After state insurance officials detailed their skyrocketing liability, nearly 50 sedan service drivers and owners defended themselves at a public hearing in Baltimore yesterday and asked that annual rate increases of up to $15,000 be repealed.
Many sedan service operators told the Maryland Insurance Administration they would go out of business if the agency did not repeal rate increases of up to 203 percent granted to the Maryland Automobile Insurance Fund.
MAIF, the state's insurer of last resort, underwrites 350 sedans that cruise Baltimore's streets -- mostly in low-income neighborhoods -- and charge $1 a mile.
The insurance rate increases were approved by the state in February and went into effect June 1. But sedan service operators have not paid the new rates pending the outcome of their challenge.
"The public will lose the most competitive group of entrepreneurs who provide cheap transportation," said Anthony L. Brennan, an attorney for sedan owners. "The cabs will not pick up on most occasions for short trips. The sedans come door to door as agreed and wait for a return. Their customers are friends and neighbors."
Tivis McElroy, vice president of the Sedan Drivers Association, called the rate increases "outrageous."
"The black community will suffer the most," McElroy said. "These folks in the sedans will go into the neighborhoods where the police don't go. MAIF is picking on the sedan services. MAIF needs to be policed "
At issue is whether sedans, which cost less than taxis, are safe for customers.
Daniel J. Deere, manager of the MAIF unit that is investigating sedan services, testified yesterday that many sedan companies have formed smaller subsidiaries and moved drivers through a so-called revolving door in an attempt to obtain low MAIF premiums.
"It's a shell game," Deere said. "There are four offices, 83 sedan organizations and seven individuals. They keep moving bad drivers to new organizations. It's an actual conspiracy to commit insurance fraud."
MAIF officials used colorful charts and graphs to show losses and liabilities caused by the sedan services that they said have drained more than $2 million from the fund since 1994 and prompted the rate increases.
"What is driving this situation is the frequency of losses," said David C. Trageser, MAIF executive director. "The amounts of the premiums were significantly less than what was needed to insure these risks. There's almost one property damage [claim] for every two sedans."
Trageser said that from 1994 to 1996, MAIF received 46.5 injury liability claims for each 100 sedans the agency insured through small "nonfleet" policies.
For "fleet" policies, which insure sedan services of three or more vehicles, 65.5 injury liability claims were made for each 100 vehicles insured, Trageser said.
He said that in 1994, MAIF insured 53 sedans and that payments on the policies exceeded premiums by $213,666. The next year, he said, 125 sedans were insured and the loss totaled $856,105. In 1996, Trageser said, the number of sedans increased to 264 and the loss was $1.2 million.
A decision on the sedan service challenge is expected within 30 days from Thomas P. Raimondi, associate deputy commissioner of the Insurance Administration.
Supporting sedan service owners was state Sen. Nathaniel J. McFadden, a Baltimore Democrat, who said in a letter to Trageser, "While I fully realize that the rates should go up because of an increase in accident and bodily injury claims, the reported increases are way out of line."
Pub Date: 7/16/97