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study committee assumed that only 31 percent of persons injured in auto accidents would be entitled to payment for wage losses. However, the AIA's own cost survey shows that more than 43 percent of traffic acci. dent victims actually incur wage

losses. 2. The AIA's cost estimates make no

allowance for future income losses to survivors in auto accidents where the breadwinner is killed. In costing out their plan, they list only the economic losses incurred up to the time of death. Our actuaries estimate that, on a conservative basis, this error alone will add more than 16 percent to the economic losses under the AIA

proposal. 3. The AIA's cost estimates make no

provision for wage losses in cases that
result in partial disability – that is,
where a worker had to take a lower-
paying job because of an impairment
suffered in an auto accident.
The AIA's cost estimates arbitrarily
list all cases of permanent and total
disability as the equivalent of 99
weeks of disability - less than 2 years.
This arbitrary assumption has the
effect of grossly understating the ac-
tual economic losses that would be
incurred in such cases.
The AIA's cost estimates do not in-
clude any provision for payment of
cases that fall into the assigned-case
plan. Yet we know that such cases
will add substantially to the financial
cost of their proposal, especially in
states where there is heavy out-of-

state traffic. It should be clear that the cost estimates are subject to serious question and that the plan may well turn out to be more expensive than presently projected.

There are other unanswered questions which must be considered, the answers to which may also adversely affect hopes of cost savings: 1. The plan contemplates paying all

persons injured in auto accidents. This includes those who do not recover because of their contributory negligence, those involved in onecar accidents and those who have claims that are so small that they

do not care to prosecute them. Is sufficient data available to accurately determine the impact that the payment of all these additional

claims will have upon the cost? 2. Will the elimination of the fault

concept adversely affect highway safety programs, with the result that there will be more accidents and

claims? 3. Since there is no deductible on the

medical and hospital expense portion of the plan, will many persons with very minor injuries which do not usually require medical atten

tion seek out medical services? · Will many persons attempt to pad

their claims by obtaining excessive or unnecessary medical and hospital treatment or by unnecessarily remaining away from work? What effect will the limitation of the plan to out-of-pocket benefits have as an

inducement to padding of claims? 5. If the AIA plan follows the proposal

of the Keeton-O'Connell plan to
provide benefits for all injuries aris-
ing out of the ownership, mainte-
nance or use of motor vehicles,
would a problem with fraudulent
claims arise? Would persons injured
in non-auto accidents claim that
they suffered injury while repairing
or servicing their vehicles to gain
benefits under the plan? Would a
substantial number of these unwit-
nessed "auto" accidents affect the
projected cost?
How many disputes between in-
surers and their insureds over bene-
fits under the plan will result in
court suits? Would a substantial
number of these suits increase the

6.

cost?

7. Would a larger claims department

clerical staff be necessary to handle the periodic payments method of the plan and the necessary paperwork this would entail? What changes in the claims staff personnel would be needed to investigate whether the insured had completed medical and hospital trcatment, was able to return to work, etc.? What effect will these items have upon

costs? 8. What will it cost insurers to train

personnel, establish new procedures,

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issue new policies, etc., for the new present system reflect the insured's potenplan? Will this cost be passed on iial for causing injury and damages to to policyholders?

others. The driver who has the highest 9. The plan contemplates payments accident and traffic violation record and

for services the injured person greatest potential for causing injury and
would have performed had he not damage pays the highest rate. The driver
been injured. This would pay for with no record of accidents and traffic
items such as hiring a housekeeper violations and with the lowest potential
to do housework for an injured for causing injury and damage pays the
housewife. How many claimants will lowest rate. Drivers whose records fall be-
"milk" this benefit by hiring out tween these poles have their rates adjusted
side help to do work they actually accordingly. Since the present system op-
could perform themselves or by erates on a third party, liability insurance
keeping a person on to do this work contract, this type of rating structure is
long after the disability has ceased? equitable.
What effect will a substantial num. Unlike the present system, the AIA pro-
ber of these situations have upon posal envisions a first party contract which,

