Washington's Consumer Protection Act Applies to Insurers' Subrogation Collection Activities
Panag v. Farmers Ins. Co. of Wash., et al., 204 P.3d 885 (April 2, 2009)
In consolidated appeals, the Washington Supreme Court evaluated the activities of a collection agency in its pursuit of subrogation claims. Both plaintiffs, Panag and Stephens, were involved in separate automobile accidents. The insurers for the other drivers, Farmers and Omni, provided their insureds with UIM benefits, then set about the business of subrogation. Both Farmers and Omni hired Credit Collection Services, Inc. (“CCS”) to obtain payment from Panag and Stephens, respectively, for the amounts the insurers had paid to their insureds.
CCS sent both Panag and Stephens a document entitled “FORMAL COLLECTION NOTICE,” setting forth the amounts paid by the insurers to their insureds as the “AMOUNT DUE.” In a series of increasingly threatening communications, CCS continued to pursue those sums, threatening litigation, license suspension, and various other costs. Panag and Stephens allegedly incurred significant costs in their efforts to contest the collection notices.
Panag and Stephens filed class action lawsuits against the insurers and CCS, alleging violation of Washington’s Consumer Protection Act (“CPA”), RCW 19.86 et seq. The traditional test for a CPA claim is known as the Hangman Ridge test, which requires the plaintiff to establish:
(1) an unfair/deceptive act or practice; (2) in trade or commerce; (3) affecting public interest; and (4) an injury to plaintiff’s business or property; (5) caused by that unfair or deceptive practice.
CCS argued that Panag and Stephens lacked standing, contending that a CPA claim could only arise in a business or consumer transaction, not in the context of collections where the parties are engaged in an adversarial relationship. The Washington Supreme Court rejected CCS’s contention, refusing to add a “sixth” element to the Hangman Ridge test. “A private CPA action may be brought by one who is not in a consumer or other business relationship with the actor against whom the suit is brought. . . . We conclude that the CPA is applicable to deceptive insurance subrogation activities.”
