ACIC Voices Opposition to Calif. SB 494

August 10, 2004

The Association of California Insurance Companies (ACIC) said it is opposed to SB 494, a bill that would reportedly result in financial loss for many injured Californians, while providing financial gains for trial lawyers.

“SB 494 is being touted as an attempt to achieve fairness to injured parties and medical care providers. But the real beneficiaries of SB 494 are trial lawyers,” said ACIC President Sam Sorich. “The bill would take money from injured people and force all California consumers to pay higher insurance costs.”

The bill by Sen. Martha Escutia, D-Los Angeles, is pending on the Assembly floor. It would allow a medical care provider to file a lien in a lawsuit when the lawsuit is brought by a Medi-Cal patient. The lien would allow the medical care provider to recover fees that are significantly higher than the Medi-Cal fee-for-service rate agreements.

Sorich explained that under SB 494, the medical care provider could take a bigger share of the recovery, which would make less money available, under the insurance policy limits, to pay the injured person for loss of wages, out-of-pocket expenses or pain and suffering.

The higher settlements and judgments that SB 494 would generate would reportedly create a bigger pot of money from which trial lawyers can take their contingency fees, which reportedly usually range from 33 percent to 50 percent of the injured person’s recovery.

“Under current law, the cost of liability insurance coverage is partially based on anticipated loss costs incurred by the universe of injured parties – many of whom have no health coverage or who may be covered by health insurance or Medi-Cal,” said Jeffrey Fuller, ACIC executive vice president and general counsel.

“In each instance, the injured party is entitled to recover only the amount actually charged under the particular health care program. Under SB 494, health care providers likely will assert that their costs of providing services to injured parties far exceed the Medi-Cal reimbursement they received for those services.

“The inescapable result will be that liability insurance coverages will experience substantial increases in loss costs that will inevitably translate directly into increased premiums for all liability insurance purchasers – auto, homeowners and commercial,” added Fuller.

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