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Jan 25 2019

Insurance Rates and Lawsuits: Separating Fact from Fiction

Authored By: Randall Hart

The Myth

$2.7 million for severe burns caused by scalding coffee. $4.5 million for years of complications caused by a medication. $28 billion to a cancer victim who began smoking in the 1950s. These awards are a sign that juries are out of control in awarding damages, and we need tort reform laws to control our insurance premiums.

The Reality

Between 1974 and 1978, insurance premiums skyrocketed, and under pressure from their constituents, lawmakers sought to ease the crisis through a series of laws that restricted victims’ rights. The market eventually settled, and insurance premiums became more affordable — until the mid-1980s when another premium crisis hit. State lawmakers again identified victims and claims against insurance companies as the primary culprit behind those grossly exaggerated premiums, and forty-six states passed different degrees of “tort reform,” all of which had the effect of limiting a victim’s ability to recover damages rather than restricting an insurance company’s ability to raise rates arbitrarily.

But, as many argued, if it lowered premiums, it was a small sacrifice to make, right?

Well, not quite — because tort reform laws didn’t have a permanent effect on insurance premiums, after all.

In 2002, yet another inflationary crisis struck the insurance industry, which hit medical malpractice particularly hard. With some healthcare providers seeing an increase of over 100% in their premiums, many doctors marched on state capitals, smaller facilities were forced to close, and the media stoked the flames by suggesting this insurance crisis could turn into an American healthcare crisis.

But if tort reform laws had already been passed, what else could lawmakers do?

Turns out, they could still enact quite a bit of harmful legislation. With half the states passing laws further restricting patients’ rights and protecting doctors from negligence and fourteen states enacting legislation to lower the caps on damages, the already under-regulated insurance industry won further major victories.

That’s not to suggest these crises were engineered by the insurance industries in order to win beneficial legislation; rather, these crises were engineered by the insurance industries because their business model is unsustainable. To understand why, we have to first examine how insurance companies actually make the bulk of their income, which isn’t through selling policies. Instead, those companies use the funds from premiums (or, more specifically, the difference in premiums and payouts) and invests in the stock market. When the market is doing well, they can lower premium prices and engage in fierce competition for your business. But when the stock market crashes and those investments are no longer as profitable, insurance companies react by drastically raising premiums.

So where does that leave the huge awards like those listed above? Do they have an effect on premiums?

In short, no. Massive awards are rare and tend to be blown out of proportion by the media, simply because sensationalism sells. And even the cumulative effect of smaller payouts by insurance companies shouldn’t negate their ability to sustain a profitable company.

The Myth

Tort reform legislation works — it keeps premiums from skyrocketing.

The Reality

There’s really no evidence that tort reform laws have had any effect on managing runaway premium prices. If they were effective, the spate of late 1980’s tort reform legislation should have prevented, or at least mitigated, the crisis of the early 2000s.

Tort reform, though, is popular among politicians because it gives their constituents the illusion that their elected representatives are sympathetic and proactive. And the market will eventually stabilize, creating a correlation between legislation and premium prices, even if there’s no causative factor involved.

According to Premium Deceit — the Failure of “Tort Reform” to Cut Insurance Prices, a retrospective study on the impact of tort reform laws passed in the 1980s, tort legislation had no impact on premium rates. In fact, states that didn’t pass any or very little tort reform legislation experienced the same premium rates as states with severe tort restrictions.

In 2009, Americans for Insurance Reform published a study that looked at the medical malpractice insurance crisis of the early 2000s and again found no correlation between legislation and premium rates, with states experiencing similar insurance rates whether they passed restrictive tort reform laws or not.

Finally, Americans for Insurance Reform’s 2016 study of the medical malpractice tort reform legislation found that in states where limits on a patient’s rights were enacted, there was a “22.7 percent decrease in pure premiums from 2002 to the present — but states that did nothing saw a larger average drop of 29.5 percent.”

The Myth

Insurance caps—those limits on non-economic damages like infertility or chronic pain—are necessary to prevent exorbitant awards that can bankrupt insurance companies.

