[vc_row][/vc_row][vc_column][/vc_column][vc_column_text]Jeff Laveson, Mel Sorensen, and Rory Cosgrove recently gave a presentation at the Property Casualty Insurers Association of America’s 29th Annual Western Region General Counsel Seminar in San Diego, California, on the Washington State Supreme Court’s controversial decision in Xia v. ProBuilders Specialty Ins. Co., 188 Wn.2d 171, 400 P.3d 1234 (2017). In ProBuilders, the Washington State Supreme Court expanded the application of the “efficient proximate cause” doctrine – a doctrine that has been traditionally applied to casualty insurance – to third-party liability coverage. The Court identified “negligence” as the “cause” of pollution damage to avoid application of the absolute-pollution exclusion in the liability policy. The Court prohibited insurers from drafting exclusionary language to avoid the “efficient proximate cause” rule as applied to liability policies. The Court’s decision now calls into question the viability of any “cause-based” exclusion in a liability policy. Finally, the Court effectively abolished the “reasonable but wrong” doctrine, making the insurer strictly liable for bad faith where the insurer’s coverage determination is found to be wrong, irrespective of whether the coverage determination was reasonable under the circumstances. The Court’s decision will force insurers to seek a judicial determination of non-coverage in many cases in order to avoid extra-contractual “bad faith” liability exposure. And while ProBuilders involved an absolute-pollution exclusion in a construction-liability policy, it will likely have implications for all property/casualty insurers writing liability policies—including personal-lines policies for auto and homeowners insurance.
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