as to the exposure of the insurer, is more 10. AIA has indicated that the size of similar to life or accident and health in

the benefits payable for wage loss or surance. In structuring rates under a first disability and disfigurement could party system, the insurer is concerned solebe increased if the legislature of a jy with the possibility of loss to its insured state enacting the plan would so de- and not with the losses the insured may sire. However, it should be clear cause others. For example, if two persons that if they were to be increased, apply for an identical life insurance policy the size of the premiums paid would and the only difference between them is also increase. Is sufficient data that one has a severe heart condition while available so that the impact of any the other is in perfect health, the one with increases in these benefits on the heart trouble pays a higher premium beplan's cost could be adequately cause he is the greater risk. Similarly, if evaluated?

two persons take out the same medical and

hospital insurance plan, but one covers While the product's cost is an important

only himself while the other also covers factor, a consumer is also concerned with

his wife and children, the person with the what he gets for his money. A person family coverage pays more. Again, the inmight choose one pair of shoes over an

surer's exposure is greater in one case than other even though the cost is 20 percent

the other and justifies a higher rate. more, simply because he knows the cheaper

Logically, the AIA plan must have a pair will fall apart quickly. A cheap prod

similar rating structure. Thus, the person uct is not always a "bargain."

expected to collect the most in case of an To the innocent victim of an automobile accident would have to be charged a higher accident the AIA plan would surely not rate than the person who would collect be a bargain even if it could be sold for little. Therefore, the owner of a station 199 or 45% less than present insurance. wagon who has a large family would pay He would be required to give up too much. higher rates than an unemployed student

with a two-seat sports car. If there were a WHO WOULD PAY HIGHEST RATES? collision between these two vehicles, the

insurer covering the station wagon would In evaluating the AIA proposal a sig. have the potential of a claim for work loss nificant factor is the possibility of changed

and disability by the owner and, in addirating structures. That is, who would pay

tion, claims for medical and hospital exthe highest rates under the plan and who penses by all in the car. The insurer of the would pay the lowest?

sports car would face a possible claim for Under the present system the insurer only medical and hospital expenses by the pays damages if its insured is found legally driver – and possibly a claim by one other liable for the injuries and damages caused passenger. by the auto accident. Therefore, the in- In this situation the fact that the driver surance rates charged to insureds. under the of the sports car has a bad traffic violation record would have less impact on rates un person should insure those who occupy his der the AIA plan than under the present vehicle from loss. Therefore, the insurers system. With fault eliminated, the sports of commercial vehicles should not be concar driver could violate a red light, kill all cerned with the losses that their drivers the passengers of a fully loaded bus and cause to others, only losses to themselves. his insurer would have no worry unless it A commercial insurer would be hard also insured the bus since the insurer of a pressed to justify charging a higher rate vehicle only pays benefits to the occupants to the owner of a truck fleet because other of that vehicle and has no concern with its insurers had to pay great amounts in beneinsured's recklessness as it relates to the fits to persons injured by the truck drivers. passengers of other vehicles.

Since it is a first party system, each person Under the AIA plan, it is logical that should care for hi

should care for himself. some who have poor driving records could demand lower rates than motorists with POSSIBLE REDUCTION OF large cars and families. If fault is no long. AUTO LITIGATION er a proper factor in an auto reparations system, this principle should also be ap Plan As SOURCE OF LITIGATION plied to racing. It would be illogical for an insurer to charge high rates to its own

It is clear that the AIA plan will not insured because he causes other insurance

eliminate all litigation resulting from autocompanies to pay a great deal of benefits mobile accidents. However, it is important to their insureds.

to consider whether the plan would reduce In evaluating the plan it is also impor.

these lawsuits. It is not claimed that the tant to consider its impact upon commer

plan would do away with all auto-tort

suits. In fact, the plan provides for residucial vehicle owners who now pay some of the highest insurance rates. Since commer

al liability actions and insurance to cover cial vehicles use roads and highways con

that liability. 17 Countrywide adoption of stantly, their insurers recognize a high loss

the plan should result in the abolition of potential. These drivers are not, as a class,

residual liability. incompetent. Their actual time on the

However, even with residual liability road exposes them to more potential acci

eliminated, it is recognized that claimants dent involvement and insurers recognize and insurers will not always agree on inthat their liability potential for injury and

terpretation of the plan's provisions or the damages is also great.

