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Leave the Driving to Bill

Matthew Strauss

It isn't that the governor of Colorado hates you soccer moms out there. He just thinks you people shouldn't have the right, when some drunk driver plows into the family Aerostar, to dun your hardworking, premium-gouging insurance company for your medical expenses and still be able to go after the blotto SOB in court for ruining your life.

That's basically what Bill Owens told a group of insurance-industry lobbyists in a private meeting last May. Unhappy that no major overhaul of Colorado's no-fault insurance system had been achieved in the 2002 legislative session, he vowed to "fix" the system this year or scrap it altogether.

"The Governor will support only real reform," one attendee of that meeting reported in an e-mail recently obtained by Westword. "He is unwilling to continue any kind of dual system in which accident victims receive both [personal injury] benefits and the right to sue."

The state's thirty-year-old no-fault system, in which medical benefits are paid by accident victims' own insurance companies regardless of who caused the collision, was up for sunset review last year. But Owens decided to extend it in order to assemble an industry-driven campaign that would either radically alter the existing law or prepare the public for its elimination.

"The Governor said he is unwilling to terminate no-fault this year," the lobbyist reported. "He thinks it would come as a great surprise to the public and the media. He wants to lay some solid groundwork for its termination next year."

Over the past ten months, the groundwork has been laid -- and how. Documents obtained through public-records requests and other sources detail how Owens and the lobbyists put their plan into action, launching a media blitz designed to convince policyholders that the no-fault system is "broken"; shmoozing editorial boards and extracting enthusiastic endorsements from the cheerleading Denver dailies; enlisting aid from health-care interests eager to salvage at least some remnants of the no-fault system; and staging an end-run around opponents of the effort, including the Colorado Trial Lawyers Association (CTLA) and consumer groups.

The result is House Bill 1225, a proposal that preserves some aspects of current medical benefits but severely limits the right of auto-accident victims to sue for damages. Sponsored by Greeley Republican Tambor Williams, the bill came roaring out of committee but now faces shaky prospects on the House floor; rattled by the overreaching quality of Owens's blitzkrieg, lawmakers have begun to entertain less draconian proposals.

Presented by supporters as a consumer-friendly piece of legislation that would lower premiums and offer more choice in types of coverage, HB 1225 has also been attacked as one of the most brazenly anti-consumer pieces of legislation to emerge from the Statehouse in years. Critics say the measure will do little to reduce rates while making it much tougher for accident victims to collect benefits or have their day in court.

"I call it the Drunk Driver Relief Act," says Dave Diepenbrock, director of legislative services for the CTLA. "There are sections of the bill that make no public-policy sense whatsoever."

Sponsor Williams says the bill is intended to bring down Colorado's soaring auto-insurance costs -- which, depending on whose data you believe, now ranks as the eighth, eleventh or thirteenth highest in the country. The state requires drivers to carry $130,000 in personal injury protection (PIP) benefits, the third-highest package in the country, but it also allows drivers to sue at-fault parties for pain and suffering after they incur only $2,500 in medical costs. Despite hefty premium increases, insurance companies have been taking a bath on PIP payments in recent years. They also maintain that the threshold for filing lawsuits is too low.

"Right now, to sue someone, you just need a trip to the emergency room and a CAT scan to reach the threshold," Williams says. "It's not a true no-fault system."

The proposal was hammered out by a "working group" of insurance and health-care industry representatives last fall. According to one informational pamphlet on the effort, deliberately excluded from the discussions were "groups which were deemed not interested in fundamental reform," such as the CTLA and the Colorado Chiropractic Association (many chiropractors derive a substantial portion of their livelihood from PIP payments).

The bill was then championed by Williams, whose district includes hundreds of employees of a State Farm Insurance regional headquarters and other pro-industry constituents -- including her husband, independent insurance broker Jim Eckersley. (Williams denies any conflict of interest: "My husband does not sell auto insurance, and we do not commingle assets.") It passed through Williams's House Business Affairs and Labor committee -- one of two "supercommittees" in the House, in which Republicans are overrepresented in comparison to the GOP majority in that body -- by an 8-5 margin. But the bill's journey hasn't been all open highway. After Attorney General Ken Salazar pointed out that HB 1225 would exempt auto insurers from the state's consumer protection act, Williams had to excise that provision, and Owens reportedly had to do some "woodshedding" of a couple of reluctant committee members to get it to the floor.

 

Denver's dailies have embraced the bill, particularly its effort to curtail exotic forms of PIP benefits such as aromatherapy and hot tubs. The Supreme Court recently upheld one $900,000 damage award for denial of hot-tub benefits, but the anecdotal evidence about how such treatments are jacking up costs doesn't hold water. According to the working group's own actuarial study of what's driving PIP costs, treatments by "alternative" health professionals account for only 2.5 percent of the total. (Chiropractors, who successfully lobbied Williams's committee not to be excluded from PIP coverage, account for 9.2 percent.)

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."


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