Ohio Insurance Director Lee Covington filed court actions Nov. 13 to intervene in four class action lawsuits that could cost Ohio insurance residents hundreds of millions of dollars.
Covington filed the motions to intervene as a party Defendant in the following cases:
• McDonald v. Westfield National Insurance Company (Wood County)
• Baughman v. State Farm (Summit County)
• Lazarus v. Ohio Casualty (Cuyahoga County)
• Mager, et al. v. Erie (Erie County).
In addition, Covington announced plans to file court actions in four related cases pending in Franklin County.
According to a preliminary Department actuarial analysis, insurers in the state could be forced to pay out more than $400 million if the class action lawsuits are successful, which will result in price increases for consumers.
According to a National Association of Insurance Commissioners study, Ohio ranks second in the nation in terms of best homeowners premium rates and ninth in the nation in terms of best automobile insurance premium rates.
Covington said if the trial lawyers are successful, these cases will affect the rates charged to consumers by all Ohio insurance companies. An adverse decision could also affect the authority of the Department to regulate insurance rates and destabilize the outstanding market all Ohioans enjoy.
State law grants the Department the sole authority to approve insurance rates and products. Any party that believes it has been aggrieved by an approved rate may make a written application to the Department for a hearing on that issue. In addition, they may request a hearing from the Department if they feel that they have been victimized by an unfair or deceptive practice in the insurance business. In this particular case, neither of these procedures had been followed, sidestepping the Department’s role as regulator of the state’s insurance industry.
Uninsured and underinsured motorists (UM/UIM) coverage provides bodily injury coverage to an insured driver or passenger as a result of an accident caused by the owner or operator of an uninsured or underinsured vehicle. The named insured and family members are also covered if they are pedestrians and are struck by an uninsured vehicle.
On Oct. 5, 1994, an Ohio Supreme Court ruling (Martin v. Midwestern Group Insurance Co.) expanded the reach of UM/UIM coverage to any car driven by an insurance consumer who had that coverage on any vehicle they owned, even if they had not insured the vehicle involved in an accident.
The court’s opinion specifically stated “it is the responsibility of the insurance company to set a premium in accordance with the risks involved.” The most actuarial sound way to calculate rates for UM/UIM coverage is to determine loss exposure based on the number of vehicles. When insurance companies employ the most accurate method for calculating risks, consumers benefit in terms of more affordable insurance premiums. Because insurance companies assess automobile loss risk on a per vehicle bases, during the period between October 1994 and September 1997, insurance consumers who purchased UM/UIM coverage continued to pay premiums based upon the number of vehicles owned and insured by the policyholder.
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