Class-action litigation catches group's interest.

As regulators look into the full impact of class-action litigation on the authority of state insurance departments, they'll be closely watching a study by Rand Corp. on national class actions.

Multistate class-action litigation is infringing on the authority of state insurance departments, said Larry Mirel, Washington, D.C., insurance commissioner and chair of the class-action insurance litigation working group. The group discussed the issue at the 2003 summer national meeting of the National Association of Insurance Commissioners in New York City.

When class-action lawsuits are extended to more than one state, where regulations differ, court decisions may find against the insurer even in states where the company didn't violate any statutes, said David Snyder, vice president and assistant general counsel of the American Insurance Association. The courts therefore void policy decisions of states.

There's a conflict between two separate systems for resolving disputes, Mirel said. The common law system involves coming before a judge to decide justice between two parties. Judges and juries only see evidence presented in court. Insurance commissioners fall into a system where legislators pass a law, he noted.

"Legislators make a decision about how insurance should be regulated," he said. "What does it say when a trial judge makes a ruling that throws that system out the window?" And when insurers are faced with millions or billions of dollars of cost for the suits, it drives up the cost of insurance.

When the group set out to collect data on class-action litigation, it learned that the Rand Corp.'s Institute for Civil Justice had already begun a study on the same issue, Mirel said.