No-Fault Motor Vehicle Insurance

LO-PAOLT BOTOP YBHlCLE IPSUPANCE (ARCRIVBl>--07/ 16/79) I S S U E bYlEP POfiBEP IB7.3022 A UTHOB : Suenairaan, Katnleen Shea American Law D r v i s i o n T&E LIbPABY OY COBGBESS - PlAJOL ISSUES SYSTEM ISSUE DEPINITIOH ------------A major r s u e has d e v e l o p e d o v e r t h e D e S t meChanlSlP t o r t h e e q u l t a D l e a n d A e f f l c l e n t c o n p e n s a t L o n of l o s s e s t o v l c t i a s ~f m o t o r v e h i c l e a c c i d e n t s . D e p a r t a e n t o r ' I t r a n s p o r t a t l o n s t u d y shows t h a t m o t o r v e h i c l e a c c l d e n t s m 1967 r e s u l t e d i n more t h a n $ 3 0 . 5 b l l l l o n l n c o r n p e n s a b l e e c o n o m i c l o s s , An e s t i s a t e a $0.5 D i i l l o n ox t h l s l o s s was c o m p e n s a t e d , a b o u t o n e - h a l f through the existlng h a b l l r t y system. The s t u d y c o n c l u d e s t h a t t h e e u s t l n g l i a ~ ~t y l sly s t e m r e s u l t s I n c o m p e n s a t i o n t h a t IS u n e v e n l y a n d ~ n e x f i c i e n t l y Sucn a d i s t r l b u t e a and t h a t ~t s h o u l d be r e p l a c e a b y a * n o - f a u l t D s y s t e m , n o - - f a u l t s y s t e m c o n s ~ s t sof c o m p e n s a t i o n o f a n a c c l d e n t v l c t l m by his own i n s u r a n c e company a n d a s u b s t a n t l a 1 l l n l t a t l o n o n t h e v x c t i m r s r l g h t t o s u e t h e at-f a u l t p a r t y z o e damages. T h e " m o t o r v e u i c l e r e p a r a t l o n s s y s t e m m 1s t h e mechanism by u h i c h persons who h a v e s u k f e r e d l o s s a s t h e r e s u l t of m o t o r v e h l c l e a c c l d e n t s a r e compensated. Some s o u r c e s o f c o m p e n s a t l o n , e.g., hosprtalization Insurance, a r e regaraea a s O U t S l d e t h e system, s i n c e t h e b e n e t l t s provided do n o t occur b e c a u s e t h e l o s s r e s u l t e d from a r o t o r v e n l c l e a c c i d e n t . Withut t h e system, s0.e t y p e s ol: c o m p e n s a t l o n a r e p a i d o n a c o n t r a c t u a l r a t h e r t h a n a s a u l t baSlS, e.g., c o l l l s x o n m s u r a n c e , b u t t h e p r i n c i p a l means o f c o m p e n s a t i o n IS t h e l i a b l l ~ t yor f a u l t s y s t e r . T h e l l a b i l l t y s y s t e m 1s c o n p o s e d of b o t h a l e g a l e l e m e n t and a n l n s u r a n c e e l e m e n t . T h e legal e l e m e n t c o n s l s t s of t h e t o r t law p r l n c l p l e o t n e g i l g e n c e , u h l c n 1s u s e d t o d e t e r ~ i n e t h e l l a ~ l l i t y f o r l o s s . T h e m s u r a a c e e l e m e n t c o n s i s t s of liability i n s u r a n c e , w h l c h was o r r g l n a l l y r n t e n d e d r o ldemnlf y n e g l i g e n t d r l v z r s i o r t h e l r I l a b u l t y , a u t whlch 1s now r e c o y n l z e d a s a a e v x e t o a s s u r e t h e v l c t l r n s o f negligent d r r v e r s oi c c n p e n s a t l o n . T h u s p u r p o s e is e v z d e n t I n s t a t i l t o r y e n a c t m e n t s t h a t either c o n p e l t h e p u r c h a s e o t i n s u r a n c e or p r o v l d e a s t r o n g l n c e n t l v e t o do s o . AS t h e r e s u l t of t h e p a s s a g e of a c o n g r a s s m n a l resolution I n 1966, t h e D e p a r t m e n t ox T r s n s p o r t a t l o n ( N T ) u n d e r t o o k a m a j o r s r u d y of t h e r e p a