Trial lawyers, insurers spar over liability coverage

Senate weighs House-passed requirement for a higher minimum

April 01, 2010|By Michael Dresser |

Maryland's trial lawyers and insurers are squaring off in a politically charged duel over a bill that would increase, for the first time in almost 40 years, the amount of insurance a vehicle owner must carry to protect others in case of an accident.

The bill, which has passed the House of Delegates and is headed to the Senate, would almost certainly lead to higher premiums for tens of thousands of Marylanders who carry the minimum liability insurance required by law. Policyholders could see increases ranging from $60 for vehicles on the lower Eastern Shore to $300 in Baltimore, state officials say.

Those potential increases - and the possibility that many of those policyholders would drop coverage and drive without insurance as a result - have spurred the insurance industry to oppose the measure.

"It's a tax upon the poor people of our state," Minor Carter, a lobbyist for Liberty Mutual, said about the measure, which would raise the minimum liability coverage to $30,000 per injured person and $60,000 per crash. The minimums have stood at $20,000 and $40,000 since 1972.

Carter explained that some motorists would likely make one payment in order to get their two-year registration tags but then let coverage lapse and take their chances of being caught driving illegally without insurance.

"They may be poor, but they're not dumb," Carter told members of the Senate Finance Committee, which voted 6-5 Wednesday to send the measure to the Senate floor.

The once-obscure measure has emerged as one of the most contentious issues in the last weeks of the 2010 General Assembly session. It pits the powerful lawyers' and insurance lobbies against one another, and each side claims to be looking out for the proverbial little guy.

For most Maryland drivers - the estimated 90 percent or more who carry comprehensive auto insurance policies with much higher coverage than required - the bill would have little or no impact. Nor would it affect the great majority of claims that are settled for amounts under the minimum levels.

Standing to gain would be a small percentage of crash victims who are injured severely enough that their expenses are not covered by the $20,000/$40,000 limit and whose own insurance does not cover the remaining amount. Also benefiting, they acknowledge, would be the lawyers who represent them.

The fight has taken on strong political implications. Opponents of the legislation contend that Gov. Martin O'Malley is covertly working for its passage to nail down the financial support of trial lawyers.

"They're a big constituency for the Democrats and Governor O'Malley, and they're pushing these bills at the expense of our constituents," said House Minority Leader Anthony J. O'Donnell.

'Lawyers Relief Act'
During a hearing Tuesday, sponsors pitched the bill as a long-overdue protection for victims of others' negligence. But one Senate opponent, Republican E.J. Pipkin, characterized it as "the Trial Lawyers Relief Act of 2010."

Chief House sponsor Del. Charles E. Barkley said that if the $20,000 minimum adopted in 1972 had been adjusted for inflation, it would now stand at $103,000 - far less than the legislation is seeking. The Montgomery County Democrat said the current limit hasn't kept pace with the growing cost of caring for trauma victims - which he estimated at $7,500 a day.

Barkley conceded that the change would raise premiums for some policyholders. But he argued that in many cases, people with minimum coverage are not poor.

The Maryland Automobile Insurance Fund, the state's provider of auto coverage for high-risk motorists who can't obtain it on the open market, said 98.6 percent of its customers would absorb the increase. According to MAIF, which opposes the bill, the change would require rate increases between 6.1 percent and 9.3 percent.

While much of the discussion of the bill revolves around MAIF drivers, opponents said about three-quarters of the estimated 200,000 Marylanders with minimum coverage bought policies through other insurers.

'Over the edge'
Representatives of those insurers lined up solidly against the proposal, arguing that an economic downturn is the worst time to raise the limits.

Jeff Williams, representing Allstate, testified that 37,000 of its customers are insured at minimum levels. "You're going to put a lot of people over the edge, and they will go uninsured."

But trial lawyers contended that when the minimums are inadequate, victims - many of them with low incomes - cannot collect enough to cover their expenses.

"I'm here because I'm concerned about the victims of accidents not being properly compensated," said Baltimore attorney William H. "Billy" Murphy Jr., who said he would not benefit because he no longer handles such cases.

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