What’s the Deal with State-Sponsored Auto Insurance?

Low-income drivers on both coasts can now get basic insurance directly from the insurance department of the state they live in-as long as that state is New Jersey or California.

Affordable, state-sponsored auto insurance could be good news for low-income drivers who need a car in the 45 states with stringent mandatory insurance rules, and a federal program for making such assistance available-the Auto Choice Reform Act-has been discussed since 1998.  At that time, the National Association of Independent Insurers (NAII) commissioned a study to determine the impact of affordable, state-sponsored insurance on the lives of low-income citizens.

The study found that, in 1991, U.S. households overall spent 2 percent of their annual income on car insurance. Low-income residents in Maricopa County, Arizona, spent up to 30 percent of their annual income on auto insurance.  But they had to have reliable private transportation to their jobs-as do most Americans-and often paid for car insurance while jeopardizing other necessary purchases.  This study found that 44.1% of respondents could not buy food at least once because that money had to be spent for car insurance.

In response to this information, California legislators made extension of the state’s mandatory insurance law contingent on developing a state-sponsored, affordable insurance program.  Naturally, the legislators expected it would be wildly popular, but experience has shown that only 4,000 drivers had taken advantage of it by 2003, for a number of reasons.

Among those reasons are:

 

  • The need to meet a tough financial eligibility rule.
  • For some, the cost-at approximately a dollar a day-was still too high.
  • Even a dollar a day was not low enough to cause already-covered, low-income drivers to switch; California’s bare-bones package offers no medical coverage to the policyholder, just to passengers.

 

In 2003, eligibility requirements and price were adjusted so that more drivers would qualify. The program now requires a policyholder’s annual income to be no more than 250 percent of the federal poverty level, or about $38,000 for a family of three. (The standard had originally been 150 percent.)

Liability coverage, at $10,000 for bodily injury to one person, is lower than the state’s minimum liability limits for private coverage, but insurance industry data show 90-percent of bodily injury claims are for less than $10,000.

The New Jersey plan, available for the first time in 2003, is slightly more extensive, paying up to $15,000 of most medical expenses due to an accident, and providing coverage for catastrophic injuries, such as severe brain damage, up to $250,000. Eligibility is based on standards for Medicaid. 

Acceptance of these policies by low-income drivers could be good news for all drivers in the states that have them.  For one thing, these policies eliminate the hassle that occurs in accidents with uninsured motorists.  This should make them attractive to the insurance industry as well as drivers.  For another, they would relieve an enormous amount of stress on low-income working families, and any stress reduction in U.S. society-particularly on the roads-would have to be a good thing.

Is there a downside for the insurance industry or for individual drivers? 

Not really, although the California program was begun partially in response to lobbying by insurance companies that wanted to impose a surcharge on drivers for temporarily dropping coverage or having been previously uninsured.  California’s legislators found that idea punitive and counterproductive.  But some states, Maryland for example, continue with very costly automatic uninsured driver coverage, and without an elective plan to cover those who have trouble paying market-priced insurance bills.  Maryland’s coverage kicks in the second a driver’s insurance lapses, regardless of the reason for the non-payment; forgetfulness, bank error, and/or poverty are equally penalized under the law.

A survey for the California Department of Insurance said that the poor want to comply with mandatory auto insurance laws.  It suggests developing a product that clearly and directly benefits the poor and is “affordable, such as an under-$300 policy that provides medical benefits and lost wage coverage.” 

That’s a small step for California…but a huge leap for states like Maryland and 42 more that have yet to consider organizing auto insurance assistance for the low-income drivers.

Proper Maintenance Can Help Businesses Prevent Weather-Related Slips and Falls

It’s that time of the year when snow, sleet and ice are a fairly common occurrence in many parts of the country. Such weather conditions pose serious problems for business owners because walkways become slippery and increase the chances for employees and customers to fall.

While you can’t control the elements, you can reduce your liability by staying alert and eliminating hazards that cause falls. One such hazard is the accumulation of ice and snow that results because deicing measures were inadequate or not properly applied.

The first step in effectively deicing a walkway is to choose the correct treatment. When selecting chemicals to melt ice, keep the following points in mind:

  • Rock salt is the most common method and the least expensive of the ice-melting chemicals. It is easy to find and can melt snow and ice until the temperature drops below 20є F. Rock salt, however, also releases a large amount of chloride when it dissolves. This chloride can pollute streams, rivers and lakes and kill vegetation. It also causes metal to corrode.
  • Calcium chloride is a deicing agent that is manufactured in small, round, white pellets. It melts snow and ice even when the temperature falls below 0є F. It is much less toxic to plants than rock salt, but it can still damage them if applied too heavily.Calcium chloride can corrode concrete.
  • Potassium chloride is a deicing chemical that doesn’t irritate skin or harm vegetation. However, it only melts ice when temperatures remain above 15є F. It must be combined with other chemicals to melt ice at lower temperatures.
  • Magnesium chloride melts snow and ice until the temperature drops below -13є F. It releases nearly 40 percent less chloride into the environment than either rock salt or calcium chloride. It is also less damaging to concrete surfaces and is less toxic to plants, trees and shrubs.

