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Do We Need No-Fault Insurance?
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by BERNARD H. PARKER
Vie* President-Southeastern Region
Nationwide Insurance
.
No-fault automobile insurance has been one
rs the most widely discussed issues in
cpriative bodies, in the press and in other
wMif forums around the nation for the past 10
rears or so.
Yet, no-fault is little understood by the
aublic. Indeed, it’s often misunderstood.
For example, no-fault auto insurance has
seen criticized for not meeting some
npeetatkms in many states where the plan
ms been adopted. However, these critical
reviews fail to point out that most state
to-fault laws are watered-down versions of
shat had been recommended by leading
reform advocates.
And overlooked in these criticisms is the
aet that no-fault insurance plans, even the
vatered-down versions, are paying more
■jured accident victims, more quickly and
nore equitably than the fault system which
mists in most states, including North
No-fault auto insurance actually is a
relatively simple concept. Confusion is
generated by the fact that there are several
/arieties or shadings of the concept, each
racked by persuasive arguments as to why it’s
lie best. And clouding the issue further—
rom the public standpoint—are charges and
xmnter-charges by foes and supporters as to
vhat no-fault will or won’t do.
A short explanation of the difference
letween fault and no-fault auto insurance
vould go something like this: Fault insurance
fives you the right to sue for uncertain
-ecovery for your losses; no-fault insurance
fives you the right and certainty to recover
or your losses without lawsuits.
Moreover, no-fault compensates all injured
iccddent victims; the fault system does not.
In more detail, what is no-fault auto
isurance? Simply stated, if you’re injured in
n auto accident you would be paid by your
mm insurance company for your personal
iguries, lost earnings and related injury
expenses, regardless of fault for the accident.
Injured occupants of your car would receive
lie same benefits from your insurer. The
njured driver and occupants of the other car
vould collect from that driver’s insurance
rampany.
How does this differ from the present
iabfiity or fault system? The chief difference is
Jut under the liability system, fault for an
jeddent needs to be proved before payment is
nade. You must prove the other driver was at
suit to collect from him or his insurance
ompany for injuries you suffered in an auto
icddent. The fact that you were injured is
teeondary to who was at fault.
What’s wrong with a system that requires
lie driver who causes the accident to pay for
osses? While it seems reasonable, the system
ioesn’t work well at all—a fact documented by
numerous impartial studies.
Proving fault is much too elusive—often
mpossible—in a society of congested
lighways, split-second crashes, multiple-car
ifleups and conflicting reports by drivers and
fitnesses. Besides, the person who causes the
ttfury doesn’t pay for the loss; his insurance
jmpany does.
Vast sums of premium dollars—premium
jUars paid by policyholders—are spent to *
ad fault for an accident before losses are
Carolina Financial Times
No-fault automobile insurance has been
proposed several times m the North
Carolina General Assembly, so far without
adoption. Do we really need no-fault auto
insurance ? The Financial Times presents
arguments for and against. Nationwide
Insurance Companies Southeastern vice
president Bernard Parker of Raleigh argues
for no-fault, Winston-Salem attorney
Eugene Phillips against it.
paid. Isn’t it reasonable and better to use
premium dollars to pay for accident injuries,
rather than for fault-finding? Payment for
losses—not fault-finding—is the better pur
pose of insurance.
Why does the insurance industry favor
no-fault? What’s in it for the insurance
companies?
UntO recent years, most of the insurance
industry generally opposed no-fault auto
insurance reform. The industry resisted
change, perhaps because of its basically
conservative nature and persuasion. Many in
the industry viewed—and some still do
view—no-fault as a threat to the traditional
way of doing things.
Nationwide Insurance stood virtually alone
20 years ago when it not only advocated
no-fault insurance, but actually came out with
a no-fault coverage. Despite bitter opposition
within the insurance industry, Nationwide
marketed the coverage in most of its operating
states.
