Insurers, lawyers clash over proposal

OLYMPIA – Two years ago, doctors and lawyers duked it out in a multimillion-dollar ballot-measure fight over “frivolous lawsuits,” “jackpot awards” and “greedy” insurers. Initiative 330 campaign ads pitted personal tragedies against images of fat-cat lawyers. Someone should have saved the ads.

This fall, insurers and lawyers are locked in a multimillion-dollar clash over, yes, “frivolous lawsuits,” “jackpot awards” and greedy insurers. One key ad features a real grieving daughter; another a fictitious law firm called “Sooem, Settle and Kashin.”

Two years ago the issue was medical malpractice; this year it’s insurers who allegedly stonewall legitimate claims to plump up their profits. And just as in 2005, voters are caught in a tug of war between two politically powerful, well-funded groups, both claiming to have voters’ best interests at heart.

This spring, lawmakers and the governor approved a controversial new law allowing triple damages when a policyholder’s claim is wrongly denied by an insurance company. If voters approve Referendum 67, the law takes effect. If not, it’s dead.

“We have one of the weakest consumer protection laws in the country,” said Sue Evans, spokeswoman for Approve 67, a group that has raised $1.7 million – nearly all of it from lawyers – to persuade voters to keep the new law on the books.

Insurance companies, who tried and failed to derail the bill in Olympia, have contributed $9.7 million to persuade voters to veto the new law. If it takes effect, they say, questionable claims and lawsuits will mushroom. The result, they say, is simple economics: Washington families will pay more for home and auto coverage.

“This is an unnecessary law that will cost the average household $200 a year,” says Dana Childers, spokeswoman for the insurer-backed group Consumers Against Higher Insurance Rates. “It’s a law that was written by trial lawyers, for trial lawyers.”

The law covers many common types of insurance: homeowners’ policies, life insurance, auto coverage and business policies. It does not cover health insurance.

“The entire point of the law was to create incentives for insurance companies to treat people fairly,” said Evans. With relatively little recourse now, she said, insurers have a powerful incentive to deny and delay claims, often with tragic results.

Take the case of Tara Sadler, proponents say. Three years ago, Sadler’s head snapped forward when her husband braked to dodge a van fleeing Yakima police. Although her doctor recommended immediate surgery to prevent her spinal cord from being pinched, her attorneys say, the couple’s auto insurance company denied her claim to cover the treatment. (They had no health insurance.) After months, an insurer-approved doctor said the same thing: operate now. That delay left Sadler permanently disabled, her attorneys say. She now uses a wheelchair to get around.

Approve 67 provided details of 10 such cases. Two Dairy Queen owners almost lost their business when an insurer allegedly refused to pay for water-damage repairs. A Centralia woman’s claim was allegedly denied – with no explanation – after she was struck, head-on, by a driver who was on the wrong side of the road. And an Ellensburg man was left in constant pain, allegedly due to his insurer’s decision to cherry-pick medical reports to justify its denial of surgery.

“We know there’s a huge problem,” said Evans. “The average family, the average policyholder, doesn’t stand a chance in challenging an insurance company.”

Washington’s insurance commissioner, Mike Kreidler, last year received 2,760 complaints involving the sorts of claims that would be covered by R-67. And those, he said, are “only the tip of the iceberg.” Most people, he thinks, simply don’t know where to complain.

So Kreidler supports the measure, which he says will help keep insurance companies honest.

“I think it’s a valuable tool for consumers to be able to stand toe to toe with insurance companies, without your insurance company telling you, effectively, ‘Take it or leave it,’ ” he said.

Arguably the most moving pro-67 ad is about David Potter, a Puyallup fire battalion chief who died of leukemia in 2006, after what his attorneys describe as a drawn-out fight over what medical care the city would pay for. In a heart-wrenching ad, Potter’s young adult daughter describes the fight to get treatment for her dying father.

But events as portrayed by Potter’s attorneys are flatly wrong, according to Puyallup Mayor Michael Deal. In a letter to state lawmakers in February, Deal said medical coverage was never delayed nor denied.

“Nothing could be further from the truth,” he said. There were questions about whether the claim should be handled as a medical insurance claim or workers’ compensation case, the mayor said, but Potter “never went without coverage or treatment – ever.”

Childers on Monday blasted the ad as shameless and unconscionable exploitation of the family’s suffering. Evans – who fired back a statement saying her group “decries (the) attack on the firefighter’s family” – said her group stands by the ad.

Proponents, Childers said, “have done nothing but throw out anecdotal evidence, innuendo and their predictions. … They have no hard data that proves this is needed.”

The insurers are particularly unhappy that the standard for awarding up to triple damages is “unreasonable” denial of a claim. That, Childers said, would be the lowest such legal hurdle in the nation. (Evans noted that damages here are capped at three times actual damages, however, unlike the many states that allow unlimited punitive damages.) In five states that passed comparable laws, Childers said, insurance rates increased every time.

The insurers cite two recent reports. Earlier this year, the state Office of Financial Management, trying to estimate the impact if R-67 passes, predicted “there would likely be an increase” in the number of lawsuits against insurers.

Three weeks ago, the Wisconsin consulting firm Milliman Inc. – in a study paid for by Childers’ group – predicted more lawsuits and more expensive settlements “including ‘padded’ or fraudulent amounts.” The report also predicted more people would make insurance claims, once word gets out that insurers are more likely to settle questionable claims to avoid lawsuits.

The 2,760 complaints to the state insurance commissioner last year are “minuscule” when weighed against the nearly 6 million insurance policies in the state, Childers said. “We’re going to shell out more money for a law that’s not needed,” she said.