Here in Washington state, the advertising war surrounding Referendum 67 is heating up. To hear "Reject R-67" describe it, the referendum is a means for trial lawyers to earn fees for large settlements and judgments at the cost of higher insurance rates. This claim centers around the referendum's threat of (up to) triple damages in judgments rendered by the court.
Those are the two main components to the Reject R-67 ads:
- threats of higher insurance rates to Washington consumers, and
- the invocation of the "greedy trial lawyer" bogeyman.
As it happens, despite the advertisements' claims to be funded by "Consumers Against Higher Insurance Rates", these threats of higher insurance rates are effectively coming from the insurance companies themselves, which are funding most of the rejection effort.
And of course, something doesn't quite add up here. It turns out that these advertisements effectively constitute an admission of wrongdoing by the insurance companies.
Why is this the case? It starts with the conditions under which the referendum has any effect whatsoever.
The referendum makes it explicitly illegal to "unreasonably deny a claim for coverage or payment of benefits". The purpose for which those of us lucky enough to afford it have insurance is to submit claims for payment of covered expenses; there is a contract to this extent. In theory, the insurance companies should already be fulfilling all reasonable claims; any denial of claims should already be a reasonable one (i.e. denial of claims for services not covered under the terms of the contract).
Let me say that again: in theory, the insurance companies should already be complying with the terms of R-67. So what are they so scared of? What could possibly make R-67 so expensive to them that they'd have to jack up insurance rates for their consumers? (Never mind that they're happy to jack up insurance rates just to increase their profits.)
The answer is lawsuits over wrongfully denied claims. The insurance companies are fighting R-67 because they know they're unreasonably denying claims as a matter of course. Hell, it's effectively policy at most companies.
We can look at this another way, too. Why invoke the spectre of greedy trial lawyers? Why would R-67 make trial lawyers able to earn large quantities of money?
Well, the trial lawyers they're talking about - those that make a career of suing large companies on behalf of individuals - earn their largest fees by commission. It is my understanding that most litigating lawyers work on contingency for these sorts of cases; i.e. they take a portion of the judgment if they win, and do not get paid if they lost. (Please correct me if I'm wrong about that.)
So what are the conditions under which these trial lawyers would earn large amounts of money due to R-67? When they would win cases under that law, or negotiate large settlements. When would they win or successfully settle these cases? When the insurance companies are, indeed, guilty of wrongdoing.
And this is the other half of the threats that the insurance companies make, and it all comes together here:
The threat of trial lawyers earning large amounts of money in settlements and judgments against the insurers, and therefore causing the insurers to raise their premiums, is one that would only make sense if the insurers know they're violating this prospective law.
With these advertisements, the insurers effectively admit that they regularly deny claims that they should be paying.