Once you have selected your deicing agent, follow these tips from the Iowa Transportation Center at Iowa State University to be sure you maintain an ice and snow-free walkway:

  • Apply deicing chemicals before a storm and remove snow/ice during and after the storm. Use plenty of deicing materials. Using too little will leave patches of ice.
  • Aim for evaporation. If the water can drain and there is full sun or even reasonable wind, the ice will evaporate. Dry pavement is a clear indication there is no ice.
  • Use a friction additive. Sand is the most popular because it’s inexpensive. Use enough to ensure that anyone walking on the surface has enough traction.
  • Check and treat surfaces every morning, especially around snow piles where melting may have created new problem areas. Reevaluate during the day and re-treat as needed.
  • Remember that a clean-looking surface is only “safe” if it is dry. A wet surface can quickly become icy in the shade or overnight.
  • Train those responsible for safety procedures how to safely maintain walkway surfaces during icy/snowy weather.

PIP and No-Fault-Is “Reform” the Wave of the Future?

More and more states are abandoning the PIP/No-Fault form of auto insurance in favor of a tort-based set of laws.  PIP/No Fault originated in the 1930s as an alternative to the often slow and expensive process of litigating claims.  The intent was to speed up the process by shifting the dispute resolution to the insurance companies rather than the courts.  In theory, this was supposed to reduce insurance rates, and initially rates did go down.  By the mid-70s, almost 20 states had some form of no-fault insurance laws.  However, over time, rates rose until “No-Fault” states had higher rates than tort-based states.  Beginning in 1980, states started repealing their no-fault laws, and now only nine states (Florida, Hawaii, Kansas, Massachusetts, Missouri, Minnesota, New York, North Dakota, and Utah) have mandatory no-fault laws. Eleven states plus the District of Columbia have hybrid laws (Arkansas, Delaware, Kentucky, Maryland, New Jersey, Oregon, South Carolina, South Dakota, Texas, and Virginia).

The pendulum seems to be swinging back to tort-based auto insurance. What does that mean for you as a policyholder?

The Good News

Tort-based systems, in theory, give you more choices for medical payments and could save you substantial amounts of money.  As an example, depending on the insurance company and coverages selected, insureds in Colorado (the most recent state to revert to a tort-based system) could see savings of 10%-30%, according to several recent Denver Post articles.

The Choices

PIP, or personal injury protection, is still available (in most cases), should you wish (or need) to pay for it.  If you choose to drop this coverage or are already under a tort-based system and don’t have this coverage, you can still purchase it, with most policies, for medical expenses.  However, this coverage will be limited, generally to no more than $50,000.  If the additional coverage is purchased, it will pay expenses incurred by you and your immediate family for injuries resulting from an auto accident when you or they are at fault.

Since many drivers are uninsured or underinsured, it is essential that you understand the ramifications and make an informed decision about the “Uninsured/Underinsured Motorists” coverage option.

What If?

What happens if you are at fault? Your auto policy should pay the other person’s claims.  Companies normally negotiate this with each other.  If you have insufficient coverage you may have to go to court—the tort aspect of the law. Either you or your health insurance company will normally pay medical expenses for you and your family once expenses exceed your auto policy coverages.

What if you are injured by another driver and that driver is at fault?  Generally the two auto insurance companies will work together to determine fault and pay benefits accordingly.  This resolves the problem in most cases.  If not, or if the amounts paid are insufficient, it may be necessary to resort to the court system to recover damages.

What if the other driver is at-fault and has no (or has inadequate) insurance?  Your insurance company normally covers your medical expenses.  This protection is provided under the uninsured/underinsured motorist coverage.  If you do not have this coverage, then your health insurance usually pays the bills, or you can sue the other party.  Which brings us to the final important considerations.

