Alabama Governor Won’t Sign Car Insurance Bill

June 18, 2007

Gov. Bob Riley decided to block legislation that would have raised the minimum amount of liability insurance that Alabama motorists must buy because he was concerned it didn’t give policyholders time to comply.

Riley’s communications director, Jeff Emerson, said the governor agrees with the bill’s intentions, but he will not sign it into law because it is worded so that the new insurance requirements would take effect the moment he finished his signature.

Emerson said Riley would support passage of the bill in a future session of the Legislature provided it has an implementation period for insurance companies to prepare new policies and motorists to buy them.

“He thinks the bill is well-intentioned and he supports the concept,” Emerson said.

The Legislature passed the bill in the final days of the session and did not have time to consider a delayed implementation date. As a result, this legislation passed with an immediate effective date which caused significant concern for insurers.

The Property Casualty Insurers Association of America requested that the governor veto the bill, saying raising the minimum limits will result in an increase in the cost of auto insurance for many drivers who can least afford it and quite possibly increase the number of uninsured drivers.

William Stander, assistant vice president and regional manager for PCI said the insurer association told Gov. Riley that the immediate effective date made it impossible for insurers to comply with the law.

“A policy change such as this requires insurers to reprogram computers, file rates and forms, and notify policyholders,” Stander said. “If the state is going to require higher insurance limits, there needs to be a delayed effective date in order to provide sufficient time for insurers to process the changes and avoid some of the confusion for policyholders that is likely to occur.”

The bill’s sponsor, Sen. Roger Bedford, D-Russellville, guided it through the Legislature on the last meeting day, June 7. Bedford said he was disappointed with the governor’s June 15 decision because insurance companies could have sold new policies when motorists’ old policies expired.

“If he had been concerned about the implementation date, he should have put on an executive amendment or had his floor leader bring up the issue” before the Legislature wrapped up its final day, Bedford said.

Bedford said he will be back next year with the bill. He said there had been some discussion about including an implementation period but all the parties couldn’t agree on it.

The legislation, also known as the Motor Vehicle Safety-Responsibility Act, a compromise between plaintiff lawyers and insurance companies, would have required motorists to have at least $25,000 in coverage for one injury or death, $50,000 for multiple injuries or deaths, and $25,000 for property damage. The current requirements are $20,000, $40,000 and $10,000, respectively.

The two largest auto insurance companies in Alabama said most of their customers already met or exceeded the proposed requirements.

Source: Property Casualty Insurers Association of America

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