SENATE BILL REPORT

SB 6060

BYSenators McCaslin, Johnson, Gaspard, Moore and West

Creating no-fault automobile insurance.

Senate Committee on Financial Institutions & Insurance

Senate Hearing Date(s):February 28, 1989; July 12, 1989; February 1, 1990

Senate Staff:Walt Corneille (786-7416)

AS OF JANUARY 31, 1990

BACKGROUND:

The current system of auto insurance in Washington State is based upon the premise that the party at fault should pay damages caused by that party's negligence.  Pursuant to that system, the negligent party's insurance must pay the damages up to the limits of the policy as they apply to the type of damages caused.  If multiple negligent parties are involved, there is a system under which each party contributes to the damages of the injured person established by the 1986 Tort Reform Act.  If the injured party is partially at fault, the damages owing to that party can be reduced under the comparative fault system.

A person may purchase insurance to protect against uninsured or underinsured drivers.  If a person is injured by an underinsured driver, a claim may be made against the injured party's own insurance company for reimbursement of what the underinsured party would be responsible for in damages up to the policy limits.  An insured may also purchase personal injury protection which reimburses for medical expenses regardless of who is at fault, up to the policy limits and for the period of time specified in the policy, usually one year.  The insured's insurance company may seek reimbursement from the negligent party for the medical expenses pursuant to the PIP portion of the policy.  PIP coverage is a type of no-fault commonly referred to as add-on no-fault in that regardless of who has caused the injuries, the medical expenses resulting therefrom will be paid by the insured's own insurance company.

It has been suggested that the cost of processing claims would be substantially reduced if a system of insurance was established so that the fault of the party was not an issue in most cases.

SUMMARY:

A registrant of an automobile must obtain basic economic loss benefits as specified.  Owners of six or more automobiles are excluded.  The violation of this provision is guilty of a gross misdemeanor.

Specified terms are defined including basic economic loss benefits which include insurance that would cover the payment of all reasonable expenses arising from an accident for medical, hospital, and funeral benefits for a year up to an aggregate of $10,000 per person.  Funeral expenses may not exceed $2,500.  Hospital room and board benefits may be limited to the regular daily semi-private room rates customarily charged.  Disability benefits are also included in the basic economic loss benefits up to a maximum of $500 per week for loss of income for one year and $25 per day in the event the injured person is not an income producer at the time of an accident.

Catastrophic economic loss benefits are also described and must be made available to any person named in a policy of insurance issued pursuant to this act. Catastrophic loss benefits include full medical coverage and a maximum of $500 per week for loss of income for up to five years and $25 per day for loss to a person who is not an income producer for up to 1875 days.  Survivor's benefits may be purchased as catastrophic loss benefits up to a maximum of $500 per week for five years.  All catastrophic economic loss benefits are subject to an aggregate limit of $100,000.

Benefits are payable to any person occupying an automobile or a pedestrian struck by an automobile, or an insured person who is in an automobile that is not covered pursuant to this act.  Benefits paid pursuant to this act may be deducted from any underinsured motorist benefits received by the insured.  Workers' compensation benefits must be deducted from any economic loss benefits provided by the act.

An insurer offering coverage pursuant to this act may exclude coverage for intentional injuries, operating a motor vehicle while under the influence of any intoxicating liquor or drug and if the driver is racing, eluding arrest, operating a stolen vehicle, operating a vehicle while committing a felony, or operating an automobile while the driver's license is suspended or revoked. Other exclusions may be approved by the Insurance Commissioner so long as consistent with public policy.

If economic loss benefits for disability or medical treatment have been paid and there is a break in the period of disability where benefits are not paid, the insurer may require medical proof before additional benefits based upon a reoccurrence of the injury is alleged.  The coverage provided pursuant to this act may contain a provision terminating the eligibility for benefits after a specified period of time when disability or medical treatment has not been required so long as it is not less than one year.

Insurers authorized to issue policies providing the economic loss benefits described in the act must organize and operate an assigned claims plan for parties where no basic economic loss benefits are available.  The assigned risk plan must contain rules for operation and the assessment of costs that are approved by the Insurance Commissioner.  Anybody wishing to use the assigned claims plan must have the same coverage as that provided by the basic economic loss benefits plan and must be subject to the same exclusions and rules of coverage that apply to basic economic loss benefits.

Benefits are payable on a monthly basis as claims arise and must be paid within 30 days after satisfactory proof of loss has been provided.  If an insurer does not pay benefits when due, the insured is entitled to bring an action on the contract to recover any benefits not paid.  If an insurer is required to pay overdue benefits under the policy, it may be required to pay reasonable attorney's fees incurred in bringing any legal action on the contract.

If any benefits are paid by a third party as a result of a suit filed, the receiver of any no-fault benefits must disclose this fact to the court.

An insurer who has paid benefits pursuant to the act has a right of action for damages against the negligent party for the amount of payments paid to the injured party.

The right to recover for noneconomic loss such as pain and suffering is abolished, except in cases of death, dismemberment, permanent total or partial disability, and permanent serious disfigurement.  The issues as to death, dismemberment, permanent total or partial disability, and permanent serious disfigurement are issues to be determined by the trier of fact.

Any damages awarded for loss of income must be the net amount of lost wages after income taxes are withheld.

A person requesting any benefits must submit to a physical examination which must be paid for by the person requesting the examination report.  An employer is required to furnish income records.

Appropriation:    none

Revenue:    none

Fiscal Note:      requested