amount of benefits. Therefore, the plan However, when rating commercial ve

provides that the jury trial will be rehicle insurance, the AIA plan recognizes

tained to resolve these disputes.18 Regardthat the concepts of the present system

ing reduction of auto accident litigation, would not apply:

the question then becomes whether the

litigation involving disputes between claimSince ... the plan recommended by the ants and insurers will produce more court committee contemplates essentially that cases than now. the motorist be responsible for people Current statistics show that 94 percent in his own car, it is clear that commer- of all auto claims are settled without lawcial vehicles (except public carrying ve- suits being filed and that another four perhicles) will have little exposure because cent are settled without the suit being of the absence of family and guests in tried to a verdict.19 The plan would have commercial vehicles. Accordingly, the to produce a better record than this before present cost borne by commercial ve a reduction in auto accident litigation hicles will be shifted to some extent to could be claimed. Since the AIA proposal private passenger vehicles.16

is not in operation, there are no statistics AIA officials have indicated a possible

available to accurately compare its opera

tion and the present system. However, shifting of some costs back to commercial

since the plan contemplates paying benevehicles once the plan is adopted. This

fits to all persons injured in auto accidents, would be illogical and a step which the

it is unquestioned that there will be more owners of commercial vehicles could justifiably oppose since under the plan each 171d at 6

181bid 16Note I supra at 9

19Note 10 supra

claims than now. Persons who can not recover now because of fault will be able to gain limited benefits. Estimates as to the increase in claims under a no-fault auto system vary between 40 and 63 percent.20

This claims increase will cause a greater number of disputes, based upon interpretation of the plan's provisions or its benefits.

Types of disputes that may result under the AIA proposal should be considered:

1. Regarding hospital and medical ex

penses, the proposal speaks of paying "reasonable charges for reasonably necessary products and services."21 Thus, two questions will arise with every claim submitted: a) are the charges reasonable?; and, b) were the services or products necessary? Here, disputes may arise between claimant and insurer. Did the claimant really need the doctor's care that long? Was such a lengthy stay in the hospital necessary? Were all drugs, braces and treatments needed? Were costs of these items reasonable? If the claimant and insurer can not agree, “reasonableness" will be a question for a

jury. 2. As to benefits for "work loss" the

proposal speaks of paying "for loss of income from work (for example, wages) and expenses reasonably in curred for services in lieu of those the injured person would have performed without income."22 Here again, disputes may arise. Did the claimant have to stay away from work so long? Was the hiring of household help necessary? If it was necessary, was it needed for so long? Would the injured person have performed the services if he had not been injured? Were the charges for the services reasonable? Once again, a jury will have to decide what was "reasonable" in

case of disagreement. 3. The plan recommends that an addi

tional benefit be paid for permanent disability or disfigurement and that it be limited to a maximum of 50 percent of medical and hospital ex

penses. The proposal states that the 20 Harwayne, The Answer To The Plan's Low Cost, 3 Trial 47 (No. 6, Oct/Nov 1967)

21 Note I supra at 5 217 bid

actual amount of this benefit will "vary according to the degree of impairment or disfigurement."23 Here again, disputes may arise. Is the claimant totally disabled so that the 50% rate should be used, or should some other percentage be used? If he is not totally disabled, how is the percentage determined? Is a small scar on a young girl's face worth a 50% rate? Should the percentage be computed on the medical and hospital bills as submitted, or should they be reduced because some of the charges are unreasonable or the services unnecessary? Again, if disputes arise, a

jury will decide what is "reasonable." The percentage of claims that would result in litigation is a matter of conjecture. Since under the AIA proposal persons injured in auto accidents will be asked to endure pain and suffering, the loss of earning capacity, and disability without just compensation, it can be expected that claimants will seek every last penny they think they have coming from their insurer. The sum the claimant may believe is rightly due him and the sum the insurer believes it should pay may be quite different.

