By

Reno, Nev.

Insurance trade groups are working on ways to counter the growing number of class action suits and are asking the National Association of Insurance Commissioners for help.

During their spring meeting here, commissioners were asked to establish a mechanism that would facilitate the NAICs filing of amicus court briefs in cases that involve insurance issues.

The growth in class action cases, according to David Snyder, assistant general counsel with the American Insurance Association, is undercutting the predictability of the insurance business.

Moreover, it is important for regulators to protect state regulation from the effects of class-action litigation, he said.

Insurers bear some responsibility for the growth in class action suits, Larry Mirel, insurance commissioner for the District of Columbia, said.

“You settle [class action suits] for millions of dollars and feed this frenzy,” he told insurers.

During discussions at the NAIC/Industry liaison committee, Ohio Director Lee Covington noted that “class action suits can be a vehicle to right legitimate wrongs.”

Covington said that in meetings with company CEOs, the Ohio department has posed the question of what company concerns kept them up at night and was told that class-action litigation was a major worry.

Philip Stano, a partner with the law firm of Jorden Burt in Washington, says plaintiffs in a current class action suit in New Mexico are claiming that 90% of the policy forms filed with the department are defective.

He recommended that boilerplate protections against such actions be included in any model legislation developed by the NAIC.

Consumer advocates asserted that class action suits can play a valid role in protecting consumers.

Class actions serve a public policy purpose and “state officials should not be throwing up firewalls” between parties that are suing and potential redress, said Kevin Hennosy, publisher of SpreadtheRisk.org in Kansas City, Mo.

Class actions can expose things that are not exposed through traditional market conduct resources, said Jeff Williams, a representative of the Legal Aid of Western Missouri in Kansas City, Mo.

This is more so, he said, given the possibility of less front-end regulation and uncertain back-end regulation. The NAIC is considering easing product filings with the promise of more back-end regulation if problems with a filed product arise.

However, Williams said that if class action cases result in settlements in which plaintiffs do not see awards because they are used to pay attorneys, then that is “highly problematic.” During the industry/liaison meeting, a settlement was discussed in which legal fees left plaintiffs no settlement money to share.


Reproduced from National Underwriter Life & Health/Financial Services Edition, March 25, 2002. Copyright 2002 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.