Md. Senate OKs higher insurance minimums

Bill goes to O'Malley

April 08, 2010|By Michael Dresser |

After a political duel that pitted trial lawyers against insurance companies, the legislature moved Wednesday to increase the minimum amount of insurance vehicle owners must carry, changing the requirements for the first time in 38 years and making higher premiums likely for as many as 200,000 Marylanders.

The Senate voted 27-20 to send the measure raising liability insurance limits to Gov. Martin O'Malley, who has signaled that he will sign it. The bill would raise the current minimum auto coverage protecting victims of crashes from $20,000 per person and $40,000 per crash to $30,000 and $60,000, respectively.

While trial lawyers argued that some plaintiffs were unable to collect enough from insurance to cover their hospital bills, insurers said the higher minimums could lead many low-income motorists to drop coverage altogether. Other opponents said the bill simply comes at the wrong time, with unemployment still high amid a national recession.

Sen. Delores G. Kelley of Baltimore County, one of the Democratic opponents, said the timing was "very poor."

"If we made it 38 years, we can wait till this recession is over," she said.

Most of the roughly 2 million policy holders who already carry more comprehensive coverage than required are unlikely to be affected. Those who hold policies with only the minimum coverage could see premiums rise an estimated $300 for a young male car owner in Baltimore, where vehicle owners pay the highest rates in the state, according to insurance officials.

If O'Malley signs the measure, Maryland would jump into the top ranks of states in terms of minimum liability coverage. For now, its limits are below the national average. More than half of U.S. states have adopted minimums of $25,000 and $50,000.

The bill was approved after a stiff fight led by the Senate's Republicans, joined by a half-dozen Democrats.

In their attempt to rally opposition, insurers enlisted many organizations that work with low-income Marylanders to oppose the bill.

In a political turnabout, Republican lawmakers from largely rural districts cast themselves as defenders of the urban poor against a powerful lobby that contributes heavily to Democrats.

"Why are we going to do it? Because a big special interest, the trial lawyers, want us to do it," said Senate Majority Leader Allan H. Kittleman of Howard County.

But Sen. Robert J. Garagiola, the floor leader for the legislation, said the issue was the estimated 200,000 Marylanders he described as "underinsured." He noted that the limits had been unchanged for 38 years.

"We should have addressed this situation 10-15 years ago and increased it to [$25,000]and [$50,000]," the Montgomery County Democrat said.

Representatives of trial lawyers argued that inflation had severely eroded the value of a $20,000 award since that minimum was adopted in 1972 - noting that today's equivalent would be more than $100,000.

They contended that a significant number of plaintiffs, many of them poor themselves, could not collect enough in insurance to cover the cost of their injuries.

Of those who carry only the minimum coverage, it was unclear how many are actually poor and how many remain lightly insured by choice.

About one-third of those who will be affected are clients of the Maryland Auto Insurance Fund, the state's insurer of last resort, which opposed the bill.

About 98 percent of MAIF customers, who are often the motorists with the worst driving records, carry only minimum coverage. But many thousands more get their policies through commercial insurance companies.

Opponents argued that such increases could prompt many low-income motorists to drop insurance altogether and to illegally drive without insurance.

Within hours of the Senate vote, opponents - including a group of Prince George's County ministers - were preparing to take their case to the governor in the hope of persuading him to veto the bill.

A loosely related measure that would allow MAIF customers to pay in monthly installments is being considered by the Senate Finance committee.

Supporters of the MAIF bill contend that lowering the cost of borrowing could help offset the increased premiums that could result from the higher minimums.

Committee Chairman Thomas M. Middleton, a Charles County Democrat, said he would hold a vote on the MAIF bill today.

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