Insurers Seek Help On Class-Actions

Insurance groups are working on ways to counter the growing number of class-action lawsuits and are asking the National Association of Insurance Commissioners to help them.

During the NAIC's recent spring meeting here in Reno, Nev., state regulators were asked to establish a mechanism that would facilitate the NAICs filing of amicus, or “friend of the court” briefs in cases that involved insurance.

The growth in class-action cases, according to David Snyder, assistant general counsel with the American Insurance Association in Washington, is undercutting the predictability of the insurance business. Moreover, he said it is important for regulators to protect state regulation from the effects of class-action litigation.

Insurers bear some responsibility for the growth in class-action suits, Larry Mirel, insurance commissioner for the District of Columbia, told insurers. “You settle [class-action suits] for millions of dollars and feed this frenzy,” he said.

During the discussion that took place at the NAIC/Industry liaison committee, Ohio Insurance Director Lee Covington noted that “class-action suits can be a vehicle to right legitimate wrongs.”

Mr. Covington said that in meetings with insurance company chief executive officers, the Ohio department has posed the question of what company concerns kept them up at night and was told that class-action litigation was a major worry.

Philip Stano, a partner with the law firm of Jorden Burt in Washington, said plaintiffs in a current class-action suit in New Mexico are claiming that 90 percent of the policy forms filed with the department are defective. He recommended that boilerplate protections against such actions be included in any model NAIC legislation.

Consumer advocates asserted that class-action suits can play a valid role in protecting consumers. Class-actions serve a public-policy purpose, and “state officials should not be throwing up firewalls” between parties that are suing and potential redress, said Kevin Hennosy, publisher of SpreadtheRisk.org in Kansas City, Mo.

Class-actions can reveal problems that are not exposed through traditional market conduct resources, said Jeff Williams, a representative of the Legal Aid Society of Western Missouri, in Kansas City.

This is more so, he said, given the possibility of less front-end regulation and uncertain back-end regulation. (The Kansas City, Mo.-based NAIC is considering easing product filing rules with the promise of more back-end regulation if problems with a filed product arise.)

However, Mr. Williams said that if class-action cases result in settlements in which plaintiffs do not see awards because of attorney fees, then that is “highly problematic.” During the industry/liaison meeting, a settlement was discussed in which legal fees left plaintiffs with no settlement money to share.

Jim Connolly is a senior editor with NU's Life & Health/Financial Services edition.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, April 8, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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Insurers Seek Help On Class-Actions

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