North Carolina is not one of the states, due
to its insurance laws. Because the industry
failed to follow suit, Nationwide dropped
no-fault coverage in 1965.
Purely by coincidence, that was the same
year two college professors—Keeton and
O’Connell—came out with a book, Basic
Protection for the Traffic Victim, in which
they advocated a no-fault auto insurance
system.
This book, which depicted the present
liability system as a veritable chamber of
horrors, started the current no-fault reform
movement.
Over the years, many independent studies
concluded that no-fault auto insurance would
be a vast improvement over the fault system.
Studies were made by government agencies,
consumer organizations, labor unions, the
press, educational institutions and even bar
associations.
The landmark study was sponsored by the
U.S. Department of Transportation. It took
2 l h years and $2 million to complete the study,
which filled 11,000 pages in 24 volumes. In its
summary conclusion in 1971, the DOT had this
to say about the fault system:
“...The existing system ill serves the
accident victim, the insuring public and
society. It is inefficient, overly costly,
incomplete and slow. It allocates benefits
poorly, discourages rehabilitation, and over
burdens the courts and the legal system.
“Both on the record of its performance and
on the logic of its operation, it does little, if
anything, to minimize crash losses.”
In support of its conclusion, the DOT offered
these findings from its detailed investigation:
—At least 25% of all persons injured in
auto accidents, and 54% of those who are
seriously injured, receive NOTHING from the
present lawsuit system. This is because they
were judged to be negligent or because they
could not prove someone else was at fault.
(Continued on page 14)
Con
[77ie writer was an executive committee
member of the 1969-71 governor’s commission
to study automobile liability insurance and
rates and has been a member of the
Automobile Reparations Committee of the
Association of Trial Lawyers of America since
1968. He is also an immediate past president of
the North Carolina Academy of Trial
Lawyers. ]
by EUGENE H. PHILLIPS
No-fault insurance is no longer a serious
issue in this state and it not likely to be again,
now that its failures have become a matter of
public record.
It was an artificial propoganda-created
issued to start with, which made great
headway, however, as long as it was an
unknown quantity, advertised and promoted
as a future reform.
And how extravagantly and glowingly it
was advertised and promoted in those days. It
would, so the public was told, repeatedly and
with innumberable embellishments, cure most
of the ills of our automobile insurance and civil
justice systems, and most wondrous of all, it
would save everybody a great deal of money.
I remember very well in 1971 when a
member of the governor’s commission to study
automobile liability and rates was solemnly
told—(along with the other commissioners and
a room full of other interested people including
several newspaper reporters)—by a high
official of the American Insurance Association
that its no-fault plan would reduce personal
injury premuims to a cool 56%.
No North Carolina newspaper disputed it,
although it was a self-evident fraud and was so
demonstrated by the question and comments
of var ious commissioners and others. It was
promises like that made throughout the
country that got no-fault going and kept it
moving until it was the law in nearly half the
country.
But success also brought exposure, and
since no-fault promises have been replaced by
verified audited fact, not a single new state
has joined the parade.
Considering what has now been learned
about this much-touted reform, few if any
more states are likely to adopt it hereafter.
In Massachusetts, the first no-fault state,
the automobile insurance system is in absolute
chaos and is still the most extensive in the
country. The small reduction that occurred in
the personal injury premium has been offset
four times over by enormous increases in
collision and other rates.
In Florida, premiums have increased twice
as much in other Southern states that do not
have no-fault. In a recent compromise, with
one house voting to abolish no-fault
altogether, its legislature amended the plan to
lower the threshold and to permit optional
deductibles that will make the compulsory
insurance requirement and no-fault generally
almost meaningless.
It is now known that no-fault is to some
extent at least, a disappointment everywhere
that it is in effect. It is a disappointment, as
the Wall Street Journal observed some
months ago, simply because the “real world” is
different from what theorists perceive it to
be and from what the propogandists claimed it
was.
They did not know, for example, that by
(Continued on page 14)
July 26, 1976