By Eric Lindquist
March 29, 2009
Wisconsin trial lawyers refer to a set of changes called for in Gov. Jim Doyle's proposed state budget as the "Truth in Auto Insurance" provisions.
They say the pro-consumer reforms will protect individuals and businesses from financial disaster and ensure people receive the coverage they believe they are buying.
The insurance industry, however, argues the changes would do little more than drive up auto insurance rates to the point that many Wisconsin consumers would be forced to drop coverage altogether.
Lawyers contend the provisions would largely reverse a series of changes made to the law in 1995 at the request of the insurance industry.
But insurers maintain those 14-year-old reforms passed overwhelmingly following the normal legislative process - as opposed to this year when Doyle slipped them into his 1,748-page budget proposal - and have helped Wisconsin offer the third-lowest auto insurance rates in the nation.
In interviews last week with the Leader-Telegram's editorial board, representatives of both groups accused the other side of misleading the public and attempting to line their own pockets, making the truth behind "Truth in Auto Insurance" difficult to discern.
The proposal getting the most attention would require a higher minimum level of liability coverage for people who buy auto insurance. State law now requires insured drivers to buy at least $25,000 of coverage for injuries to one person and $50,000 of total coverage for accidents in which multiple people are injured.
Doyle's budget would increase those minimums to $100,000 per person and $300,000 total. It also would raise the minimum property damage coverage from $10,000 to $25,000.
That would make Wisconsin's minimums the highest in the country, said Andrew Franken, president of the Madison-based Wisconsin Insurance Alliance.
The alliance estimates that jacking up the minimum coverage requirement would raise the average cost of auto insurance for Wisconsin consumers by 33 to 43 percent, pricing many people out of the market.
"As an industry, we recommend people buy $100,000/$300,000 ... but we also recognize there are hardworking people who are struggling to make ends meet who can't afford that," Franken said. "The people who would pay for this package are all of the consumers in Wisconsin."
At this point 20 to 25 percent of state drivers carry coverage below the higher proposed minimums, he said, and many of those people likely would quit buying insurance rather than pay the higher premiums.
The insurance industry's wildly inflated claims about the impact on premiums are merely scare tactics intended to stop the Legislature from doing the right thing for consumers, said Scott Winston, an attorney with the Eau Claire law firm Guelzow and Winston.
Winston noted that rates never went down after what he called the "insurance company handout" in 1995. So why, he asked, should people believe the opposite will happen now?
The reality, Winston said, is that minimum coverage levels set in 1982 haven't kept up with inflation and don't reflect today's cost of medical care or auto replacement.
"I see it frequently right here in the Chippewa Valley where if you've got minimum coverage it's just a matter of divvying it up almost between the insurance companies," he said. "If you can get a small fraction for your client, you're lucky. The person who needs the money most - who has the lost wages, who has the kids - they're getting nothing."
Though Franken countered that more than 90 percent of state claims last year were fully covered under the $25,000/$50,000 threshold, Winston said his office alone handles several local cases of serious accidents per year in which damages exceed those minimums.
Taxpayers are forced to pick up the slack when claims go uncovered and accident victims are forced to turn to government health insurance programs such as BadgerCare and Medicaid to cover their treatment costs, said Lance Walter, a consultant to the Madison-based Wisconsin Association for Justice.
"Why are we bearing the costs that are directly related to someone else's error, omission or negligence?" Winston said. "We're bearing that cost at the expense of insurance companies making huge profits."
Trial lawyers and insurers also disagreed on other items in the proposed budget related to auto insurance. Among them:
- Joint and several liability: The governor's proposed 2009-11 budget calls for returning to state law what is known as joint and several liability. A key element would end the requirement that people must be at least 51 percent at fault for causing an injury to be held responsible for all of the damages.
Franken called today's practice common sense and said Doyle's proposal could lead to a circumstance in which a co-defendant deemed 1 percent at fault for causing an accident might be required to pay 100 percent of the damages if other co-defendants don't have the resources to pay.
The other side of the story, Winston said, is that the proposed change would ensure that innocent victims and their health insurers don't end up bearing the costs of a loss. Instead, claims in such cases, which he called exceedingly rare, would be paid by those with at least some responsibility for the loss.
- Stacking provisions: The proposed budget would prohibit anti-stacking provisions in auto insurance policies. That means a consumer with two or more policies would be entitled to coverage under all of those policies when the injured person's damages exceed one of the policies.
Franken argued that the current policy, under which consumers just get the coverage they buy for the particular vehicle involved in a crash, makes more sense. Otherwise, he said, consumers might choose to buy one policy to cover multiple vehicles.
But Winston said consumers should have access to all the coverage they pay for in the event they need it.
- Reducing clauses: Another budget proposal would prohibit insurance companies from deducting certain payments, including those from other insurers, from underinsured motorist coverage claims.
Policyholders should receive the proceeds of their policy's coverage up to the amount of damages suffered, Winston said, adding that the provision would ensure consumers get what they believe they are paying for.
Franken, however, said consumers aren't misled under the current system because they can collect up to the limit - regardless of the source of that money - stated on their policy.
"That's what we're pricing and selling, and people know it will be offset by someone else's coverage," he said. "We're selling a product. It is what it is."
Together, the provisions take away consumers' right to choose how much coverage they want to buy, Franken complained.
With all of the claims and counterclaims being tossed around regarding the auto insurance provisions, it will be up to legislators and the governor to sort through the mess and determine if the reforms will remain in the final budget they approve later this year.
Lindquist can be reached at 833-9209, 800-236-7077 or firstname.lastname@example.org.