The Rhode Island General Assembly adjourned its 2010 formal session last night, according to the American Insurance Association (AIA).
“This session, like many that have preceded it in Rhode Island, presented a number of challenges to the insurance industry,” according to Laura Kersey, AIA assistant vice president, Northeast Region.
Notably, the General Assembly approved Senate Bill 2508, the An Act Relating to Insurance; Unfair Claims Settlement Practices Act. SB 2508 was introduced on behalf of the Auto Body Association of Rhode Island (ABARI) and would require an independent appraisal on all cars with damages in excess of $2,500 by an appraiser unaffiliated with the repair shop.
“No other state requires this kind of appraisal, and SB 2508 would only add time and costs to a repair process that is already one of the most costly in the country,” said Kersey “Unfortunately, Rhode Island legislators approved a bill that could increase repair costs for consumers, increase hassle for consumers and limit consumer choice.”
SB 2508 now awaits Gov. Donald Carcieri’s consideration, and AIA will urge him to veto this ill-advised legislation.
AIA was pleased that the General Assembly failed to approve House Bill 7916, An Act Relating To Motor Vehicles -- Insurance Rates, which would have prohibited an insurer from considering an applicant's credit history in determining auto insurance rates. Additionally, legislators refrained from acting on House Bill 7766, An Act Relating to Probate Practice and Procedure -- Bonds of Executors, Administrators, and Guardians. AIA strongly opposed both bills and testified against HB 7766, which would have provided a cause of action on behalf of any principal or claimant covered under a fiduciary bond filed under a probate court order against the surety for wrongfully, and in bad faith, refusing to pay or settle a claim, or perform its obligations under the bond.
The major victory for insurers, however, came not on the legislative front, but on the judicial one. Last week, the Rhode Island Supreme Court issued a favorable ruling in Auto Body Association of Rhode Island v. State of Rhode Island Department of Business Regulation when it overturned the lower court decision and upheld the Department of Business Regulation's interpretation of the labor rate survey statute.
“The Court appropriately recognized that the labor rate survey was intended to be just one factor for insurers to take into account in the setting of labor rates,” said Kersey.
AIA had filed an amicus brief before the Court, which argued that the lower court decision constituted an impermissible rewriting of the labor rate survey statute and would have led to absurd and unintended results.
According to Kersey, “The original ruling in the lower court would have allowed a small segment of the auto body industry to arbitrarily set its own rates based on self-reported and unsubstantiated data. Our brief also raised constitutional concerns with the lower court decision, and noted that the decision could harm Rhode Island consumers by increasing repair costs.”
The Supreme Court also reversed the lower court's ruling that the statute was applicable to every insurer authorized to sell motor vehicle liability insurance in Rhode Island because this issue was not properly before the court. The lower court decision would have required insurers that don't even write auto insurance in the state to undertake a costly labor rate survey. The Supreme Court decision effectively upheld the Department's regulation which requires insurers that write more than one percent of the total premium volume of motor vehicle liability insurance in Rhode Island to participate in the survey.
“Fortunately, the Rhode Island Supreme Court gave the proper deference to the Department's determination regarding the labor rate survey statute,” Kersey concluded.