The long-simmering debate over setting up a no-fault insurance system for Maryland motorists may be brought to a boil by the recent recommendation of a Schaefer administration panel.
The nine-member Governor's Commission on Insurance voted 6-3 earlier this month to recommend that Gov. William Donald Schaefer back a bill to create a "pure" no-fault system. The commission was created in March 1990.
Page Boinest, a spokeswoman for Schaefer, says the governor has not made a decision on whether to include a no-fault proposal in his legislative package.
Various no-fault proposals have been debated in Maryland for the last two decades. But all proposals to restrict the ability of drivers to sue have been defeated by the lawyer-dominated General Assembly.
Under the traditional system, a person involved in an accident may sue the other person for negligence and for pain and suffering. Insurance liability policies pay these claims.
With a no-fault system, the policyholder may not sue or be sued. Instead, the person's claims are paid by his or her own insurance company. Claims for pain and suffering would not be allowed, unless the customer had bought a special policy covering that.
Insurance companies have lobbied for various versions of no-fault systems, saying they would cut insurance premiums to consumers. Lawyers and some consumer groups have opposed the systems, contending they would not result in lower rates and would prevent consumers from suing.
Last year a coalition of business and community groups campaigned for a hybrid no-fault system that would have allowed policyholders to choose to be covered by either a no-fault or traditional system. The measure died in committee.
"The issue is not no-fault. The issue is social reform," says A. Samuel Penn, chairman of the governor's commission. "What we are talking about is the citizens having to give up something to get something," he says.
Penn says the main advantages of a no-fault system would be the quick and proper reimbursement of people in accidents, the relieving of pressure on the judiciary system and a reduction in premiums.
The commission had not backed last year's modified no-fault proposal because it was too complicated, Penn says. But he concedes that any no-fault bill will face stiff opposition. "Certainly the odds are not very good," Penn says. "But I think the case is extremely worthwhile and the issue is worth public debate."
As part of its 18-month effort, the commission contracted with a consulting firm, Tillinghast of Arlington, Va., to prepare a report on insurance issues in Maryland. The consultants also asked three major insurance companies how much they expected premiums to change under a pure no-fault system. The companies estimated premiums would drop from 30 to 50 percent, depending on the size of the coverage.
The companies were State Farm Mutual Insurance Company of Bloomington, Ill.; United States Fidelity and Guaranty Insurance Co. of Baltimore; and the Government Employees Insurance Co. of Chevy Chase.
Even though these estimates were from insurance companies, which are supporters of no-fault, Penn is confident of the accuracy since they were reviewed by Tillinghast actuaries. "Actuaries are pretty reputable," he says.
However, a report done by the state Department of Legislative Reference in December 1990 finds no savings in no-fault programs in other states. It compares traditional tort states with states that had no-fault programs, where the savings from eliminating suits generated enough savings to provide savings to pay claims for all accident victims. The study found that premiums had actually increased more in such no-fault states than in the traditional tort states.
But the report says a more detailed study is needed on the costs and benefits of no-fault systems.
In response to last year's no-fault effort, the Maryland Trial Lawyers Association and other groups formed a task force to do their own study of no-fault. That report is expected out in the next month.
"It is a horrendous proposal," says Jonathan Schochor, a member of the task force and the immediate past president of the Maryland Trial Lawyers Association. He particularly objected to the proposal to eliminate awards for pain and suffering, citing people who are in wheel chairs or have other long-term injuries.
"You can not short shrift that issue," Schochor says.
On another insurance front, a proposal to create a non-profit company to provide low-cost insurance to Baltimore residents is on hold while an interagency task force is investigating the proposal for Mayor Kurt L. Schmoke.
"We want to make sure that we come up with a company that can stand up to the marketplace," says Richard Krummerich, a special mayoral assistant who is heading the task force. The task force will also try to determine the availability of city funds to finance the new operation, he says.
He declines to give a timetable for the inquiry, saying he would have a better idea in January.
A feasibility study of a non-profit company last year estimated that such a company could cut 20 percent off the average insurance bill by using various cost-cutting strategies.