For Immediate Release
2/1/2011

Auto Insurance Legislation Rolls Back Important Consumer Protections

The Republican controlled State Assembly is scheduled to take up a bill on Wednesday that if passed will repeal important consumer protections for auto insurance policyholders.

"Generally, legislators fight for their constituents to make sure that policyholders get all of the coverage they pay for," said Mike End, President of the Wisconsin Association for Justice. "But now legislators are taking away the rights of their constituents to get the coverage they purchased in good faith."

The changes proposed would return Wisconsin to a lower standard of accountability by again allowing provisions in complex auto insurance contracts to deny consumers the coverage they have purchased.

One of the worst anti-consumer provisions in the bill is to again make reducing clauses legal for insurance companies to use. End said, "If you buy $100,000 in underinsured motorist coverage (UIM) that is what insurance companies should provide if you are injured by a driver with inadequate insurance and your bills exceed your coverage. A reducing clause allows insurance companies to never provide $100,000 in coverage when the other driver has insurance."

Here's how it works. You are in an accident caused by another driver, and your bills exceed $200,000. The other driver has $50,000 in insurance coverage, which is paid to you. You purchased $100,000 in UIM coverage. Rather than get the full amount, the other driver's insurance is subtracted from your UIM policy, leaving only $50,000 in UIM coverage, not the $100,000 you purchased. Or, even worse, if the other driver had insurance coverage of $100,000, then your $100,000 of UIM coverage would not apply at all. You would have paid a premium and would receive nothing in return.

Other anti-consumer measures currently included in the bill are:

  • Insurance companies can include anti-stacking clauses in their policy. "Stacking" is the combination of two or more UM/UIM coverages purchased for different automobiles in a household. Separate premiums are paid for each coverage. The proposal limits coverage to only one UM and/or one UIM policy, no matter how many policies the owners of multiple cars paid for.
  • No written notification of UM/UIM coverage for umbrella policies is required. Insurance companies will no longer be required to tell consumers that they can purchase the coverage.
  • Commercial policies, which include auto insurance provisions, no longer would be required to carry UM/UIM coverage on their vehicles. This means there may be no coverage for school bus passengers when the bus is hit by a driver with little or no insurance.
  • New rules for when a driver runs you off the road, but doesn't hit you. You will be required to file a statement under oath to the insurance company within 30 days of the accident or coverage will be denied. This makes no exception for someone who may be seriously injured. This provision is entirely new and without precedent in Wisconsin.

"This legislation does not reflect the values of Wisconsin citizens. Consumers in our state expect to get the coverage they pay for. And they also expect the people who make the laws in this state to be on their side. Unfortunately, this anti-consumer bill does neither," End concluded.

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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