Insurance Company Failure to Defend: Laws, Circumstances, and Ramifications
When you purchase commercial or personal liability insurance, whether auto, homeowners, or otherwise, in Washington State, you expect your insurer to step up and defend you if you're sued. But what happens if they refuse? A failure to defend can leave you exposed to massive legal costs, judgments, and emotional stress. In Washington, insurers have a broad duty to defend, and breaching it often constitutes bad faith, leading to severe consequences under state law. As of 2025, with rising litigation and insurance disputes amid economic pressures, understanding this issue is crucial for policyholders. The Washington Supreme Court has long emphasized that insurers must defend if there's any potential for coverage, and failures can result in bad faith claims under the Insurance Fair Conduct Act (IFCA, RCW 48.30.015). As a plaintiffs attorney specializing in bad faith insurance cases in Washington, we help clients hold insurers accountable for refusal to defend, recovering defense costs, damages, and more. This guide explores the law, common circumstances, and ramifications of an insurer's failure to defend in Washington State.
The Law Governing Insurer's Duty to Defend in Washington
Washington law imposes a strict duty on insurers to defend their insureds against lawsuits that could potentially fall under the policy. This is broader than the duty to indemnify (pay for losses), meaning insurers must defend even if coverage is uncertain. Key principles include:
The Eight Corners Rule - Insurers must look only at the "eight corners" of the policy and the legal complaint to determine if defense is required. If the allegations conceivably trigger coverage, defense is mandatory—no external investigations allowed to deny it.
Bad Faith Refusal - Under common law and IFCA, refusing to defend without a reasonable basis is bad faith. A bad faith refusal may estop (prevent) the insurer from later denying coverage, making them liable for the full judgment, even beyond policy limits.
IFCA Protections - RCW 48.30.015 allows insureds to sue for unreasonable denials or failures, with remedies including treble damages (up to three times actual harm) and attorney fees. This applies to both personal and commercial policies.
Circumstances Where Insurers Fail to Defend in Washington
Insurers may refuse defense under various pretexts, but Washington law scrutinizes these closely. Common scenarios include:
Ambiguous Allegations in the Complaint - If a lawsuit's facts could arguably be covered (e.g., negligence vs. intentional acts), defense is required. Insurers sometimes refuse by investigating outside the complaint, violating the eight corners rule.
Policy Exclusions or Disputes - Refusals based on exclusions like intentional acts or pollution, but if the complaint doesn't clearly exclude coverage, defense must proceed. In commercial contexts, this arises in liability suits against businesses for employee actions or product defects.
Reservation of Rights Issues - Insurers may defend under a reservation (agreeing to defend but reserving denial of coverage), but if they withdraw prematurely or harm the insured's defense, bad faith claims follow.
Fraud or Misrepresentation Allegations - Insurers might refuse if they suspect fraud, but without proof, this can backfire as bad faith.
Delayed or Inadequate Response - Failing to respond promptly to tender of defense, as required by regulations, escalates to bad faith.
These circumstances often stem from insurers prioritizing profits over duties, especially in high-stakes commercial claims.
Ramifications and Consequences of Failure to Defend
The consequences for insurers in Washington are steep, designed to deter misconduct:
Estoppel from Denying Coverage - Bad faith refusal prevents the insurer from asserting non-coverage, making them liable for the entire judgment or settlement, regardless of policy limits.
Payment of Defense Costs and Damages - Insurers must reimburse all legal fees, costs, and any resulting harm, including emotional distress or lost business opportunities.
IFCA Remedies - Treble damages, attorney fees, and costs if the refusal is unreasonable. In bad faith cases, insureds can recover for pain, suffering, and punitive elements.
Broader Liability - Failure can lead to Consumer Protection Act claims or common law bad faith, with no cap on damages if harm is proven.
Reputational and Regulatory Fallout - OIC investigations can result in fines, and repeated failures harm insurer reputations.
For the insured, ramifications include financial ruin if undefended, but successful bad faith suits can fully compensate and deter future abuses.
What to Do If Your Insurer Fails to Defend You in Washington
Act quickly: Tender the defense in writing, document everything, and consider filing an OIC complaint if refused. Retain a lawyer and send a 20-day IFCA notice before suing. Consult a bad faith attorney to evaluate IFCA, estoppel issues, and damages. Statutes of limitations apply, so don’t delay.
Protect Your Rights: Contact a Washington Bad Faith Insurance Lawyer Today
An insurance company's failure to defend in Washington State can have devastating effects, but the law provides powerful remedies under IFCA and common law. At Hogue Law Firm, we specialize in holding insurers accountable for bad faith refusals, ensuring you get the defense and compensation you deserve.
If your insurer has failed to defend you, schedule a free consultation. Call 509-934-1998 or fill out our online form. Don't face this alone—fight back today.