NAIC Urged To Act To Discourage Early Class Settlements By Insurers
The National Association of Insurance Commissioners can and should take decisive steps to discourage insurers from settling class actions too soon, according to an industry insider.
At least one regulatory member of the NAIC/Industry Liaison Committee criticized insurers for the early settling of class actions that may pose a threat to the authority of insurance regulators. (See NU, March 25.)
But David Snyder, assistant general counsel for the American Insurance Association, Washington, D.C., told National Underwriter the criticism ignores certain realities facing insurers in class actions.
First, insurers could be accused of acting in bad faith for not settling an expensive class action lawsuit, he indicated. This could make the insurer liable to the policyholder for damages.
Second, the punitive damages exposure in a class action can be staggering, Snyder said.
He suggested if the NAIC spent as much energy on dealing with class actions as it does on other matters, such as optional federal chartering, the threat from these cases and the frequency of early settlements would be reduced.