Consider the “Deductible Gap”

Generally, under a tort system, medical payments under your own policy are limited.  However, in most cases you can choose “additional medical payments” and “Uninsured/Underinsured Motorists” coverages as part of your auto insurance policy.  After years of rising rates, many people may choose to forgo any additional coverages.  This could be a problem if you have high-deductible health insurance, or no health insurance at all.  There is potentially a huge gap between the amount paid under a tort-based policy and your health insurance deductible.  If you have no insurance, the out-of-pocket costs could be staggering.  If you are not at fault in the accident, the tort-based system allows you to go to court to get compensated for these costs, as well as for pain and suffering, but there is a time factor and a lot of out-of pocket expenses involved.

What Does This Mean for Health Insurance Costs?

As more costs are shifted to the health insurance system, your costs are likely to rise.  Furthermore, not everyone has health insurance.

So, What Is Next?

This is a good time to look at your health insurance to make sure it covers you adequately if you drop PIP/No-Fault coverage.  It’s all about avoiding unpleasant surprises!

Third Party Coverage Is a Key Coverage of Employment Practices Liability Insurance

The purpose of third-party coverage in an Employment Practices Liability (EPLI) policy is to protect an organization and its employees from accusations of wrongful acts committed against customers, clients, vendors, and suppliers. Some EPLI policies also cover wrongful acts committed by third parties against the insured’s employees.

Harassment and all forms of discrimination are covered under wrongful acts. Discrimination claims include discriminatory practices against a person based on their race, religion, age, sex, national origin, disability, pregnancy or sexual orientation. Harassment involves unwanted sexual advances or requests for sexual favors. Both verbal and physical conduct, as well as other forms of harassment that create a hostile or offensive work environment, are covered. Some policies also cover accusations of mental anguish, emotional distress, humiliation and assault.

If your organization has a lot of interaction with the public, it is especially vulnerable to third-party claims like those described above. In some cases, EPLI carriers may not provide third-party coverage to firms with a high potential for claims. What they might offer instead is limited coverage, such as covering accusations of discrimination, but not harassment claims.

To protect your organization from third-party claims, you need to go beyond just purchasing coverage. You must implement policies and procedures that address discrimination and harassment issues, both from the standpoint of an employee’s actions and the actions of third parties. EPLI insurers are increasingly requiring employers to implement these practices before they will issue a policy.

Having policies in place will offer little help to stop third-party claims if employees aren’t adequately trained. New employee orientation programs should include a presentation outlining the organization’s harassment/discrimination policies. The training must also include how to report and handle a third-party claim. However, hearing the information once is not enough to insure compliance. Employees must be periodically retrained through departmental meetings. To maintain the effectiveness of departmental training sessions, be sure that supervisors are provided with copies of all policy updates and procedural changes.

One important caveat to keep in mind is that most EPLI policies don’t provide third-party coverage for accusations involving the violation of the Americans with Disabilities Act. Nevertheless, you should review your EPLI policy’s definition of a claim to determine the policy’s interpretation. Many policies define a claim as a “demand for monetary damages.” This definition can present a problem in an ADA claim, because many of these claims are asking for reasonable accommodations, not monetary awards. That’s why it is important to ensure that your policy’s definition of a claim includes claims for non-monetary damages. A policy with this expanded definition will cover defense costs and indemnity connected with an ADA claim, but will not provide the funds to bring your organization into compliance with the provisions of the law.

Tucson Home Insurance Rates Will Trend Up

“Hey – why did my Tucson Home Insurance Rates Go Up…Again?”

Tucson Home insurance rates are on the rise and the outlook is that the trend will continue.  Homeowners insurance in general has been underpriced and an unprofitable line of insurance for most every insurance companies.

When Arizona property owners open up their renewals they will most likely see rate increases from 10 to 40 percent higher.  This is because there has been a perfect storm brewing for a long time when it comes to home insurance rates.  While some of the milder weather states like Arizona, New Mexico and Colorado have dodged big premium increases this may soon change.

The perfect home insurance storm is a convergence of record low interest rates, a poor economy, record catastrophes from natural disasters (like Superstorm Sandy, Joplin Tornadoes, wildfires and forest fires in Colorado and the Western US) and a spike in home burglary claims.

It may not be too far in the future that Tucson homeowners will face more rate increases on property policies but may also face availability issues.  Rates will most likely jump for AZ landlords insurance policies too. As insurance companies look to improve profitability they are re-inspecting many of the Tucson are home insurance policies that they have on the books.  Homes can be non-renewed if certain maintenance problems are noted by inspectors.

Most non-renewal letters go out for condition issues with the home and often include the following:

  • Roof Detioration (shingles missing, roof rolling and cracking)
  • Trees and Vegetation too close to Residence (limbs of trees touching structure)
  • Dry Rot and Paint Issues (peeling paint and dry rot on fascia)
  • Overall care (abandoned cars, refrigerators, beds and junk around property)

So how can you offset the Tucson home insurance rate increases that are sure to come?

