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"It's still hard for me to believe what's happened," he adds. "I mean, when I bought my motorcycle insurance, I asked for full coverage, and that's what I thought I had. But I found out full coverage for motorcycles isn't very full at all."
According to Wheat Ridge insurance agent Bill Peterson, who's widely thought to be the local expert on motorcycle insurance, such misunderstandings are all too common and are not always the fault of riders who don't ask the right questions. Since motorcycles make up an extremely small percentage of most agencies' business, he believes, many agents are poorly informed about the coverage, and the rise in dealerships where salesmen toss in policies with the purchase of a bike only exacerbates the problem. (For instance, Harley-Davidson sells motorcycle insurance through its Web site, harley-davidson.com; motorcyclists can purchase policies online without ever talking to an agent.) For these reasons, Peterson's developed a five-minute videotape explaining motorcycle insurance that he makes each of his clients check out before buying anything from him. "If you won't watch it, I can't work with you," he says. "Simple as that."
Not only do viewers learn from the video that motorcyclists in Colorado don't have PIP, but they are told about an important way to compensate for this shortcoming: uninsured/underinsured motorist coverage. This option, which Peterson insists all of his clients exercise, pays injured parties when they're in an accident with a driver who's at fault but has no insurance or not enough insurance, or in the case of hit-and-runs. For automobile owners, uninsured/ underinsured can be superfluous, because the state mandates that they purchase $130,000 in PIP. But for motorcyclists, it helps make up for the absence of PIP in a limited number of scenarios -- and since it can be purchased in amounts up to the limits of a person's liability coverage, the protection it provides may in some circumstances exceed PIP dollar amounts. Better yet, the price is quite reasonable; the average motorcyclist with a good driving record can get $50,000 in uninsured/ underinsured coverage for under $100 per annum -- much lower than most car drivers pay yearly for PIP.
But unlike PIP, uninsured/underinsured motorist coverage isn't immune from subrogation, a practice that hits motorcyclists harder than any other category of Colorado motorists, as Dan Leventhal and Bill Head know all too well. Most insurance policies contain a subrogation clause -- a contractual agreement -- that allows the company to claim part or all of a damage award to offset what it's paid in hospital bills and the like.
Louis Saccoccio, general counsel for Washington, D.C.'s American Association of Health Plans, a group that represents the health-care industry, says such clauses are necessary from a legal and financial standpoint. "First, it prevents a person who is injured from enjoying a double recovery," Saccoccio says. "An individual who is injured is entitled to be compensated for his injuries, but is not entitled under the law to be compensated for those injuries twice. And it also has an impact on costs. To the extent that health plans are able to recover payments from the person who caused the injury, there are savings there. That helps hold down premium costs in general."
Be that as it may, subrogation is still forbidden in a handful of states, such as Georgia and Arizona. And in the states where the practice is legal, there's no clear-cut set of laws or rulings governing what insurance companies can and can't do in this arena. Denver attorney Wade Eldridge, a motorcycle enthusiast who has spoken about subrogation at meetings and conventions across the country, concedes that many of his colleagues don't fully grasp the concept -- and as he sketches out the double helix of subrogation rules, it's obvious why.
Subrogation, Eldridge explains, is legally defined as one party standing in the shoes of another, meaning that when a health-insurance company pays a health-care provider for injuries inflicted by a driver who caused an accident, it's doing so with the expectation that it will be repaid for its expenditures. But because the victim in this scenario has already paid premiums to his insurance company for coverage, a Colorado common-law doctrine known as the "collateral source rule" comes into play. "Basically, it says that if a guy whacks you, he's got to pay your medical bills even though they may have already been paid by your carrier," Eldridge says. Better yet, Eldridge notes that Colorado common law also suggests that insurance companies don't receive subrogation rights until an individual is "made whole.
"For instance," he explains, "if your medical carrier has paid ten or fifteen thousand in medical bills but you get $25,000 by suing, the carrier will want that money. But if you're a paraplegic, $25,000 is going to be inadequate to compensate you for your injuries; it won't make you whole. So the carrier shouldn't be able to take that money."
Sounds good so far -- but, says Eldridge, "here's where it gets complicated." In 1974, the same year Colorado's no-fault law came into being, the federal government enacted the aforementioned Employee Retirement Income Security Act (ERISA), which deals in part with the ways insurance companies do business in the U.S. As the Motorcycle Riders Foundation warns, ERISA trumps Colorado common law, including state protections regarding subrogation, in many circumstances; that's why the Colorado law guaranteeing insurance benefits to motorcyclists doesn't offer nearly the protection its authors envisioned. Eldridge notes that ERISA includes a "savings clause" whose text -- "nothing in this chapter shall be construed to exempt or relieve any person from any law of any state which regulates insurance" -- seemingly offers a glimmer of hope. But said hope is quashed by a subsequent "deemer clause" that states, "Neither an employee benefit plan...nor any trust established under such a plan, shall be deemed to be an insurance company."