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Carriers Say Federal Class Action Lawsuits Could Supplant State Regulation of Insurance

Last week, the Alliance of American Insurers (Alliance), the American Insurance Association (AIA), the National Association Independent Insurers (NAII), and the National Association of Mutual...
July 23, 2003

Last week, the Alliance of American Insurers (Alliance), the American Insurance Association (AIA), the National Association Independent Insurers (NAII), and the National Association of Mutual Insurance Companies (NAMIC), filed a friend-of -the-court-brief with the 11th Circuit Court of Appeals, stating that federal class action lawsuits should not be allowed to supplant state insurance regulators' authority to set rates. The brief was filed in the case of Gilchrist, et al. v. State Farm Mutual Automobile Insurance Co., et al.

In November 2002, the U.S. District Court for the Northern District of Florida certified a countrywide class of auto insurance policyholders who claim that four insurance companies conspired to violate antitrust laws by requiring the use of non-OEM replacement parts to repair their damaged vehicles. The brief filed by the Alliance, AIA, NAII, and NAMIC, urges the federal appeals court for the 11th Circuit to reverse the lower court's class certification order.

What It Means to Agents:  According to the four carrier trades, the lower court, by granting class status, has ignored the provisions of the McCarran-Ferguson Act which allow states to regulate insurance and is also ignoring the filed-rate doctrine, under which insurers cannot be attacked in court once a state insurance regulator has approved a rate. Thus, the class action litigation could result in federal judges, in effect, becoming the regulators of insurance rate and form, taking it out of the hands of state regulators.