Insurance giants like, State Farm, Allstate, Safeco and Farmers have poured over $8 million into the referendum battle regarding how insurers are required to treat their customers. Their goal is to convince voters to reject a law passed earlier this year that could force insurers to pay up to triple damages and lawyer fees if they fail to pay a legitimate claim and then lose in court.

Supporters of the law claim it forces insurance companies to pay legitimate claims in a timely and fair fashion and frees the courts from relatively minor cases that clog the system for months and even years.

Washington state lawmakers heard so many complaints from policyholders who believed insurers weren't treating them fairly that earlier this year they passed a law called "The Fair Conduct Act." Hearings were held, the bill was revised -- even watered down, and both the House and Senate passed it. The governor readily signed it.

But the very next day a coalition, funded primarily by insurance companies, moved in to stop the law from going into effect by filing petitions for a voter referendum on the law. Representatives of the insurance industry say the law will raise premiums and that the system is working fine as it is. The law, they said, will only make things worse, and they want voters to have the final say.

The campaign to woo voters has already begun. The insurance industry-backed group is already running television commercials depicting greedy lawyers planning to sue and warning consumers that the law will lead to frivolous lawsuits and higher rates.

Former insiders say insurance companies began limiting or denying legitimate claims in minor injury cases and reaped billions in profits as a result. The strategy has tied up courts across the country -- over minor claims, judges told CNN -- for months and even years. How did they do it?

"It really came down to basically three elements: a position of delay, a position of denying a claim and ultimately defending that claim that you're denied," said Jim Mathis, a former insurance industry insider.

But Robert Hartwig, with the industry-backed Insurance Institute, said the strategy was not intended to deny valid claims but to attack fraud, which, he claimed earlier this year, was rampant in minor accident cases.
"What insurers are doing is trying to monitor costs. And every insurance company is under the same pressure to do it," Hartwig said.