AAI Welcomes Colo. Transition From No-Fault to Tort-Based Auto System

May 12, 2003

Recently, Colorado Gov. Bill Owens (R) signed into law AB 1188, authored by Rep. Keith King (R-21 El Paso), to allow the state’s auto insurance system to transition from a no-fault system to a tort reparation system similar to that used in 37 other states.

The bill’s passage reportedly caps a frustrating year of insurers working with medical providers, plaintiffs’ attorneys and the Legislature to seek reforms that would curb Colorado’s high automobile insurance premiums. (Colorado was ranked as having the 11th highest average automobile insurance premium in the country last year.) The Alliance of American Insurers (AAI), which served on the Governor’s No-Fault Reform Task Force, reportedly supports the move.

“Only a handful of states continue to have no-fault systems, and they all tend to be high cost,” Peter Gorman, vice president of the Alliance’s Western Region, commented. “Not one state has enacted no-fault in the last 20 years due to concerns that the model law endorsed by the insurance industry will be compromised in the legislative process by the trial bar. That is what happened in almost every state where no-fault was enacted. While we still support the concept, we cannot in good conscience support the provider abuse and high premiums we see in some states. For that reason, we supported repeal after it became clear meaningful reform was impossible in Colorado.”

Colorado’s skyrocketing auto premiums are reportedly due to an extremely low threshold ($2,500) after which lawsuits are permitted and a generous $100,000 minimum medical service coverage for “reasonable” care. This coverage has given rise to a host of alternative care providers serving injured drivers. The average number of chiropractic visits per claim in particular has reportedly jumped from 24 in 1997 to 33 in 2003.

Last year, Gov. Owens extended the no-fault law’s sunset for one year on the condition that the Legislature offer “meaningful” reform with significant cost savings. The insurance industry offered its own bill that would have reportedly met this test with a 20-28 percent premium reduction, but it was rejected by the providers and plaintiffs’ bar.

With the legislative session having ended May 7, several last-minute efforts were made to rescue no-fault, but all failed. Existing no-fault statutes expire July 1, 2003. HB 1188 addresses mandatory minimum financial responsibility to maintain $25,000/$50,000/$15,000 liability and property damage limits.

Insurance Commissioner Doug Dean is reportedly working on implementing regulations that are expected to allow no-fault coverage for all existing policies until policy renewal.

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