W. Va. S.B. Prohibits Third-Party Lawsuits

The West Virginia House of Delegates passed Senate Bill 414 prohibiting third-party bad-faith lawsuits against insurance companies. The bill was part of Gov. Joe Manchin’s insurance and tort reform proposals and has to go back to the Senate.

State Farm Insurance has already announced that due to the passage of SB 414, as of May 1 it will return to West Virginia to offer both homeowners and business insurance.

The legislation would ban lawsuits filed by non-policyholders against the insurer of the other party involved in an accident.

Instead of lawsuits, third parties would file administrative complaints with the state insurance commissioner. As proposed, the bill would allow the commissioner to fine offending insurers. The House Judiciary Committee amended the bill to allow the commissioner to also award restitution to consumers.

There are many differences between the House and Senate versions of the legislation. The House created a fund to pay uncompensated victims, increas-ed the policy surcharge that goes to volunteer fire departments, ordered the state Insurance commissioner to produce a report by January analyzing what the legislation has done, and added an amendment requiring that the Insurance Commission consumer advocate be an attorney.

Consumers have to file a complaint with the commission about an insurance firm dealing in bad faith and wait 60 days for the company to reach a settlement. If not, the insurance commissioner must rule on the bad-faith complaint within 30 days and can fine a firm up to $250,000 if it has a history of bad-faith dealings.

The bill would require insurers to file their rates with the commissioner every six months for the next two years.