Lawmakers Hold Meeting About State's Latest 'Crisis'

The Register-Herald, August 25, 2004

More than 100 people packed a small conference center room at Glade Springs Resort in Daniels Tuesday to hear speakers address a legislative subcommittee on insurance. Homeowner and automobile insurance was called the state's latest "crisis" by a host of speakers, ranging from insurance agents to small business owners and even a bank president.

"Regular citizens are wondering why legislative leaders in Charleston are doing nothing about this crisis," said Arthur Warden, a Beckley resident. Warden, 43, told panel members he represents the "ordinary citizen on the street."

"There are senior citizens on fixed incomes deciding between paying their homeowner insurance or buying their needed prescription medication or food," Warden said. "Meanwhile, our politicians concern themselves with who is a Democrat and who is a Republican and its the people of West Virginia who suffer."

Warden said voters are fed up with the Legislature doing nothing, year after year, about the problem.
"The people of West Virginia are going to remember what our Legislature has done about insurance," he said. "Many of you sitting here today may not be sitting in the Legislature in the future if something is not done about this crisis."

Speaker after speaker agreed the state's insurance crisis is a result of West Virginia's insurance laws and court decisions that have created a legal environment that is both unpredictable and unfair to insurance companies.

"Because insurance policyholders ultimately pay the cost of these laws through their insurance premiums, West Virginia consumers have seen their premiums soar to levels that are among the most expensive in the country," said Michael Romeo, a Nationwide Insurance agent.

"At the same time, insurance companies are either abandoning the West Virginia insurance market altogether or are stopping to write new automobile and homeowner insurance policies. This leaves many West Virginians struggling just to find the automobile or homeowner coverage they need."

Laws meant to protect West Virginia consumers when they buy insurance actually hurt them because they sour the industry on selling policies and setting rates in the state, lawmakers were told.

"My company is getting beaten down by these laws, the lack of availability and affordability of commercial and property insurance in West Virginia," said Patty Nesbitt, owner of Blast Tech Inc., a small business in Raleigh County. "The high cost of insurance is making it virtually impossible for my company to make a profit."

Nesbitt, Romeo and Warden were just a few of several speakers on Tuesday who singled out three areas of West Virginia law at the interim session meeting of Select Committee B on Insurance.

One limits when insurers can refuse to renew home and auto policies. Allstate officials estimated that only a small percentage of their customers cause most of their costs because they repeatedly file claims for incidents that can't be counted against them, including theft, fire, vandalism and wind damage.

"How long would anyone operate a business if they kept losing money?" asked Bill Straub Jr., a State Farm Insurance agent in Beckley. "It would not be long before the doors of that business would close."

Straub said that is what is happening with insurance companies in West Virginia.
"Currently, it is not profitable to write policies in West Virginia," he said.
State Farm, the state's largest insurer, is among several companies that have stopped writing new homeowner and automobile insurance policies in West Virginia.

A second law favors the face value of a policy over the replacement value of the property insured. In West Virginia, insurers are forced to cover the total cost of the replacement value of the property insured and not the amount paid for the property.

Some speakers from insurance agencies suggested that law encourages arson and other means of fraud.
"I do see it as an incentive for people to have losses," one insurance agent said.
The third law allows people to sue an insurer and allege it failed to deal with them fairly in claims against policyholders. Because these lawsuits are filed by non-policyholders, they are called third-party bad faith cases.

"Third-party bad faith lawsuits are one reason West Virginia has been referred to as 'tort hell,'" said Nancy Kissinger, president of Bank One in Beckley and also the president of the Beckley-Raleigh County Chamber of Commerce. "We must have civil justice reform in West Virginia. Third-party bad faith lawsuits are directly affecting business insurance rates."

Kissinger blamed such lawsuits on insurance rates that more than doubled for many West Virginia businesses within the last few years.

"To afford the new rates, many businesses cut jobs, have less insurance coverage and, in some cases, close down and move to another state to do business," she said. "Tort reform is desperately needed in West Virginia."

Agents told lawmakers that in neighboring Virginia, homeowner and automobile insurance is available at one-third to half the cost.

"West Virginia is doing something wrong and the Legislature has the power to fix it," Warden said. "When doctors threatened to leave the state, the Legislature acted. We have a full-blown homeowner and automobile insurance crisis here right now and the regular people of West Virginia expect our Legislature to do something now."