Assembly Poised to Enact Anti-Consumer Law

The Assembly on Tuesday will debate Assembly Bill 4, an auto insurance bill that will prevent many consumers from receiving adequate compensation for their injuries and bills because they will not receive the insurance coverage they thought they had purchased.

Probably the biggest consumer trap contained in the bill will allow insurance companies to insert language into their policies that will prevent consumers from ever receiving the insurance coverage they thought they had purchased. The insurance policy provision that will be allowed by this legislation is called a "reducing clause."

Mike End, President of the Wisconsin Association for Justice, said, "It is very difficult to understand why the Legislature continues to enact laws that take away consumer protections from Wisconsin citizens. The Legislature should be in the business of making laws that protect Wisconsin citizens, not making laws that remove such protections."

A reducing clause allows an injured person's insurance company to reduce the amount of underinsured insurance coverage by the amount of the at-fault driver's liability insurance coverage.

Wisconsin resident Carroll Plumb's accident illustrates the impact Assembly Bill 4 will have. Mr. Plumb was badly injured in an accident last summer. He is still hospitalized and has incurred medical bills of over $1 million. The at-fault driver who hit Mr. Plumb had $250,000 of insurance coverage. Mr. Plumb had purchased underinsured motorist coverage of $300,000 on both of his vehicle insurance policies.

If Assembly Bill 4 had been in effect at the time of the accident, Mr. Plumb would receive a total of $300,000 from all of the insurance policies, $250,000 from the other driver's policy and only $50,000 from Mr. Plumb's two policies. Assembly Bill 4 would allow the insurance company to limit Mr. Plumb to using only one of the two policies having underinsured motorist coverage and that policy's $300,000 coverage would be reduced by the $250,000 paid by the other driver's policy. Although Mr. Plumb had purchased a total of $600,000 of underinsured motorist coverage, he would only receive $50,000 of that amount under the proposed law.

Under the current law in Wisconsin, Mr. Plumb will receive $850,000 comprised of the other driver's $250,000 and both of the policies having $300,000 underinsured motorist coverage. The difference in what Mr. Plumb will receive under the current law compared to what he would receive under the new law means the difference between filing for bankruptcy or helping to substantially pay for the care he needs.

"There is no reason why consumers should not receive all of the insurance coverage they pay premiums for," said End. "Instead of continuing the current protections for consumers, the Legislature is enacting laws that will harm Wisconsin citizens. Such laws benefit no one, certainly not the people most seriously injured, nor us taxpayers who will have to foot the bill for injured people who will now be unable to pay."

Insurance companies aren't suffering financially because of auto insurance legislation passed in 2009. American Family Insurance Group, a Madison-based insurer and largest auto insurer in Wisconsin, had a net income of $487.1 million in 2010, an increase from its $256.9 million in profits in 2009. (Wisconsin State Journal, American Family continues recovery, March 3, 2011).

American Family earned this increased income despite higher losses in 2010 from hail, tornadoes and wind in parts of Wisconsin, Minnesota, and Kansas.

These numbers show that insurance companies have been doing fine since the 2009 auto insurance changes in Wisconsin.

The Wisconsin Association for Justice stands with consumers to promote a fair and effective justice system for every citizen, not just the privileged and wealthy.

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