Expanding insurance liability will hurt businesses, consumers

Members of the Vdolek family in Redmond try to remove a tree that fell onto their home during December's fierce windstorm. (JOHN LOK / THE SEATTLE TIMES)
By Scottie Marable and Chuck Mott
Special to The Times

In March, Gov. Christine Gregoire invited small-business owners to a roundtable discussion titled "Washington is Open for Business." This title goes along with a running theme of her administration, promising to make Washington "the most business-friendly state in the nation," as she put it in the roundtable invitation letter.

Unfortunately, a bill now waiting on the governor's desk would dismantle Washington's "Open for Business" sign and send the wrong message to those businesses already located here or considering a move to our state.

The bill, Senate Bill 5726, would expand liability, which is bound to spur litigation and cost all of us without providing real benefits for consumers or businesses. In expanding liability, the bill provides the lowest threshold in the nation for suing insurance companies and allows punitive triple damages. This in turn will raise insurance premiums for all businesses, adding to the already burdensome unemployment and worker-compensation costs, which are among the highest in the nation.

In passing this legislation, our lawmakers are trying to solve a problem that doesn't exist. Policyholders already have a number of avenues to seek redress for a grievance against an insurance company. Under current state law, insurance companies can be sued for breach of contract and for bad faith, both remedies that allow a consumer to recover damages as well as attorney fees.

More important, Washington provides extra-legal recourses through the independently elected insurance commissioner, as well as the attorney general, by way of the Washington Consumer Protection Act. Each has a strong track record of consumer advocacy and is unafraid to use their power to impose fines, penalties and sanctions to protect the consumers in our state.

Last December's catastrophic windstorms provide a recent and vivid example of state laws and state agencies that are working just fine to foster an insurance system that consumers can count on. Within 15 weeks of those destructive windstorms, insurance companies paid out more than $172 million in claims, settling more than 90 percent of the tens of thousands of claims filed. Though it was a massive event, only three consumer complaints were filed with the Office of the Insurance Commissioner.

Such statistics are hardly indicative of a crisis requiring our state government to expand liability.

The only sure thing about providing triple damages is that it will lure many people to pursue litigation to settle differences with insurers. It will clog up the courts and end up costing us all more in premiums. That's not good for business.

It's also not good for consumers. The expanded liability will cause insurance companies to weigh each part of the insurance settlement process. Inevitably, it will take longer and longer to settle insurance claims.

Senate Bill 5726 will end up hurting Washington businesses and consumers. The increased threat of litigation will drive insurance rates through the ceiling. And, in our view, there is a negligible return on such added cost to either businesses or consumers.

Scottie Marable is vice president, Pinnacle Marketing, Inc., Bellevue (smarable@pinnaclenw.com); Chuck Mott is owner, Innovac, Edmonds.