Multi-State Class Actions Could Infringe on State Regulators’ Authority, Interfere with Claims Adjudication

March 10, 2006

The National Association of Mutual Insurance Companies (NAMIC) has joined other members of the insurance industry in filing an Amici Curiae brief involving a multi-state class action appeal currently before the Washington State Supreme Court.

The friend of the court brief supports a petition for discretionary review in Laughlin v. Allstate Insurance Co.

“NAMIC is participating in this appeal because one state court should not have the authority to interfere with another state’s regulation of its insurance industry or the adjudication of state specific insurance claims,” stated NAMIC State Affairs Manager Christian John Rataj.

Laughlin, a Washington resident, filed suit in Washington against Allstate pertaining to a contract interpretation dispute relating to an underinsured motorists coverage provision. Plaintiffs from 19 different states petitioned the trial court to certify a multi-state class action. The insurance carrier opposed the class certification.

The insurance carrier argued that the multi-state class action did not meet the tests for certification. Specifically, the differences in insurance laws and contract laws in the various 19 states prevent the class from being certifiable pursuant to the statutory requirements of “commonality” and “predominance” between and among the insurance claims, it said.

The trial court rejected the insurance carrier’s arguments and certified the class. The insurer then sought discretionary review by the Court of Appeals.The Court of Appeals granted review of only the “predominance” issue and affirmed the trial court’s ruling. The insurance carrier then filed a petition for discretionary review with the State Supreme Court.

According to Rataj, “Laughlin is important to the insurance industry because it raises fundamental legal questions about the constitutional principle of Federalism and the doctrine of states’ rights … Insurance consumers benefit from local regulation and adjudication of state insurance and contract law, and this case poses a serious threat to a state’s authority over its local insurance industry.”

NAMIC and the other Amici Curiae parties argued that the trial court’s granting of a multi-state class action:

1) raises significant constitutional due process of law, and commerce clause questions;

2) is inconsistent with the constitutional principle of “Comity” (the doctrine that one state should respect the legal decisions and executive actions of another state); and

3) would act as an extra-territorial regulation of the department of insurance in the 19 class action states involved in the case.

“NAMIC has been a staunch advocate of state regulation of insurance because state regulators are members of their local community and have better experiential knowledge of the local insurance issues germane to the citizens of their particular state,” Rataj said.

The Amici Curiae brief can be viewed at: http://www.namic.org/pdf/060309WashLaughlinAmiciBrief.pdf .

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