The American Insurance Association (AIA) is looking to counter attempts to pass “bad faith” legislation in several states. The AIA contends the bills are an attempt by the plaintiffs’ bar to inject itself and tort principles into the policyholder-insurer relationship and will lead to frivolous lawsuits against insurers.

“Courts don’t need to be clogged up with new and unnecessary lawsuits when ample safeguards and remedies currently exist to protect consumers,” Eric Goldberg, AIA associate general counsel, said in a statement.  “Adoption of ’bad faith’ legislation and the subsequent lawsuits that follow only serve to drive up consumer costs and encourage improper claims settlement.  Moreover, these bills serve to mask insurance fraud and arson as they discourage proper claims investigation.  That’s not something policyholders or our economy can afford.”

The AIA notes that each year, insurers handle millions of first-party claims in a manner acceptable to their customers and only approximately 1 in 5,000 disputed claims result in insureds suing their carriers.

Accordingly, AIA gave its backing to the “Resolution Opposing Unfair and Unbalanced Insurance ‘Bad Faith’ Legislation” adopted by the American Legislative Exchange Council’s (ALEC) Civil Justice Task Force at their annual meeting.

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