Washington state lawmakers are reviewing a proposed bill that would empower the state’s insurance commissioner to require restitution payments directly to policyholders for legal violations and impose fines on property/casualty insurers on a per-violation basis.
Currently, policyholders seeking redress for violations must go through the courts, a process that Insurance Commissioner Patty Kuderer (pictured above) described as inefficient.
Kuderer, who began her first term after the November 2024 election, has made this legislation a top priority for her office.
“Any fine we collect goes into the state general fund. It does not make the policyholder whole,” Kuderer said in a report from AM Best. She added that restitution payments would include 8% simple interest starting from the date the obligation arose.
Examples of violations that could trigger restitution include using unapproved rates or operating as an unauthorized insurer.
Currently, while the commissioner’s office can fine insurers for these actions, it cannot mandate that policyholders be reimbursed for overpayments or funds collected illegally.
The property/casualty insurance industry has not expressed outright opposition to the bill but questions its necessity, citing existing consumer protections. In a letter to Washington House members, the American Property Casualty Insurance Association (APCIA), Northwest Insurance Council, and National Association of Mutual Insurance Companies argued that regulators already have mechanisms to fine insurers and order restitution.
The letter highlighted two 2024 cases to illustrate current enforcement capabilities. In one instance, an insurer was fined $25,000 and ordered to pay $133,233.48 in restitution for incorrect rate charges. In another case involving market conduct issues, a $15,000 fine and $86,217.24 in restitution were imposed.
The trade groups suggested lawmakers incorporate procedural safeguards into the bill, such as referencing the state’s Administrative Procedures Act, which governs administrative hearings. They also recommended limiting restitution to actual damages to ensure clarity and fairness.
Under the proposed bill, property/casualty insurers could face fines of up to $10,000 per violation. Currently, the commissioner’s office is restricted to a $10,000 cap regardless of the number of violations. The commissioner’s office noted this change would align the rules for property/casualty insurers with those for health insurers, who already face per-violation fines.
The industry raised concerns about the potential impact of this change, noting that the commissioner already negotiates penalties exceeding $10,000 under current rules.
In their letter, the trade groups said, “If the current limit is $10,000, but the OIC can issue a consent order that includes a $40,000 fine plus restitution, it is chilling to consider the penalty in a consent order when the OIC is authorized to issue up to $10,000 per violation.”
The groups also urged lawmakers to consider applying per-violation penalties only in cases where an administrative hearing has occurred and the regulator prevails. They further recommended introducing caps or aggregate limits on penalties and differentiating fine levels for negligent versus intentional conduct.
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