R-67: reasonable step to encourage fairness

You can’t get by in today’s society without insurance. Common sense requires you to buy it, and in some cases, such as driving a car in Washington, the law does. Policies represent a considerable portion of any household budget.

So it’s reasonable to expect that when you file a legitimate claim, your insurance company will treat you fairly and meets its obligations in a timely way. Referendum 67, which voters across the state will decide this fall, would penalize insurers that don’t. We believe it’s a reasonable safeguard for consumers, and should be approved.

Insurance companies are fighting it hard — in fact, they’re responsible for putting it on the ballot. After the Legislature passed and the governor signed ESSB 5726 last spring, insurers launched a petition drive to force a public vote. A “yes” vote for R-67 supports keeping the new law in place; a “no” vote is to reject it.

R-67 would allow a policyholder to collect up to triple damages and attorney fees from his insurance company if, in the view of a court, it unreasonably denies or delays a legitimate claim. It doesn’t apply to third-party claims (a person you rear-ended, for example, can’t use the provisions of R-67 to go after your insurance company) or to health insurance.

The campaign has pitted insurance companies against trial attorneys, who crafted the original bill. Insurers say it’s unnecessary, that current remedies are sufficient. They also say that R-67 will encourage fraud, inflated claims and frivolous lawsuits, raising their costs and forcing everyone to pay more for insurance.

We suspect that passage of R-67 might put some upward pressure on rates, but mostly because insurers will be less likely to low-ball customers who file legitimate claims or try delaying decisions to encourage a favorable settlement — practices attorneys who support the measure claim are becoming more frequent. If fraud and frivolous suits arise, insurers should fight back in court.

State Insurance Commissioner Mike Kreidler, who supports R-67, says that “if insurance companies treat their own policyholders the way they are required to be treated by law, insurance rates won’t change. The only insurance companies with something to fear are those who make a practice of acting in bad faith with their own customers.”

Opponents also say that the legal standard for assessing triple damages — that an insurer acted unreasonably or had “no rational basis” for denying a claim — is too low. If potential damages were unlimited, as they are in many states, perhaps a higher standard would be appropriate. But with a firm cap on damages in place, we think it’s about right.

If unintended consequences do follow, lawmakers and/or the governor can seek changes. For now, passage of R-67 will simply give consumers reasonable leverage to ensure that insurance companies treat them fairly.