Both adversarial lawsuit and no-fault legal processes are valid for determining auto accident compensation and have potential for improvement, according to a new report.

The public policy paper issued by the National Association of Mutual Insurance Companies (NAMIC) argues that states should consider reforms to improve both civil litigation and no-fault laws.

"The result could be both increased consumer choice and significantly lower premiums," said Robert Detlefsen, NAMIC vice president of public policy.

The debate over whether tort systems adequately compensated automobile accident victims dates back to 1932, said study author Peter Kinzler, an independent consultant on auto insurance issues.

At that time a Columbia University study found that "no system based on liability for fault is adequate to meet existing conditions."

However, it was another 40 years before 16 states adopted no-fault systems. While this resulted in better compensation for injured persons, several states failed to deliver on the promise of lower premiums.

"Good no-fault laws require tight thresholds (i.e., limits on lawsuits) in order to balance out the increased cost of no-fault benefits," Mr. Kinzler writes. "Unfortunately, most of the 16 no-fault states had 'weak' thresholds that were inserted into the laws at the urging of the opponents of no-fault, the tort bar."

Among the options that would reduce costs in the tort systems would be:

o Repealing or modifying the collateral source doctrine to discourage people from running up medical bills in order to get a tort recovery for the same bills, when health insurers do not track tort claims and recoup what they paid their insureds from the successful tort claim.

o Adopting a higher standard to recover for pain and suffering while maintaining the negligence standard to recover for economic loss.

o Making early offers that would enable consumers to recover economic damages from an insurer in a more timely fashion, thus avoiding both the delays and the uncertainties of recovery of the civil litigation tort system.

o Establishing a "full tort" versus "economic tort" option that would permit motorists to elect to forego pain and suffering damages in return for significantly lower premiums.

As for no-fault reforms, the options, it was suggested, should include:

o Replacing weak state thresholds with thresholds that permit lawsuits only for uncompensated economic loss and not for pain and suffering.

o Adopting strong verbal thresholds based on the model state law.

o Permitting motorists to choose between the no-fault law in their state and pure no-fault.

Special Reports /

NAMIC Offers Ideas To Fix Tort, No-Fault Systems

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