For the second time in two months, a federal court in Washington state has rejected an insurer’s attempt to avoid the consequences of its wrongful failure to defend its insured by effectively changing its mind and later—in this case much later—offering a defense. In Rushforth Construction Co. v. Wesco Ins. Co., plaintiff Rushforth was a general contractor. Following good contracting practices, Rushforth made sure that it was included as an “additional insured” under liability policies issued to its subcontractors. When Rushforth was sued for construction defects, it tendered the claim to Wesco, the insurer for one of those subcontractors.

Wesco’s claims handling was less than stellar. Rushforth tendered the matter to Wesco on July 1, 2016. To its credit, Wesco opened a file and began investigating the claim, even going so far as to draft a reservation of rights letter sometime around September 1, 2016. From there, however, the claims-handling wheels came off. For reasons unexplained, the reservation-of-rights letter was never finalized or sent, despite repeated inquiries from Rushforth. Finally, more than a year after the claim was tendered, Rushforth filed suit against Wesco. Only then did Wesco send its letter, agreeing to defend under a reservation of rights. Rushforth rejected that offer.

Rushforth moved for partial summary judgment on three issues: 1) whether Wesco breached its duty to defend; 2) whether Wesco acted in bad faith; and 3) whether Wesco’s belated offer to defend cured its breach. According to Judge Coughenour of the Western District, the answers are 1) yes; 2) yes; and 3) no. The Court specifically rejected Wesco’s argument that it never actually denied a defense, and thus could not have breached. “An insurer may breach its duty to defend by failing to respond to an insured’s tender in a reasonably timely manner.” And because Wesco offered no justification for its delay, the Court went on to conclude that Wesco had acted in bad faith as a matter of law.

Finally, the Court rejected the insurer’s argument that its belated offer of a defense cured its prior breach. Because Wesco’s breach was material, the insured was released from its contractual duty to cooperate, and Wesco had no right to provide a belated defense. The insured “had the option of allowing Wesco to assume a defense, but it was not required to do so. Wesco cannot cure its breach by forcing [Rushforth] to accept a belated defense.”

For insurers handling claims in Washington, the case presents another reminder that Washington law favors the policyholder. Fail to defend at your own peril, and don’t expect the opportunity to “fix” a wrongful denial if the insured fights back. For policyholders, the lesson is similar: the law is frequently on your side in Washington, and insureds should not hesitate to aggressively protect their interests in the face of an insurer’s denial of coverage (or, as here, an insurer’s failure to act).