Insurance News Net – March 15, 2013
The Property Casualty Insurers Association of America issued the following news release:
Lessons learned in other states demonstrates that expansion of bad faith laws leads to increased costs for consumers, businesses and court systems. Oregon lawmakers should avoid importing several bad faith laws from other states that have only led to increased litigation and higher consumer costs, said the Property Casualty Insurers Association of America (PCI).
“Oregon lawmakers should pay close attention to the cost increases resulting from expansion of bad faith laws in California, Florida, and Washington,” said Kenton Brine, PCI assistant vice president. “Conversely, a study by the West Virginia Insurance Commissioner found that insurers operating in states allowing third-party bad faith lawsuits face bodily injury claim costs that are 25 percent higher than non-third-party tort states. This led to the West Virginia Legislature eliminating third-party bad faith lawsuits in 2005, which resulted in a $200 million savings in loss costs over the next five years.”
A new PCI report provided findings from different studies examining the impacts on litigation and costs following enactment of bad faith statutes. For example:
* After Washington enacted a first-party bad faith law in 2007, within slightly more than a year 1,000 notices of intent to file a lawsuit had been filed with the Office of the Insurance Commissioner. Two years later, 1400 more notices were filed. Washington’s four-year average auto personal injury protection claim cost increased more than five percentage points faster after enactment of the new law (25.2% post law vs. 19.7% prior). During the first two years of Washington’s first-party bad faith law, the homeowners loss costs rose an additional 21.9 percent compared to other states, costing an additional $190 million in losses for Washington residents.
* After the Royal Globe court decision in California implemented a bad faith doctrine, the annual bodily injury insurance premiums increased between 32 and 53 percent. The elimination of Royal Globe in 1988 reversed this trend and the average bodily injury payment in California fell relative to that in 29 out of 31 other tort states.
* Florida’s statutory third-party bad faith law caused bodily injury loss costs to be 30.2 percent higher.
“Oregon lawmakers have a clear choice. They can learn from the increased litigation, higher court costs and greater insurance premiums that resulted from increased bad faith litigation in other states or they can roll the dice and let Oregon consumers pay the price,” said Brine. “Oregon already has strong unfair claims handling laws and regulations. Given the tenuous economy, now is not the time to approve new laws that are proven to increase costs for consumers and businesses.”
To view the report click here:
http://www.pciaa.net/web/sitehome.nsf/lcpublic/638/$file/Oregon_BadFaith__031
via Insurance News – Industry Report Shows Ore. Proposals Could Cost $200M.