Insurers warn regulators: class actions hurt us all. (Briefing).

Class-action lawsuits are not only costly and potentially lethal to insurance companies--they increasingly undercut the decisions of state regulators, industry representatives told the National Association of Insurance Commissioners.

David Snyder, assistant general counsel of the American Insurance Association, cited a high-profile series of cases in Ohio in which plaintiffs asked a court to invalidate rates for uninsured/underinsured motorist coverage that had been approved by the insurance department, even though rate approval is under the jurisdiction of the commissioner.

Ohio Insurance Commissioner Lee Covington outlined the toll such lawsuits can take on a company "One of our class actions will result in hundreds of millions, if not billions, going from the marketplace," Covington said, "One company lost 10% of its surplus. Most would identify class actions as their No. 1 risk right now. They do destabilize the marketplace, and consumers end up paying the price," he said.

Covington tried unsuccessfully to expand a white paper on the impact of class actions on insurance to include court decisions that conflict with coverage decisions by state commissioners.

The Consumer Protection Working Group is studying the issue of whether class-action lawsuits infringe on the regulatory jurisdiction of commissioners. The group also approved formation of a subgroup to address the subject of a model act on the use of arbitration clauses in insurance contracts--a topic that many consumer representatives warned warranted NAIC attention.