Whose No-Fault is It, Anyway?

...That concept has existed almost as long as cars themselves (it was first conceived by Judge Robert S. Marx in 1925), and it's been a serious proposition since the publication of Robert Keeton and Jeffrey 0' Connell's Basic Protection for the Traffic Victim in 1965...

...or a parent whose brand-new, but poorly designed, to-aster exploded and burned your child...

...It's quicker because it eliminates the court delays...

...The next day the committee reported out Brown's bill and grafted on Johnston's proposal as an amendment, creating a completely incoherent proposal that called for no-fault insurance and opposed it at the same time...

...In add-on states, by contrast, no-fault coverage guarantees victims if not a war-chest, at least a cushion with which to press on with a lawsuit...

...David Urbanczyk provided research for this article...

...Period...

...Even the purer forms of no-fault allow lawsuits against the only real bad guys in this arena: drunks...

...or a black homebuyer denied credit by a racist bank...

...To actually collect money to pay for treating your broken leg, you have to prove that the crash was somebody else's fault—someone who's either adequately insured or wealthy...

...The lawyers have more at stake...

...Holl introduced his own insurance reform bill—one that retained the tort system that has been so generous to the state's lawyers—and the bill cleared the Senate...

...Countless key legislators are lawyers themselves—and therefore have an interest in preserving the tort system that earns them contingency fees...

...After all, those with big medical bills often need to settle, while those with minor injuries can afford to wait—particularly given the chance at a "pain and suffering" bonus that has nothing to do with emotional trauma or inconvenience, but is a standard three- or four-times multiple of out-ofpocket costs...

...This creates all kinds of problems...

...Not to worry...

...The watered-down no-fault laws the trial lawyers gave us break down into two categories...

...Anti-no-fault material recently mailed out by the American Trial Lawyers Association boasted, "From: Nader's Center for Study of Responsive Law—Not a Trial Lawyer Document...

...Some actually feel intimidated by Nader's disapproval...

...Never mind that in most car wrecks, actual fault is usually shared —Mr...

...As a result of this liability system, auto insurance is an increasingly unaffordable item: A Philadelphia couple with an 1988 Chevy and an 1984 Olds and two clean driving records now pays $2,400 annually for standard coverage...

...This leads to more claims, greater dollar payouts per claim, and, therefore, higher premiums...

...You can work hard (but that's no fun...

...They roll over and play dead and let the trial lawyers take over...

...Before the insurance debate wound up in the California legislature, for instance, it wound up on the ballot...

...The virtues of no-fault insurance have been borne out by experience...

...Nader's argument is that any restriction on the public's access to the courts is bad...

...Jones, who should have been more vigilant, was daydreaming about his girlfriend...

...You, the little guy with the broken leg, have just shelled out $5,000 in medical expenses, and you can't bide your time for three years before collecting, so you settle out of court for half of what you're entitled to in order to avoid complete destitution...

...For example, in Connecticut injured parties need only demonstrate $400 in medical expenses (that's a couple of trips to the doctor, with a few tests thrown in) to jump the nolawsuit hurdle...

...while the home office might back no-fault, independent brokers specializing in high-risk drivers might oppose it, since any measure that reduces premiums reduces their commissions...

...There's also a common-sense appeal to no fault: Since most accidents are just that—accidentsin which both drivers share some blame, what's the point in having a battery of lawyers concocting clever arguments about whose guilt is greatest...

...While, in fact, it is an ideal reform that's seldom been tried, most people think it's been tried quite often and found to be a failure...

...Under the traditional tort system, victims are often left with no funds to cover accruing medical and other expenses while they await their turn on the docket...

...Occasionally, heroes like Ralph Nader can bring enough publicity and morality to bear to make the good guys win...

...Sound bad...

...In these states, individuals still have an unrestricted right to sue and be sued to recover for accidentrelated injuries...

...But the effect of both on the average consumer is the same: He gets screwed...

...Still, with a good plan and wise promotion, the insurance companies and allies could win the no-fault battle...

...It puts consumer groups in a difficult position to be on the other side of an issue from him," says Glen Nishimura, executive director of HALT, a Washington-based legal reform group...

...And at times, the insurance lobby has just had more pressing concerns, as in Pennsylvania in 1984, when the insurers traded away their no-fault bill in order to gain political backing on the catastrophic health care fund...

...Then again, whatever one may think of Willie Brown's leadership of the California Assembly, it's fair to suggest he hasn't achieved his position of influence by alienating his party's top financial backers...

...That view has no doubt been shaped by Nader's fondness for product liability suits...

