Keodalah Revisited

By: Maeve Riehman, Horst Krekstein & Runyon, LLC

‍Imagine a world in which insurance employees are sued over everyone of their decisions. In late 2019, the Washington State Supreme Court decided Keodalah v. AllstateIns. Co. which held individual claims adjusters cannot be held personally liable for bad faith or violations of the Consumer Protection Act (CPA) under Washington’s code, RCW 48.01.030. At the time of that decision, insurers breathed a sigh of relief for their adjusters while others, however feared the spiked interest in the legal question of personal liability would increase the number of policyholders seeking to sue claims representatives. The standard established in the Keodalah case specifically addressed an under-insured motorist (UIM) coverage dispute. This claim ultimately went to trial where the jury returned a verdict that the other party was 100% at fault and Keodalah was owed full coverage under the UIM policy. Keodalah followed that verdict with a second lawsuit against Allstate that included claims against the adjuster for bad faith and CPA violations. On the specific issue of whether the claims against the individual adjuster had merit the trial court ruled against it however this was reserved by the Court of Appeals and the claimed were allowed to proceed on the basis that Washington law imposes a duty of good faith on the adjuster, not just the employer, and the adjuster could be liable for a CPA violation even absent the existence of a contractual relationship between Keodalah and the adjuster. These issues are specifically discussed by the Washington State Supreme Court in their 2019 decision.

Adding adjuster liability to any bad faith claim against an insurer could drastically change the adjusting process and coverage litigation. Considerations for any legal representation team include complexity of cases, cost of litigation, continuity of a single case, and the financial burden of determining damages and other fees when a corporation and an individual, specifically an individual employed by the named corporation, are both parties to the suit. As a result, adjusters will have to be more educated in the specific insurance field which will not only decrease the pool of adequate candidates but will likely decrease the pool of people actually willing and interested in taking on that responsibility. Many times, there must be evidence of more than negligent conduct on behalf of the insurer but the Washington Supreme Court has found bad faith even in cases when an insurer merely failed to “anticipate whether and how the law might change.” Washington Supreme Court Justice Madsen in Xia v. ProBuilders Specialty Ins. Co., 188 Wn.2d 171, 196, 400 P.3d 1234 (2017). Insurers are held to this ambiguous standard but with individual adjuster liability, an adjuster would be asked to understand and act in accordance with this standard as well or risk a personal suit against them. Fortunately, that is not the case, affirmed by Keodalah v. Allstate.

Although governing law in Pennsylvania differs from the 2019 decision, these shock waves and concerns were felt across the insurance and insurance litigation industry. In current Pennsylvania law, there is no individual adjuster liability for claims against an insurer stemming from bad faith or CPA. The PA courts hold strong that the well-known statute, 42 Pa.C.S. §8371, denotes specific language saying ‘the insurer as acted’ does not implicate a duty on an individual employed by the insurer. This was affirmed in a Philadelphia Common Pleas Court in 2004 in Chau v RCA Ins. Group and by Pennsylvania Eastern District Federal Court in 2018 in Reto v. Liberty Mut. Ins. See Chau v. RCA Ins. Group, 2004 Phila. Ct. Com. Pl. LEXIS 23 (Pa. Ct. Com. Pl. Phila. Cnty. 2004); Reto v. Liberty Mut. Ins., 2018 U.S. Dist. LEXIS 133336

(E.D. Pa. 2018). Unlike the low bar and ambiguous Washington bad faith standard Pennsylvania uses, the well-grounded standard that bad faith can only be found when the insurer knew of or recklessly disregarded its lack of a reasonable basis in denying the claim. But the issue of whether an individual adjuster can be held liable under bad faith or CPA has not been directly appealed to or heard by the Pennsylvania State Supreme Court.