r a t l o n s s y s t e a , p a r u c u a r l y rhe I l a b l l l t y s y s t e m . The w o r K r e s u l t e d l n 2 3 p u ~ L l s h e d s t u d i e s a n a a r e p o r t , wlllch was i s s u e d I n Harch 1971, The r e p o r t c o n c l u a e d . L r a b i l r t y s y s t e m has r e s u l r e d In the lnequtable t h a t the e x l & l n g d l s t r l b u t l o n o z D e n e f l t s , v ~ t ht n e overcompensation o f s m a l l e r c l a m s and t h e u n d e r c o n p e n s a t l o n o k l a r g e r c i a u s ; t h e u n t l s e l y d l s t r l b u t l o n of b e n e t l t s , particularly I n t h e a a l a y r n p a p e n t of l a r g e r , a o r e s e r l o u s clalms; and the c o s t l y and l u e z x l c l e n t U s t r l b u t r o n of b e n e t i t s , w i t h more t h a n o n e - h a l t of e a c h prernluin d O l l d r p d y m g l e g a l rees a n a l n s u r a n c e o v e r h e a a a n d l e s s t h a n o n e - h a l i of each p r e n l u m d o l l a r c o a p e n s a t l n g v i c t l m s , A d d l t l o n a l l y , t h e DOT r e p o r t c o n c l u a e a t h a t t h e h a b l l l t y s y s t e m h a s f a l l s d to r e d u c e losses a n d h a s c r e a t e u v a r L o n s l n s r l t n t l o n a l stresses on t h e i n s u r a n c e I n d u s t r y , t h e p u b l ~ c , and t h e 3 u d l c l a A s y s t e m , I t h a s Been s u g g e s t e a t n a t t h e i u n d a m e n t a l r e a s o n f o r these v a r l o u s p r o b l e m s rs a n I n h e r e n t c o n t r a a l c t r o n m t h e s t r u c t u r e of t h e u a n l l t y s g s t e a between a f a u l t - ~ a s e d l e g a l e l e m e n t a n d a conpensatloa-orlentea Insurance element, T h o s e who r e p c t t h e v l e v t h a t t n a r e 1s n o inherent c o n t r a d ~ c t l o n I n t h e l l a b l l l t y s y s t e m a a v o c a t e c o n t x n u a t i o n o r t h e e x l s t m g s y s t e a or r e t o r n s t h a t do n o t a l t e r t h e DaSlC k a u l t p r l u c x p l e . T h l s p r l n c l p l e hOlaS t h a t t h o s e u h o CBS- 2 a r e r e s p o n s l b l e f o r r o t o r v e h l c l e a c c i d e n t s m u s t , a s a matter of e q u l t y a n d f o r d e t e r r e n t p u r p o s e s , b e l e g d l l y h a b l e &or t h e i r c o n d u c t . T h o s e wno a c c e p t t h e v l e v t h a t there IS a n i n h e r e n t c o n t r a d i c t l o c I n t h e e x l s t l n g s y s t e a h a v e p r o p o s e d replacing rt u l t h a n o - s a u l t system. T h e two Key e l e m e n t s o f a n o - f a u l t s y s t e n are c o n p r e h e n s l v e , f l r s t - p a r t y ( o w n e r - o p e r a t o r ) l n s u r a n c e and a s u ~ s t a n t a a l l m r t a t x o n o f t o r t l l a ~ l i i t y . A m a j o r q u e s t l o n I n t h e e n a c t m e n t of a n o - - i a u l t p l a n rs w h e t h e r ~t s h o u l d be l n s t z t u t e a a t t h e P e d e r a l or S t a t e l e v e l . I n f a v o r of t h e P e d e r a l a p p r o a c h , l t IS a r g u e a t n a t t h e n a t u r e of motor v e h l c l e t r a v e l r e q u l r e s b a s l c u n i f o r u l - c y t h r o u g h o ~ tt h e c o u n t r y and t h a t t h e S t a t e s h a v e b e e n s l o w t o e n a c t g e n u l n e n o - f a u l t p l a n s , I n f a v o r o t S t a t e e n a c t B e n t , lt IS a r g u e d + h a t lt rs t h e p o h c y ox t h e B c c a r r a n - P e r g u s o n ~ c (15 t U.S.C. 1011) t o i