A key committee of the American Legislative Exchange Council (ALEC), a nonpartisan association of state legislators with 2,400 members, has approved a model law designed to limit the ability of trial lawyers to file class-action lawsuits that undermine the authority of state regulatory agencies.

The model law was introduced by the National Association of Mutual Insurance Companies (NAMIC) at ALEC's annual summit in Coeur d'Alene, Idaho. The model would require trial judges to determine whether the subject of a proposed class-action lawsuit is within the jurisdiction of a state agency. If it is, the judge would be prohibited from certifying the class. The law would require judges to explain their decisions in writing, and would allow either party to immediately appeal the certification ruling to a higher court.

“Regulatory class actions — in which plaintiff attorneys seek not only to win large monetary awards, but also to alter existing regulatory regimes — empower private attorneys with personal agendas to serve as de facto regulators,” said Robert Detlefsen, NAMIC's director of public policy. He cited the Avery v. State Farm case as an example of the kind of class-action lawsuit that seeks to overturn regulatory decisions made by state legislatures and insurance departments.

Detlefsen stressed that the model act would apply to any proposed class action involving a regulated business firm and a state agency with appropriate jurisdiction. However, because insurance is among the most heavily regulated industries in the United States, with most regulation administered by state insurance departments, the model would have special significance for the regulation of insurance.

“It would strengthen the system of state insurance regulation, provide consumers with a more efficient and less costly means of dispute resolution, and help insurers predict future loss costs more accurately by allowing them to rely on the judgment of knowledgeable insurance regulators who are ultimately accountable to the public,” Detlefsen added. “The class-action litigation mechanism has none of these features, and is too often driven by self-serving trial lawyers and ideologues.”

Special Reports /

Class-Action Certifications May Be Restricted

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