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When pressed, Williams acknowledges that soaring medical costs are the primary reason PIP costs have increased dramatically. "But," she adds, "if auto-insurance companies aren't on the hook for any treatment that anyone thinks might help them, it's going to save money."
HB 1225 plans to contain PIP costs through managed-care options and a wish-list of other industry proposals, such as abolishing an independent medical-review panel that has consistently ruled against insurers' denials of benefits. But what alarms critics most about the bill is its provision to replace the $2,500 monetary threshold for filing lawsuits with a "verbal threshold" patterned after Michigan law, which requires a judge to determine if the plaintiff's injuries are grave enough to permit litigation.
The CTLA's Diepenbrock says that while Colorado's $2,500 threshold, which hasn't changed since 1985, may be too low, it hasn't resulted in a rash of lawsuits. The number of auto-injury court filings in the state has dropped by a quarter over the past decade despite the rising population, and the average amount of the claim payment has dropped, too, in inflation-adjusted dollars. Barring the right to sue is a radical solution to a non-existent problem, he argues.
"If the problem is PIP, then let's deal with that," he says. "If the problem is fraud, they ought to tighten the anti-fraud provisions of the existing law and go after the overtreating slimebags. The fact is that Colorado is next to the bottom in the filing of lawsuits, and the bottom is Wyoming -- where, if you get drunk, you have to drive around for a few hours to find somebody to smash into."
Shifting to a verbal threshold would actually result in more lawsuits, Diepenbrock says, as attorneys seek to get judicial rulings on whether their clients are sufficiently injured to sue. Only injuries resulting in death or "serious impairment of an important body function that significantly affects the person's general ability to lead a normal life as manifested by the person's significant inability to perform...principal economic or non-economic activities" would allow for lawsuits.
"Suppose some guy gets badly injured," Diepenbrock muses. "He breaks his legs, and it impacts the nerves to his, uh, genitals, and he can't do anything anymore, if you take my meaning: He can't have sex. That might be a significant inability, but is it a principal activity? You tell me."
Williams insists that the verbal threshold has "worked well" in other states. "I would expect that there would be a flurry of cases challenging the law, hammering out what it means, and then it's over," she says. "It's actually going to be a lot cheaper."
But cheaper for whom? The actuarial study estimates that adopting Michigan's verbal threshold could save as much as 25 percent in premium costs for bodily-injury claims. (Whether those savings would be passed onto consumers is another question; 1225's backers have rebuffed CTLA efforts to get them to "guarantee" such savings in the bill.) But Michigan's system also requires virtually unlimited coverage for medical benefits and lost wages, while HB 1225 would further limit those benefits.
And there's little proof that the threshold actually discourages litigation. Four states that have verbal thresholds -- Michigan, New York, Florida and New Jersey -- also have two to ten times as many auto-lawsuit filings per capita than Colorado.
Perhaps the most devastating critique of the bill was provided by attorney Richard Laugesen, who teaches insurance law at the University of Denver Law School. Laugesen has spent much of his career defending insurance companies and their clients, not suing them, and has studied Colorado's no-fault system extensively over the past three decades. Two weeks ago, he sent lawmakers a thirty-page analysis of 1225, which he characterized as "drastically out of balance in favor of the insurance industry."
"Allowing insurers to take in substantial premiums without paying benefits is not in the public interest," Laugesen wrote. "The main sources of the problem of insurance cost are double-digit health care expense, coupled with insurer difficulties with their investments.... A reform that attempts to solve insurer problems on the backs of injured persons would be wrong and irresponsible."
Laugesen says the current system needs tweaking -- a higher monetary threshold, a stricter time frame for rehabilitation benefits -- not dismantling. "We've had it thirty years, and it's worked reasonably well most of the time," he says. "The beauty of our system was that it was taking care of economic losses and curtailing the right to sue. But if you can't go after anybody in court and you can't get your benefits paid, where are you?"
If no new no-fault legislation is passed, Colorado will return to a tort system, in which injured motorists must pursue at-fault drivers for their costs rather than their own insurance agents. Nothing would please some insurance companies more; in correspondence with Owens, State Farm vice president David Hill and other industry top brass have expressed their preference for a tort system. But that system would shift the burden of auto-related medical expenses to citizens' health-care providers, alienating Owens's friends in that industry -- donors as vital to him in supporting past campaigns and any future presidential run as his chums in the auto-insurance business.
Laugesen says a tort system "wouldn't be the end of the world," but it would hike liability insurance rates. "You'd have more people suing each other," he notes, "and I'm not sure that's good for the public."