e a v e t h e a a t t e r of I n s u r a n c e t o t h e S t a t e s and t h a t s u c h a n a p p r o a c h p e r m l t s e x p e r l n e n t a t i o n a n d a p l a n t u l o r e a t o t h e n e e d s o r e a c h S t a t e . A t t h e P e d e r a l l e v e l , there 1s a l s o t h e g u e s t l o n or w h e t h e r =here s h o u l d be o n e u n l f o r n i p l a n or a p l a n t h a t s e t s alnlnum s t a n d a r d s , Among t h e o t h e r a a J o r q u e s t r o n s r n c o n s l a e r r n g n o - f a u l t i n s u r a n c e are t h e folloulng: (1) S n o u i a n o - f a u l t b e n e f l t s c o v e r o n l y p e r s o n a l i n j u r y l o s s o r s h o u l d t h e y aLso c o v e r p r o p e r t y a a n a g e ? ( 2 ) S h o u l d t h e r e oe d u r a t l o n a l a n d / o r d o l l a r l l n l t s on n o - f a u r t b e n e f l t s ? (3) S h o u l d t o r t l l a b i ~ r t y b e p r e s e r v e d f o r damages e x c e e d i n g n o - f a u l t beneflts? (4) S h o u l a t o r t I l a b l l l t y be p r e s e r v e d f o r g e n e r a l aamages, e g g . , p a i n and s u f f e r r n g ? (5) S h o u l d a n l n s u r e r who p a y s f i r s t - p a r t y b e n e f l o s h a v e s u b r o g a t l o n rights a g a l n s t t h e O t h e r p a r t y a s i n s u r e r ? (b) S h o u l d n o - f a u l t b e n e f l t s be p r r m a r y or secondary t o O t h e r s o u r c e s ? A s l d e f r o m v a r l o u p o l l c y questions, t h e r e 1s t h e r s s u e of Whether C o n g r e s s h a s t h e c o n s t i t u t l o n a l authority t o s u p p l a n t t b e t o r t law of t h e S t a t e s wltn a no-fault plan. D u r l n g t h e 94th C o n g r e s s , no--fault m o t o r v e h i c l e i n s u r a n c e l e g l s l a t ~ o nwas a g a l n l n t r o d u c e a I n b o t h Houses. Two of t h e p r l n c l p a l b i l l s were S - 354, t h e l a t l o n a l S t a n d a r d s r o r l o - P a u l t i n s u r a n c e A c t , l n t r o d u c e a by Sen. idlagnuson, a n d B.B. 9b50, t h e l a t l o n a l S t a n d a r d s f o r N o - f a u l t B e n e z l t s A c t , rntroduced lams by Bep- Van D e e r l l n - a o t n b z l i s r e q u l r e d e v e r y S t a t e t o e n a c t n o - t a u l t r e e t l n g s p e c L f x e d P e a e r a l s t a n a a r d s . if a n y S t a t e f a l l e d t o d o s o by t h e a e a d l r n e , an a l t e r n a t e n o - f a u l t systeis voula go i n t o effect, t o be a d m l n l s t e r e d Dp t h e F e d e r a l Governrent o r , o p t i o n a l l y , b y t h e S t a t e l t s e l f . No i l n a ~a c t l o n i i a s t a K e n on e l t h e r b ~ l l . I n t h e 9 5 t h Congress, s e v e r a l no-fault b l l l s were a g a l n x n t r o d u c e d , 6 6 0 1 (flurphy) , l d e n t l c a l b i l l s . p r l n c l p a l l y 5. 1381 (Bagnuson) a n d H .& Under t h i s p r o p o s e d l e g l s l a t l o n , t h e S t a t e s were r e q u l r e a t o e n a c t t n e l r own p l a n s t o r motor vehicle a c c l d e n t l n s u r a n c e t h a t would a e e t or e x c e e d baslc P e d e r a l s t a n a a r a s . T b e S t a t e s mould r e m a i n s o l e l y r e s p o n s i b l e f o r t h e a d o l n l s t r d t l o n a n a regulation 02 m s u r a n c e , Although s l n l l a r t o H R 9650 f r o n t h e 94 t h C o n g r e s s , thrs proposed leglslauon contalned sone r o d l t r c a t l o n s b a s e d on a h a l y s l s o t S t a t e e x p e r i e n c e w i t h t h e n o - t a u l t concept. S. 1M1 V&S r e p o r t e d out o f t h e S e n a t e C c m m l t t e e on Coamerce, S c l e n c e and T r a n s p o r t a t i o n a n a t h e House I n t e r s t a t e a n d P o r e l g n Commerce S u b c o r n a r t t e e o n Corisuuer Protection and Z l n a n c e t a v o r a b l y r e p o r t e d H . J . 