Review your policy and get a second opinion.  At TucsonInsurance.com agency we recommend that you open your renewal package and review it with your agent.  Make sure you review the discounts section to be sure that some have not accidently dropped in error.  Other options include having your agent check rates for higher deductibles, alarm discounts, multi-policy bundling discounts, and shopping your rates with multiple carriers.  You can send us a request to review and quote your home policy right here.

 

 

What’s the Deal With Generic Crash Parts?

If you were to hang around the inventory area of any major independent auto repair shop, you’d hear the statement, “Parts are parts.”  In short, generic, also called aftermarket, parts will be perfect clones of those from the automaker, or original equipment manufacturer (OEM).

The initial introduction of aftermarket parts undercut the OEM prices by 30 percent.  Even the Insurance Institute for Highway Safety believed that the only place it might matter whether a part was OEM or aftermarket was the hood.  So many insurers decided using aftermarket parts was one way to keep costs, and premiums, down.  Even so, the use of aftermarket parts reportedly never rose above 15 percent of the market, despite the efforts of the Certified Automobile Parts Association (CAPA).

CAPA was established in 1987, through the efforts of the Auto Body Parts Association (ABPA) in order to improve public confidence in aftermarket parts. Although CAPA gets significant funding from the insurance industry, collision repair experts also sit on the 14-member Board of Directors and provide substantive advice.

Despite all this, in recent years, several class action lawsuits have substantially eliminated the use of aftermarket crash parts.

The first major setback for aftermarket parts happened in 1999.  In the case of Avery vs. State Farm, a jury in southern Illinois found State Farm liable for $456 million in damages and an additional $730 million in punitive damages in a class action suit involving use of aftermarket auto parts.  The plaintiffs claimed State Farm Mutual Auto Insurance Co. had failed to tell policyholders about the use of aftermarket parts in auto repairs, violating consumer fraud laws and that, further, using those parts did not restore the automobile to its pre-crash condition, resulting in a breach of contract.  Although the award was reduced to $1.05 billion, the appellate court left the decision in favor of the plaintiffs standing.

Such rulings have caused most insurers to avoid aftermarket parts, allowing the automakers to regain a captive market, and also eliminating an opportunity for insurers to save money and pass those savings on to the policyholders.

Not long after the State Farm verdict, Public Citizen, a consumer advocacy group founded by Ralph Nader, condemned the ruling: with no basis in fact, the courts had created a virtual monopoly for OEMs in crash parts.  Worse, that monopoly was not going to serve, but rather cost, the consumer.

Still, there are a few bright spots.

In February 2003, three class action suits involving aftermarket parts-one each in Ohio, Washington state and Florida-were overturned or dismissed.

The Institute for Highway Safety did further studies, too, and, in March 2000, concluded again that the source of cosmetic crash parts has nothing to do with the car’s subsequent crashworthiness.  The test involved a 40-mph crash with identical 1997 Toyota Camry’s one with OEM cosmetic parts and one with a CAPA-certified hood (the only part originally thought to possibly require OEM replacement).  The CAPA-certified parts performed identically to the automaker parts in every significant way, reports the Insurance Information Institute.  As a result, CAPA is hoping its new term-“functionally equivalent”-will be more effective in explaining the parts’ performance than the old term used in state and local laws, “of like kind and quality.”

It is likely, however, that insurers will be wary of using aftermarket parts in the near future, unless more judgments are overturned.  Or until there is legislation clearing the way for aftermarket parts.

CAPA has produced model legislation that was introduced by the National Council of Insurance Legislators in 2002.  However, it was tabled until winter, 2005, meaning the status quo will remain at least until then.   Were it to be passed, CAPA says, the public would be protected both from an expensive monopoly and any chance of substandard parts.

Federal Rules Governing Civil Litigation Require Businesses to Keep Better Tabs on e-Documents

New rules, which took effect on December 1, 2006, require U.S. companies to keep better track of their employees’ e-mails, instant messages and other electronic documents in the event the companies are sued. These new rules are part of amendments to federal guidelines governing civil litigation and were approved by the Supreme Court in April 2006 after a five-year review.

Under the new rules, a company that is party to federal litigation must produce electronically stored information as part of discovery. This is the process by which both sides share evidence before a trial. Federal and state courts have already been requiring such evidence in individual cases. The new rules now make the production of such evidence mandatory for companies involved in federal lawsuits. Furthermore, any information technology employee who copies over a backup computer tape once a lawsuit has been filed could be accused of committing “virtual shredding.” Companies are still permitted to purge databases if the information they contain isn’t relevant to pending cases or cases the company anticipates being a party to in the future. However, sectors, such as financial services, remain subject to the data-retention rules they have always followed. In-house attorneys and IT staff will have to work together to ensure routine erasing of backup data doesn’t present legal issues. Lawyers must also know where company data is stored.

