Legislation that would allow third parties in insurance-related lawsuits to sue the claimant’s insurance company has essentially died before the Senate Corporations Committee. The House approved the bill, but on Tuesday, May 23, the Senate Corporations Committee voted unanimously to table it for further study. That vote came after testimony by several lobbyists representing the insurance industry.
No one testified in favor of the measure at the committee hearing.
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The “bad faith” bill deals with an insurer’s refusal to pay a claim made under any insurance policy and would allow third parties to sue for compensatory damages, punitive damages and attorneys fees. A similar bill was defeated by the legislature during the 1999 session.
The National Association of Independent Insurers has been keeping a close eye on the bill. The NAII believes such legislation would “set a dangerous precedent in Rhode Island.”
The bill took a pounding before the Senate Corporations Committee.
Robert P. Suglia, assistant general counsel for the Amica Mutual Insurance Company, said that the proposal would promote multiple lawsuits and create “an impossible conflict of interest” on the part of insurance companies.
Suglia also said it would send a terrible message to Rhode Island businesses.
“It says the state is lawsuit friendly, not business friendly,” said Suglia.
Stephen D. Zubiago, a lawyer representing the National Association of Independent Insurers said that if passed, the measure “would clog our courts and increase costs for insurers.”
“This would also have a very serious impact on companies considering relocating here,” said Zubiago.
The NAII’s Gerald Zimmerman, in a prepared statement, also pointed to the potential increase in insurance premiums.
“Any sort of legislation that permits third parties to sue insurance companies seriously compromises the insurer-policyholder relationship, and sets the stage for greedy plaintiffs’ attorneys to pick the pockets of the insurers and their customers,” he said. “Unfettered lawsuits can only result in higher premiums and poorer service for everybody.”
Zimmerman and others also pointed out that voters threw out a similar law in California earlier this year because of a dramatic increase in costs to policyholders.
Representatives of The Beacon Mutual Insurance Company, and the Northern Rhode Island Chamber of Commerce also spoke against the proposal.
