of Am. v. Butler, 118 Wn.2d 383, 823 P.2d 499 (1992); Tank v. State Farm Fire & Cas. Co., 105 Wn.2d 381, 715 P.2d 1133 (1986). When an insured proves bad faith, harm is presumed and the burden shifts to the insurer to rebut the presumption. Butler, 118 Wn.2d at 390.

Critically, Washington allows first-party bad-faith claims to proceed even when coverage is ultimately denied or contested. Coventry Associates v. American States Ins. Co., 136 Wn.2d 269, 961 P.2d 933 (1998). The insured may recover damages flowing from the bad-faith investigation itself, including expert fees incurred to prove the claim.

III. POLICY INFORMATION AND COVERAGE

A. Policy Details

B. Applicable Coverages and Limits

C. Coverage Analysis

The loss is covered because:

☐ The cause of loss is a covered peril under the insuring agreement
☐ The damage occurred during the policy period
☐ The property is covered property
☐ The insured gave timely notice
☐ Proof of loss has been tendered (or is enclosed)
☐ No exclusion applies; any exclusion cited by the Company is inapplicable, narrowly construed, or subject to the efficient proximate cause doctrine

Efficient Proximate Cause. Washington applies the efficient proximate cause rule. Where a covered peril sets in motion a causal chain resulting in loss, coverage exists even if excluded perils contribute to the loss. Graham v. Pub. Employees Mut. Ins. Co., 98 Wn.2d 533, 656 P.2d 1077 (1983); McDonald v. State Farm, 119 Wn.2d 724 (1992); Vision One, LLC v. Phila. Indem. Ins. Co., 174 Wn.2d 501 (2012).

IV. THE LOSS EVENT

A. Description of Loss

On [__/__/____], the insured property sustained significant damage caused by [________________________________]:

[________________________________ DETAILED NARRATIVE ________________________________]

B. Cause and Origin

☐ Fire / smoke
☐ Windstorm (common WA perils: Puget Sound windstorms, atmospheric river events)
☐ Rain, snow, or ice weight
☐ Weight of snow / ice dam (WA coastal and mountain exposure)
☐ Tree-fall (wind-driven)
☐ Sudden and accidental discharge of water from plumbing / appliance
☐ Water backup of sewer or drain (if endorsed)
☐ Fallen tree / lightning / hail
☐ Vandalism / malicious mischief / theft
☐ Volcanic action / earthquake (if endorsed)
☐ Wildfire / smoke damage
☐ Other: [________________________________]

C. Mitigation Efforts

Our client complied with all policy conditions and the Washington common-law duty to mitigate:

All mitigation costs are recoverable under the policy's Duties After Loss and Additional Coverages provisions.

V. CLAIM HISTORY AND THE COMPANY'S CONDUCT

A. Claim Timeline

B. The Company's Position

[________________________________] has taken the position that [________________________________].

This position is legally and factually untenable because:

1. [________________________________]
2. [________________________________]
3. [________________________________]

C. Company Violations of WAC 284-30-330 — Specific Unfair Claims Settlement Practices

The Company's handling of this claim independently violates WAC 284-30-330:

☐ WAC 284-30-330(1) — Misrepresenting pertinent facts or policy provisions
☐ WAC 284-30-330(2) — Failing to acknowledge and act reasonably promptly upon communications
☐ WAC 284-30-330(3) — Failing to adopt and implement reasonable standards for prompt investigation
☐ WAC 284-30-330(4) — Refusing to pay claims without conducting a reasonable investigation
☐ WAC 284-30-330(5) — Failing to affirm or deny coverage within a reasonable time after proof of loss
☐ WAC 284-30-330(6) — Not attempting in good faith to effectuate prompt, fair, and equitable settlement when liability is reasonably clear
☐ WAC 284-30-330(7) — Compelling the insured to litigate by offering substantially less than the amount ultimately recovered
☐ WAC 284-30-330(13) — Failing to promptly provide a reasonable explanation of the basis in the policy for denial or compromise offer
☐ WAC 284-30-330(14) — Failing to honor payment drafts within 3 working days
☐ WAC 284-30-330(17) — Failing to make a good faith effort to settle before invoking appraisal

Each violation is a per se unfair or deceptive act under the CPA (Kallevig) and an independent basis for IFCA treble damages and attorneys' fees under RCW 48.30.015(5).

VI. DAMAGES AND AMOUNTS CLAIMED

A. Dwelling / Structural Damage (Coverage A)

Based on the enclosed contractor estimate from [________________________________] and engineering report from [________________________________], replacement cost value is:

B. Other Structures (Coverage B)

$[____]

C. Personal Property / Contents (Coverage C)

D. Additional Living Expense / Loss of Use (Coverage D)

Our client was displaced from [__/__/____] through [__/__/____] ([____] days):

E. Ordinance or Law (if applicable)

Code upgrades required by [________________________________] County / City building codes: $[____]

F. Debris Removal

$[____] (within [____]% cap of Coverage A).

