RAND study examines insurer class actions

The number of class action lawsuits filed against insurance companies in the United States spiked in the late 1990s before the passage of the federal Class Action Fairness Act of 2005, and many were filed and resolved outside of the public scope, according to a new report released Wednesday by the RAND Corp.'s Institute for Civil Justice.

The report by the Santa Monica, Calif.-based public policy and research nonprofit organization states that 89% of the lawsuits between 1992 and 2002 were filed in state courts, with 82% of suits naming plaintiffs from the same state. Of the class action suits, one in five of them were funneled into the federal court system, and two-thirds of them were either disposed in favor of the defendants or voluntarily dismissed by the plaintiffs, the report shows.

Researchers concluded that the study highlights a problem with "shadow" lawsuits, according to a statement.

"In class actions (prior to the federal law) we saw many cases filed, litigated and resolved in a relative obscurity," said Nicholas M. Pace, lead author of the report. "This shadow litigation happened outside the view of many interested parties. That probably does not serve the public interest."

Researchers gathered their information by surveying 199 insurance companies, according to the report. According to a statement by RAND, the study provides the most comprehensive glimpse of class action suits filed against insurance companies before the federal reform passed, expanding federal jurisdiction of class action suits to limit abuse in state courts and providing the federal government more oversight of such cases.

The complete report, titled "Insurance Class Actions in the United States" is available at www.rand.org.