...The day before the Ways and Means Committee was scheduled to vote on the no-fault bill, Brown held a closed-door meeting for the committee's Democratic members, touting his own insurance reform bill—one that lacked the key no-fault provision...

...Daniel Mirvish is a Washington writer...

...Say you're a small businessman who's been swindled by an unscrupulous contractor...

...They call it "stingy" for refusing to cover pain and suffering...

...Without them, consumers might still be stuck with all those injuries and medical bills from Corvairs and Pintos...

...That's why claimants often settle instead of waiting for a court date several years away (and risking the uncertainty of a jury verdict...

...Insurance companies, for the most part, will make their money either with no-fault or without it...

...at the same time, it increased the amount paid to claimants from 48 percent to 73 percent...

...You can win the lottery (perfect—except for the long odds...

...by Peter Spiro and Daniel Mirvish In America, there are three ways to get rich...

...the lawyers have contributed $10,000 to Holl in the last year and a half alone, making him their second largest beneficiary in the legislature...

...Holl has been a favorite beneficiary of the Pennsylvania Trial Lawyers Association...

...It is a basic tenet of his being that nofault shouldn't happen...

...By now, the trial lawyers and Nader have been so successful in misleading the public about no-fault insurance that no state has enacted a no-fault measure since 1983, even the watered-down kind...

...The trial lawyers have consistently used that influence to block true auto insurance reform...

...Smith made a quick turn, but Mr...

...The Consumer Federation of America endorsed the Johnston no-fault bill but made a self-conscious decision not to actively work for it...

...Money talks, no-fault walks To understand why 26 states haven't had any nofault legislation at all, and why 21 others have settled for No Fault Lite, which is often just as bad, it's important to remember a crucial fact about the politics of state legislatures: They're heavily influenced by trial lawyers...

...Experience has shown that without pure no-fault, you're stuck with phony reforms, fleeced customers, and courtrooms full of smiling lawyers...

...In Michigan, the average insurance premium is 17 percent less than it would be without no-fault, according to a 1985 study by the Transportation Department...

...They stopped giving money to Johnston, by the way, when he proposed his bill: no-fault, no money...

...In New York it is 6 percent less...

...Witness this process at work: First the trial lawyers emasculate the no-fault proposals, ensuring their failure...

...in 21 percent less...

...The plan was headed to the Senate Judiciary Committee, which must approve any insurance bill, and whose 11 members (eight are lawyers) had received $297,000 in campaign donations from the California Trial Lawyers Association during a recent 18-month period...

...Ralph's religion The defeat of no-fault isn't the result of entrenched, moneyed interests alone...

...Of course this suits the shady contractor and the racist bank just fine...

...In fact, add-on laws may result in more autoinjuryrelated court filings...

...Meanwhile, suits are on the rise...

...A 1945 act of Congress forbids the federal government from regulating the insurance industry...

...Without Nader's backing, the consumer lobby hasn't been able to bring much pressure to bear on the issue...

...But the insurance business is also a fragmented one...

...The plan won bipartisan support in the state House but screeched to a halt upon arrival in the Senate—just as the lawyers, who have close Senate ties, expected...

...system, also means you have to wait—those lawyers with all those suits create gridlock in the civil courts: more than 80,000 auto cases clog the California superior court system alone...

...Now, with insurance premiums at record highs, any proposal coming from the insurance companies is likely to meet with a large dose of public skepticism...

...The committee was glad to resolve the dispute, striking down the no-fault provision by a 9-2 vote...

...No-fault treats auto insurance like any other kind of insurance: If you get injured, you get paid...

...In Los Angeles County, tort filings have increased by more than 60 percent in the past two years...

...The bill's chief Senate opponent, Ed Holl, who chairs the Senate Banking and Insurance Committee, had several reasons to set his considerable influence to work against it...

...Or the fact that trial lawyers groups paid him $7,000 in honoraria last year...

...In getting rid of no-fault in 1984, the trial lawyers teamed up with the insurance lobby, who agreed to support the lawyers' opposition to the no-fault law in exchange for getting the lawyers' backing on an entirely unrelated plan to create a state-run catastrophic insurance fund...

...But unlike cases of corporate America turning out unsafe products, in most auto accidents there are no scheming Goliaths against whom only the resources of the courts will prevail—there are usually just individual drivers who have made unintentional mistakes...

...Chances are you'll have to wait years for justice because the courts are busy listening to Smith's and Jones's lawyers bending the truth about who caused that wreck...

...This is quite a sophisticated, and effective, con job...

...But these thresholds are often so low that they keep virtually no cases out of court...

...For one, it means you have to hire a lawyer, who will then pocket 30 to 40 percent of the money the court awards you...

