Commentary: John Canfield

Trial lawyers misrepresent third-party lawsuit reforms

The Charleston Gazette, March 4, 2005

It's clear from Michael Romano’s Viewpoint column on Monday [Feb. 28th] that the personal injury trial lawyers are circling the wagons in their desperate attempt to hold on to the third-party lawsuits that they file against insurance companies. Romano’s article was filled with misrepresentations in an effort to scare consumers about reforms to the third-party lawsuit system. But I believe that the majority of consumers and legislators understand that these third party lawsuits affect the availability and affordability of insurance in our state, and that we have a historic opportunity to work with Gov. Joe Manchin to enact meaningful reforms.

Under the legislation proposed by Gov. Manchin, consumers will remain completely protected by the Unfair Trade Practices Act (UTPA). Not one word of that consumer protection law will change under the governor’s bill. It is false and misleading for Mr. Romano to say that the Legislature is being pressured to “destroy the protection....contained in the Unfair Trade Practices Act” and that insurers are arguing for the “elimination” of that law. The protections afforded by the UTPA will remain fully intact and will continue to benefit West Virginia consumers.

The real change here is that the venue for these complaints will move from the county courthouse to the Insurance Commission, exactly as it works in 44 other states. The personal injury lawyers who make a healthy living off the current litigation system can’t stand the thought that they might be cut out of this process. If the trial lawyers succeed in blocking these reforms, will the insurance market improve in West Virginia ? If the trial lawyers block these reforms, will our insurance rates go down?

According to research conducted recently by RMS Strategies of Charleston, 81 percent of West Virginians support changes in our insurance laws in order to improve the state’s business climate. Eighty-nine percent of West Virginians agree that the current third-party lawsuit system creates incentives for personal injury lawyers to file unjust lawsuits.

West Virginia is one of only six states that allow private third-party lawsuits against insurance companies. Third-party lawsuits result in higher claim costs and additional legal defense costs. These higher costs are passed on to West Virginia consumers in the form of higher premiums. Consumers in West Virginia are paying higher insurance rates than people in our neighboring states. As a percentage of our median household income, West Virginia consumers are paying the third-highest auto insurance rates in the nation. By moving third-party complaints from the courthouse to the Insurance Commission, Gov. Manchin is trying to reduce these costs and to make insurance products more affordable for West Virginia consumers.

These UTPA complaints were always designed to be brought as administrative actions within the Insurance Commission. They were never intended to be allowed as private lawsuits in county courthouses. The West Virginia Legislature has never passed any law to allow these lawsuits. Forty-four other states don’t even allow these lawsuits at all. Instead, these private lawsuits were authorized by the West Virginia Supreme Court in a series of decisions starting back in 1981. Governor Manchin is simply proposing that these complaints be moved back to the Insurance Commission, as intended, with its specialized knowledge of insurance matters.

The West Virginia Insurance Commission recently issued a yearlong study of third-party lawsuits in West Virginia . The report found that “ West Virginia ’s legal approach to third-party causes of action is in the minority” and that our insurance climate “is overly litigious and premium rates are higher because of it.” The report also found that the costs associated with third-party lawsuits “increases the cost of insurance in the state, and ... these higher costs are ultimately shifted forward to insurance consumers.” The report also found that the consumer protections provided to consumers under the UTPA “provide prompt, fair and equitable treatment of consumers.”

West Virginia ’s restrictive insurance laws are out of step with the rest of the nation. We must enact insurance and civil justice reforms that will allow for a more competitive market in this state, which will improve the availability and affordability of insurance products for consumers. We must also improve our state’s insurance market if we are to have any hope of getting commercial insurance companies to enter our new private workers’ compensation system.

Gov. Manchin is working to enact reforms that will have a significant and meaningful impact on the cost of insurance in West Virginia . West Virginians understand the need for reform, as well as the consequences of not taking action.

John Canfield is an attorney with the State Farm Insurance Companies in Charleston . He is also an officer of the West Virginia Insurance Federation, a trade association representing property & casualty insurers doing business in West Virginia .