Tort-based Approach to Colo. Auto Insurance Continues Advancement

The Colorado House passed legislation this week that would replace the state’s current no-fault auto insurance system with a tort-based
system. Meanwhile, the House is also expected to act this week on legislation that would attempt to reform the no-fault system.

After defeating two no-fault reform bills earlier this session, lawmakers are being presented with the choice of converting Colorado’s auto insurance law to a tort system (HB 1188) or reforming the current no-fault system (SB 78).

“Legislators are keeping their options open by advancing bills that would create both types of auto insurance systems,” said Michael Harrold, senior director, state government affairs for the National Association of Independent Insurers (NAII). “Between the alternatives, returning to a tort system is the best approach for providing consumers what they want – rate relief. The present no-fault system is broken and SB 78 does not implement the necessary reforms to significantly reduce costs. SB 78 lacks cost containing
medical care standards that are based on universal, quality control standards and fails to give consumers the cost saving option to choose to exclude certain types of alternative care treatments from coverage. Moreover, if SB 78 does pass the House, any cost savings currently contained in the bill are likely to be further watered-down.”

Motorists in Colorado are currently paying the 11th highest auto insurance rates in the country primarily due to the broad medical coverage afforded drivers under the state’s no-fault system. As costs have spiraled out of control, the average personal injury protection (PIP) claim cost has increased from $5,000 in 1988 to $7,800 in 2001 and auto insurance premiums have jumped.

House Bill 1188 would reportedly eliminate the no fault system, but preserve all of the underwriting, rating, and cancellation provisions in the current no fault act.

“It is estimated that by converting to this tort system, savings off the current state mandated coverage could be between 15 and 35 percent, which could represent up to $176 per car. But in order to maintain the potential savings, HB 1188 reportedly needs to be enacted without amendments such as those being discussed by the trial bar and chiropractic association that would mandate first-party medical payment coverage. While political conditions remain very fluid, lawmakers are facing an adjournment date of May 7 and as a result will be narrowing their options very soon.” said Harrold.