Insurers Land Big Senate Win on Class Action Rules

The U.S. Senate rejected what could have been damaging amendments and approved by a vote of 72-26 historic changes to the way class action lawsuits are handled.

The vote almost assures enactment since the Senate measure, the Class Action Fairness Act, is similar to bills previously passed by the House of Representatives on several occasions. President Bush has also backed similar reforms. House Majority Leader Tom DeLay (R-Texas) said he planned to send the bill to the House floor the week of Feb. 14.

Supporters, including the insurance industry, contend that the bill will limit lawsuit abuse, which they maintain drives up the costs of doing business. Opponents had argued that the measure unfairly restricts the ability of consumers to sue.

The bill’s key provision redirects many class action lawsuits from state courts into the federal court system. It is intended to curtail venue shopping, whereby lawyers bring large national class action suits in more favorable state courts. The bill establishes federal authority over interstate cases in which plaintiffs’ claims are over $5 million in the aggregate, while maintaining exclusive state authority over strictly intrastate cases.

The bill passed with help from every Republican except two who did not vote, along with 18 Democrats and the Senate’s lone independent, James M. Jeffords of Vermont.

Insurance trade groups praised the Senate action. Melissa Shelk, vice president of federal affairs for the Washington, D.C.-based American Insurance Association, called it a “tremendous, meaningful step forward in the fight to tame an out-of-control court system.” Previous class action reform efforts in the Senate have come close, but fallen just short of passage.

While the final vote on S. 5 showed bipartisan support for the legislation, “it also is very important to note that this bipartisan cooperation resulted in proponents’ ability to successfully fight off amendments to the bill. Sending a clean bill to the House is critical for swift action and success on that side of the Hill,” Shelk said.

The Hartford Financial Services Group Inc. also applauded the vote, noting that Connecticut’s two Senators, Christopher Dodd and Joseph Lieberman, helped steer the most recent version of this bill through the Senate.

“Today is an important day for all Americans, for the companies who make products for them and for the insurers whose policies protect those companies,” said Ramani Ayer, Hartford’s chairman and CEO.

Republicans hope the Senate success creates momentum for passage of other tort reforms, such as a cap on jury awards for pain and suffering in medical malpractice cases.