During the 2005 legislative session, Governor Manchin sought to lower the high insurance premiums the people of West Virginia were paying. The Governor’s insurance reform bill was substantial in words, containing over 20 pages, but it contained provisions that actually helped the insurance companies.

The most notable was the removal of third-party bad faith lawsuits.

State law used to allow non-policyholders to sue an insurance company that failed to deal in good faith with their claims against a policyholder.

Now the Governor has stripped away your right to sue. Not trusting the wisdom of the court, he set up his own panel within the Insurance Commission that reviews the cases.

But that is not all. It used to be that if the court found a company guilty of giving some poor soul the run-around, there was no limit to the monetary fines.

Governor Manchin’s law now places significant limits on the penalties:

“Require the payment to the State of West Virginia of a penalty in a sum not exceeding one thousand dollars for each and every act or violation, but not to exceed an aggregate penalty of ten thousand dollars, unless the person knew or reasonably should have known he or she was in violation of this article, in which case the penalty shall not exceed five thousand dollars for each and every act or violation, but not to exceed an aggregate penalty of one hundred thousand dollars in any six-month period.” (SB 418)

If the insurance company has a history of perpetually violating the law, the Commission may add additional fines not to exceed $250,000.

With this enforcement mechanism limited, insurance companies know exactly how much delaying a claim will cost. Delay is now an issue for the bean counters: is harassing the non-policyholder worth the chance of being caught and being fined at most $5,000 per violation? If so, they’ll take that liberty.

But that is not all. All damages and penalties used to go to the victim. Now the state claims it all except actual economic damages and non-economic damages not exceeding $10,000. Restitution may not be given for attorney fees and punitive damages.

Without the monetary reward and no chance of getting attorney fees reimbursed, there is no impetus for the individual to take their claim before the Commission.

You tell me: does reducing the insurance company’s penalties for not paying you the money they owe you help the insurance company or hurt them?

Now that Manchin’s bill has had a chance to impact the insurance market, my father received two letters from his insurance carrier, Liberty Mutual, dated November 21st.

The first letter concerned his home insurance:

“Dear Valued Customer,

“Your Governor and state legislature have been working hard to reform insurance laws and help make insurance more affordable. As your insurer, we work hard to provide you with the best coverage and services at a competitive price. Because of our already competitive pricing, we will not be decreasing rates in your area this year.”

My father is not alone. Senator Sprouse has received numerous calls from irate West Virginians who have seen their insurance premiums go up, not down!

My father’s second letter discussed his auto insurance:

“Dear Valued Customer,

“Your Governor and state legislature have been working hard to reform insurance laws and help make insurance more affordable. As your insurer, we understand the impact that high premiums can have on our customers.

[…]

“Because of our already competitive pricing and the work your state has done on insurance reform, we are pleased to inform you that we will not apply a 3% base rate increase to your auto policy this year.”

Instead of actually cutting their client’s bills, Liberty Mutual will not apply the cost of living adjustment and just keep it at the same level of extortion as last year.

The problems with Governor Manchin’s insurance bill were of great concern to the Republican Senators and they told Manchin so during a Republican caucus he attended. A Senator called the reforms “weak” and Manchin agreed.

Manchin said he knew it was problematic but the people of West Virginia want a cut on their insurance bill – no matter how small – and he was determined to do what it took to give them their cut so that they knew he was trying to do something. Once West Virginians saw a reduction, Manchin said he would revisit the issue to do meaningful reform.

In public, Manchin’s tune was much more optimistic. He told the people of West Virginia they would definitely see a significant reduction in their insurance. The reforms he conceded were weak in private, he called “sweeping” in public.

Not only have we received many irate calls over the growing premiums, one man even sent us copies of his insurance bill to illustrate how they have steadily increased since Manchin signed the bill into law. He included a note, “liars figure, but figures never lie.”

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On a side note, Joe Manchin, the gubernatorial candidate, told the Daily Mail in 2004 that he was not interested in removing West Virginian’s opportunity to have their day in court. As the Charleston newspaper recounts:

“Joe Manchin, Lloyd Jackson and Jim Lees all agreed that West Virginia’s court system isn’t the kind of tort hell depicted by the Chamber of Commerce. Rather, they say so-called tort reform measures would limit access to courtrooms.

“To a man, the Democratic front-runners say the proposed reforms would translate to limited access to the legal system for West Virginia citizens, without any guarantee of an improved business climate or lower insurance rates.

“Jackson, a former Lincoln County prosecutor, said most tort reform measures would ‘close our courtrooms to people who have a legitimate issue they need addressed.’

“Manchin, the secretary of state and a small businessman, agreed.

“‘Being the only non-lawyer, I agree with where they’re both coming from on that,” he said. “The protections have to be there for the citizens of West Virginia.’”