Insurers Dig Deep And Lose Big On Washington's Referendum 67

Insurers Dig Deep And Lose Big On Washington's Referendum 67

Washington voters on Nov. 6 approved Referendum 67--a measure that allows successful plaintiffs in insurance bad faith cases to receive treble damages.

Battle lines have been drawn between insurance companies and the Washington State Trial Lawyers Association ever since Gov. Chris Gregoire signed the Insurance Fair Conduct Act into law on May 15. By September, insurers had amassed a war chest totaling $5.8 million, but that amount climbed to $9.6 million before yesterday's election. More than 60 percent of those funds were contributed by the four biggest players in Washington's insurance market--Farmers Group, Inc. (Liberty Mutual), State Farm, Safeco and Allstate.

The Reject R-67 campaign conducted a media blitz that began in August and touted an industry study claiming that the costs associated with the Insurance Fair Conduct Act would be passed on to consumers in the form of $650 million in rate increases. In spite of the industry's take-no-prisoner's approach voters approved the law by a margin of 56.9 to 43.1 percent.

Interesting to note are some additional statistics. The Seattle-Post Intelligencer reported Oct. 12 that the insurers generating the most customer complaint filings with Washington Insurance Commissioner Mike Kreidler's office in 2006 were (you guessed it) Farmers Group Inc. (Liberty Mutual), State Farm, Safeco and Allstate. This is hardly surprising when one also considers that these insurers collectively control almost 40 percent of Washington's auto and homeowners insurance market.

Here's another interesting fact. Sen. Brian Weinstein (D-Mercer Island), one of the prime sponsors of this controversial insurance legislation, is a former trial lawyer. And the trial bar is supporting bills across the country that would make it easier to bring suits, recover damages and collect more attorneys' fees from insurers. A slew of other states--including Connecticut, Maine, Maryland, Minnesota, Montana, Oregon and Vermont--are working to expand the insurance consumer's litigation arsenal.

Insurers are vowing to overturn the new law. In a statement released this morning, Christian Rataj, northwestern state affairs manager for the national Association of Mutual Insurance Companies, said "this is an unfair and costly law driven by the trial bar simply to increase the number of lawsuits filed. NAMIC will work with lawmakers and other stakeholders to repeal this law in the next legislative session."

According to the Property Casualty Insurance Association, the fight over Washington's treble damage law is only one battle in an ongoing controversy of national proportions and insurers appear ready to "go to the mattresses."

What do you think? Do consumers really need a treble damage stick to protect themselves from alleged unscrupulous claims practices or will the new law allow every insurance claim, regardless of merit, to become a bad faith lawsuit?