By
Washington
Class action lawsuits have steadily weakened the very fabric of state regulation of insurance, says the American Council of Life Insurers, Washington.
ACLI says the life insurance industry has experienced more than a decade of abusive class actions.
In a letter to Sen. Orrin Hatch, R-Utah, in connection with a Senate Judiciary Committee hearing on class action abuse, ACLI says decisions by state judges have national implications for insurers in other states.
The letter was signed by Phil Anderson, senior vice president of government relations, and Kimberly Olson Dorgan, vice president of federal relations.
The letter cites a pending class action in New Mexico as an example of how state regulation might be affected by a single states court.
State courts in New Mexico, ACLI says, are certifying nationwide classes of plaintiffs for the manner in which their premiums are disclosed in their policies.
These cases are being certified, ACLI says, even though state insurance commissioners review and approve the disclosures.
“The result of nationwide regulation through targeted class action litigation has indirectly usurped the role and authority of state commissioners of insurance,” ACLI says.
The issue of class action litigation is controversial enough to have even divided top Senate Democrats.
The split was highlighted during the Judiciary Committees hearing on S. 1712, which would allow defendants in major, national class action lawsuits to have their cases heard in federal courts.
One of the primary sponsors of the legislation, Sen. Herb Kohl, D-Wis., insists that no one can argue that the class action process is not in serious need of reform.
“We have a simple story to tell,” he says. “Consumers are getting the short end of the stick in class action cases, recovering coupons or pocket change, while their lawyers reap millions.”
Kohl says stories of nightmare class action settlements that affect consumers across the country are all too frequent.
He cites one class action lawsuit filed against a video store that produced dollar-off coupons for future video rentals for the plaintiffs, in which the plaintiffs attorney collected $9.5 million.
In another case, Kohl says, a member of a class that technically won a case ended up owing $75 to her lawyers and then had to defend a lawsuit that her lawyers filed against her in state court.
“Under our bill, that will never happen again,” he says.
But Senate Judiciary Committee Chairman Patrick Leahy, D-Ver., says he believes some special interest groups have distorted the state of class action litigation by relying on a few anecdotes.
The availability of class action litigation, Leahy says, allows ordinary people to band together to take on powerful corporations or even their own government.