William Kastner Assists Surety in Defeating Major Bad Faith Claim

April 20, 2015 (Seattle) – On March 17, 2015, Todd Blischke and his associate Meredith Dishaw of Williams Kastner defeated what is believed to be the largest extra-contractual claim ever asserted against a surety in the State of Washington. The bond obligee plaintiff asserted causes of action for common law bad faith and violations of Washington’s Insurance Fair Conduct Act (IFCA). The lawsuit arose from a complex landfill gas generation project. When the equipment at the project purportedly failed to perform as required under the contract, the plaintiff asserted a claim under the bond. The claim was denied by the surety following two months of investigation. Thereafter, the plaintiff filed an action, Stellar J Corporation v. Unison Solutions, Inc. et al., Western District of Washington, Case No.: 3:12-cv-05982 RBL, seeking damages of over $14,000,000 from the surety based on allegations that the surety acted in bad faith by failing to perform an adequate investigation, wrongly denying the claim, and violating IFCA by failing to comply with provisions under the Washington Administrative Code.

Blischke and his team filed a motion for partial summary judgment seeking dismissal of the bad faith and IFCA claims. Despite noting that in Washington there is generally a “bounty on the head of insurance companies,” Judge Ronald B. Leighton granted the motion, finding there was a genuine dispute as to liability under the bond, thus justifying the surety’s denial of the claim. The outcome is notable given what appears to be a growing trend in Washington to assert extra-contractual claims against sureties.

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Williams Kastner has been serving clients in the Pacific Northwest since our Seattle office opened in 1929. With more than 80 attorneys in offices located in Washington and Oregon and affiliated offices in Shanghai, Beijing, Hong Kong, Kunming and Shenzhen we offer global capabilities and vision with a local sensibility.