The Reality

Insurance lobbyists are particularly fond of pressuring legislators to enact strict caps on non-economic damages, but Americans for Insurance Reform again “found that states that enacted or lowered caps on non-economic damages saw an average 21.8 percent decrease in pure premiums …but the states that did not saw an even greater average drop of 28.9 percent.”

Furthermore, a 2012 study¹ of nine states with damage caps also found “no significant impact on Medicare Part A spending,” thus suggesting that limiting a patient’s legal right to recover damages has no discernible impact on healthcare costs.

Conclusion

Tort reform tends to have the same impact: limiting a person’s right to recover damages, particularly general damages (those awarded for immeasurable injuries like pain and suffering). The insurance industry has very few legal restrictions on its operations, and its business model of allowing stock market trends and interest rates to determine premium prices has had the deleterious effect of limiting consumers and patients’ rights to compensation for a company or medical provider’s negligence. Liability insurance is supposed to exist so that we consumers have recourse if we are harmed by the actions of others, not to ensure insurance companies’ massive profitability. If we want to seek true insurance premium reform, we must look to the insurance companies themselves and hold them accountable for the cyclical destabilization of their market.

References

¹ Paik, Myungho and Black, Bernard S. and Hyman, David A., “Damage Caps and Defensive Medicine, Revisited” (November 8, 2016). Journal of Health Economics, 2017, vol. 51, pp. 84-97; Northwestern Law

& Econ Research Paper No. 13-20; Illinois Program in Law, Behavior and Social Science Paper No. LBSS14-21. Available at SSRN: https://ssrn.com/abstract=2110656

Jan 22 2019

Large Vehicle Accidents Southwest Louisiana (SWLA)

Authored By: Randall Hart

Large Truck Accidents In Southwest Louisiana

With the increase of large vehicles in the SWLA southwest Louisiana area drivers need to be extra vigilant of the dangers these vehicles pose for the everyday driver.
The increase of construction sites and new parking lots to accommodate the influx of drivers on the roads create choke points and dangerous blind spots for weary or impatient drivers. There are often large vehicles attempting to “squeeze” into congested traffic at times when traffic is at its worst.

A recent DOT study shows an increase in overall fatalities from motor vehicle accidents in the last decade and the majority of these fatalities were caused by large vehicles which has increased 29% since 2009.

Large Vehicle Accident In Southwest Louisiana

A 2016 article in USNews compares the effects of drowsy driving to that of drunk driving and the statistics cited are alarming. “Drowsy driving is estimated to be a factor in 20 percent of fatal crashes. …drivers that skimp on the seven hours of sleep experts recommend increase their risk of a crash exponentially”, the article states. With the narrow margins of error presented in the tight construction zones and the extra vehicles on the road these days in SWLA a second’s worth of inattention can mean the difference in life or death with these large vehicles.

The article also cites AAA’s suggestion of taking a break from driving every 2 hours or 100 miles, travelling with a partner that can share the driving responsibility, and avoiding medications that raveling drowsiness. These are valid suggestions to help keep our roads safer as we travel to and from work.

If you have been in an accident recently and need advice from a skilled local personal injury attorney that knows the local justice system in southwest Louisiana please feel free to reach out to Broussard & Hart, LLC. Toll-Free at 866-281-4774.

Jan 19 2018

Should I Get GAP Insurance?

Authored By: Randall Hart

gap-insurance

If you have taken a loan to buy a new vehicle, you may need GAP insurance. GAP insurance pays for the difference between the market value of your car at the time of its loss (totaled or stolen) and the balance you owe on the loan. GAP insurance is also applicable to a lease on which you owe, rather than a loan.

When you buy a new vehicle, it begins to depreciate- lose value- the minute you drive it off the lot. A vehicle may depreciate 20-30% in the first year alone. After the first year, the vehicle’s value will continue to fall. Currently, the average depreciation rate (lost value) is about 18% per year. What you owe on the car- the loan or lease balance- does not fall this fast. That leaves a “gap” between what the vehicle is worth on the market and what you owe. This is commonly referred to as being “upside down.” If you are “upside down” when your vehicle is totaled or stolen, standard auto coverage pays only what the car is worth on the market when the loss occurs. If you owe more on your vehicle than what the vehicle is worth, GAP insurance bails you out of this jam and covers the difference.

