Industry Associations Urge Wash. Governor to Veto Fair Conduct Act

Insurance industry associations are continuing to fight Washington’s Insurance Fair Conduct Act, asking Gov. Chris Gregoire to veto the legislation.

ESSB 5726 is designed to provide insurance consumers with additional remedies for what they perceive to be unwarranted claim denials. If signed, the law would allowable monetary damages to increase, and the law would require payment of costs and attorneys’ fees, and permit the courts to award triple damages as a punitive measure.

The National Association of Mutual Insurance Companies’ state affairs manager for the West, Christian J. Rataj, said ESSB 5726 is unnecessary and would be detrimental to consumers and insurers in Washington, because there is a greater incentive to litigate. Rataj also suggested the legislation could interfered with the regulation of the insurance marketplace, creating an economic burden and staffing resource problems for the office.

“Washington state law already provides insureds with a number of effective legal and regulatory remedies to address their claims adjusting disputes,” NAMIC said in a letter to the governor. “Additionally, NAMIC fears that ESSB 5726 will encourage and facilitate the filing of legally frivolous and factually groundless lawsuits, which will needlessly drive up insurance defense costs for carriers and ultimately lead to higher insurance rates for consumers.”

Rataj said the legislation is unbalanced. “Plaintiffs should be provided appropriate legal remedies to protect them against outrageous claims adjusting practices, but not at the expense of denying defendants procedural safeguards necessary to protect them from frivolous lawsuits.”

“There is no evidence to support an argument that insurance consumers are being mistreated by their insurance carriers in the claims adjusting process, and, in fact, the contrary is evident,” he continued in his letter. “ESSB 5726 is nothing more than a potentially damaging solution to a non-existent problem.”

Source: NAMIC, Associated Press