0603 as a c l e a n ~rli. however, t h e f u l l House Comalttee o n I n t e r s t a t e and P o r e l g n C o m e r c e rejected t h e c i e a n b l U by a v o t e of 22 t o 14. No f u r t h e r a c t l o n was t a K e n o n e l t h e r b l i l . . A t t h e S t a t e l e v e l , fb S t a t e s characterized a s g e n n n e n o - a u l t fxrst-party have, t o a a t e , e n a c t e a what h a v e been laws - t h a s la, p l a n s u l t h comprehensive k n e f lts a n d a s l g n l r l c a n t a b o i x t l o n or t o r t l l a o l l l t y . The 16 CYS- I873022 3 OPDATE-05/25/79 S t a t e s are C u o r a d o , Connecticut, P l o r l d a , G e o r g i a , B a n a n , K a n s a s , Kentucky, M a s s a c h u s e t t s , blchxyan, kllnnesota, Nevada, Hew J e r s e y , Sew York, Borth Ezght D a k o t a , Pennsylvania, aud U t a h , P u e r t o Blco a l s o h a s s u c h a p l a n . States h a v e s o - c a l l e a add-on p l a n s t h a t p r o v l d e f o r some t l r s t - p a r t y benefits, b u t do n o t l l m i t t o r t I l a m l l t y . The e l g a t S t a t e s a r e Arkansas, Delaware, d a y l a n d , Oregon, S o u t h C a r o l l n a , S o u t h Dakota, Texas, and Virgln~a. . Congress. fiouse. C o m m i t t e e on I n t e r s t a t e a n d P o r e x g n C o a n e r c e S u b c o r n ~tee ~ t o n Consumer P r o t e c t i o n and F i n a n c e . B e a r i n g s , 9Uth C o n g r e s s , )st s e s s l o n , o n H.B. 2 8 5 , l i . B . 1 2 3 2 , H O B . 1400, n.E, 7985, and d.d. 6441. Y a s h r n g t o n , U . S . Govt. P n n t . Oft., 1975. 908 p. t i e a r l n g s h e l d J u n e 13, 19; and J u l y 8 , 14, 19, 22-25, 1975. -Serial no. 94-42' U .S. ---- P e a e r a S t a n d a r d s t o r Yo--Pault H o t o r V e h l c l e A c c l d e n t B e n e t l t s Act. hearings, 95th C o n g r e s s , 1st s e s s l o n , o n EI .R b601. 8.d. 7476, 8-81 1597, B O P . 2300, HOB. 2 5 0 8 , a n d H-k. 5149. W a s h m g t o u , 0.S. Govt. Y r l n l . Off., 1977. 7 6 3 p, Serlal No. 45-55. . S t a t e n o - t a u l r a u t o a o b r r e u s u r a n c e experiences. H e a r l n g s , H a s h i n g t o n , U.S. Govt. P r l n t . 9 5 t h C o n g r e s s , lst s e s s i o n . Off 1977. 8 9 5 p. Serlal no, 95-41, ., Congress. s e n a s e . Committee on C o m m e r c e . da t1ona.l S t a n d a r d s f o r Bearings, 9 4 t h C o n g r e s s , Yo-Pault Botcrr V e h l c l e i n s u r a n c e A c t . 1st s e s s l o n , o n S. 354 , Washington, 0 .S Govt k r l n t . Off 1975, U .So b4b . P. Hearings h e i d AFr, 'Serial no. 94-20" 14, . ., 22, 30; nay 5; a n a J u n e 5, 19, 3475. 0 .S , C o n g r e s s , S e n a t e , Coamxttee o n Commerce, S c l e n c e and Transport a t l o n S t a n d a r d s f o r eio-Fault B o t o r V e h i c l e Accrclent Benefits A c t . H e a r l n g s , 4 5 t h C o n g r e s s , 1st s e s s l o n , on S . 1581. Washrngton, U.S. Govt. P r l u t . O f f 1977. 