National class action lawsuits, which cost insurance companies millions of dollars, will eventually have an effect on consumers because insurance companies will pass those costs on in rate increases, says Ohio Insurance Director Lee Covington.

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Recently Covington unsuccessfully sought to block the nationwide class action certification of Enfield vs. Old Line Life Insurance Co., which is being tried in New Mexico, because it could "significantly undermine" the ability of the Ohio Department of Insurance to regulate insurers.

Covington says high legal fees from the settlement of class action lawsuits don't provide much benefit to consumers, and they often cause insurers to pass the costs on to consumers through higher premiums.

"A local judge in another state doesn't know the issues facing consumers in Ohio but may make a decision that affects those consumers directly," he says. Covington believes he has sole responsibility for determining insurance policies in his state.

Attorneys in the New Mexico class action suit said Covington's arguments against the certification of the class didn't make sense. If Covington had blocked the certification it could have led to standard insurance policies being interpreted differently across the country. They argue that class action lawsuits can benefit consumers because contract language becomes universal and not subject to different interpretations in different states.