AB 1458

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SEC. 11. This act shall apply to an injury, including 2 death, resulting from an accident occurring on and after 3 January 1, 1976.

[Los Angeles, Calif., Apr. 7, 1975]

No-FAULT AUTO INSURANCE BILL INTRODUCED IN ASSEMBLY; DOESN'T RESTRICT RIGHT TO SUE

Sacramento-Major no-fault automobile insurance legislation has been introduced by Assemblyman Alister McAlister, chairman of the Assembly Finance, Insurance and Commerce Committee.

The bill, AB 1458, is similar to SB 2350, introduced last year for the State Bar by Sen. George Moscone, D-San Francisco.

McAlister's committee staff has been working on the measure for the past several months in an attempt to gain support of every no-fault faction except the insurance industry.

McAlister, D-San Jose, said the bill includes the best aspects of legislation that has been introduced during the last few years and adds a few consumeroriented reforms.

The bill provides for mandatory insurance, does not restrict the injured person's right to sue for pain and suffering, and implements an Assigned Claims Fund for pedestrians and bicyclists.

The coverages of the bill are similar to those in the only competing measure, AB 500, introduced by Assemblyman Jack Fenton, D-Montebello.

McAlister's bill provides for payment of 100 percent of the first $2,000 in medical expenses. Above that amount, it provides for 80 percent of all other medical expenses, up to a $50,000 maximum.

Fenton's bill provides a flat 100 percent of the first $50,000.

McAlister's bill provides a total of $5,000 for workloss, loss of services, survivor's benefits and funeral expenses. The maximum funeral expense payable under the bill is $1,000.

Fenton's bill is similar.

The McAlister bill does not contain a threshold (minimum amount of damages before the plaintiff can sue for pain and suffering).

The threshold in Fenton's bill is $2,000. A spokesman for McAlister said $1,000 is really not an effective threshold because it is easy to run medical expenses beyond that amount.

The bill will probably have broad support from the State Bar, the California Trial Lawyers Association, California Rural Legal Assistance and the California Consumer Federation.

The insurance industry has not seen the measure and will probably oppose it. While the bill has Assembly Speaker Leo McCarthy as a co-author, there is one major stumbling block.

Gov. Edmund Brown, Jr. has not taken a position. At the State Bar Board of Governors meeting last month, he voiced concern about losing individual accountability if the no-fault concept is accepted.

According to a spokesman for McAlister, many of the other coverages that are standard in automobile insurance policies are granted irrespective of fault. There is no evidence to indicate that people become irresponsible when they have no-fault insurance, he said.

Under McAlister's bill, uninsured motorists would be prohibited from suing for any damages they could have received had they purchased the required insurance.

The bill requires all motorists to purchase policies of personal injury protection insurance providing $50,000 medical benefits and additional compensation for wage loss, etc.

The bill would enable motorists to satisfy the recently enacted Financial Responsibility Law by purchasing a policy of personal injury protection insurance. According to McAlister, while the present Financial Responsibility Law purports to require all motorists to buy liability insurance, it is not enforceable, and approximately 32 percent of California's motorists are uninsured.

"By shifting the emphasis to insuring yourself against injury and associated expenses, rather than insuring the other party, this bill should reduce the number of uninsured motorists in California," he said.

The bill should also encourage a reduction in premium rates for health insurance policies, according to McAlister, because it would permit health and accident insurers to reduce benefits under their policies, which are already covered under the personal injury protection policy-on the condition that the premiums on the health policies be commensurately reduced.

The bill is co-authored by Sen. Moscone and Assemblymen Howard Berman, D-Sherman Oak; Robert Beverly, R-Redondo Beach; Daniel Boatwright, DConcord; Larry Chimbole, D-Laneaster; Wadie Dedden, D-Chula Vista; Julian Dixon, D-Los Angeles; John Foran, D-San Francisco; Terry Goggin, D-San Bernardino; Ken Maddy, R-Fresno; Bill McVittie, D-Ontario; Floyd Mori, D-Pleasanton; Louis Papan, D-Daly City; Richard Robinson, D-Santa Ana; Herschel Rosenthal, D-Los Angeles; Bob Wilson, D-El Cajon; and Edwin Z berg, D-Sacramento.

Senator Moss. Our next witness is Mr. Paul W. Brock, president of the Defense Research Institute, from Milwaukee, Wisconsin. Mr. Brock, we have your statement here, and will place it in the record in full.

You may proceed.

STATEMENT OF PAUL W. BROCK OF MOBILE, ALA., ON BEHALF OF THE DEFENSE RESEARCH INSTITUTE OF MILWAUKEE, WIS.; ACCOMPANIED BY PHILLIP W. KNIGHT, CHAIRMAN OF THE BOARD OF THE FEDERATION OF INSURANCE COUNSEL; PROF. JOHN J. KIRCHER, OF MARQUETTE UNIVERSITY SCHOOL OF LAW AND RESEARCH DIRECTOR OF THE DEFENSE RESEARCH INSTITUTE; THEODORE P. SHIELD, PRESIDENT OF THE INTERNATIONAL ASSOCIATION OF INSURANCE COUNSEL; AND JOHN D. BAUMAN, PRESIDENT-ELECT OF THE ASSOCIATION OF INSURANCE ATTORNEYS

Mr. BROCK. Thank you, Senator Moss. It was thoughtful of you to save the best for last this morning, and I appreciate you letting us come before you.

Senator Moss. You have a panel with you.

Mr. BROCK. Yes, I brought some friends. At the end of the table is Phillip W. Knight of Miami, Florida, chairman of the board of the Federation of Insurance Counsel.

