Posted: 4/25/2007
NAMIC: Washington State Bad Faith Bill is Unnecessary, Would Drive Up Rates
OLYMPIA (April 25, 2007) — The National Association of Mutual Insurance Companies (NAMIC) has strongly urged Washington’s governor to veto legislation creating the Insurance Fair Conduct Act. In a letter to Gov. Chris Gregoire, Christian J. Rataj, NAMIC's state affairs manager for the Western U.S., said the legislation, ESSB 5726, is unnecessary and would be detrimental to consumers and insurers in Washington.
“Washington state law already provides insureds with a number of effective legal and regulatory remedies to address their claims adjusting disputes,” the letter says. “Additionally, NAMIC fears that ESSB 5726 will encourage and facilitate the filing of legally frivolous and factually groundless lawsuits, which will needlessly drive up insurance defense costs for carriers and ultimately lead to higher insurance rates for consumers.”
NAMIC has 110 member insurance carriers doing business in Washington that write approximately 31 percent of the property/casualty insurance business in the state.
The legislation, approved by the Legislature and sent to the governor, provides insurance consumers with additional remedies for what they perceive to be unwarranted claim denials. But, as Rataj points out in his letter, the legislation is unbalanced. “Plaintiffs should be provided appropriate legal remedies to protect them against outrageous claims adjusting practices, but not at the expense of denying defendants procedural safeguards necessary to protect them from frivolous lawsuits. ESSB does not strike such a balance.”
The proposed legislation was passed despite the fact that Washington's insurance marketplace is vibrant, competitive, and pro-consumer. “There is NO evidence to support an argument that insurance consumers are being mistreated by their insurance carriers in the claims adjusting process, and, in fact, the contrary is evident.” the letter states. “ESSB 5726 is nothing more than a potentially damaging solution to a non-existent problem.”
Rataj also suggests the legislation could have the following unintended consequences:
- It could interfere with Office of the Insurance Commissioner regulation of the insurance marketplace and create an economic burden and staffing resource problems for the OIC. The legislation would change the regulatory environment, which currently encourages carriers to regularly self-audit their business practices and work closely with the OIC to maintain regulatory compliance. The change in the professional relationship between insurance carriers and the OIC could lead to frivolous lawsuits.
- It could lead to unnecessary lawsuits and delay the adjudication of meritorious cases. The language of the bill indicates a plaintiff need only prove by a mere preponderance of the evidence that an insurer engaged in an unreasonable act or a violation of the insurance code to assert a claim for treble damages and reasonable attorney fees. The phrase, “unreasonable act” is not clearly defined in the bill.
- It will subject defendants to defacto punitive damages without providing them with appropriate statutory safeguards necessary to protect them against frivolous claims. ESSB 5726 would create the lowest trigger in the nation for the imposition of punitive damages.
In asking the governor to veto the legislation, Rataj urged her to “prevent Washington from becoming the land of frivolous insurance lawsuits, unnecessarily high insurance defense costs and needlessly increased insurance rates.”
For further information, contact
Nancy Grover
(202) 628-1558 Tel
(202) 628-1601 Fax
ngrover@namic.org