453 p . H e a n n g s h e l d J u l y 13, 15, 16, and 20, 1977. . ., U .S, Congress. S e n a t e , C o m m i t t e e on C o m m e r c e , S c l e n c e and Transportetlon. S t a n d a r d s f o r N o - f a u l t Motor V e h i c l e A c c l a e n t B e h e f ~ t sA c t ; r e p o r t on S, 1381, t o g e t h e r v l t h 1976, m l n o r i t y vlews. Washington, U . S . 6 0 V t . P r r n t . O r f . , 63 p . ( 9 5 t h congress, 2d s e s s l o n S e n a t e . B e p o r t no. 95-935) . ----- . N a t l o n a l S t a n d a r a s f o r so-Fault I n s u r a n c e A c t ; r e p o r t o a S. 354 t o g e t h e r with n r n ~ r i t yv l c u s . A a S h l n g t o n , O.S. Govt. P r i n t . o f f . , 1975. 137 p , tY4tn C o n g r e s s , 1st s e s s l o n , S e n a t e , ljteport no. 94-233) 08/01/38 - The 05/22/78 - The 03/09/38 - S. 07/15/77 -- h o u s e C o m i t t e e o n I n t e r s t a t e and P o r e l g n Goamerce rejected B . R . 33048 by a v o t e ox 22 t o 19. House Commerce Subcommittee o n Consumer P r o t e c t l o n a n d P l n a n c e r e p o r t e a BOB- bb01 a s a c l e a n b l l l , fl.B. 13046. 15t54i uas r e p o r t e d o u t of t h e S e n a t e C o ~ n e r c e Commxttee by a v o t e of 9 t o 7. D e p a r t m e n t GI T r a n s p o r t a t l o n S e c r e t a r y B r o c X Bdams t e s t r f i e d D e f ore t h e S e n a t e Committee o n C o u u e r c e , S c l e n c e , a n a T r a n s p o r t a t l o n , expressing t h e C a r t e r a d n l n l s t r a t l o n 's s u p p o r t f o r S 138 1. . 06/14/77 - 03/22/77 - f i e a r l n g s 04/25/37 - s. 03/31/76 - S. U7/27/TS - S. 03/23/75 - S. 05/01/74 - The 03/27/74 - The vere h e l d during t h l s perlod ou P . P . 0601 a n d r e l a t e d b r l l s by t h e Su&committee on C o n s u e r P r o t o c t l o n and F i n a n c e . 354 was seIit D a c k t o t h e S e n a t e C o a m l t t e e o n Coamerce a f t e r demte, b y a S e n a t e v o t e o t 49-45. 354, as aluended, was r e p o r r e d t o t h e S e n a t e f r o s t h e C o v m l t t e e on Commerce. 354 was reintroduced I n t h e 9 4 t h C o n g r e s s b y S e n a t o r Hagnuson, a n d was rererred t o t h e C o r n l t t e e o n C o s n e r c e , S e n a t e p a s s e d S . 354, a s r e p o r t e d Dy t h e Committee on C o r a e r c e a n d a s f u r t h e r a n e n d e d by t h e S e n a t e . S. 09/13/73 . 1381 and H . B b b O 1 , identical b l l l s , Mere l n t r o a u c e d l n t h e '35th C o n g r e s s . S e n a t e C o u m i t t e e o n t h e J u d i c i a r y f a v ~ r a b l yr e p o r t e d as amended by t h e S e n a t e C o u m l t t e e on Commerce. 354, - The Senate agreed t o a unan~mous-consent a g r e e n e n t of Sen. w a r r e n Magnuson t o refer S. 354 t o t h e Commrttee on t h e J u d l c l a r g , w l t h t h e u n a e r s t a u d i n g that t h e c o a m i t t e e u l l l r e p o r r o r discharge t h e ~ r l bly P ~ D . 15, 3974. T h l s d e a u 1 n . e was s u D s e q u e n t l y e x t e n d e d t o Bar. 1 9 , 1974. 08/00/7j -- T h e S e n a t e Commlxtee on Conruerce f a v o r a b l y r e p o r t e d a n a s e n a e u S. 354, a % a t i o n a l s t a n d a r d s n n o - t a u l t 03/00/31 - On t h e conciuslon o t ~ s y s t e a , t h e DOT issued C r a s h Losses a n d T h e r r S t a t e s , whrch e n d o r s e d c a l l e d upon t h e S t a t e s plans. blll. t sst u d y of t h e reparations ~ t s r e p o r t , motor V e h i c l e Compensation i n t h e U n l t e d t h e n o - f a u l t p r l n c r p l e and to e n a c t comprehensive no-1au.At