Insurer abuses warrant a change, legislator says

March 01, 1991|By M. Dion Thompson | M. Dion Thompson,Annapolis Bureau of The Sun

ANNAPOLIS -- A bill that would enable people to sue their insurance companies for punitive damages if they feel they have not been properly protected stands a good chance of approval by a Senate committee, its chairman said yesterday.

Finance Committee Chairman Thomas P. O'Reilly, D-Prince George's, made the prediction after testimony from several witnesses complaining about treatment by their insurers.

"I think that the problem of bad faith and first-party causes is so significant that this committee probably would want to take some action to address it," he said.

Yesterday's hearing also included testimony on a bill to prohibit insurance companies from basing their rates on geographical areas -- making coverage more expensive in higher crime areas like Baltimore. Previous, similar bills have failed,but Mary Pat Clarke, president of the Baltimore City Council, vowed that "in the next two years this will be the new tax revolt, not just in Baltimore City but throughout Maryland."

Still, Senator O'Reilly said the bill would likely meet the same fate as the previous bills. "Geographical rating won't pass," he said. "That's not to say there isn't a problem. . . . The answer is more complex than this legislation."

The harshest testimony yesterday came on a bill that would allow people to sue insurance companies for punitive damages in addition to compensation for losses.

Witnesses accused their insurers of resisting attempts to collect for medical costs after auto accidents. They also described attempts by insurers to cancel policies after accidents that were not the fault of the insured.

One couple, Joe and Nancy Dyer, said they carried on a five-year fightwith their insurance company and still got canceled. Mrs. Dyer said the problems began after a 1986 accident when the company told her she wasn't covered. Two years later, the company canceled her insurance and claimed the accident was her fault. Mrs. Dyer also said that even though she eventually proved she had not been at fault, the company left her policy canceled.

"I think the state of Maryland is allowing an insurance dictatorship to exist," said another witness, Diana Griffith. "I don't know what the purpose of insurance is if it isn't to protect us."

Insurance representatives said that while they found it hard to defend their companies against the testimony, the bill's passage could make it easy for people to file claims lacking in merit.

Sen. John A. Pica Jr., D-Baltimore, who had introduced many of the bills, said the testimony pointed out the need for providing some means for people to seek punitive damages from their insurance companies. Also on the panel's agenda was a bill to create a people's counsel for the state Insurance Division. The

Department of Fiscal Services estimated that such a bill could cost the state $147,000 in its first year.

Though Mr. O'Reilly seemed to appreciate the need for such a counsel, insurance representatives said the counsel would merely duplicate tasks already performed by the Insurance Division's Consumer Advocate Board.

John A. Donaho, the Maryland insurance commissioner, told Mr. O'Reilly that rather than establish a people's counsel, the General Assembly should increase his budget by at least $3 million. Mr. O'Reilly asked if that would improve service to consumers.

"Yes," replied Mr. Donaho. "I think we could do so, with the exception of those people who could never be satisfied."

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