...And Nader is so singularly influential that his determined backing would have the potential to make no-fault a nationwide reality...

...True, you can't look forward to that pain and suffering jackpot—the kind that inspires bumper stickers—but then again Blue Cross doesn't compensate you for pain-and-suffering either...

...It's only you who can't...

...Maybe Brown just thinks a tort system is better...

...the final initiative sprawled to 24,000 words...

...Jones was at fault for not seeing it blink...

...Harry Snyder, executive director of the Consumer's Union in California, says, "Ralph has a view bordering on the religious...

...So it's all the more dismaying to find Nader using the force of his considerable reputation to block these efforts at reform...

...No-fault is cheaper, quicker, and fairer...

...Compare that to 92 cents for Blue Cross health insurance...

...That's right, Mr...

...In hindsight, it seems a prudent investment...

...Maybe...

...Or that the group's total primary contributions reached $873,000, making it the state's second-largest PAC...

...It also means your insurance company, which is constantly being sued by other drivers, has to hire lots of lawyers, too, driving up the cost of your premiums...

...So now the state has a no-fault bill passed by the House, a tort bill passed by the Senate, and little chance of reconciling the two—meaning no-fault, for now, is dead...

...I don't think you could really design a much worse system if you tried," says insurance expert Andrew Tobias...

...After New York instituted no-fault, its autoinjury court filings dropped 80 percent...

...After Michigan switched to nofault in 1973, AAA Insurance cut the amount it paid lawyers from 32 percent of its premium revenues down to only 4 percent...

...In the same county, jury awards for such notoriously unprovable injuries as whiplash and knee pain climbed 42 percent in a single year...

...As the California Insurance Commissioner put it, consumers are "not going to get lower auto insurance rates" without reforms like no-fault...

...Furthermore, a recent study done by former White House Conusumer Affairs Adviser Virginia Knauer estimates that nofault would save consumers $3.7 billion a year...

...The state's trial lawyers had an easy time painting it as an insurance industry con-job, and the proposal went down to defeat by more than a 2-1 margin...

...Meanwhile, the nation's insurance companies have proved similarly ineffective as lobbyists...

...They're the ones who get rich dragging car wrecks through the courts, and, as it happens, they also have inordinate influence in the state legislatures, where insurance laws get written...

...Or you can get in a car wreck and sue...

...the only difference is that they can also recover additional amounts directly from their own insurer for out-of-pocket costs...

...even entrenched, moneyed interests sometimes lose...

...On the contrary, without no-fault the auto insurance mess is unlikely to ever be straightened out...

...Listen," he recently told a San Diego audience, during the California no-fault debate, "insurance spokesmen—and I've dealt with them for years all over the country—they don't want the tort system, period...

...But that doesn't mean pure no-fault should be abandoned...

...Having your Ford bashed up is only the first step...

...While the trial lawyers are driven by plain old greed, Nader at least is driven by principle—his inordinate belief in the virtues of the lawsuit...

...The first is the trial lawyers...

...The legislature is hopeless," says Herb Dennenberg, a former Pennsylvania insurance commissioner and an ardent backer of no-fault...

...Thanks to trial lawyers and Nader, there is a great deal of confusion surrounding no-fault insurance...

...The tort system routinely undercompensates people seriously injured in auto accidents, and overcompensates those with minor injuries...

...That's why in a sense, nofault is almost inevitable...

...they say only a tort-based system can punish bad driving...

...And countless others are the beneficiaries of trial lawyer largess...

...Then, conveniently, they turn around, and point to those failures as evidence that no-fault doesn't work...

...It's cheaper because it eliminates the lawyers and the incentive for "pain and suffering" fraud...

...A shot at such generosity also creates powerful incentives for outright fraud...

...This, thinks the visitor from abroad, truly is the land of opportunity, where you can acquire great wealth just by getting your Ford bashed up...

...Among the reforms voted on was Proposition 104, a no-fault plan backed by the insurers...

...While this may come as no surprise—few of us have any illusions about the effects of lawyer-lobbyists on the public good—the second part of the answer is a surprise indeed: Ralph Nader...

...in New Jersey, the issue may decide who becomes the next governor...

...Cheap, quick, and fair What is so maddening about the crisis in auto insurance is that the solution is hardly a secret: nofault insurance...

...There are two guilty parties...

...it's the trial lawyer whose living is on the line...

...On the whole, the insurance industry tends to back no-fault, since it eliminates the outrageous jury awards, and, in reducing delays, tends to smooth relations with injured customers...

