Auto Insurance Needs A Tort Reform?

Actuaries predict that each person living in the United States will be involved in three traffic accidents in his lifetime. Year after year, most of these potential victims will purchase automobile insurance.

Perhaps because people pay their insurance premiums annually and yet, on the average, have accidents far less frequently, they tend to think of themselves primarily as purchasers of insurance and not potential victims, an idea much encouraged by insurance industry no-fault advertising. This savings illusion is shattered only when the consumer finds himself in a smashup. The ideal system of automobile insurance has yet to be devised. Any total solution would certainly retain the best features of negligence and harmonize these features with long overdue improvements in casualty insurance.

Because complaints about automobile insurance are national in scope and deal with underwriting and regulatory practices that can be best controlled by the federal government, the government should take the lead. As a first step, it should end the exemption from federal intervention granted the automobile insurance industry by the McCarran-Ferguson Act. Standardization of rating criteria, greater attention to consumer complaints, and insurance for all are but a few of the measures that can be brought about with the help of Congress.

Unfortunately, reform proposals to date have concerned reduced insurance costs, diverting attention from more critical problems. What has been missing on the part of the reformers is a genuine effort to take the less spectacular steps necessary to preserve what is equitable in our system of justice. We have been encouraged to abandon the use of the adversary system for a no-fault system in which insurance companies are subject only to the control of regulatory commissions, which have already demonstrated they are incapable of exercising effective restraints over the companies. We are asked to forgo adjudication and leave accident reparation entirely in the hands of the architects of no-fault bills.

Meaningful reform must be preceded by public understanding of the roles of the players—the industry, the bar, and the government. Attractive merchandising has distorted the objectives of the reformers. Is it true that you are in "good hands" with Allstate? Will Liberty Mutual really "stand by you"? As in many other areas in American life, advertising has run ahead of the product; expectation is not fulfilled by reality. The overwhelming number of complaints about the fault system received by DOT have dealt with insurance company practices. And yet the companies are now about to be rewarded with a financial bonanza by a changeover to no-fault.

The bar's position has been undermined both from within and without. The DOT study shows that plaintiff attorney fees amount to about 6.4 per cent of the total premiums referred to by the no-fault reformers. The total cost of lawyers' fees for both the plaintiff and defendant will not exceed the price of the agents' commission for selling and renewing year after year what is now compulsory insurance.

The caricature of the negligence lawyer as a fee-crazed ambulance chaser has been overworked by critics of the bar. The function of the negligence bar has been to represent people who are victims of misfortune and assist them in their efforts to compete with superior economic interests. Now we find the image of the trial lawyers tarnished by the campaign to discredit the fault system.