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Alaska Unfair Claim Settlement Bill Would Undermine Insurance Commissioner's Authority, Says NAMIC

INDIANAPOLIS (April 17, 2006)-A bill to change Alaska's insurance settlement practices, "is unnecessary, would likely cause insurance rates to increase, would unreasonably usurp the Insurance Commissioner's regulatory prerogative and could lead to the filing of groundless and frivolous lawsuits," asserted Christian J Rataj, west region state affairs manager for the National Association of Mutual Insurance Companies (NAMIC).

On Tuesday, NAMIC filed a letter of opposition with the Alaska House Labor and Commerce Committee opposing House Bill 350 which would alter the current Unfair Claim Settlement Practices Act.

"There has been no evidence offered to support the contention that the current version of the Unfair Claim Settlement Practices Act has failed to properly regulate and enforce lawful insurance settlement practices or provide claimants with an appropriate venue for the redress of their insurance complaints," said Rataj.

"NAMIC is concerned that HB 350 will lead certain plaintiffs to file groundless, baseless and frivolous lawsuits in hope of coercing insurance companies into settling claims that do not financially merit an expenditure of policyholder premiums on litigation expenses," said Rataj.

66 NAMIC member companies write 40 percent of the homeowners insurance and 31 percent of the automobile insurance in Alaska.

In essence, HB 350, Unfair Claim Settlement Practices, would:

• allow claimants to file a private cause of action against an insurance carrier for an alleged claim settlement practices violation;
• create a system of penalties to be assessed against insurers;
• allow for the imposition of punitive damages; and
• would repeal current state law that does not allow the director to assess a penalty or fine for a "single act" violation of the Unfair Claim Settlement Practices Act.

In NAMIC's letter of opposition, Rataj argued, "Creating a private cause of action is unlikely to have any meaningful impact upon on how insurance carriers adjust and settle insurance claims. The state's Department of Insurance is already empowered to use a wealth of different regulatory sanctions to discipline carriers that do not comply with state insurance law. Thus, HB 350 is unlikely to do anything other than increase the earnings of trial lawyers, who will now have another "procedural chip" for negotiating settlements, i.e. threaten a punitive damages lawsuit to secure a larger settlement."

According to Rataj, "The vast majority of states in the country have delegated the sole responsibility for evaluating, investigating and remedying consumer complaints about unfair claim settlement practices to the state's Department of Insurance. This approach is reasonable, cost-effective and consistent with the regulatory function of the department."

"This misuse of the legal process could clutter the trial dockets of the state courts and adversely impact the judicial system's ability to timely adjudicate meritorious causes of action," said Rataj.

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For further information, contact
Bob Detlefsen, NAMIC
(317) 875-5250 Tel
(317) 879-8408 Fax
rdetlefsen@namic.org

Christian J. Rataj
(970) 204-6695 Tel
(970) 377-1360 Fax
crataj@namic.org