Anyone who looks at America’s lawsuit-based auto insurance system has to conclude that, except in Michigan, it provides poor value for the consumer dollar and a terrible surprise for most of the worst-injured victims.

(The surprise: High as the premiums are, the benefits from your lawsuit, when you’re badly hurt, are zilch, if your injury was caused by a hit-and-run driver or a driver you cannot prove was at fault or a driver who has no insurance or assets to sue for — which is a high proportion of the accident causers … and next to zilch if you are hit by a driver who did stay around to be sued and whom you can prove was at fault and who did have the legally mandated insurance — which in California, for example, will entitle you to only $15,000 (less legal fees) even if you have $1 million in medical bills, excruciating pain, terrible disfigurement, and can never work again a day in your life. In Michigan, where insurance costs less, you would, in this situation, have all your medical and rehab bills paid, and some wage loss reimbursement. But the lawyers claim to think Michigan’s system is worse for consumers and victims. Vastly better protection at significantly lower cost? They see that as a bad deal, because there’s little money in it for them.)

The defense lawyers who represent insurance companies are not keen on Michigan-style no-fault either, because if most lawsuits were eliminated, so would be most of their incomes.

In the November issue of Crossroads, published by The Auto Insurance Compensation Project of the University of Wisconsin at Milwaukee, Jackson Williams, a spokesperson for the defense attorneys, offers six suggestions to try to improve the situation without clamping down too hard on lawsuits:

  1. Repeal the Collateral Source Rule. This would allow juries to be told when someone was already covered by health or disability insurance and so didn’t necessarily need to be reimbursed for already-reimbursed medical bills or lost wages. (In deciding the damages to award, juries could choose to ignore this information, but they would have it.) This would likely lower the cost of settling many claims and reduce the incentive to sue in the first place.
  1. Allow a Seat Belt Defense. Right now, though a victim may have violated the law by not wearing his seat belt, the jury can’t know that or take it into account in deciding how much compensation he is owed. The defense lawyers argue this shifts some of the cost of injuries to those who do wear seat belts.
  1. Adopt Medical Injury Profiles. “Injury profiles representing the medical consensus as to what treatments are required for minor injuries should be admissible in lawsuits to help jurors identify excessive medical expenses.”
  1. “No Pay/No Play” for Uninsured Plaintiffs. California passed this by referendum, prohibiting uninsured drivers to sue for pain and suffering. (They can still sue for all their medical, rehab and wage loss.) In other words, if you make $6 an hour and can’t afford $1,400 to buy auto insurance, you’re not entitled to sue for pain and suffering if you’re hurt. It would seem fairer to cut the cost of auto insurance by eliminating most of the legal expense and fraud, so low-income people could afford to obey the law and buy it. Then maybe such a provision might be warranted.
  1. Require Contingency Fee Disclosure. The idea here would be to force personal injury lawyers to tell their clients at the end of a case how much time they had spent on it, and if they felt outraged (“I’m paying you $32,000 for 17 hours’ work?”), they could “negotiate for a reduced fee.” But even assuming each attorney were candid about his hours, what leverage would the consumer have in these “negotiations”? Ordinarily, the contingent-fee agreement is signed up front, and the lawyer is the one who receives the cash, takes his fee and expenses, and passes on the remainder to the client.
  1. Experiment with Procedural Reforms. Like changes to the rules of discovery, mandatory arbitration and the like.

Even if there is merit to some of these — as I think there is — you can be all but certain the personal injury lawyers will not allow them to happen. And note that the savings these reforms would achieve are achieved almost entirely by reducing what crash victims get. You’re poor and couldn’t buy insurance? You get less. You weren’t wearing your seat belts when your head was bashed in? You get less. You were already reimbursed for these expenses you’re suing for? You get less.

Some of that may in fact be warranted.

But where are the reforms that would cut out the legal expenses and fraud? And why not just do what Michigan does? It’s been working there for 25 years.

(The one important tweak: as suggested yesterday, Michigan needs to allow low-income drivers to buy a less generous, more affordable benefit package.)



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