Rhode Island's governor, Gina M. Raimondo, has vetoed 2019-H 6102, “An Act Relating to Courts and Civil Procedure – Procedure Generally – Causes of Action.”
The bill would have created a private cause of action against an insurer for a violation of the state Unfair Claims Settlement Practices Act in the case of a total loss. The bill provided that, if successful, a plaintiff could collect treble damages and attorneys' fees.
In her veto statement, Governor Raimondo explained that, if the bill were enacted, Rhode Island would have become the first state in the nation where private individuals could sue their insurers for up to three times the amount of their damages if they feel their vehicle had been unfairly totaled.
At present, the governor said, there are significant regulatory tools available to the Department of Business Regulation (“DBR”) to investigate and penalize the insurance industry on this point – providing for fines and restitution in cases where the DBR can establish a pattern and practice of violations of the law. In the governor's view, the DBR “has aggressively exercised this authority to protect Rhode Island consumers,” ordering fines and restitution of more than $1.1 million to date in cases of confirmed violations by insurance companies.
Existing Rhode Island law regarding total loss determinations, based heavily on national model legislation, was never intended to establish the right for customers to sue insurers, according to the governor. Instead, it empowers the DBR “to police Rhode Island's insurance market for patterns of unfair practices relating to auto insurance claims.” According to the governor, the new cause of action proposed by the bill “would replicate existing and effective administrative enforcement by creating a strong financial incentive to pursue a claim in court, weakening DBR's proven enforcement toolkit.”
Moreover, the governor stated, adding a private cause of action providing treble damages and attorneys' fees would be “unprecedented nationally, could trigger a significant volume of potentially frivolous litigation, and will ultimately drive insurance premiums – already among the highest in the nation – even higher for Rhode Island drivers.”
The governor added that enactment of the legislation also might force some insurers “to exit the Rhode Island market, making our car insurance market even less competitive and more expensive.”
The governor concluded that the bill was “overly burdensome” and “anti-business” and “work[ed] against the progress we've made together to improve the economy and make it easier to do business in our state.”
Nearly a dozen Rhode Island insurers had asked the governor to veto the bill.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].