While bad faith arguments are always looming in litigation, it would be inaccurate to say any uptick or change in theme was specifically due to this ruling, especially in Pennsylvania. It is important to remember, even if brought to the Supreme Court of Pennsylvania, Keodalah is not controlling law and could only be used as a persuasive judgment. Previously posted in PACIA Pulse, October 2025 edition ©

Pennsylvania Act 46: What to Know About Pennsylvania’s New Towing and Storage Practices

Zachary Weinstein, Horst Krekstein & Runyon, LLC

Pennsylvania Act 46 of 2026 (the “Act”) introduces new requirements governing towing and vehicle-storage practices throughout the Commonwealth. The legislation is intended to curb predatory towing and abusive towing and storage practices by imposing disclosure requirements, regulating payment practices, and establish escalating monetary penalties for violations.

Notably, Act 46, the product of Senate Bill 779, initially proposed substantially more severe criminal consequences for unlawful towing and storage practices, classifying certain violations as misdemeanors punishable by fines and imprisonment of up to one year for a first offense, and up to two years for subsequent offenses. While the original legislation carried significant criminal teeth, those provisions were ultimately stripped from the enacted version.

The Act – New Requirements and Penalties

Section (a) of the Act establishes basic requirements for towing operators. Towing companies must maintain proper registration, a physical business location accessible to the public during business hours, display the company’s name, address, and telephone number on each tow truck. Storage facilities must also post towing, storage, and related service fees, as well as their business hours.

An initial violation of Section (a) may result in a monetary penalty of up to $750, while second or subsequent violations may result in fines of up to $1,500.

Sections (b) and (c) impose additional requirements on towing and storage operators. Tow operators may not solicit or tow a vehicle unless the tow has been specifically requested or authorized by an authorized municipal official, law enforcement officer, or the vehicle owner or operator. The tow operator must also obtain the owner or operator’s signature authorizing motor vehicle repair or storage exceeding twenty-four (24) hours. The tow operator must also inform the owner/operator where the vehicle was taken and how it may be retrieved and, upon request, provide an itemized written statement of all charges associated with the vehicle.

The Act also prohibits towing and storage operators from refusing payment by cash, a credit card from a common issuer, or an insurance company check or payment from an authorized tower or salvor acting on behalf of the insurer.

Initial violations of Sections (b) and (c) may result in fines of up to $2,500; second or subsequent violations may impose fines of up to $5,000; and third or subsequent violations result in the impoundment of a tow truck owned by the tow truck operator until all monetary penalties imposed are satisfied.

The Act does not prevent municipalities from maintaining or enacting their own rotational towing ordinances.

What does Act 46 mean for Insurers and Investigators?

For insurers and investigators, one of the most significant aspects of Act 46 is the additional transparency it requires from towing and storage operators.

The Act provides insurers and its investigators with a statutory right to request itemized statements of all charges, along with documentation establishing when and why the vehicle was towed, where it was taken, and the authorization for any repair or storage exceeding twenty-four hours. These records can provide useful information when evaluating the reasonableness and legitimacy of claimed expenses. They may also help identify discrepancies between the reported circumstances of a loss and the services or charges ultimately billed.

The Act also prohibits operators from refusing an insurance company’s check or payment from an authorized tower or salvor acting on the insurer’s behalf.

What does Act 46 mean for Insureds?

For insureds, the Act provides greater transparency and protection when their vehicles are towed or stored following an accident or loss. Insureds can also request information regarding where their vehicle was taken, how it can be retrieved, and seek itemized statements of all related charges.

Conclusion

The goal of Act 46 is to promote greater transparency and accountability in Pennsylvania’s towing and vehicle-storage industry by establishing requirements governing towing practices, disclosures, itemized charges, accepted forms of payment, and escalating monetary penalties for initial and subsequent violations.

While the Act does not take effect until December 2026, its enactment provides an important framework for future claim investigations. The takeaway is relatively straightforward: When towing or storage charges appear excessive, unexplained, or inconsistent with an insured’s accounting of the loss, insureds and insurers will have a statutory right to obtain documentation related to the tow or storage. Once the Act takes effect, its disclosure and itemization requirements will provide an additional benchmark against which those charges and practices can be evaluated. ©

Property in 60 Seconds: Supreme Court Holds: Investigate!

By: Marc Furber, Horst Krekstein & Runyon, LLC

‍It’s not everyday that the United States Supreme Court issues a decision directly on point for insurance investigators. But that’s exactly what happened in Keathley v. Buddy Ayers Construction, Inc.

