As collision repairers we find ourselves ever more involved in the legal aspects surrounding the repair of vehicles. One concern is insurers' efforts regarding national no-fault insurance legislation. In order to see how this will adversely affect consumers and your business, you'll need to have a basic understanding of the following legal terms: tort, tort reform and no-fault insurance. So, bear with me here!
In layman’s terms
According to Black’s Law Dictionary, a tort, in the most basic understanding of the term, is a civil wrong for which a remedy, such as the means of enforcing a right or preventing or redressing a wrong legally or equitably, may be obtained. This is usually in the form of damages, such as money claimed by or payment ordered to a person as compensation for loss or injury.
Tort reform, in its basic form, is defined by Black’s as a movement to reduce the amount of tort litigation, usually involving legislation that restricts tort remedies, or that caps awards damages, especially for punitive damages.
Black’s further qualifies tort reform as it relates to the business of insurance. “Advocates of tort reform argue that it lowers insurance and healthcare costs and prevents windfalls. Opponents contend that it denies plaintiffs the recovery they deserve for their injuries.” The last part of the explanation, as it relates to the business of insurance, should give us a strong hint at how tort reform will impact you, your business, and the consumers whose vehicles you would like to have a shot at repairing.
According to Black’s, no-fault insurance is defined as, “an agreement to indemnify for a loss due to personal injury or property damage arising from the use of an automobile, regardless of who caused the accident.”
Discussion of no-fault insurance on a state-by-state basis
Efforts to promote no-fault insurance on a state-by-state level are nothing new. According to www.infoplease.com, there are currently only 13 states with no-fault auto insurance laws that in some way restrict the right of parties to file legal suits. No-fault insurance (which made its debut in 1947 in Canada and migrated to the US in 1971,) is a type of indemnity plan, usually applied to automobile coverage. It follows that those injured in an accident receive direct payment from the company with which they themselves are insured. Basically, no-fault insurance eliminates the need for accident victims to establish another’s liability, or fault, through a civil lawsuit.
Understandably, lawyer groups oppose no-fault, contending it limits the citizen’s right to sue. Supporters say that it leads to quicker settlement of accident claims and lower premium rates than the traditional tort liability system because it reduces legal fees and court costs. The website of insurance.com adds, in part, “In most states, auto insurance functions under a traditional fault-based system (under which) insurance companies make payments based on each person’s degree of fault in an accident.”
However, long and costly court battles may be required to determine who was at fault in many accidents. In an attempt to reduce this problem, thirteen states (CO, FL, HI, KS, KY, MA, MI, MN, NJ, NY, ND, PA, and UT) have adopted an alternative no-fault system of insurance.
Under a no-fault system, when you have an accident, your auto insurance provider automatically pays for your damages, regardless of fault, up to a specified limit. In exchange for this guaranteed payment, you must forego some of your rights to sue the other driver involved in the accident. By the same token, you are also protected from being sued in the event you are at fault in an accident.
There are elements of no-fault in all auto insurance coverage. For example, medical payments and property damage are typically paid regardless of fault. Under a pure no-fault system, your auto insurance provider pays for any economic damages, such as medical bills or lost wages, up to the policy limit. You are completely prohibited from suing a negligent driver for “non-economic” damages, such as pain and suffering or loss of companionship.
At the present time, no states function under a pure no-fault system. Instead, all thirteen no-fault states have adopted a modified no-fault system. This means that your insurer still pays for your economic damages up to the policy limit, but you may be allowed to sue for non-economic damages if the amount of these damages exceeds a specified threshold.
Beyond the above very simplified explanation of no-fault insurance, there are many and varied real life applications of it. The point to remember, though, is that although no-fault insurance for states may sound appealing at first, rising insurance costs have led some states that presently have it to re-examine its effectiveness. For example, Colorado may be allowing their no-fault status to sunset, although insurance.com didn’t note the change.
Insurers are pushing hard for national (federal) no-fault insurance legislation
In 2002, from within the upper management of the insurance industry, friends of iCan, the Insurance Consumer Advocate Network let the network know of insurance industry plans to push for a Federal Department of Insurance to be folded into the U.S. Department of Commerce. The underlying objective at that time was to effectuate insurance related tort-reform that would eventually achieve a national no-fault form of auto insurance.
Dennis Howard, on his website, www.iCan2000.com, has since been warning collision repair professionals, consumers and legislators of the disastrous aspects of national no-fault insurance for consumers and repairers if the National Insurance Act of 2006 were to be enacted.
With more than 40 years working within the insurance and claims arena as an agent, staff adjuster, litigation supervisor, trainer, independent adjuster, consumer advocate, litigation consultant, and currently serving as executive director of
iCan, Howard is very qualified and well versed in his warning of the residual consequences that would befall consumers and collision repairers should a national form of no-fault insurance be enacted.
“The insurance industry has been lobbying for tort reform, and the current administration has tort reform as a basic element of its agenda,” Howard said. “No-fault insurance, especially as administered at the federal level, would constitute a form of tort reform with broad, sweeping and tragic consequences.”
Howard describes the insurance industry as “having two profiles; one profile is for legislators, regulators, voters and prospective policyholders, while the other profile is for existing policyholders expecting promises to be kept.”
