OLYMPIA – In a clash between two titans, large insurers have spent nearly a million dollars so far this year to torpedo a law they say will drive up Washingtonians’ insurance rates.
On the other side: the state’s trial lawyers, who say the new law is a critical consumer protection against insurers who are now free to pooh-pooh legitimate claims in favor of a plumper profit margin.
Who decides who’s right?
An insurer-backed group calling itself “Consumers Against Higher Insurance Rates” has until Saturday afternoon to turn in 112,400 signatures calling for a public vote that would overturn the new law. But there’s no suspense there. Dana Childers, a spokeswoman for critics of the new law, says they’ve got about 160,000 so far. That’s enough to all but guarantee Referendum 67 a spot on the fall ballot.
Trying to prevent that, Gov. Chris Gregoire and her staff have repeatedly met with both sides in Olympia and Seattle to negotiate a compromise. Those meetings are continuing this week. So far, there’s no deal.
“There are moments when you think they’re real close and then others where they’re real far apart,” said Marty Brown, the governor’s legislative director. “Every little nuance touches the next nuance.”
Already, the insurers have spent about $300,000 on signature-gatherers. They’ve also spent another $600,000 for a month of television ads in major markets across the state, including Spokane.
The law changed this spring, when Gregoire signed Senate Bill 5726. When a court finds that an insurer wrongly denied a claim, it says, a judge must award attorneys fees, court costs and damages to the policyholder who filed the suit. Also, as a penalty, the judge may award triple the damages.
The law covers most common insurance – homeowners’ policies, life insurance, auto coverage, business insurance – but not health insurance. It also covers only those policyholders suing their own insurer.
“The entire point of the law was to create incentives for insurance companies to treat people fairly,” said Sue Evans, a spokeswoman for “Approve 67.” The group, which backs the law, has raised more than $200,000, virtually all of it from lawyers and law firms. Similarly, campaign records show, the two dozen donors to “Consumers Against Higher Insurance Rates” include not one individual consumer. All – State Farm, Farmers, Safeco, Allstate, Progressive – are insurers or industry groups.
As things stand now, Evans says, insurers have a powerful incentive to deny and delay claims, sometimes with tragic results. Bracing for a months-long fight for voters, the lawyers are collecting information on such cases. Among them:
“Puyallup Fire Department Battalion Chief David Potter, who died of leukemia last year, allegedly after the city’s insurer “dragged out” the man’s claim. Unable to raise the $100,000 down payment for a bone-marrow transplant, the man died within a year.
“A Selah woman, Tara Sadler, injured while dodging a speeding van three years ago. Doctors repeatedly urged her to have immediate surgery for a disc pressing on her spinal cord, according to her lawyers, but it took six months to see an insurance-company-approved doctor. While waiting for the claims adjuster to return from vacation, her attorneys say, the woman lost the ability to walk, turn her head or hold a pen. The surgery was finally done but was apparently too late to help much. She gets around in a wheelchair today.
People now have limited recourse, Evans said. Washington’s Consumer Protection Act already allows for triple damages in such cases – but caps them at $10,000. And the state insurance commissioner’s office has limited ability to intervene in individual cases, she said.
“On any given day, we all get in our cars and go to work. Something could happen to you, your family, when you least expect it,” Evans said. “And in your darkest hour, you need to know that your insurance company is going to do what it agreed to do.”
The insurers’ side says the new law is an expensive fix in search of a problem. After major wind storms in December, Childers said, about 42,000 Washingtonians filed claims with their insurers. Roughly $170 million has been paid out. And so far, she said, there have been only three complaints to the state insurance commissioner.
“Where’s the problem here?” she said. “Where’s the crisis?”
She maintains that the law will have one primary beneficiary.
“This isn’t about consumers,” she said. “It’s about trial lawyers.”
With guaranteed attorneys fees, she said, they’ll file more lawsuits, costing insurers – and their policyholders – a lot more money.
Both sides, interestingly, paint themselves as David in a pitched battle with a political Goliath. The lawyers point to the insurance companies’ deep pockets; the insurers point to the trial lawyers’ tight political connections to Democrats, who have majority control in Olympia.
If Gregoire – a veteran negotiator who clearly relishes the role – manages to hash out an agreement that heads off the referendum, it wouldn’t be the first time she’s waded into a high-profile fight. After the state’s most expensive initiative fight ever – $16 million – in 2005, Gregoire won some agreement on medical malpractice liability reforms from the sparring doctors and lawyers.
As election season kicks into high gear, the question is whether it’s the governor or the voters who will be steering the way.