City News Service
Motorists and others injured in auto accidents have received steadily lower payments from insurance companies since a 1988 state Supreme Court decision, according to a study released today.
The Foundation for Taxpayer and Consumer Rights found that insurers have doled out lower health care, wage loss and injury payments to auto accident victims in the 1990s.
The findings are based on data from the National Association of Insurance Commissioners, and from the “insurance services office” called Fast Track Data, said Doug Heller of FTCR.
FTCR is a non-profit organization which, in part, monitors insurance companies, insurance practices and implementation of Proposition 103.
According to the study, the reduction in insurance payments to accident victims is directly linked to a state Supreme Court ruling in Moradi-Shalal v. Fireman’s Fund Insurance Cos.
The ruling rescinded the right of an ”innocent” accident victim to take legal action against the insurer or the at-fault driver, if the insurer tries to delay, underpay or deny a legitimate insurance claim, said Harvey Rosenfield, the foundation’s president and author of Proposition 103.
The report’s data indicated a need for legislation to hold insurance companies accountable for their claims practices, he said.
The study found that in 1997, while insurance companies received more than $8.5 billion in auto liability premiums from Californians, they paid out about $4.2 billion in claims.
”Just as drivers are expected to pay their premiums promptly and in full, insurers should pay claims on time and at full value,” Rosenfield said.
”People buy insurance to be covered in case of an accident, but with insurers’ current claim practices, injured motorists are forced to sue the at- fault driver because they don’t have remedies against the insurer. This is not how the system is supposed to work.”
For example, Rosenfield contended, an auto accident victim with a $1,000 claim would receive less than $710, after adjusting for inflation, than he or she would have before the Moradi-Shalal ruling.
Rosenfield said the study disputes the insurance industry’s argument that restricting accident victims’ right to sue lowers premiums.
In other states with restrictions on full liability similar to those in the Moradi-Shalal case, premiums increased dramatically during the last 10 years, he said.
The study also found that since the 1988 state Supreme Court decision, insurance companies:
— decreased the dollar value of claim payments to California accident victims by 4.5 percent, while the value of claims payments increased 16 percent nationwide;
— decreased the actual value of a liability claim every year since 1992;
— paid 26 percent fewer claims to California accident victims, while accident victims nationwide saw an 8.5 percent increase in claims settled;
— reduced overall liability payments by 29.2 percent, while payments increased nationwide by 25.9 percent.