Claims that the nature of a no-fault compensation plan will reduce litigation can not be accepted at face value. The same claim was made for workmen's compensation. The AIA plan would be similar to workmen's compensation in that its prime concern is the amount of benefits an injured person has coming.

A 1966 study of Texas trial courts showed that eight times more workmen's compensation claims resulted in court suits than did auto liability claims.24

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accident or against the persons who sold them. Members of the organized plaintiffs' bar have suggested that a claimant's counsel should always consider the possibility of such a products suit in every auto collision case.25

While courts have been reluctant to rule that a manufacturer must produce a product that is accident-proof, they may change their position if the AIA plan abolished usual forms of tort liability. It is clear that the plaintiffs' bar is committed to establishing the principle that a manufacturer should be held to insure the absolute safety of its product. The end result of the adoption of the AIA plan may well be the replacement of the normal auto-tort action with one for product liability.

THE PLAN'S QUESTIONABLE
CONSTITUTIONALITY

There is little doubt that a plan which would severely limit the damages recoverable by the innocent victims of traffic accidents would be subject to having its constitutionality challenged. The AIA proposal states the following:

Most lawyers and legal scholars believe that in today's constitutional climate the courts would be loathe to strike down legislative enactments providing a comprehensive no-fault automobile accident

reparations system. 26 Such a broad, sweeping statement would seem to require a great deal of amplification and documentation. It is questionable whether most lawyers and legal scholars have even considered the problem. A reading of the proposal indicates no research on the subject but a total reliance upon the analysis of the constitutional problems confronting the Keeton-O'Connell plan, as set forth by its authors.27 The situation should be more carefully examined to determine whether constitutional obstacles will be as easily overcome as is believed.

ty or property, without due process of law. This prohibition has a counterpart in many state constitutions through provi. sions which guarantee a legal remedy for all injuries.28 Because of such prohibitions, there is abundant authority for the premise that a state may not completely abolish a cause of action for injuries without substituting another adequate remedy.29 Proponents of the Keeton-O'Connell plan may argue that the plan will have no trouble in this respect, since it does not abolish all tort remedies. Since the AIA plan would eliminate all tort actions, it must be shown that this scheme substitutes an adequate remedy.

It will undoubtedly be argued that the system of private, first-party insurance envisioned would be an adequate substitute for the tort remedies which would be abolished by statute. Here, there would be strong grounds for disagreement.

Regarding motor vehicle damage, under the AIA scheme there would be no replacement of the existing tort remedy. Under the present system, if a motor vehicle is damaged by the negligence of a third party, its owner may bring a tort action against the negligent person to recover damages. The AIA proposal would absolve the negligent motorist of all liability to other owners' vehicles damaged by careless conduct and each vehicle owner would be forced to assume the responsibility for damage to his vehicle. Under the proposal all insurers would be required to offer a form of non-compulsory collision coverage. This could hardly be considered an adequate replacement for the existing tort remedy which would be abolished. As was previ. ously discussed, even with the collision coverage, the motorist himself would have to pay for protection of his property from the negligence of others and, that protection would not be complete.

28For example, the Wisconsin Constitution, Ar. ticle 1 g 9 provides:

DUE PROCESS The Fourteenth Amendment to the United States Constitution prohibits a state from depriving a person of life, liber

25DRI, Special Bulletin No 6 (Apr 1967) 26 Vote 1 supra at 9

Every person is entitled to a certain remedy in the laws for all injuries, or wrongs which he may receive in his person, property, or character; he ought to obtain justice freely, and without being obliged to purchase it, completely and without denial, promptly and without delay, con

formably to the laws. The words "conformably to the laws" have been held to have the same meaning as "due process of law," McCoy v. Kenosha County, 218 'NW 348 (Wis 1928)

29Ruben & Williams, The Constitutionality of Basic Protection, I Conn L Rev 44, 46 (1968)

27/bid, citing Keeton & O'Connell, Basic Protec. tion For The Traffic Victim, Ch 9 (1965)

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