Following the Washington Senate’s passing of an Insurance Fair Conduct Act, the Property Casualty Insurers Association of America (PCI) has issued a statement voicing its concern that the bill will lead trial attorneys to seek more litigation that could lead to higher insurance costs.
According to the association, the passing of the bill, which is expected to be signed by Gov. Chris Gregoire, will make the legal climate “more hostile.” It said the legislation lowers the threshold for allowing lawsuits against insurers, making even a violation of the Washington Administrative Code an act of bad faith.
Under SB 5726, allowable monetary damages increased, and the law, requires payment of costs and attorneys’ fees, and permits the courts to award triple damages as a punitive measure.
“This so-called Insurance Fair Conduct Act could make Washington among the worst states in the nation for settling insurance claims,” said John Eager, senior director, claims for PCI. “Washington statutes provide broader remedies and damages than most states and under SB 5726, virtually every insurance claim holds the potential to become a ‘bad faith’ lawsuit. Insurers are already required by law to act in good faith in the interest of their policyholders, and severe penalties exist for those who do not. Consumers benefit from the reasonable resolution of disputes – not from windfall recoveries, higher insurance costs and higher fees for attorneys.”
PCI noted that Washington is not alone in grappling with insurance claims issues. It said this year, the trial bar has aggressively pushed an agenda that would encourage more lawsuits and ultimately increase insurance rates for consumers and businesses. The trial bar is supporting bills across the country that would make it easier to bring suits, recover damages and collect more attorneys’ fees, the association stated in a press release. The trial lawyers associations have sought to expand their ability to bring both first- and third-party bad faith suits. PCI indicated it has been involved in fighting against bad faith legislative activity in Maryland, Minnesota, Montana, Oregon and Washington. Other states such as Connecticut, Maine and Vermont also defeated bad faith legislation this year.
As the Montana legislative session draws to a close, legislation that would require insurers to pay attorney’s fees in first- and third- parties bad faith cases has died. However, PCI said the bill (HB 464), which was at the top of the Montana trial lawyers association’s legislative agenda, did not die without a fight. The bill nearly died in a Senate committee with tied vote, the association explained. Upon a second vote, the bill passed out of committee to be defeated on the Senate floor. However, the bill still had some life left and had to undergo two more votes before it ultimately died.
Meanwhile, the Oregon House Committee on Consumer Protection recently heard but took no action on HB 3075, which would allow both first- and third-party lawsuits against insurers for alleged violation of an unfair claims settlement practices standard. “The bill allows personal injury lawyers to sue people who are liable for injuries and accidents, but also to file a second lawsuit against their insurance company for ‘bad faith,'” PCI stated.
“This ‘second lawsuit’ bill would be a disaster for Oregon – just as it was in California for nearly a decade until it was overturned by the courts,” said Kenton Brine PCI’s northwest regional manager. “During those 10 years, personal injury lawsuits nearly doubled, insurance fraud skyrocketed and consumers’ insurance premiums rose dramatically. Oregon doesn’t need this type of legislation that forces most people to pay more for insurance so a few have the opportunity to bring a second lawsuit.”
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