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2002 FINAL STATELEGISLATIVE PROGRAM CONTROVERSIAL ISSUE ISSUE: NO FAULT AUTO INSURANCE SUMMARY: No fault auto insurance is the type of coverage in which a driver's own insurance company pays for the injuries or damages of the insured party regardless of fault. The critical provision in some no fault insurance laws is the "verbal threshold," a concept in which lawsuits are permitted only for drivers who die or suffer serious injuries. By limiting the number of categories within the "verbal threshold," proponents of no fault insurance seek to deprive large numbers of injured parties of their right to sue. Other states with no fault insurance laws use a "monetary threshold." Under the "monetary threshold" approach, claimants are required to submit medical expenses over a certain amount prior to initiating litigation. The battle over no fault insurance in Maryland began in the early 1970's. The issue was defused in 1976 when the General Assembly approved a Personal Injury Protection (PIP) bill that provided for no fault insurance up to $2500 worth of coverage. A broadened no fault concept resurfaced in 1989 where it was used as a bargaining chip to obtain favorable consideration of choices within PIP insurance. The mandatory no fault bill, and another measure that proposed to set up a voluntary no fault system, both died in committee. In the 1990 and 1991 sessions, the only no fault bills to be filed died in committee. No fault bills were introduced in the House of Delegates in 1992 and 1993 but were not even afforded the opportunity for a hearing. There were no bills concerning no-fault insurance in the 1994 session, and the 1995, 1996, 1997 and 1998 versions were killed in committee. There were not any No Fault bills filed in 1999, 2000 or 2001, but that does not mean that interest in the concept has evaporated. Proponents and opponents of no fault insurance have basic disagreements over issues involving individual responsibility, the relative importance of a driver's right to sue, the impact of litigation on insurance premiums, and the experience of states that have enacted no fault statutes. The goals of the supporters of no fault insurance are to lower automobile insurance costs, to obtain faster payment of benefits to accident victims, and to set up a more efficient insurance system by lessening the amount of litigation. Proponents of no fault insurance base their arguments on the assumption that increased litigation is the primary cause of increased auto insurance premiums, and cite estimates prepared by the Insurance Information Institute, that legal fees add up to approximately 11 per cent of all premium dollars. They suggest that Maryland drivers could save as much as $87 per car under a true no fault insurance system. Critics of no fault insurance argue that the statistical evidence prepared by the insurance industry is spurious, and cite examples where no fault insurance has failed to decrease premium costs. No fault opponents emphasize the importance of maintaining a citizen's right to seek compensation for injuries, and the necessity of making drivers responsible for their actions. Defenders of the traditional tort approach believe that requiring drivers to have insurance that pays for damages to others serves as a deterrent, and that no fault insurance blames the victim whose premiums will increase as a consequence of payment for damages arising out of accidents that were caused by reckless drivers. As a means of increasing support for their arguments, advocates of no fault laws have shifted their attention from broad statutes that would require all drivers to purchase no fault insurance, to a system whereby consumers could select between no fault and traditional liability policies, the so-called CHOICE PROPOSALS. Under this approach, a policyholder may give up the right to sue and in return be protected from the suits of other drivers except in well defined and very limited circumstances. Critics of CHOICE PROPOSALS cite the structural bias of this approach in favor of those who select no fault. In accidents involving a no fault automobile operator and a driver with traditional liability insurance, advocates of CHOICE contend that the insured party with no fault should be protected against lawsuits. The consumer who paid for the right to sue may exercise that option by seeking payment for their damages from their own insurance company under uninsured motorist coverage. The consequences of this approach, claim opponents, would be a dramatic increase in the liability insurance option premiums in comparison to the payments of no fault drivers. At the federal level, legislation to enact federal no fault automobile insurance with an "opt out" provision for states not wishing to participate was introduced in 1997. That effort failed, but another proposal has been filed in the Congress this year and is presently under consideration. The American Bar Association is opposed to these bills, preferring instead to let states decide their own form of motor vehicle accident reparation system. AUTOMOBILE INSURANCE SYSTEMS Pure Tort Add On Verbal Threshold Monetary Threshold MSBA 2002 POSITION: Strongly oppose all no fault proposals. The specter of no fault insurance will haunt Maryland for the next few years as policy makers grapple with ways to lower auto insurance premiums. Instead of tampering with the rights of victims to seek compensation for damages, elected and appointed officials should concentrate their attention on abuses within the tort system involving fraud, the impact of the antitrust exemption for insurance companies, the interaction between fluctuations in insurance company investments and premium increases, and the design of reliable, independent baseline studies to determine the underlying reasons for high automobile insurance premiums. SAMPLE LEGISLATION:
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