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Legislator Group Approves Measure to Strengthen State Regulation

ALEC Model Act Would Halt ‘Judicial Usurpation’ of Insurance Regulatory Authority

INDIANAPOLIS (April 24, 2006)—A key committee of the American Legislative Exchange Council (ALEC) has approved a model law designed to limit the ability of trial lawyers to file class action lawsuits that undermine the authority of state regulatory agencies. ALEC is the nation’s largest nonpartisan individual membership association of state legislators, with more than 2,400 members nationwide.

The model law was introduced by the National Association of Mutual Insurance Companies (NAMIC) at ALEC’s annual Spring Task Force Summit in Coeur d’Alene, Idaho. ALEC’s Civil Justice Task Force voted to approve the measure on Friday. The ALEC Board of Directors will vote on whether to formally adopt the measure at its annual meeting in July.

The model would require trial judges to determine whether the subject of a proposed class action lawsuit is within the jurisdiction of a state agency. If it is, the judge would be prohibited from certifying the class. The law would require judges to explain their decisions in writing, and would allow either party to immediately appeal the certification ruling to a higher court.

“Regulatory class actions—in which plaintiff attorneys seek not only to win large monetary awards, but also to alter existing regulatory regimes—empower private attorneys with personal agendas to serve as de facto regulators,” Robert Detlefsen, NAMIC’s director of public policy, told the task force as it prepared to vote on the proposed model act. “By ensuring that regulatory authority that is statutorily invested in administrative agencies will not be usurped by courts, the ‘Regulatory Class Action Reform Act’ upholds democratic principles and promotes public accountability,” Detlefsen said. He cited the Avery v. State Farm case as an example of the kind of class action lawsuit that seeks to overturn regulatory decisions made by state legislatures and insurance departments.

Detlefsen stressed that the model act would apply to any proposed class action involving a regulated business firm and a state agency with appropriate jurisdiction. However, because insurance is among the most heavily regulated industries in the United States, with most regulation administered by state insurance departments, the model would have special significance for the regulation of insurance.

“It would strengthen the system of state insurance regulation, provide consumers with a more efficient and less costly means of dispute resolution, and help insurers predict future loss costs more accurately by allowing them to rely on the judgment of knowledgeable insurance regulators who are ultimately accountable to the public,” Detlefsen added. “The class action litigation mechanism has none of these features, and is too often driven by self-serving trial lawyers and ideologues.”

NAMIC intends to discuss the ALEC model with members of the National Association of Insurance Commissioners’ Class Action Working Group at the NAIC’s summer meeting next June. Detlefsen noted that former District of Columbia Commissioner Lawrence Mirel, who chaired the working group until his resignation last year, was a strong proponent of the concept embodied by the ALEC model law. “We hope the NAIC will support NAMIC’s effort to move this measure forward in the states,” Detlefsen said.

The “Regulatory Class Action Reform Act” can be viewed at NAMIC Online. An article written by Detlefsen that explains the need for such a measure was published in the Fall 2005 edition of the Journal of Insurance Regulation. A copy is at www. namic.org/pdf/DetlefsenJIRArticle.pdf.

More information about the American Legislative Exchange Council is available at www.alec.org.


For further information, contact
Rick Nelson, APR, CAE
(317) 875-5250 Tel
(317) 879-8408 Fax
rnelson@namic.org

Robert Detlefsen, Ph.D
(317) 876-4268 Tel
(317) 879-8408 Fax
rdetlefsen@namic.org

Posted: Monday, April 24, 2006 12:00:00 AM. Modified: Tuesday, April 25, 2006 9:39:03 AM.

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