Montana Commissioner’s Letter To Trial Lawyers Raises Industry Ire

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A letter from Montana Commissioner John Morrison to the insurance segment of the American Trial Lawyers Association soliciting funds to expunge campaign debt has insurers protesting what they say is a conflict of interest.

Additionally, a consumer advocate is saying that a point in the letter about the close ties state insurance commissioners have historically had with the industry should move the National Association of Insurance Commissioners to take action to ensure that conflicts of interest are avoided.

Insurers are already talking to insurance commissioners about their concerns over the letter and say they will raise the issue at the winter meeting this week.

The Oct. 2, 2001 letter from Morrison asks for help in erasing debt so that “I can get on with my fight to protect consumers–all across the country.”

Morrison notes in the letter that “historically, many insurance commissioners and the NAIC have had close ties with the industry.” He also notes that “Today, I am the only consumer trial lawyer among the 50 plus commissioners.”

Morrison outlines regulatory consumer initiatives that he is working on at the NAIC. Those initiatives include the creation of a consumer protection working group that Morrison chairs.

Additionally, Morrison notes an NAIC complaint database system that is scheduled to become operational on December 1. The database shows the number of complaints against each insurer, classified by type, and information about the insurer. In a later phase of the initiative, Morrison writes, an attempt will be made to make individual complaints available.

In an interview with National Underwriter, Morrison says the letter does not present a conflict of interest because “I do not regulate trial lawyers.”

To date, he says the amount of money raised by the letter–sent to the several hundred national members of the insurance segment of the ATLA–has been under $2,000. Morrison says his campaign debt stands at about $35,000.

The reason he approached lawyers nationally, according to Morrison, is that there is a $400 contribution limit per person in Montana and given the small amount, it was necessary to raise money outside the state.

When asked if he would return the contributions, he said “absolutely not.” He noted fundraisers thrown by the insurance industry for commissioners both at and outside NAIC quarterly meetings.

Morrison says it is “important for insurance commissioners to make sure that they are not overly influenced by the industry.” However, he also noted that commissioners also need to listen to the industry.

He said the overwhelming majority of attendees at NAIC quarterly meetings are industry people compared with a handful of consumer advocates.

During his tenure as insurance commissioner, which started with his election in November 2000, Morrison says he has “not seen anything at the NAIC in which any commissioner was unduly influenced by a particular interest. I have not seen anything to suggest that anyone is beholden to anyone else.”

Morrison adds that he has abided by Montana law and has not taken contributions from any corporation. He has also not taken any contribution from a political PAC, he adds. However, he says he may have received contributions from certain agents.

He notes that he will continue to pursue consumer initiatives as well as work for the industry. Morrison notes his efforts to get federal assistance for insurers in the wake of the events of Sept. 11.

Kevin Hennosy, chairman of SpreadtheRisk.org in Kansas City, Mo., and a consumer advocate, says the issue underscores the need to publicly finance campaigns. He notes that Morrison has no regulatory authority over trial lawyers.

Hennosy concurs that fundraising has gone on at quarterly meetings and says the NAIC should adopt a policy statement at its executive and plenary sessions that “bans raising campaign funds at NAIC meetings.

“Commissioners know this kind of thing goes on, it is not good, and know what to do to stop it. They have decided to turn a blind eye to it,” Hennosy says.

Incoming NAIC President Terri Vaughan says she has heard this kind of criticism aired since she became a commissioner in 1994. It is important to note, she says, that commissioners are chosen by their states’ own constitutional processes and if commissioners are perceived as being too tied to the industry, then it is up to individual state governments to address any concerns.

Vaughan adds that when the matter was discussed in 1995, it was decided that it was not appropriate for the NAIC to prevent fundraising because it is a state issue. She says if the issue is raised, she would welcome the opportunity to revisit it.

Insurers, at press time, are planning to express their own concerns in a letter to Vaughan. They note concerns over plans to disclose individual consumer complaints to the public. The letter says that although the industry supports making “complaint ratio” information available, it does not believe customers personal information in complaints should be disclosed.

Insurers proceeded in good faith in working on a database that would provide a level of information to consumers, according to Paul Blume, vice president with the American Insurance Association in Washington. But the letter suggests that the database could become a “roadmap to trial lawyers,” he continues.

He says he is concerned that “litigation could become the regulator of insurance.” Additionally, he notes that revealing private consumer information in complaints would cause difficulty for insurers.

On the issue of fundraising, Blume agrees that insurers and insurance groups do raise money for elected commissioner candidates they support. Attorneys raise money for candidates they support.

“However, I do not recall a time when an insurer or insurance group has used an NAIC policy and/or position as a means of raising money for a commissioner candidate. That is what is troubling about the Morrison letter to ATLA letter.”

Jack Dolan, a spokesman for the American Council of Life Insurers in Washington, says “the ACLI frequently finds itself at odds with the trial bar. Still, it remains to be seen what impact it will have on Mr. Morrison, in his role as the insurance industry’s regulator.”

Roger Schmelzer, vice president-regulatory affairs with the National Association of Mutual Insurance Companies in Indianapolis, says that “the issue is what is going to be done with the database. Is it going to undermine state regulation or help consumers?”

Morrison’s letter underscores concerns that the database be properly used and that individual complaints not be used as a source for trial lawyers to create a plaintiffs’ class.

Among the points that insurers hope to address with regulators, according to Schmelzer, are a company’s right to respond to a complaint and make sure that there is standardization in the information reported.


Reproduced from National Underwriter Life & Health/Financial Services Edition, December 10, 2001. Copyright 2001 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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