Hackett Beecher & Hart Press Release
April 19, 2011

Brent Beecher
Hackett Beecher & Hart
206-624-2200, bbeecher@hackettbeecher.com

Jim Klavano
Australia Unlimited, Inc. and Old Friend Footwear
425-272-0800, jimklavano@yahoo.com

Seattle shoe maker vs. Hartford Insurance makes legal history with Insurance Fair Conduct Act test case

Australia Unlimited awarded $5.43 million following ‘tortuous’ legal battle

Seattle, Wash. – April 19, 2011 – Seattle shoe manufacturer Australia Unlimited was awarded $5.43 million in damages after a King County Superior Court judge ruled its insurance company, Hartford Insurance, unreasonably and in bad faith denied Australia Unlimited’s insurance claim.

One of the claims in that lawsuit made by Australia Unlimited, creator of the NothinZ brand polymer clogs, was that Hartford violated the Insurance Fair Conduct Act, or IFCA. The IFCA was enacted in 2007, after voters of Washington State adopted it by Referendum 67. The IFCA provides legal remedies for policyholders, including the ability to seek punitive damages in court if their insurance company unreasonably denies their claims or violates regulations governing unfair claims settlement practices.

After a two-week trial, a 12-person jury in this case found Hartford had done exactly that. Although it was enacted nearly four years ago, this appears to be the first lawsuit resulting in damages worth more than a few thousand dollars. Although it had the opportunity to do so, Harford declined to appeal the ruling.

"It’s not clear why there haven’t been more awards under the Insurance Fair Conduct Act," said Brent Beecher of the Seattle law firm Hackett Beecher & Hart, which represented Australia Unlimited. "Many people have speculated about that, but one very reasonable hypothesis is that the threat of triple damages and attorney fees has worked – that is to say, insurers in this state may have actually been properly incentivized by the new law to avoid the kind of behavior exhibited by Hartford in this case."

"The law now gives insured people in Washington a powerful hammer to use against insurers that unreasonably deny claims," Beecher added. "However, the hammer is no real threat unless you swing it when you need to."

In the case of Australia Unlimited, the company was awarded $3.8 million in actual damages in August 2010 after the trial. The jury found Hartford Insurance guilty of acting in bad faith and violating the IFCA. Hartford Insurance severely damaged Australia Unlimited’s business by failing in its duty to defend Australia Unlimited when national giant Crocs, Inc., sued the local shoe maker in 2006, the jury decided.

Last month, King County Superior Court Judge Barbara Mack ruled that under the IFCA Australia Unlimited also was entitled to more than $1.25 million on top of that verdict. In her ruling, Mack described the three-year process as "torturous" for Australia Unlimited and commended its attorneys for their tenacity.

Of the nearly 2,200 IFCA notices filed in Washington since it was enacted, this is believed to be the first resulting in more than trivial damages, said Beecher, who represented Jim Klavano, president of Australia Unlimited, after six other law firms turned the Seattle businessman down.

"When Jim approached us about Hartford’s denial, we knew it was going to be a long, expensive lawsuit," Beecher said. "We also knew Hartford would be able to defend itself with a virtually unlimited war chest. But we were convinced Hartford had wrongly denied Australia Unlimited’s claim, and we were proud to be in Australia Unlimited’s corner. Hartford fought hard for over three years, but the judgment speaks for itself."

For Klavano this case has been long and emotional.

"Most insurance companies count on the high expense of lawyers to deny policy benefits, so most people wouldn’t take on a company like Hartford," Klavano said. "I was only able to fight Hartford because Jim and Brent Beecher understood my policy and partnered with me."

About Australia Unlimited

Jim Klavano started Australia Unlimited in 1981 in Kent, Wash., and eight years later started designing and manufacturing sheepskin slippers. The company is best know for its Old Friend Footwear slipper brand, which specializes in problem-solving sheepskin footwear. Old Friend Footwear also developed the popular line of foam shoes called NothinZ (www.oldfriendfootwear.com/nothinz.php) and a line of massage sandals. Old Friend Footwear sells its products in every state in the United States and in markets overseas. Read more about Old Friend Footwear at www.oldfriendfootwear.com.

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