Accident victims traditionally pay attorneys one-third to one-half of the final settlement reached with an insurance company. According to practicing trial lawyers, the equivalent hourly rate for many small claims is $500 an hour or more.
It is no wonder that no-fault insurance, an insurance system that replaces litigation with automatic victim compesation, faces the diehard opposition of the city's trial lawyers. They have been successful in convincing some D.C. officials that no-fault insurance reduces insurance benefits, increases premiums and limits our civil rights.
Actually, no-fault provides better protection, by eliminating inequities of the liability or "lawsuit" system. A properly designed no-fault system can provide benefits that are 12 times greater, or even more. One D.C. no-fault proposal would provide $100,000 for each victim's medical and rehabilitation expenses, $24,000 for lost wages and assistance and $1,000 for any funeral expenses. These amounts contrast starkly with benefits under a lawsuit proposal pending before the council, which would require coverage of only $10,000 per victim and $20,000 for all victims of one accident.
Since no-fault automatically pays the victims' expenses, there is no need to sue another driver for compensation. Lawsuits for pain and suffering are restricted to cases of death or severe injury, for those who really deserve it: the paralyzed, the scarred, the amputees and others whose lives have been significantly altered.
No-fault provides better benefits at comparable prices to lawsuit insurance simply because the legal determination of fault is extremely expensive. According to a U.S. Department of Transportation study, for every premium dolar paid in an auto liability insurance system, only 44 cents actually goes to accident victims; 23 cents goes for the legal costs of determining fault. In a properly designed no-fault system, roughly 70 cents of every premium dollar goes to compensate victims.
In the District, no benefits can be collected if the victim contributed in any way to the cause of the accident. The victim bears the burden of proof and must independently hire a lawyer and file a lawsuit against the other driver and that person's company. The victim's own insurance company plays no role in the settlement.
Even if both are injured and sue each other, only one can collect. The DOT study indicated that because of this need to prove someone else completely at fault, more than half of all accident victims receive nothing from liability insurance. Of those who are compensated, seriously injured victims receive only one-sixth of their actual medical and other expenses.
Minor accident litigation works in reverse. It is usually too expensive for the insurance companies to defend minor claims in court, even for accidents in which they believe their policyholder was blameless. So they attempt to settle quickly outside of court. "Pain and suffering" claims often are used to inflate settlement demands. According to the DOT study, minor accident victims typically receive an average of four to five times the actual cost of the injury-- costs borne entirely by all policyholders.
The uninsured motorist poses an additional threat, particularly in Washington, where 40 percent to 60 percent of all drivers are uninsured. Yet the pending liability insurance bill would allow District drivers to buy the right not to be insured! The council sidestepped the issue by allowing drivers to pay a $250 fine (in advance) to drive uninsured. The risk of this would be borne by all prudent drivers who would buy additional coverage. Since no-fault insurance compensates victims regardless of blame, the uninsured motorist threat is eliminated.
Trial lawyers zealously proclaim that no-fault jeopardizes our precious right to sue. What they don't mention is that a right to sue doesn't offer any corresponding right to collect. Because a personal injury lawyer is paid only for winning, victims who may have been partly at fault often have difficulty finding a lawyer. Because the lawyer's compensation increases with the size of the award, he will argue for the largest possible amount, regardless of what an injury is reasonably worth.
No-fault is supported by strong consensus of consumer and labor organizations, senior citizens, members of Congress, bicyclists, newspapers, legal scholars, the physically handicapped, economists, attorneys, accident victims and insurance companies. But these groups have been frustrated by trial lawyers bent on protecting a significant source of their income.
It may be merely coincidental that some of the council members who changed their position to oppose no-fault also are scurrying to raise re-election campaign money. What is certain is that contributing trial lawyers have been working to transform a meaningful local consumer reform movement into the Lawyers' Relief Act of 1982.