If you have paid less than 20% down on a new vehicle or have the vehicle financed for five years or more, you may need GAP coverage. Adding GAP coverage to an auto insurance policy is typically the best buy, but not all car insurance companies provide GAP insurance. Lenders may offer GAP coverage for a flat fee, but this is probably the most expensive way to buy GAP coverage. If your auto insurer does not offer GAP coverage, you can probably purchase stand-alone GAP coverage online that are more affordable than what the auto dealer or lender will charge.

Jan 19 2018

Reasons Why You Might Need More Car Insurance Coverage

Authored By: Randall Hart

reasons-why-you-need-car-insurance

An auto insurance policy typically includes several different types of coverage. In this post, we’ll focus on liability coverage. Liability coverage pays others for the damages caused in a collision if you are at fault. Liability coverage pays damages for bodily injury and property damage that, absent the coverage, you will owe personally.

Liability coverage is the insurance Louisiana requires before you are allowed to drive. Most states have minimum coverage requirements. In Louisiana, the minimum coverage for bodily injury is termed 15/30. This provides a maximum liability coverage of $15,000.00 per injured person with a maximum of $30,000.00 per accident. The minimum legal requirement for property damage is $25,000.00.

If you injure someone with your car, claims brought against you could be for a lot more money than the minimum coverage required by law. This is especially true for bodily injury claims. There are two reasons why you might consider increasing your liability coverage for bodily injury claims well above the minimum required.

First, the amount of liability coverage you carry should be high enough to protect your assets from seizure/liquidation in the event of an at-fault crash. Often, experts recommend at least $100,000/300,000 in bodily injury coverage- but even that may not be enough. Take your net worth and subtract your exempt assets to determine what a judgment creditor could recover from you personally. This is the amount that is truly at risk in the event you cause an auto crash that injures someone badly. If you have a million dollar tract of land, you could lose it in a lawsuit if your liability coverage is insufficient. The more assets you have, the more you stand to lose. Your liability insurance should be proportional to your assets.

A second reason you might want liability coverage above the minimum is not readily apparent. In Louisiana, many drivers carry the minimum liability coverage or no insurance at all. Approximately 12% of all Louisiana drivers are uninsured, despite the law requiring insurance coverage. If you have a collision that is not your fault with an uninsured or underinsured driver, your damages, your losses, will not be fully compensated unless you have enough uninsured/underinsured motorists coverage (UM coverage). The maximum UM coverage available to you in Louisiana equals your bodily injury coverage limits. If you carry minimum liability coverage (15/30), the maximum UM coverage is also 15/30. To protect yourself from uninsured loses which are not your fault, you might want to increase your liability coverage to obtain higher UM limits, as well.

UM coverage is inexpensive in comparison to liability coverage. Given the chances of bodily injury claims which are not your fault and caused by uninsured or underinsured drivers, carrying UM limits higher than 15/30 makes good sense.

Nov 01 2017

Property Damage Guide

1. What should I send my insurance company after a wreck?

Send your insurance company a package containing the following:

• Recent pictures of your vehicle before the crash.
• Detailed pictures of the damage to your vehicle from all directions.
• A picture of the odometer clearly showing the mileage on your vehicle.
• A list of any extras installed on your vehicle with the age and the retail cost.
• A used car value from NADA.com (free online resource).
• The name, address, and phone number of the body shop you prefer to use.
• A statement that you want original manufacturer parts, not aftermarket parts.
• A request to replace your seatbelts if you sustained anything more than a minor collision.
• A copy of the police report or a signed letter from you describing the accident.
• A request that the insurance company let you know immediately if they need more information to evaluate your loss.

2. Can I choose the body shop that I want to use?

You have the right to choose the body shop you want – insurance companies will often try to steer you to a certain body shop. You may be required by your insurance contract to allow a certain body shop or adjuster to inspect your vehicle, but you are not required to use the insurance company’s choice of body shop. Use a body shop that you know and trust based on reputation or experience.