Next is my lawyer, John J. Kircher, who is an assistant professor of law at the Marquette University Law Srhool, and is also the research director of the Defense Research Institute.

To my right is Theodore P. Shield of Los Angeles, who is president of the International Association of Insurance Counsel.

And to his right is John D. Bauman, who is the president-elect of the Association of Insurance Attorneys.

Now, as you might expect, you are surrounded this morning by defense trial lawyers.

Senator Moss. Well, very good. We are glad to have all of you gentlemen before the committee. We welcome you and look forward to hearing from you. Mr. Brock.

Mr. BROCK. Well, thank you. I want to say initially that I have had the pleasure of observing the way you and Senator Buckley, handled the meeting and I appreciate it and have been quite impressed by your innate courtesy and by your ability to put the speakers at ease. This is my first appearance, and I felt some trepidation before I came. But you have done a lot to ease that.

The Defense Research Institute, which I will call DRI, is a 6,000member organization composed primarily of defense trial lawyers.

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We have a number of corporate members, including a number of insurance companies.

We are essentially an educational organization. Our primary purpose is to educate and to improve the skills of trial lawyers about the country. As you might expect, a very large volume of their work deals with automobile cases. We think we speak from some background of experience, at least with reference to the trial aspect and to the working of our tort system.

I admire the thoroughness and detail that has gone into S. 354. I admire the thought that your committee and your very able staffsome of whom I have had the pleasure of meeting before-have put into it.

I wish I could say that I was in favor of the bill, and admired it. But of course, as you will gather in just a moment, I really don't. There have been three reasons advanced primarily, as I understand it for a Federal no-fault bill as distinguished from individual State action. And we favor individual State action in this area.

One of the bases is that of uniformity. I don't think there's anything sacrosanct about uniformity. As other speakers before me have said this morning, you have common law in at least 48 or 49 of your 50 States, with the possible exception of Louisiana. There are differences from State to State in comparative negligence, in contributory negligence, and in the measure of awards, the damages.

Some States have ceilings on death action, some don't. Some have compensatory death action, some have punitive. These laws are changing constantly.

I rather doubt that any motorist who has ever embarked on a trip, has ever given much thought to what differences there were in the tort laws of the States in which he would drive. It certainly hasn't hampered the flow of interstate commerce.

As I read the newspapers, it seems that we have more automobiles on our highways every day, and more people in them, at least as long as they can buy gasoline.

So I submit to you that as lon gas whatever reparations they are entitled to are administered under the tort laws that we have had, nobody is being done an injustice, and that uniformity for the sake of uniformity is not necessarily a utopian solution.

The point has been made that some States have enacted inadequate laws no-fault laws. Everyone has said, ad infinitum, that 24 States have passed these laws, and I think 2 others were held unconstitutional.

Of the 24 States, I would suggest that two, maybe- Michigan and Minnesota-would meet the standards set up by S. 354. Therefore, if the S. 354 were passed, the United States Congress would be saying to the legislatures of 22 States that the would have to replace their laws; that they had done it wrong; that they weren't adequate; that their analysis of the needs of the citizens of their States was wrong; and that the Federal Congress in Washington had more insight into the problems of those States than did their own legislatures.

Now. Senator, there's an awful lot of difference between Alabama, which is my home State, and Senator Buckley's State of New York. There's probably a lot of difference, I would think, between Texas and Oregon.

In Alabama, we have very little court congestion. We don't need a no-fault bill to aid that problem. It may be rampant in New York, I don't know.

I submit to you that the reason you have different provisions in different State bills, and the reasons perhaps that some States have not enacted no-fault bills is because they have other legislative problems that are more pressing.

It is not inconceivable that some States think they don't need nofault bills, that they are pretty well satisfied with the way things have been-at least since the advent of the automobile, if not back to the time of the Magna Carta.

And so, I doubt that the contention that we need uniformity, that the States are not acting fast enough, that the laws that they have passed are not adequate-I really doubt that that is a truism, as it applies to each individual state.

There are some provisions of S. 354 that we'd like to comment on. Your limitations for economic recovery, as I read it, are set up initially on a formula whereby you would take a thousand dollars and you'd multiply that by a fraction, the numerator of which would be the average per capita income of the citizens of that Sate, and the denominator would be the average per capita income of the citizens of the country as a whole.

Now, specifically, this would mean that a citizen of Alabama's maximum monthly recovery under the no-fault plan would be $757 a month. If he were in the District of Columbia, it would be $1.375 a month. There are variations in between for those States.

It's true that after the whole thing is washed out, and he has received all the benefits he can receive by that, he can file a law suit for the difference, if he cares to do so.

But that's a sort of an after-the-fact thing, and I suppose he has to wait for a long period of time to know what his ultimate claim would be, and that's pretty much a self-defeating sort of a proposition.

I doubt that there's any reason, other than for the sake of a mathematical formula to penalize the fellow who presumably is industrious enough to go out and make a couple of thousand dollars a month and get in a high income group and pay a high rate of income taxes. I don't know why he should be limited to $757 a month. And I think that's what this formula on economic recovery would do, to say nothing of the differential between the various States.

You have a limitation on tort liability. You say you can go to court and you can sue in court if you have death, serious permanent disfigurement, serious permanent injury, more than 90 days continuously of total disability.

Senator, this isn't going to fit a lot of people. This isn't going to fit a lot of injured people, and there are going to be an awful lot of people who have serious injuries, very real injuries in the way of mental anguish, humiliation, trauma, aggravation of preexisting diseases, that can't come under this formula.

I had a case 2 months ago in which a very attractive lady's son was killed in a collision accident 2 years before. She had nightmares for a year, and really had not slept. She got over that.