The Washington Supreme Court held today in a 6/3 split decision that an insurer is not entitled to have a jury decide the reasonableness of a covenant judgment.
The 'R' Street Institute, a new think tank focusing on free markets, has published its inaugural research project, a state-by-state report card on insurance regulation. The Institute measured states' performance based on fourteen standards, including including the concentration of home and auto insurance markets and relative size of residual markets; the effectiveness of state solvency and fraud regulation; the transparency and politicization of insurance regulation; the tax and fee burden placed on insurance markets and the proportion of fees used to support insurance regulation; and the relative freedom granted to insurers to set risk-based rates, including through the use of credit and territorial information.
The Institute ranked Vermont the best regulatory environment for insurance and Florida the worst. Washington State ranked in the bottom quarter at 39th, receiving a 'C' grade. Washington received the second lowest score on the standard "politicization," with the lowest score going to California.
The Washington Insurance Commissioner recently issued a press release stating that he fined insurance carriers, agents, and brokers more than $1.3 million in 2011, and has imposed more than $13 million in fines since 2000. Many of these fines exceeded the statutory maximum fine of $10,000, and some exceeded $500,000. The Commissioner takes the position that he may impose a multiple fines for multiple violations of a single statute. Such cumulative penalties are generally rejected by the courts except where expressly authorized by statute. They can also violate the Excessive Fines Clause of the Eighth Amendment to the United States Constitution. But no Washington court has addressed these questions with respect to the Insurance Code. Besides the legal questions, the prevalence and magnitude of the fines raise practical concerns. Some fines are certainly appropriate if within the statutory limitations. But do Washington insurance consumers benefit from these huge fines? Or do they drive insurers out of the state, reducing competition and increasing premiums?
Moratti v. Farmers Insurance Co. of Wash. (Wash. Ct. App. Division One, July 5, 2011)
The Court of Appeals held that, for purposes of the statute of limitations, a bad faith claim against an insurer accrues when the underlying judgment against the insured becomes final. The court held this was true even where the alleged handling of the claim in bad faith occurred more than three years earlier, when the insurer denied the third party claim without investigating, which eventually led the insured to stipulate to a $17 million judgment in exchange for a covenant not to execute.