3. What should you tell the body shop who is fixing your car?

You should insist on using original manufacturer parts and fixing the full extent of the damage – Sometimes insurance companies will instruct a body shop to use cheap aftermarket parts that are often lower in quality. You have the right to have your vehicle restored in pre-accident condition, which should include original manufacturer parts.

4. What about replacing my seatbelts?

You should replace your seatbelts after any serious crash. A seatbelt that has already been involved in a major collision may not provide the same benefit during the next collision.

5. Am I entitled to a rental car?

If you are making a claim through your own insurance company, your policy will control whether you are entitled to a rental vehicle and for how long. If the policy does not specify what type of vehicle you can rent or the maximum cost per day, you should insist on a vehicle that is similar to your own.

If a third person caused damage to your vehicle and you are making a claim through their insurance company, you have the right to a rental vehicle that is comparable to your personal vehicle. This is especially true if you have a large family or need a certain type of vehicle, like a truck, for work. Insurance adjusters will often try to put you in the smallest, cheapest vehicle possible.

6. Is there a time limit on your rental vehicle?

If someone else caused damage to your vehicle and you are making a rental claim through their insurance company, there is no set time limit for how long you can keep a rental vehicle. Here are some general guidelines:

– If your vehicle is damaged, but not disabled, you are entitled to a rental vehicle the entire time your vehicle is at the body shop.

– If your vehicle is disabled, but will be fixed, then you are entitled to a rental vehicle from the time of wreck until repairs are made.

– If your vehicle is totaled, you are entitled to a rental vehicle from the date of the crash until a reasonable time period after you have been informed that your vehicle is a total loss, usually around 30 days.

The number of days can change based on the circumstances. If you cannot afford a replacement vehicle until you are paid for your vehicle, you may be entitled to keep your rental vehicle until you have been paid for your vehicle and have time to shop for a new one.

Any time you think your vehicle may be a total loss, it is a good idea to start looking around for a replacement vehicle right away.

7. How do you know if your vehicle is a total loss?

Every insurance company has their own policy about what constitutes a total loss, but there is also a Louisiana law which states that total loss is any damage exceeding 75% of the vehicle’s value. Louisiana Revised Statute 32:702.

8. What to do if your vehicle is declared a total loss?

Insurance companies will often hire third party companies to short change the value of your vehicle. Insist that the insurance company pay the value listed on NADA.com. In most cases, you are entitled to the clean retail value as listed by the NADA in addition to the costs of tax, title, and license.

9. Does the insurance company have to pay for the drop in resale value?

With CarFax, everyone who buys a used car will know if there has been prior damage. So if you get in a wreck 5 days after driving your brand new car off the lot, does the insurance company have to pay for the loss of resale value? This is called a diminution in value claim.

If you are making a claim through your own insurance company, this claim is controlled by the policy. Most do not provide for it.

If a third party caused damage to your vehicle, their insurance company is responsible for a loss of your car’s resale value, but they hate to pay it. You will need a letter from an experienced used car salesman estimating the amount of the loss. You can also find similar vehicles that have recently sold online and compare one with and without accident history.

10. Am I responsible for storage fees?

If a third party caused damage to your vehicle, their insurance company is responsible for all towing and storage fees. If you are making a claim through your own insurance company, your policy will control whether towing and storage fees are covered. Reasonable expenses are usually covered.

11. How long does my insurance company have to pay?

If a third party caused damage to your vehicle, their insurance company has thirty (30) days after “satisfactory proof of loss” to make a written offer to settle your claim. If the insurance company violates this statute, they owe you a 50% penalty, plus attorney fees (if applicable), in addition to the original claim. You can provide “satisfactory proof of loss” by sending the package described above. Louisiana Revised Statute 22:1892.

If you are making a claim through your own insurance company, they are also required to make a written offer within thirty (30) days of receiving satisfactory proof of loss. Additionally, they must pay your claim within sixty (60) days to avoid a penalty. Louisiana Revised Statute 22:1973.