Insurance Associations Urge Wash. Governor to Veto Fair Conduct Act

The American Insurance Association, National Association of Mutual Insurance Companies and Property Casualty Insurers Association of America are urging Washington Gov. Christine Gregoire to veto SB 5726. Dubbed the Insurance Fair Conduct Act, the bill recently was passed by legislators and would allowable monetary damages to be increased, require payment of costs and attorneys’ fees, and permit the courts to award triple damages as a punitive measure.

The associations said the legislation is “needless” and “contrary” to one of Gov. Gregoire’s stated priorities to improve Washington’s business climate because they believe it will encourage litigation, with the costs eventually being passed onto consumers.

“SB 5726 is a solution in search of a problem. There is zero evidence that this legislation is needed in the state of Washington,” said Kenton Brine, PCI Northwest regional manager in a statement. “The Department of Insurance has no data indicating that Washington policyholders are being treated unfairly. In fact, statistics from the recent December windstorms demonstrate that 80 percent of the 42,500 claims filed were settled within 90 days resulting in more than $170 million being paid to policyholders, while only 3 consumer complaint files were opened by the Insurance Commissioner’s office.”

“If this bill is signed into law, Washington insurance consumers and small businesses will pay for the increased insurance costs caused by frivolous litigation,” said Christian John Rataj, NAMIC western region state affairs manager. “Current law gives insurance consumers powerful remedies to address unfair claims practices. Washington’s Consumer Protection Act specifically addresses insurance bad faith actions and the Insurance Commissioner has broad authority to take aggressive enforcement action and levy substantial fines.”

“SB 5726 is bad for Washington’s business community. Signature of this bill will put Washington grossly out of step with how insurance claims are handled by the rest of the country,” said Steve Suchil, AIA assistant vice president, Western Region. “This bill would set the lowest standard in the nation for awarding punitive damages. Does Washington want to be known as a state that encourages lawsuits at the expense of companies that do business there and consumers that buy insurance?”

The Washington State Senate approved SB 5726 on a vote of 31 to 18. The bill was sent to Gov. Gregoire. and is awaiting her signature or veto.