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on June 16, 2013 by admin in Insurance Industry, Comments (0)

Dozens of lobbyists tie up bill to let consumers sue insurance companies

Cover Oregon Health InsuranceView full sizeA team of IT experts work in a sprawling space at Cover Oregon, the agency that is the portal to the developing health insurance exchange in Oregon. A bill under consideration in the Oregon Legislature would allow consumers to sue insurance companies for delaying claims, denying coverage and other reasons.
SALEM -- More than 40 registered lobbyists are fighting a bill that would give Oregonians the right to sue insurance companies.

House Bill 3160 would add insurance companies to the state's Unlawful Trade Practices Act, allowing Oregonians to sue companies for not paying claims promptly, denying coverage for losses or medical bills, and other reasons.

Insurance companies are the only industry exempt from the 1971 law after banks were added in 2010 in the wake of the recession.

The bill to eliminate the insurance exemption passed the House 33-27 in April, but currently lacks the votes to pass in the Senate. A similar effort two years ago went nowhere.

"Insurance is perhaps the most important product in any consumer's life, yet it's the only business product exempt from Oregon's consumer protection statute," said Angela Martin, executive director of Economic Fairness Oregon, a consumer advocacy group in Portland. "That defies common sense. The only reason for that is because of the checkbook that our opponents have."

Opponents charge the legislation would lead to more claims, higher premiums and frivolous lawsuits that would further clog the state's already overburdened court system. The real winner, they say, would not be consumers, but trial lawyers.

"If there's a finger being pointed at moneyed insurance lobbyists, it's being pointed by moneyed trial lawyer lobbyists," said Justin Delaney, a vice president at The Standard, a Portland-based insurance company. "The concern is that we're inviting plaintiffs and personal injury lawyers from all over the country to file suit here to try to seek these outsized damages and awards. This is a radical change to the law in Oregon."

The legislation would only result in a deluge of lawsuits if insurance companies are currently mistreating a lot of customers, said Kristen Leonard, one of the two registered lobbyists for the Oregon Trial Lawyers Association, which supports the bill.

"There aren't very many people lobbying on behalf of consumers here," she said. "It can be a very lonely place for organizations taking on these issues."

Sen. Chip Shields, a Portland Democrat working to pass the bill, said he knows he is taking on a formidable lobby. "Literally, I think I've found two lobbyists who are not employed to kill this bill," Shields said.

Literally is an exaggeration, but the bill is getting a lot of hired opposition. Forty-seven lobbyists signed a letter to lawmakers urging them to vote against the bill. That includes representatives for 48 insurance companies, business associations and other groups.

Lobbyist Fawn Barrie organized the letter on behalf of the Oregon Liability Reform Coalition and defends the push. "I think it just helps show legislators who they can get in touch with. The broad list of people who are opposed to this legislation shows the negative impact it could have on Oregon businesses and, ultimately, consumers."

Former Gov. Ted Kulongoski opposed adding insurance companies to the unlawful trade practices law when he served as the state's insurance commissioner about 25 years ago.

"But times have changed -- and I have changed my mind," he wrote in a March letter supporting the bill. "The financial services meltdown in 2007 and the resultant recession ... must be a wake-up call for public officials to provide greater consumer protection against fraudulent business practices in the financial services markets."

Competing complaints

Lawmakers this spring heard testimony from Oregonians who said insurance companies had delayed payments on claims, refused to authorize medical procedures doctors said were necessary, or treated them unfairly.

Wendi Rockholt said she injured her back and neck after getting rear-ended in a car accident six years ago. An insurance adjuster later appeared without notice at her Mulino home and pressured her to sign a release form if she wanted her medical expenses to be covered.

"He wouldn't take no for an answer and basically wouldn't leave my property until I had signed this paper," she said. "I was young, I didn't know what my rights were, and I felt threatened. I felt like I had to do what I had to do to get my medical paid for, so I signed the release."

Insurance agents and lobbyists had their own complaints and said the legislation was extreme.

Unlike similar laws in other states, House Bill 3160 would also allow third-party defendants to sue. For instance, an auto body shop would be able to sue a customer's car insurance company even if it wasn't the policyholder.

The Oregon attorney general would also be able to sue insurance companies, with the approval of the director of the Department of Consumer and Business Services.

Washington, which passed a similar law in 2007, exempts health insurance companies, which represent a significant portion of the industry.

Consumer protection goals

The Insurance Division of the Department of Consumer and Business Services already regulates insurance companies extensively, insurance agents and lobbyists said.

Division officials last year handled 3,228 consumer complaints about insurance, according to department statistics. They recovered $1.1 million in benefits on behalf of consumers and took 68 enforcement actions, including levying $1.8 million in fines and revoking the licenses of some insurance agents.

"We have robust regulatory and enforcement work that we do, and insurance companies are kept in line by our agency," said Lou Savage, the insurance commissioner. "If there are additional tools that the Legislature wants to give to consumers, that's a reasonable policy discussion."

The division can revoke the business license of an insurance company but can't order it to pay restitution to a consumer. Senate Bill 414, which would allow the department director to seek restitution for consumers, is headed to a Senate floor vote. Insurance lobbyists prefer that approach.

Rep. Brian Clem, D-Salem, has questioned whether the division can properly represent the interests of consumers when it receives money from the companies it's charged with overseeing.

State budget staff estimate the division will collect $156 million in taxes, business licenses and fees from insurance companies in 2013-15.

Clem testified in support of insurance legislation two years ago alongside his mother-in-law, who discovered after an auto accident that her supplemental insurance company had canceled her coverage, believing she was dead. She was not.

Regence then refused to reinstate her coverage, saying she had a pre-existing condition, Clem told fellow lawmakers.

Consumers can sue insurance companies now but must do so under breach of contract or other claims that are harder to win and rarely cover attorneys' fees.

Officials at the Insurance Division advised Clem to get a lawyer, which he attempted to do. "The lawyer said 'I could take the case and obviously she's not dead, we'll win, but you're going to have to pay all my fees out of your own pocket,'" Clem said during the House vote on the bill in April. "That's what made me decide we had to get some additional tools for Oregonians."

-- Yuxing Zheng

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