The Democratic state senator and attorney from Marshall County wants to know what information the governor and Insurance Commission used when determining West Virginians should not be allowed to sue an insurance company without first being a subscriber of that carrier's coverage.

Gov. Joe Manchin and others have said West Virginia is out of step with the rest of the country. The state is one of just six to allow third-party "bad-faith" lawsuits in which a person sues another person's insurance company for maltreatment.

The Legislature last year ordered Insurance Commissioner Jane Cline to study the issue, and her department came to the conclusion that the Mountain State does need to change its Unfair Trade Practice Act, under which bad faith claims are brought.

She presented her report, "Third Party Causes of Action: Effects on West Virginia Insurance Markets," in February. Among other findings, it said a study by the Rand Institute indicated premiums in West Virginia were about 11 to 19 percent higher because of third party causes of action. A separate study reached a similar conclusion.

If Senate Bill 418 is passed, removing third-party bad-faith lawsuits from the courtroom and replacing them with administrative proceedings could knock $50 million off automobile and homeowner premiums paid in West Virginia, according to promises made by major insurance carriers.

The bill already survived Kessler's attempts to change it in the Senate Banking and Insurance Committee. But this week, SB418 is before the Senate Judiciary Committee, which Kessler leads. He is planning to try again to preserve some form of civil action for third-party bad-faith cases.

Protected by Law

Kessler said before he can consider believing the insurance companies' promise for premium reductions in exchange for tort reform at their word, he wants access to the information used to come to the conclusion that third-party bad-faith lawsuits should be prohibited.

According to a letter he received from Cline, however, that information is not available to the public because it contains proprietary information about insurance carriers. According to state code, the information is not for public consumption and is considered confidential, immune from a Freedom of Information Act request or a subpoena or from being admitted as evidence in any criminal, private civil or administrative action.

"Therefore, even though the report is to the West Virginia Legislature, I have been prohibited by (state law) from presenting the information in any fashion that violates the confidentiality provisions," Cline said in a March 10 letter to Kessler.

"I simply cannot disclose the information you seek without violating this code provision."

For Kessler, the answer is frustrating, particularly because he cannot find any specific calculations to verify the $50 million in insurance premium savings if the bill passes.

"As a policymaker of the Legislature, I am not entitled to see the information used to compile the report," Kessler said. "I am disturbed about how the entire process has occurred.

"Insurance companies are hiding behind a veil of secrecy, sneaking around with a bag of money to convince people to change the law," he continued. "If trial lawyers were walking around with a bag of money trying to get people to help them, they'd be arrested for extortion. But apparently it's okay for insurance companies."

Change is Needed

Not everyone agrees with Kessler. In fact, he seems to be an army of one right now.

Senate President Earl Ray Tomblin, D-Logan, said he expects the measure to pass despite Kessler's objections.

"I think the vote may be somewhat closer in Judiciary," Tomblin said. "Kessler has a problem, but I expect the governor to put the full court press on this.

"Insurance companies have promised a reduction within 90 days -- a $100 reduction," he continued. "Apart from that, this will open up the market and create competition in this state, which we don't have now. That will drive down the cost even more."

He said removing third-party bad-faith lawsuits is the most important part of the tort reform package for insurance companies.

"They have to have that," Tomblin said.

Brian Kastick, Manchin's director of Public Policy and Financial Affairs, said West Virginia needs to bring itself in line with the rest of the country.

"When West Virginia makes itself more like other states, the citizens will benefit," he said. "They'll see a $100 reduction in their car insurance not just this year but every year."

Brenda Nichols Harper, vice president and general counsel for the West Virginia Chamber of Commerce, said more states are passing progressive tort reform measures and the Mountain State is falling behind.

"South Carolina just passed massive civil justice reform," Harper said. "... Support (here) is building. As more states pass laws that make West Virginia out of step, more will recognize the need for change."

Harper said most other states handle third-party bad-faith cases as an administrative remedy, which makes SB418 a reasonable change.

Finding the Right Change

According to the West Virginia Trial Lawyers Association, more states than just six allow citizens to sue another person's insurance company for unfair treatment.

"To say we're one of five or six states to allow it is inaccurate," said Jim Casey, lobbyist for the association.

"Other states allow 'torts of outrage' where bad faith or other outrageous behavior by insurance companies (is actionable). Some states do it by consumer protection laws."

Casey said removing a third-party cause of action means the initial first-party cases might not be as successful.

"You have to take less than the case is worth because there is no way to hold insurance companies accountable," he said.

"The threat of a third-party bad-faith claim against an insurance company is real in that it makes them evaluate cases along what is realistic as opposed to what they can get away with."

For all of Kessler's objections, however, he admits the Unfair Trade Practices Act does need to change.

"I think if it's abused, it needs to change," Kessler said. "Filing cases simultaneously to threaten the insurance company -- the extortion effect of it -- ought to be eliminated. ... I share the governor's concern for changing the state's business image, but I'm not sure totally eliminating third-party bad-faith is the way to do it. We have some other ideas to consider."