...Thanks to the inefficiencies of the liability system, only 44 cents of every premium dollar makes it into the pockets of accident victims...

...In this case, the someone was a legislator named Patrick Johnston, who chairs the Assembly's Finance and Insurance Committee...

...No wonder insurers estimate that phony claims now account for 15 to 20 percent of all auto insurance payments...

...The specter of, the promise of, the likelihood of Nader's opposition saps their enthusiasm on nofault...

...they can afford to wait...

...By the time the court gets through all those Smiths and Joneses and turns its attention to you, years are likely to have passed...

...Johnston's no-fault bill had cleared the insurance committee and was heading for Ways and Means, where its prospects looked good, when Speaker Willie Brown, trial lawyer and trial lawyers' friend, began to intervene...

...As a result, we have a law that benefitted everyone but the consumer...

...Clogged courts, of course, inherently benefit the wealthy and powerful, who have the resources to wait...

...With the case for no-fault insurance being plain for anyone to see, an obvious question arises: Why has no-fault insurance—real no-fault insurance, that is—been instituted in only three states...

...Turn now to California, and you'll find it's deja vu all over again—someone suggested a no-fault system, and the trial lawyers blocked it...

...So up go your premiums...

...Someone has to pay for all those lawyers, after all, and that someone is you...

...And why does no-fault now seem such a discredited concept...

...Coast to coast, the nation's jurists are sifting through one car wreck after another, trying to decide whether Mr...

...And in other states with higher thresholds, victims have a powerful incentive to run up medical bills in order to make the cut...

...Smith was at fault for not turning on his blinker in time or whether Mr...

...Nader has stubbornly refused to recognize this distinction...

...This happens in two ways...

...Add-on legislation may result in more accident victims getting compensated—since payment on the additional coverage is not fault-based—but it will also mean higher premiums and no reduction in court caseloads...

...What they don't say is that they've got billions of dollars in contingency fees at stake...

...But the insurers did little to court consumer support and tacked on a number of unrelated features...

...And while many other consumer lobbies, such as the Consumer Union and the National Insurance Consumers Organization (a Nader spin-off group), do still support no-fault, without Nader they have much less clout...

...This system of suits, known as the tort liability Peter Spiro is a law clerk for a federal appellate judge...

...Or the fact that the vast majority of those funds went to the Democratic party that Brown leads...

...Due to the publicity that surrounds astronomical jury awards for such dubious injuries as "whiplash," it's this last path to wealth— the fender bender—that sometimes seems to offer the truest promise...

...They want to get rid of the civil jury...

...Unfortunately, the backers of no-fault haven't been putting forth either...

...First, in nine so-called "add-on" states, insurers must offer (and, in five, consumers must purchase) a certain amount of no-fault coverage in addition to standard liability policies...

...Foreigners must be mystified by those American bumper stickers that say, "GO AHEAD, HIT ME—I COULD USE THE MONEY...

...It gets worse—the endless bickering over traffic cases that ties up the civil courts also keeps out matters that really do cry out for judicial attention...

...It's fairer because you get paid for what your injuries actually cost you—your out-of-pocket medical expenses, rehabilitation costs, and lost wages...

...Consumer Advocate himself has consistently teamed up with the trial lawyers to block one of the most important consumer reforms in the country...

...Or the fact that the California Trial Lawyers Association donated $85,000 to his last campaign— just for the primaries, that is...

...When Governor Robert Casey tried to revive nofault this past summer, the lawyers' lobby was again the chief impediment...

...That's because 21 states have concocted watered down no-fault systems—fake nofault— that in some cases is worse than the tort system it replaces...

...Maybe the fact that he himself works as a personal injury lawyer has no effect on his position...

...In a number of states, including Pennsylvania and California, the demand for auto insurance reform has emerged as a pivotal political issue...

...But it's a shame that it's taking so long...

...The second type of merely nominal no-fault system now in place—so-called "no-lawsuit" no-fault— has in some cases worked out even more poorly: Victims must meet a dollar threshold of out-of-pocket expenses before they can take their claims to court...

...Consider the case of Pennsylvania, where the trial lawyers first helped ensure that the state's no-fault law was watered down, then got it ditched in 1984, and have subsequently blocked attempts to reinstate it...

...But closer inspection shows this system contains more tarnish than shine...

...By contrast, true no-fault states, like Michigan, allow lawsuits only when someone's been killed, dismembered, or severely disfigured...

...and with insurance reform bills pending in a number of state legislatures, the public's only hope is that enough voters see through it...

...There is no question that '84 was a product of a joint effort by trial lawyers and the insurance industry," says Otis Littleton, a Pennsylvania House aide...