NAMIC Denounces Insurance Regulation by the Courts

August 13, 2003

Confidence in the reliability of the law is shattered whenever a court pre-empts the authority of state insurance regulators, according to a new public policy paper released by the National Association of Mutual Insurance Companies (NAMIC).

NAMIC’s paper, The Damaging Effect of Regulation of Insurance by the Courts, examines what is an insurance market and why this is important. The paper then describes the over-reaching by the courts and how some verdicts have undercut and impacted the nation’s insurance regulators—the very officials elected or appointed to oversee the business of insurance in their respective states. The paper also proposes a solution to restore the historical balance of government.

The “Fair Notice and Market Stability Model Act” is the centerpiece of the public policy paper and advocacy campaign intended to cure the problems cited above without hindering access to the courts by people with legitimate claims.

“If insurers can’t rely on regulations, and can be held liable for legal conduct, laws and regulations become meaningless, markets are destabilized, and insurance availability will be damaged,” said Roger Schmelzer, NAMIC’s vice president-regulatory affairs.

The “Fair Notice and Market Stability Model Act” would:

·Eliminate uncertainty by requiring regulators to immediately issue new regulations when a regulation is stricken down by a court, or an emergency regulation when a statute is stricken down and the legislature is not in session.

·Provide insurers with a defense against damages when their conduct was compliant with a statute, regulation, finding, or order.

·Provide insurers with a defense when their actions comply with an emergency regulation.

·Strictly limit the impact of a court’s ruling to the state in question.

This model act will reportedly restore an insurance company’s ability to rely on the law. It will in no way interfere with access to the courts for those who have been injured.

NAMIC said it will make The Damaging Effect of Regulation of Insurance by the Courts available to more than 1,300 member companies, selected members of Congress, state legislators, state insurance commissioners, federal regulators, academics, judicial policymakers, and the media.

The paper was written by Peter Bisbecos and Victor Schwartz. Schwartz is the co-author of the leading law school text on torts entitled Prosser, Wade and Schwartz’s Cases and Materials on Torts (10th ed. 2000). Bisbecos is NAMIC’s Director of Legal and
Regulatory Affairs.

The full text of the paper can be viewed at NAMIC’s Web site, NAMIC Online at

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