New No-Fault Insurance Effort Emerges in Capitol

Screech! Crunch!

You’ve just been involved in an automobile accident. And the next sound you hear--even before the wailing of the ambulance--will very likely be the raised voices of the drivers involved arguing over whose fault it is.

Sure, there are a few level-headed types out there who calmly and quietly follow the prescribed procedure, exchanging names and policy numbers without further comment. But even those civilized drivers have arguments over fault--they just don’t begin the fight until the insurance claims are filed.

Last week, I told you about my own experience as an auto accident victim, and the tortuous 3-year process I had to go through just to get a marginal out-of-court settlement for my injuries. Forty percent of the money went to my attorney. If I had insisted on seeing my case through to trial, the ordeal would probably have lasted 2 more years, at least.

That’s because the courts are so clogged with auto accident cases. They increased 81% from 1982 to 1986, according to the Judicial Council of California. And according to the RAND Corp., they now account for 43% of all civil cases in the state.

It seems to me there ought to be a better way.

And it seems that way to some other people as well--people such as state Assemblyman Patrick Johnston (D-Stockton), and Judith Bell, director of special projects for the San Francisco-based Consumers Union, which publishes Consumer Reports magazine.

I don’t have any specifics to offer on what I think that better way might be. But they do. The California Trial Lawyers Assn. also has some suggestions for improvements, although the attorneys’ group would prefer to keep the current system intact and so far has not proposed legislation.

Johnston, who chairs the assembly’s Committee on Finance and Insurance, and Consumers Union have drafted a bill that would set up a no-fault insurance system modeled after a successful system in New York State.

We all heard the term “no-fault” bandied about ad nauseam last fall during the insurance industry’s $70-million campaign for Proposition 104, the so-called No-Fault Initiative. And our response at the polls was a resounding “No way!”--Proposition 104 lost by a 3-1 ratio.

Instead, we approved the Ralph Nader-backed Proposition 103--now only partially in effect while undergoing review by the California Supreme Court.

Proposition 103, however, makes no changes in the current tort system, which is based on the concept of fault.

Jeff Shelton, an aide to Johnston, says the new no-fault bill, AB 354, is designed to complement, not contradict, Proposition 103. And it has nothing to do with Proposition 104.

“AB 354 is to Proposition 104 what the Constitution of the United States is to the constitution of Russia,” Shelton says.

“Proposition 104 had 80 pages that had nothing to do with no-fault,” says Bell.

To understand how no-fault compares to the at-fault system, Shelton says, you first have to know a little history.

“The legacy of tort actions is that people should be required to compensate others when they’ve caused others harm through negligence. It began to develop during the Industrial Revolution as a defense against those who are hurt,” he says.

Wait a minute. A defense against victims?

That’s right, Shelton says. “The old English common law wasn’t so interested in negligence. The tort system requires not just that you prove I was the cause of your injury, but that I caused it as a result of a negligent act.”

In AB 354’s no-fault system, neither fault nor negligence would be a factor. If you’re injured in an auto accident, you file a claim with your own insurance company, “just like you would do now with your health insurance if you were sick, or with your homeowner’s insurance if your house burned down,” Shelton says.

“We think it would speed up the process. In New York when this system went into effect, the amount of time people waited to be paid was reduced from 2 years to 2 months, on the average.”

The Johnston no-fault bill also would require insurance companies to settle claims promptly or pay a 2% per month penalty for delays, along with attorney fees if their clients sue them as a result.

Because the insurance companies involved will never argue about who’s at fault in an accident, Shelton says, “many of the frictional costs we have now will be reduced.”

As with any no-fault system, some injured people will not be allowed to sue. But the Johnston bill’s claim limit is double that of Proposition 104--$50,000 total versus $10,000 for medical expenses and $15,000 for work loss. And its definition of what constitutes a serious injury, in which a victim can sue for pain and suffering damages, is much broader than under Proposition 104.

Still, the bill would remove about 80% of current cases from the court system, Bell says.

But wouldn’t an insurance company be inclined to cancel your policy if you make large claims against it? Mine did in 1986, after I filed a $6,000 collision damage claim.

That’s where Proposition 103 comes in, say Shelton and Bell, with its strict rules about the circumstances under which a policy can be canceled or not renewed.

A no-fault system might also reduce insurance premiums, Bell says. In New York, rates have increased only 4% a year since no-fault was instituted. In California, however, rates have gone up 42% since 1985.

But Gary Chambers, president-elect of the Orange County Trial Lawyers Assn. and a member of the state association’s governing board, says insurance companies don’t need cost-saving measures to reduce rates.

“I would like to see Proposition 103 go into effect before we start legislative efforts to help the insurance companies,” Chambers says. Proposition 103 mandates a 20% rate rollback, although that provision has been stayed pending the court’s review.

“No-fault was rejected overwhelmingly by the voters last fall,” Chambers says. “They don’t want it.”

But Chambers agrees that the system needs help. He thinks the first step in speeding things along is “more courtrooms. Statistically there are no more lawsuits per capita in California than in 1915, but there are one-third as many courtrooms available (per capita). The legal system has not kept pace.”

Chambers is also an advocate of mandatory arbitration and other efforts to streamline the process, as have been made in some counties. “In Riverside and San Diego counties they have an accelerated trial program, in which a case is put on a computer system to make it move and avoid the delays,” he says.

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