WASHINGTON (March 14, 2007) - Two sections of legislation being considered today by the House Ways and Means Committee would unnecessarily increase business costs for insurers, resulting in higher premiums for policyholders, according to the National Association of Mutual Insurance Companies (NAMIC). The provisions would prevent companies from deducting the cost of settlement agreements and limit the deductibility of punitive damages.
The controversial sections of the legislation - 223 and 224 - are included in the Senate-approved version of the Small Business and Work Opportunity Act of 2007, but not in the bill passed by the House. The Ways and Means panel is hearing testimony today on all revenue raisers included in the Senate's version
Section 223 would deny any deduction for punitive damages that are paid or incurred as the result of a judgment or in settlement of a claim, thereby lengthening the legal process.
"This provision would increase the cost of doing business to insurers, which will be forced to spend more money and time litigating cases," said Marliss Browder, NAMIC senior federal affairs director. "Ultimately, this increased cost would be passed on to policyholders in the form of higher premiums."
Similarly, Section 224 would increase costs to insurers by changing the rules regarding the deductibility of fines and penalties. Current law precludes businesses from deducting from income only those fines or penalties paid to a government or entity for the violation of a law. This section would expand the prohibition on deductions of fines and penalties for all types of positive settlements currently entered into the normal course of business.
"We encourage the committee to reject these provisions of the legislation," Browder said. "Allowing insurers to keep more of their resources will allow them to pay off claims and conduct their business, instead of forcing them to unnecessarily increase premiums to policyholders."
* The Working Group for Certainty in Settlements includes the American Chemistry Council, American Petroleum Institute, American Tort Reform Association, Associated Builders and Contractors, Association of American Railroads, Business Roundtable, Edison Electric Institute, The Financial Services Roundtable, National Association of Manufacturers, National Association of Mutual Insurance Companies, National Foreign Trade Council, Securities Industry and Financial Markets Association, Small Business and Entrepreneurship Council, and the U.S. Chamber of Commerce.
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