A new study released by the Insurance Research Council (IRC) has found a Washington law increased homeowners insurance costs by $190 million.
The IRC study examined the impact of the Insurance Fair Conduct Act (IFCA), enacted by the Washington State Legislature, then upheld at the ballot by Referendum 67 in 2007. The study compared claim frequency and severity loss trends in Washington with frequency and severity trends in four other states with similar laws. Research found that the Insurance Fair Conduct Act has increased litigation and settlements, resulting in $190 million in higher homeowners insurance costs over two years.
“The facts are in and the bottom line is the law approved in 2007 is leading to more litigation and higher costs for consumers — the very impact insurers, business leaders and liability reform groups predicted,” said Kenton Brine, assistant vice president for the Property Casualty Insurers Association of America (PCI).
“By creating the lowest standard in the country for someone to file a first-party bad faith lawsuit and allowing insurers to be sued for three times the amount of damages, plus attorney fees, the law has led to larger payouts for personal injury lawyers and an increase in costs borne by insurers and policyholders. The threat of costly litigation and exposure to court-awarded treble damages and attorney fees has forced insurers to settle more claims with little investigation or pay claims in excess of their true value. That threat – and those costs – show no sign of relenting in 2011 or beyond,” PCI said in a statement.
Under the law, plaintiffs are required to notify the Washington Office of Insurance Commissioner not more than 20 days before a bad faith lawsuit may be filed. Since the law took effect in December 2007, thousands of new lawsuit notices have been filed – the chart tracking the notices is over 400 pages long, PCI said. More than 150 lawsuit notices have been filed in the first three months of 2011 alone.
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