North Carolina Insurers Against Change to Negligence Rule

May 14, 2010

North Carolina property and liability insurers are taking their case to the public to impede an effort in the Legislature to change how monetary awards are determined when somebody gets hit by a car while crossing the street or slips on an icy sidewalk.

The Insurance Federation of North Carolina began running radio ads Wednesday — the opening day of this year’s legislative session. It says the ads will educate listeners on how a proposal to change the rule for negligence cases would raise their insurance rates if approved.

While supporters of the tort reform argue rates essentially won’t change, opposition resulting from ads could reach legislators’ offices and help derail a House bill approved last year that would allow an accident victim to recover damages even if the person is slightly to blame for what happened.

The federation’s statewide media blitz, which it says will cost roughly $30,000 a week, reflects the high stakes for trial lawyers, insurance companies and other businesses should the state switch to what’s called a “comparative negligence” standard.

“Given the current economic climate … we’re just trying to open the public’s eyes to the potential costs,” said Jennifer Cohen, the federation’s executive director. “Comparative negligence is always going to create increasing pressure on insurance rates.”

North Carolina Advocates for Justice, the group representing the state’s trial lawyers, want North Carolina to join 46 other states that follow a variation of the comparative negligence or comparative fault standard.

Under comparative negligence, if a judge or jury determines the plaintiff is entitled to $100,000 in damages but finds the injured person 30 percent at fault and the defendant 70 percent to blame, the plaintiff is awarded 30 percent less, or $70,000.

In the current system using a “contributory negligence” standard, a plaintiff could recover nothing even if the person is only slightly to blame for what happened. An injured pedestrian may have been checking a cell phone at an intersection or failed to take due care in checking whether a wet sidewalk was actually a sheet of ice.

The commercial by the federation, whose members include Nationwide, Allstate, Geico and Travelers, cite a consultant’s report written on behalf of the North Carolina Rate Bureau that calculated automobile liability insurance costs will increase by at least 5 percent if the House bill becomes law because more claims will be paid. That equates to a $150 million increase based on a $3 billion insurance industry, Cohen said. She didn’t know how long the ads would run.

The trial lawyers cite another consultant’s actuarial report showing insurance premium rates in South Carolina and Tennessee have grown more slowly than North Carolina’s rates since the surrounding states went to the comparative negligence standard in the early 1990s.

“There will be no significant change” in rates, said Paul Pulley, a lobbyist for North Carolina Advocates for Justice, adding the new standard will create a much fairer system. The House passed the bill last year with surprising bipartisanship — 19 Republicans joined a majority of Democrats in supporting it.

The North Carolina Chamber isn’t thrilled with shifting the negligence standard but would be more open if the legal scales were tilted more toward defendants. The Chamber’s website says the group has put together a coalition that wants more restrictions, such as denying plaintiffs any damages if they are found at least 50 percent at fault.

Senate Majority Leader Martin Nesbitt, D-Buncombe, didn’t know whether senators could come up before the session’s end this summer with a compromise that could pass muster with several different interest groups.

“It obviously has to make a lot of people happy,” Nesbitt said.

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