First, the Court advised that a discrepancy in a past bankruptcy proceeding will not automatically amount to judicial estoppel. Importantly though, the court didn’t stop there. In mandating a fact-specific inquiry when evaluating discrepancies or omissions in a bankruptcy proceeding, the Court used a totality of the circumstances approach where relevant facts and circumstances are reviewed on a case-by-case basis. 

In our opinion, this decision demonstrates that the SIU mandate has been validated by our nation’s highest court, reinforcing not only the importance of a thorough consideration of all the facts surrounding a past bankruptcy filings (ownership, assets, valuation, business operations, occupancy, or other material facts), plus the SIU mandate overall. 

Questionable claims warrant detailed investigation. In short, Keathley validates what many SIU professionals already know: success often depends not on finding the discrepancies, but on thoroughly investigating and documenting the reason for those discrepancies in order to develop a detailed factual record.

Read the opinion here.

This post was originally published through Horst Krekstein & Runyon’s Property in 60 Seconds Newsletter. ©

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Pennsylvania Superior Court Upholds Rescission Based on Material Misrepresentation

By Patrick McHugh, Horst Krekstein & Runyon, LLC

A policyholder's failure to disclose significant developments affecting professional licensure and potential liability can support rescission of an insurance policy when the omitted information is material to the insurer's underwriting decision.

In a recent unpublished decision, the Pennsylvania Superior Court affirmed summary judgment in favor of Positive Physicians Insurance Company (“PPIC”), holding that the insurer was entitled to rescind a physician's professional liability policy based on material misrepresentations and omissions in the physician's renewal applications.

The case arose from PPIC's efforts to deny coverage to Dr. Xiang (Sean) Yuan in connection with a medical malpractice claim. Dr. Yuan previously treated a patient who alleged that an unlicensed individual performed a liposuction procedure and caused injuries.

In June 2020, Dr. Yuan submitted a renewal application to PPIC. He answered "no" to questions concerning whether he was aware of circumstances that could result in a professional liability claim, whether his medical license had ever been suspended or revoked, and whether he had been charged with a criminal offense or was under investigation for a criminal act.

Shortly after submitting the application, however, Dr. Yuan was charged with numerous criminal offenses, and his medical license was suspended. He did not disclose those developments to PPIC. When he later sought another renewal, he failed to disclose this information, despite the application requiring disclosure of information that could influence PPIC's decision to provide coverage.

PPIC subsequently rescinded the policy and refused to defend or indemnify Dr. Yuan in the malpractice action. Dr. Yuan challenged the rescission arguing, that the information was not material and that his application answers were truthful when originally provided.

The Superior Court rejected those argument, concluded that the undisclosed information was material. A physician's suspension from practicing medicine, as well as criminal charges relating to circumstances potentially connected to professional liability, could significantly affect an insurer's assessment of the risk.

Implications for Insurers and Fraud Investigators

Yuan is important because a material misrepresentation may arise not only from an affirmative false statement, but also from the knowing omission of information that materially changes the risk.

For insurers and Special Investigations Units (SIUs), the case highlights several practical considerations:

· Renewal applications matter. Material information arising after an original application may become relevant when coverage is renewed.

· Continuing disclosure provisions can be significant. Clear application language requiring an insured to disclose subsequent developments can strengthen a rescission position.

· Recorded Interviews and Examinations Under Oath are important. Locking an insured into a statement is critical in a claims investigation and can be used later in litigation.

· Documentation is critical. Underwriting guidelines, application questions, communications, and testimony from underwriting personnel can help establish materiality.

· Timing matters. Investigators should establish when the insured learned of the relevant event and when the insured made the representation or omission.

Because Yuan is an unpublished Pennsylvania Superior Court decision, it should be treated as persuasive rather than binding authority. Nevertheless, the case provides a timely example of how Pennsylvania courts may analyze material misrepresentation and rescission.

Yuan reinforces the value of identifying material changes in an insured's circumstances, documenting the insured's disclosure obligations, and connecting the omitted information directly to the insurer's underwriting decision.©