At Gallagher Bassett, we believe timely and effective communication is the cornerstone of excellence in our business to maintain trust, alignment, and confidence with our clients and partners. To continue delivering service excellence, our team remains up to date with new or amended laws and helps our clients navigate these changes through our team's expertise and solutions tailored to their programs.
A new Washington State law expands the duty of good faith and fair dealing to encompass all workers' compensation (WC) self-insurers and third-party administrators (TPAs), a duty previously confined to municipal and private sector firefighter employers.
What Is Changing
Effective January 1, 2026, the new law mandates strict adherence to the duty of good faith and fair dealing, empowering the Department of Labor and Industries (L&I) to impose corrective actions, probationary measures, and potential certification withdrawal for repeated violations. It also establishes stringent criteria for maintaining self-insurer certification.
The specific changes include:
Duty of Good Faith and Fair Dealing
The bill mandates that all self-insurers and TPAs must adhere to the duty of good faith and fair dealing in handling WC claims. The bill increases oversight of self-insured employers by granting L&I more authority to investigate and enforce the duty of good faith and fair dealing, and the department will adopt rules for additional applications of this duty and criteria for penalties.
- L&I will investigate alleged violations upon receiving a written complaint or on its own initiative, considering industry-standard claim processing practices and relevant state laws and rules. Within 30 days of receiving a complete complaint or acting on its own, the department will determine if a violation occurred.
- Employers or TPAs have 10 working days to respond to a notice. If they fail to respond, the department will issue an order based on available information.
Certification Withdrawal
This law updates provisions for corrective actions against self-insurers, specifically allowing the department to issue probationary status and/or withdraw certification following a violation. The timing of violations is determined by the date of the department's order, and any subsequent affirmations of violations relate back to this date.
Penalty and Related Exposure
This law expands the penalties for violations. If a violation of the duty of good faith and fair dealing is found, the penalties include:
- Payment of one to 52 times the average weekly wage, depending on the severity of the violation.
- Probationary status or withdrawal of an employer's self-insured certification if the employer violates the duty of good faith and fair dealing.
This new law is effective January 1, 2026 and applies to all claims regardless of the date of injury.
All Gallagher Bassett teams managing Washington-based WC claims are aware of the changes and will ensure that claims are handled effectively and in compliance with these provisions.
For more information, please reach out to your client services manager.
Make Gallagher Bassett your dependable partner
When making the right decision at the right time is critical to minimize risk for your business, count on Gallagher Bassett's extensive experience and global network to deliver.