NU Online News Service, July 29, 1:50 p.m. EDT

The majority of the American public is not overly supportive of legislation allowing policyholders to file first-party bad-faith lawsuits, the Insurance Research Council (IRC) said in a new report.

IRC conducted the study as several states are seeking to enact legislation that would allow policyholders to file lawsuits alleging their insurer acted in "bad faith" when settling claims.

In addition to authorizing these lawsuits, IRC said some of the proposed legislation would allow courts to impose punitive damages and other costs against the insurer when such lawsuits are successful.

According to the report, Washington, Maryland and Minnesota recently enacted laws that allow first-party bad-faith lawsuits.

At least 12 additional states--such as New Jersey and Michigan--as well as the District of Columbia, considered such legislation in 2009, the report noted.

IRC's "Public Attitude Monitor 2010: First-Party Bad-Faith Legislation" report found that 26 percent of respondents said that allowing such lawsuits is a "poor idea," while 31 percent said it is a "fair idea."

In contrast, twenty-two percent said allowing the lawsuits is a "good idea" and twelve percent categorized it as an "excellent idea."

The report noted the similarity between these findings and opinions about third-party lawsuits reported in the IRC's 2000 survey, in which 56 percent of respondents said such lawsuits would be a "fair" or "poor" idea.

When asked what the possible effects of allowing first-party bad-faith lawsuits would be, 25 percent of respondents noted "higher insurance costs," 14 percent said "more frivolous lawsuits," and 7 percent said "making insurance companies more accountable."

IRC noted that all responses were volunteered, and mainly reflected whether or not respondents supported legislation for first-party bad-faith lawsuits.

In addition, the report found that 71 percent of respondents said they are either "not at all willing" or "not very willing" to pay more for insurance to allow such lawsuits.

In contrast, 22 percent said they are "somewhat willing" to pay more, while only four percent said they are "very willing."

The study was conducted for the IRC by the market research firm Harris Interactive from December 15, 2009 through January 6, 2010. The firm interviewed 1,614 adults countrywide, age 18 and over.

A public policy paper by the National Association of Mutual Insurance Companies states that at least 25 states recognize the right to file a private cause of action alleging bad faith.

Special Reports /

Americans Lukewarm On Filing Bad Faith Suits Against Insurers

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