February 2, 2009

BILL WOULD MAKE IT EASIER TO SUE INSURERS FOR UNFAIR CLAIM PRACTICES

Trial lawyers are lobbying for legislation that would make it easier for some Connecticut consumers to sue insurers for unfair claim practices — and potentially collect bigger damages.

Guess how the insurance industry is reacting.

The bill, advocated by the Connecticut Trial Lawyers Association and Attorney General Richard Blumenthal, would allow accident victims to sue a wrongdoer's insurance company under the Connecticut Unfair Insurance Practices Act (CUIPA).

Only the insurance commissioner and attorney general are now able to bring an action under that law, said Joel T. Faxon, a lawyer with Stratton Faxon in New Haven.

The bill also would remove a phrase from the law that defines a violation as something an insurer does wrong "with such frequency as to indicate a general business practice." Removing the phrase would benefit consumers because it is nearly impossible for a consumer to show such a pattern, lawyers said.

Changing the law would encourage insurers to resolve claims more fairly and quickly instead of forcing people to sue, clogging the court system and costing taxpayers more money, lawyers say.

Consumers "are very tired of big business treating them poorly. People want to be able to assert their rights," said Robert I. Reardon Jr., president of The Reardon Law Firm in New London and a past president of the trial lawyers association.

Insurance trade groups, however, warn that the bill, SB 763, aired Tuesday in the legislature's insurance and real estate committee, would result in more litigation, force insurers to settle unsubstantiated claims and drive up premiums.

"Bad, bad, bad bill. It ought to die," Susan Giacalone, counsel at the Insurance Association of Connecticut, said in an interview. "It's turning the CUIPA statute on its head to the detriment of consumers. It opens up the floodgates to litigation."

Trial lawyers disagreed.Giacalone noted that a successful CUIPA case could be used to allege a violation of another law, the Connecticut Unfair Trade Practices Act, which makes it possible to collect double or triple damages. Also, the bill would allow a court to award punitive damages for a CUIPA violation.

Current law favors the industry and "raises the cost of seeking redress and discourages anyone from seeking relief," Blumenthal said. "It's a testament to the political sway of the insurance industry. There's no rational or policy reason for it."