Conn. Bill To Ease Bad Faith Suits Stirs Insurers' Opposition

National Underwriter News
February 19, 2009

Insurance interests are lobbying hard against a measure being pushed by trial lawyers and state Attorney General Richard Blumenthal, that would make it easier to sue insurers over claim settlement issues.

The bill, which is backed by the Connecticut Trial Lawyers Association, would remove a provision in the Connecticut Unfair Insurance Practices Act (CUIPA) that requires plaintiffs to prove that the alleged illegal conduct at issue is a general business practice of the carrier.

Rey Becker, vice president of global issues and research for Property Casualty Insurers Association of America (PCI) said in a statement, "There is no indication that there is anything wrong with the current model. This is an effort to increase costs for consumers and divert money to trial lawyers."

There are currently 15 different types of misconduct that the bill (SB763) pertains to and they range from bad faith actions that include failing to promptly settle claims to misrepresenting pertinent facts or insurance policy provisions relating to coverage.

Connecticut's existing law follows the National Association of Insurance Commissioners Unfair Practices Act model that is used in many states. The law requires that the consumer or the Connecticut Insurance Department prove that illegal activities by the insurers are a general business practice, meaning single instances of misdeeds do not necessarily qualify.

Bob Reardon, the Connecticut trial lawyer who drafted the language in the legislation, said in a statement, "This bill is simply about giving the consumer the right to hold someone accountable when there has been wrongdoing. It is no different than holding a building contractor accountable when there has been a mistake made on your home. The problem is under the current law in Connecticut that is not easily done."

The bill has been met with opposition by the nation's top insurance trade groups. The American Insurance Association and National Association of Mutual Insurance Companies joined Property Casualty Insurers Association of America (PCI).

Representatives of the trade groups testified against the bill recently before the Connecticut Insurance Real Estate and Insurance Committee arguing that the legislation would lead to a dramatic increase in insurance litigation and settlement costs and a resulting jump in premium rates.

The trade organizations said that the existing law gives sufficient protection to the consumers and to the insurers. A change in the law, they said, would flood insurers and the state with litigation over indiscretions as trivial as clerical errors.

So far the measure, which is sponsored by the full committee, has not been scheduled for a vote.

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