NAMIC Renews Call to Eliminate Regulation By Litigation

June 23, 2004

“Lawmakers, regulators and courts must ensure that markets function freely and that laws governing those markets are reliable,” declared National Association of Mutual Insurance Companies (NAMIC) Legal and Regulatory Affairs Director, Peter Bisbecos this morning during a briefing at the Washington Legal Foundation’s headquarters in Washington, D.C.

Bisbecos’ remarks were part of a panel that also featured the Hon. Randall T. Shepard, Chief Justice of Indiana, and District of Columbia Insurance and Securities Regulation Commissioner, Larry Mirel.

Chief Justice Shepard recently authored a law review article, “Why the Courts Matter in Building a Strong Economy,” about how courts can help the conduct of business in America. Commissioner Mirel cited lawsuits against the insurance industry to make the broader point that litigation is a poor and intrusive way of regulating an industry.

Echoing themes initially outlined in The Damaging Effect of Regulation on Insurance by the Courts, a NAMIC public policy paper released last year, Bisbecos asserted that because courts are insulated from public debate, they “may not engage in the kinds of public debate and interaction necessary in making public policy.” When some courts have strayed from legislatively-mandated policies, what results, according to Bisbecos are public policy decisions “imposed on people who are not parties to the litigation without notice … in some instances state officials charged with enforcing the law were not even parties to the lawsuit that overruled their regulatory powers.”

Bisbecos said that courts have had the effect of nullifying the oversight authority of state insurance regulators across the country, which erodes the integrity of state insurance regulation and creates uncertainties for insurers doing business across state lines.

“When courts are not faithful to the public policy decisions made by other branches of government, their intervention creates a void, an absence of law for which there is currently no solution,” Bisbecos said.

To address this problem, the Board of Directors of the American Legislative Exchange Council (ALEC) recently adopted “The Fair Notice and Market Stability Act,” model legislation proposed
by NAMIC. The model provides that in the event of an out-of-state court ruling applicable across the country, insurers, and other regulated companies would be allowed to rely on their home state laws without denying plaintiffs access to the courts.

NAMIC argued for adoption of the “Fair Notice and Market Stability Act” in its public policy paper, The Damaging Effect of Regulation of Insurance by the Courts. The paper, containing the full text of the act, can be read at NAMIC’s Web site at:

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