'Not-ready-for-prime-time' no-fault.

In a news conference on May 20, House Majority Leader Dick Armey (R-Tex.) declared that his "top personal legislative initiative" is passage of the Auto Choice Bill, legislation to impose federal no-fault auto insurance on the states. He said that he intends to have the bill on the House floor by the end of July, that Senate Majority Leader Trent Lott (R-Miss.) has promised the bill will be considered in the Senate as well, and that he, Armey, has a "high degree of confidence" the bill will be signed into law before the end of 1998.

The same day, Armey testified at the first House hearing on no-fault insurance in nearly 20 years. But the results of the hearing can hardly be encouraging to the forces favoring no-fault.

According to supporters, the no-fault bill would lower premium costs, raise compensation, fight fraud, lower the number of uninsured drivers, and get more drivers better compensation faster than ever before. One wag said it is lucky that Rogaine and Viagra have already been introduced or the supporters would claim two more ailments no-fault could cure.

Yet, states have been unwilling to accept this insurance scheme. Supporters of no-fault are apparently convinced that their failure to persuade any state to move from a tort system to a no-fault system since 1976 is because (1) they have not packaged it correctly; (2) they have not tinkered enough with the incentives; and (3) the political clout of the trial lawyers has thwarted them. It apparently has not occurred to them that, possibly, no-fault has failed because most people disagree with allowing those who cause injuries to buy immunity from liability.

No-fault supporters bear the burden of proving that the states, which traditionally have had regulatory authority over insurance issues, have so failed in regulating auto insurance that a federal takeover of insurance law is necessary, and that a discredited 1970s insurance scheme should be resurrected to address the problems. It is hard to imagine supporters of the federal "choice" no-fault insurance scheme meeting that burden of proof based on their recent performance in the Commerce Committee.

The statements by lawmakers disclosed skepticism about the scheme. Members from states with no-fault were most skeptical because their experience with such insurance has been so negative. Rep. Frank Pallone (D-N.J.), whose state has had a long history with no-fault insurance--as well as suffering the nation's highest auto insurance costs--summed up the experience: "For years now, New Jersey has been like a laboratory for the Armey auto insurance choice system--and the results are definitive. The rat died." Even Republican lawmakers were cool to the proposal.

The testimony was long on slogans and short on specifics. The principal House sponsors, Armey and Rep. Jim Moran (D-Va.) were unable to answer basic questions about how the bill would treat injuries suffered by passengers and pedestrians struck by no-fault drivers, or how drivers who cross state lines would be treated if an accident occurred. After repeated attempts to address these questions, Moran finally gave up, telling puzzled committee members to ask the witnesses on the next panel.

The second panel had six witnesses. The first two--Lester Blizzard, an assistant district attorney in Harris County, Texas, and Peter Taormino, a convicted insurance fraud felon--testified about the problem of insurance fraud. The second two were Jeffrey O'Connell, "the father of no-fault," and Peter Kinzler, a long-time no-fault advocate and insurance industry lobbyist. Finally, consumer advocate Harvey Rosenfield and Defense Research Institute representative Michael Gladstone appeared in opposition to the bill.

The sponsors have been emphasizing the antifraud argument, and the first witnesses highlighted how fraud is commonly committed. The scheme they explained consisted of a fraud ring staging accidents with two vehicles filled with a cast of characters feigning injuries, who then bring claims with the help of crooked doctors and lawyers.

But Rep. Diana DeGette (D-Colo.) asked if anything in the no-fault plan would prevent exactly this situation from happening. Blizzard agreed the plan provided no disincentive to fraud, because participants need only choose the current state coverage option to receive similar coverage.

Members of Congress were particularly troubled by the prospect of depriving people of their right to receive noneconomic damages--in some cases, without their even knowing they were losing their rights. Subcommittee ranking member Tom Manton (D-N.Y.) asked Kinzler to comment on the following hypothetical situation:

A person who has "chosen" no-fault has an elderly, blind relative who is a member of his household. If another driver caused an accident in which the relative is injured, does the blind person lose the right to bring an action because of his relative's choice of insurance? In other words, would the bill mean that someone who does not even drive is deprived of the right to be fully compensated by the driver who caused the injury?

Kinzler agreed the bill would deprive the blind passenger of his right to recover noneconomic damages but that he would have the right to opt for his own tort insurance coverage. But how many blind people, who do not drive, think about what auto insurance coverage they might need?

Unfortunately, the poor performance of no-fault supporters and the unanswered questions may not be enough to put the brakes on the bill. Armey is a powerful member who has the clout to push legislation forward--no matter how ill-advised. ATLA takes seriously the threat this bill poses to injured drivers.