Oregon Bill Could Drive Up Insurance Costs, Insurers Claim

March 3, 2009

The American Insurance Association (AIA), National Association of Mutual Insurance Companies (NAMIC) and Property Casualty Insurers Association of America (PCI) are reaching out to Oregon legislators to highlight what it calls the “dangers” of HB 2791, which the associaitons believe would “clog courtrooms with frivolous lawsuits and drive up insurance costs by layering a new private right-of-action on top of the existing enforcement mechanism for the unfair claims practice statute.”

The bill would establish a private right-of-action against insurers by a person who suffers an injury or loss as a result of an insurer’s violation of sections of the state’s Consumer Protection Act. AIA, NAMIC and PCI refer to such legislation as “second lawsuit” laws.

After an auto accident, a personal injury lawsuit is common as injured accident victims seek to recover medical payments, lost wages, damages to their vehicles and attorney fees and costs. But when personal injury lawyers can also sue the defendant’s insurance company for “bad faith,” the result is that nearly every personal injury lawsuit spawns a second, bad faith lawsuit, the associations claim.

“HB 2791 is an expensive, anti-consumer solution to a nonexistent problem,” said Ken Gibson, AIA vice president, western region.

“HB 2791, the so called ‘Bad Faith’ law should really be retitled the ‘Bad Public Policy’ law, because it creates an unnecessary legal cause of action and is rife with adverse unintended consequences and insurance premium cost-drivers for consumers: it will hinder insurers’ in their ability to investigate and prevent insurance fraud; encourage and reward the filing of frivolous lawsuits; and unreasonably drive up the cost of defending against and settling insurance claims,” said Christian J. Rataj, NAMIC western region state affairs manager.

Kenton Brine, PCI Northwest regional manager, said, “We’ve witnessed an unprecedented explosion of potential litigation in Washington thanks to the bad faith law. And in Oregon — where a projected $3 billion budget deficit is forcing the state’s courtrooms to close down for a day or more each week — neither the justice system nor Oregon taxpayers can afford thousands of new lawsuits that only enrich personal injury lawyers.”

Sources: AIA, NAMIC, PCI

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