G. Claim Summary

VII. GENERAL CONTRACTOR OVERHEAD AND PROFIT

Our client is entitled to 10% overhead and 10% profit ("O&P") because the repairs reasonably require the services of a general contractor to coordinate multiple trades. Washington's Office of the Insurance Commissioner has repeatedly taken the position that insurers may not categorically withhold O&P from replacement cost estimates where a GC is reasonably necessary. Arbitrary withholding of O&P violates WAC 284-30-330(6) and (7) and is itself an indicator of bad faith. Holden v. Farmers Ins. Co. of Wash., 169 Wn.2d 750, 239 P.3d 344 (2010) (insurers may not unilaterally exclude categories of loss from replacement cost calculations).

VIII. APPRAISAL (IF APPLICABLE)

A. Invocation

Due to the Company's failure to make a good-faith valuation of the loss, we hereby invoke the appraisal provision of the policy with respect to disputes over "amount of loss" only. Coverage disputes are not subject to appraisal and are reserved for litigation.

B. Appraiser Designation

Our client appoints [________________________________] as its appraiser. The Company is required to appoint its appraiser within 20 days under the standard policy language. The two appraisers shall select an umpire; failing agreement, either party may request a Superior Court judge to appoint one under the policy terms.

C. Good-Faith Effort Required Before Appraisal

Washington regulation requires an insurer to make a good-faith effort to settle before invoking appraisal. WAC 284-30-330(17). An insurer that invokes appraisal prematurely or to avoid an IFCA exposure is itself acting in bad faith.

IX. IFCA NOTICE AND BAD FAITH EXPOSURE

A. Common Law Bad Faith Summary

Washington's common-law first-party bad-faith cause of action permits recovery of:

• Full contract damages (policy benefits)
• Consequential damages caused by the bad-faith handling
• General tort damages, including emotional distress where proven
• Presumed harm under Butler
• Coverage by estoppel in egregious cases
• Attorneys' fees under Olympic Steamship Co. v. Centennial Ins. Co., 117 Wn.2d 37, 811 P.2d 673 (1991) (fees recoverable when insurer forces insured to litigate to obtain benefit of coverage)

B. Insurance Fair Conduct Act — RCW 48.30.015

A first-party claimant "unreasonably denied a claim for coverage or payment of benefits" may recover:

1. Actual damages;
2. Treble damages in the court's discretion (up to 3x actual damages);
3. Reasonable attorneys' fees and litigation costs, including expert fees.

C. 20-Day Pre-Suit Notice (RCW 48.30.015(8))

FORMAL NOTICE: If the Company does not resolve this claim by the response deadline below, our client intends to serve the 20-day written notice of basis for cause of action on the Company and simultaneously file the notice with the Washington Office of the Insurance Commissioner (P.O. Box 40256, Olympia, WA 98504-0256). Please treat this letter as a final warning and opportunity to cure before the IFCA clock begins.

D. Consumer Protection Act — RCW 19.86

A single violation of WAC 284-30-330 or -340 satisfies the "unfair or deceptive act" element of a per se CPA claim. Stevens v. Brink's Home Sec., Inc., 162 Wn.2d 42 (2007); Kallevig, 114 Wn.2d at 923. CPA remedies include actual damages, treble damages capped at $25,000 (RCW 19.86.090), attorneys' fees, costs, and injunctive relief.

E. Cedell — Presumption of No Attorney-Client Privilege

Please take notice that under Cedell v. Farmers Ins. Co. of Wash., 176 Wn.2d 686 (2013), the attorney-client privilege is presumptively waived as to the claim file and adjuster-counsel communications in any first-party bad-faith litigation arising from this claim. The Company has an affirmative duty to preserve all such materials; spoliation sanctions will apply to any destruction.

X. MONETARY DEMAND

We demand payment of $[____] in full satisfaction of the claim, calculated as follows:

XI. RESPONSE DEADLINE AND CONSEQUENCES

This demand expires at 5:00 p.m. Pacific Time on [__/__/____].

If the Company fails to tender the amounts owed:

1. Litigation will be filed in the Superior Court of [________________________________] County, Washington, seeking policy benefits, prejudgment interest, common-law bad-faith damages, IFCA treble damages, CPA treble damages (capped at $25,000), consequential damages, emotional distress damages, coverage by estoppel where available, and attorneys' fees under Olympic Steamship, IFCA, and the CPA.

