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Study Proves the Obvious in Washington State

A recent study of insurance “loss costs” in Washington State indicates that the 2007 passage of a plaintiffs’ bar-backed liability expansion has, duh, led to higher costs and higher premiums.

Though plaintiff lawyers and other supporters of Referendum 67, the so-called Insurance Fair Conduct Act, assured voters that the changes to liability law it encompassed would not raise homeowners’ insurance premiums, new analysis by the Insurance Research Council estimates those costs have since jumped by at least 22 percent.

“You cannot increase liability without increasing costs, it’s just that simple,” said Dana Childers, executive director of the Washington Liability Reform Coalition (LRC), prior to the vote on R-67 . “These increases in claims costs will undoubtedly result in increased homeowner insurance rates down the road.”

Childers and the Seattle-based LRC had argued that R-67’s significant expansion of liability would invariably invite more speculative lawsuit filings, forcing insurers in many cases to settle even meritless claims out of court, rather than incur the expense of trials and the risk of large jury verdicts. 

The Impact of First-Party Bad-Faith Legislation on Key Insurance Claim Trends in Washington State examines, among other things, available data for the first two years following enactment of R-67.  That examination shows insurers’ loss costs increased by as much as $190 million in those years, and no one should be surprised since the law now makes it much easier for the malevolently motivated to file bad-faith lawsuits against their own insurance company.

Most notable, the law broke with precedent by allowing for payment of unlimited punitive damages, in addition to payment for actual damages, attorneys’ fees and court costs. Prior to enactment of R-67, Washington case law did not allow unlimited punitive damages.  And since the prospect of awards for unlimited punitive damages is to personal injury lawyers what an all-you-can-eat breakfast buffet is to those booted off NBC’s The Biggest Loser, no one should be shocked by an increase in the number of costly lawsuits.

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