Capital Review
January 31, 2003
No-fault auto insurance must be reformed
When Colorado drivers receive their auto insurance renewal statements, many call their agents to complain about increasing rates. In turn, agents have shrewdly provided irate customers with the names and address of state legislators, who are the only ones able to change the laws which make Colorado one of the mostly costly states in which to drive.
"No fault" insurance triggers the largest increase in Colorado auto insurance rates, and state law requires every driver to purchase no-fault coverage. In my own case, no fault accounts for almost one-quarter of my total premium.
As with problems in the health insurance market, no-fault auto insurance originated amid the best of intentions, but it backfired when people discovered how to take unfair advantage of the system.
So, what is no-fault coverage?
Under no fault insurance, when someone is injured in an auto accident, each injured person collects injury and property damage from their own insurance company – regardless of who is at fault.
Prior to 1974, an injured person had to take the other driver to court, prove the other driver was at fault, and then sue for damages. That erstwhile tort law was changed because attorneys often walked away with a large chunk of the injured person’s judgment and because juries were awarding more for "non-economic damages" (e.g., pain and suffering) than for actual medical costs and lost wages.
Under no-fault coverage, drivers forfeit the right to sue for pain and suffering unless medical expenses surpass $2,500. Also, everyone is required to purchase no-fault coverage in order to cover their own costs.
One reason Colorado rates are exorbitantly high is because drivers are required to carry $100,000 in no-fault coverage (second highest in the nation) and injured parties can make claims for up to 10 years. By contrast, Kansas requires only $9,000 in coverage, and Utah mandates just $3,000.
Meanwhile, the $2,500 injury threshold was intended to prevent lawsuits in all but the most serious cases. Instead, it has become a target to be exploited by personal injury lawyers and assorted "health care providers." Attorneys know that once their client reaches $2,500 in medical expenses, they can sue the other driver – this undermines the fundamental basis for no fault which was to keep claims out of court.
Unlike health insurance, no fault insurance pays for alternative treatment by religious healers and experimental therapies, among others. Insurance companies have been ordered to pay for hot tubs, treadmills, weight machines, weight-loss programs, aromatherapy and health club memberships.
And we all know who pays in the end, don’t we?
Since 1997, the average claim under no fault has increased 53 percent to $7,749. Although that amount seems excessive, it also begs the question, "Why are we required to carry $100,000 in coverage?"
Among the proposed changes to Colorado’s no-fault law:
• Reduce the required coverage from $100,000 to a reasonable amount similar to other states.
• Rather than allow pain and suffering lawsuits when medical expenses exceed $2,500, restrict those "non-economic damage" suits to a specific list of the most severe injuries.
• Create a fair review board to decide which medical expenses are legitimate. Under current law, even the most bizarre medical expenses are routinely approved.
• Provide an option for drivers to purchase coverage for alternative or experimental medicine.
Ultimately, the Legislature must decide whether it will continue to force all Colorado drivers to pay high costs for insurance in order to reimburse others not for injuries and lost wages but for "non-economic losses."