2. Regulatory Complaint will be filed with the Washington Office of the Insurance Commissioner:
   - Consumer Protection Division, P.O. Box 40256, Olympia, WA 98504-0256
   - Online complaint: https://www.insurance.wa.gov
   - Consumer hotline: 1-800-562-6900

3. Market Conduct / Pattern Evidence will be sought in discovery regarding the Company's claims practices, reserves, and training materials — which Cedell confirms are discoverable.

4. 20-Day IFCA Notice will be served.

XII. DOCUMENT PRESERVATION NOTICE

This letter constitutes formal notice to preserve all documents and ESI, including:

• Full claim file (live, archived, backups)
• Adjuster notes and activity logs
• All internal communications (email, Teams, Slack, messenger)
• Supervisor approvals and round tables
• Reserve history
• Estimate files (Xactimate XML, PDF, history of changes)
• Photos, video, drone footage, moisture readings
• Engineering and cause-and-origin reports
• IME, peer review, and third-party vendor reports
• Claims manuals and training materials
• Defense counsel communications (presumptively not privileged per Cedell)

XIII. CONCLUSION

The Company sold our client a promise to pay covered losses. That loss has occurred, proof has been submitted, and the only remaining step is payment. We urge the Company to honor the policy promptly and avoid the full weight of Washington's bad-faith and IFCA regime.

Respectfully submitted,

[LAW FIRM NAME]

By: _______________________________
[ATTORNEY NAME], WSBA No. [____]
[________________________________]
[________________________________], WA [____]
Tel: [____]
Email: [________________________________]

Counsel for [________________________________]

ENCLOSURES:

• Policy declarations and all endorsements
• Sworn proof of loss
• Contractor estimate(s) and scope of work
• Engineering / cause-and-origin report
• Photographs / video of damage
• Personal property inventory
• ALE receipts and documentation
• Mitigation invoices
• Correspondence history with the Company

CC:

• [Client]
• [Mortgagee, if any]
• [Public Adjuster, if any]

Sources and References

• RCW 48.30.010 — Unfair practices: https://app.leg.wa.gov/rcw/default.aspx?cite=48.30.010
• RCW 48.30.015 — Insurance Fair Conduct Act: https://app.leg.wa.gov/rcw/default.aspx?cite=48.30.015
• RCW 48.01.030 — Duty of good faith: https://app.leg.wa.gov/rcw/default.aspx?cite=48.01.030
• RCW 48.18.200 — Limitations on actions: https://app.leg.wa.gov/rcw/default.aspx?cite=48.18.200
• RCW 19.86.090 — CPA remedies: https://app.leg.wa.gov/rcw/default.aspx?cite=19.86.090
• RCW 4.16.040 — 6-year statute of limitations: https://app.leg.wa.gov/rcw/default.aspx?cite=4.16.040
• WAC 284-30-330 — Unfair claims settlement practices: https://app.leg.wa.gov/wac/default.aspx?cite=284-30-330
• WAC 284-30-360 — Claim acknowledgment: https://app.leg.wa.gov/wac/default.aspx?cite=284-30-360
• WAC 284-30-370 — Prompt investigation: https://app.leg.wa.gov/wac/default.aspx?cite=284-30-370
• WAC 284-30-380 — Prompt, fair, equitable settlements: https://app.leg.wa.gov/wac/default.aspx?cite=284-30-380
• Safeco Ins. Co. v. Butler, 118 Wn.2d 383, 823 P.2d 499 (1992)
• Coventry Associates v. American States Ins. Co., 136 Wn.2d 269, 961 P.2d 933 (1998)
• Cedell v. Farmers Ins. Co. of Wash., 176 Wn.2d 686, 295 P.3d 239 (2013)
• Tank v. State Farm Fire & Cas. Co., 105 Wn.2d 381 (1986)
• Indus. Indem. Co. of the Nw. v. Kallevig, 114 Wn.2d 907, 792 P.2d 520 (1990)
• Olympic Steamship Co. v. Centennial Ins. Co., 117 Wn.2d 37, 811 P.2d 673 (1991)
• Holden v. Farmers Ins. Co. of Wash., 169 Wn.2d 750, 239 P.3d 344 (2010)
• McDonald v. State Farm Fire & Cas. Co., 119 Wn.2d 724 (1992)
• Graham v. Pub. Employees Mut. Ins. Co., 98 Wn.2d 533 (1983)
• Vision One, LLC v. Phila. Indem. Ins. Co., 174 Wn.2d 501 (2012)
• Stevens v. Brink's Home Sec., Inc., 162 Wn.2d 42 (2007)
• Washington Office of the Insurance Commissioner: https://www.insurance.wa.gov
• OIC Consumer Line: 1-800-562-6900
• IFCA Notice Information: https://www.insurance.wa.gov/laws-rules/insurance-fair-conduct-act-ifca