In a word, Howard, with his intimate knowledge describes the insurance industry as “insidious.” The dictionary variously describes insidious as intended to entrap or beguile; stealthily treacherous or deceitful; and operating or proceeding inconspicuously but with grave effect. Virtually any shop owner who has spent more than a few minutes dealing with insurers will readily agree with Howard, though maybe not verbally for fear a degree of insidious retaliation would be brought upon him or her.
If you have the time and inclination, do read the complete text of this nearly 300-page proposed legislation at www.govtrack.us. Or you can consider Howard's observations, upon having read and studied it personally.
iCan's analysis of The National Insurance Act of 2006
While potentially available to consumers, the primary intent of the office of ombudsman in this proposed legislation for a national form of no-fault insurance seems to be a tool to enhance communication between the Federal Department of Insurance and the insurers being regulated. An ombudsman is defined as an official that investigates complaints, reports findings, and helps to achieve equitable settlements. The commissioner seems to have the authority to limit the scope of activity in which the office of ombudsman would be allowed to become involved, evidenced in the following quotes taken from the proposed legislation, concerning handling of complaints.
“…the Ombudsman shall issue a written determination of the appeal. Such determination shall become the final decision of the office, unless reversed, modified, or stayed by the Commissioner.”
Also proposed, concerning retaliation, “…if the Ombudsman determines that reasonable grounds exist to conclude that retaliation has taken place, (he) shall refer the matter to the Commissioner.”
Terms of note
Transparency: Whereas a standard practice of transparency in the office of Commissioner would evoke positive impressions, the Commissioner has the authority to seal any documents if he or she believes it to be in the best interest of the public.
Accounting standards: Senate Bill 2509 calls for a standardization of accounting methods to be used to determine insurer profitability. This is a good thing, and is an element included in iCan's Policyholders’ Bill of Rights.
Pre-approval of rates: S.2509 calls for Federal Department of Insurance pre-approval of premium rates before implementation. This, again, is a good thing and is also an element included in iCan's Policyholders' Bill of Rights. However, if the Federal Department of Insurance fails to approve rates within a short period of time, insurers have the right to implement whatever rates they filed without being subject to retro-active reversal.
No delegation of authority: S.2509 precludes the Commissioner from delegating any authority to any insurance industry self-regulating organization, which in-and-of-itself sounds good. However, as any reader of the law can appreciate, the impact of a law can be as profound by what it Does Not say, as by what it Does say. Here, it would seem completely within the letter of the law for the Commissioner to delegate authority to individuals who may be members of an “insurance self-regulating organization” but would be expected to act outside their membership, which would appear to be an opportunity for the Commissioner to act within the letter of the law while, at the same time, defeating the intent of the law.
Consumer Protections: While S.2509 creates an Office of Ombudsman, which on the surface would hint of protecting the rights of consumers, the reality of this proposed office is that there is virtually no statutory basis for the Office of Ombudsman to intervene on behalf of consumers. iCan's Policyholders’ Bill of Rights contains two elements incorporated into S.2509, although the rate control element has been substantially compromised. Additionally, other elements of iCan's Policyholders' Bill of Rights that we consider essential consumer protections have been ignored. This includes right of insurability, right of equitable recovery, right of public record admissibility, right of third party to access alternative dispute resolutions as outlined in the standard ISO-165 line contract referencing first party rights to arbitration, and appraisal options.
Authority of the commissioner: in S.2509 gives the commissioner broad, czar-like authority to implement rules and regulations as he or she may choose. All this power will rest in the hands of one individual. Over the past 30 years the insurance industry has spent many millions of dollars trying to implement no-fault insurance on a state-by-state basis, an endeavor that has been largely unsuccessful. In reading S.2509 we see nothing to preclude the establishment of national no-fault insurance. In fact, we see the commissioner as having the authority to do exactly that.
See for yourself
To read the National Insurance Act of 2006, visit www.govtrack.us and type “S 2509” into the search engine. To view the bill of rights and evaluate the above-listed observations, visit www.ican2000.com and click on the link for “Policyholders’ Bill of Rights.”
S.2509 deserves more discussion, so start talking, and email your Senators and Congressmen on this bill. In doing so you can help bring to the attention of your legislators what we see as potentially the most devastating insurance related legislation to confront consumers in more than 40 years.
Let your Senators and Congressmen know how you feel about having a Policyholders’ Bill of Rights amended into the National Insurance Act of 2006. At the very least, insist that the commissioner NOT be given the authority to override any existing fault or no-fault statutes currently in place in any state.
In Howard’s opinion, the National Insurance Act of 2006, in its present form, is a thinly disguised, well-camouflaged onramp for national no-fault insurance. Don't allow congress to take action based upon inaccurate or incomplete information.
The Insurance Consumer Advocate Network, www.ican2000.com, is an internet-based consumer advocacy effort designed to increase consumer awareness of insurance-related issues, encourage consumer involvement with insurance-related efforts, and facilitate consumer contact with pro-consumer entities.
Just knowing that insurers are very much interested in national no-fault insurance becoming law should in itself send up red flags to consumers and the collision industry. This bill is in the first step in the legislative process. Introduced bills go first to committees that deliberate, investigate, and revise bills before they go to general debate. Though the majority of bills never make it out of committee, considering the clout and financial incentives the insurance industry is able to provide, this one most likely will if you don't do your part to defeat it.
A bill must be passed by both the House and Senate and then be signed by the president before it becomes law, But don't let this one get that far. Inform your customers, senators and representatives why national no-fault insurance is no good for consumers and business.