Many large companies are unaware of the data they have on hand, which makes them unprepared if sued. Because they lack a real knowledge of what data they house and where it is located, these companies are more likely to settle lawsuits to avoid the costs associated with electronic discovery. Better organization of the data will lower these costs and enable companies to avoid settling.

On the other hand, large companies are likely to face higher costs from organizing their data. The new rules make it necessary for companies to know about items more difficult to track, like work-related digital photos on employee cell phones and information on removable memory cards. As a result, firms that help businesses track and search their electronic data are experiencing a huge surge in new business.

Most legal experts agree that it isn’t a question of companies changing how they keep electronic files, but rather a question of having a more complete knowledge of where documents are stored. The new rules also provide more direction as to how electronic evidence is to be handled in federal litigation. This includes guidelines on how companies can be exempted from providing data that isn’t reasonably accessible, which could lessen the burden of electronic discovery.

Erin Brockovich Brought Mold to the Attention of Homeowners, Insurers Everywhere

The toxic mold issue gained national attention when activist-turned-celebrity Erin Brockovich testified before the California legislature in 2001 that she, her husband, and their three children were battling mold-related illnesses due to fungus that had contaminated their home. Since then, homeowners everywhere have been curious about the more that 100,000 species of mold that contaminate homes and can cause damage to the lungs and nervous system.

In fact, one of most toxic molds, Stachybotrys (pronounced “stack-e-botris”), has been found in all 50 states and grows in areas that are wet, including in leaky plumbing, sewer backups, and even around frequently overflowing washing machines. Unlike, Stachybotrys, most molds are not hazardous to you if you are healthy. Too much exposure to most molds, however, may cause asthma or hay fever or serve to worsen other existing symptoms, according to experts.

Even if mold in your home does not cause health problems, it establishes itself in the wood of your home, causing “dry rot.” This can quickly turn a homeowner’s worst nightmare into a devastating reality.

Dead mold eventually causes wood to dry and shrink, breaking up into irregular chunks. Cracks in the wood then act like straws, siphoning up moisture and carrying it to the undamaged portions of wood. Left unchecked, this process keeps recurring, continually rotting more wood, and can cause severe structural damage to your home.

Even so, insurance companies typically consider mold damage a home maintenance problem and, consequently, it is excluded in standard home insurance policies, which cover mold damage only if it is the result of a covered peril, such as a burst pipe. Mold caused by water from humidity, leaks, condensation, or flooding is excluded from coverage.

Adding insult to injury is the fact that mold claims cost insurers more than $1 billion in 2001, approximately five times the cost in 2000, according to the Insurance Information Institute. As a result, home insurers are raising their premiums and most are excluding mold altogether.

A handful of insurers now offer riders that allow you to purchase some degree of mold coverage. For information about mold coverage in your home insurance policy, ask your personal insurance agent.

More Workers’ Compensation Claims Made As the Result of Work-Related Traffic Accidents

According to the Network of Employers for Traffic Safety, both on- and off-the-job motor vehicle crashes cost employers $60 billion annually from 1998 through 2000. The problem is so widespread, that in a recent study, the National Council on Compensation Insurance Inc (NCCI) noted that traffic accidents are the leading cause of accidental deaths in the United States. The study also said that workers’ compensation claims resulting from motor vehicle accidents are more severe than the average claim. Although they make up approximately 2 percent of all claims, they account for more than 5.5 percent of all losses because they cover a disproportionate share of the most severe claim types.

While workers’ compensation claims from motor vehicle accidents are growing, their frequency is declining but at a slower pace than for workers’ compensation claims in general. There are some other important characteristics about these claims that the NCCI noted in its study:

 

  • They almost always involve time lost from work.
  • Neck injuries are the most frequent diagnoses in these claims.
  • The average duration for a motor vehicle claim is 70 percent longer than for other types of claims.
  • They are three times as likely to involve a claimant attorney as compared to other types of claims.

 

The leading cause of these claims is a traffic accident that happened because the driver became distracted. The study revealed that almost 80 percent of the crashes and 65 percent of the near crashes resulted from the driver becoming distracted within three seconds of the event. The chief causes of the distraction were drowsiness and cell phone use.

The researchers had some specific suggestions regarding the steps employers can take to reduce the frequency and severity of these claims:

 

  • Encourage your employees to use seat belts – Failure to use seat belts cost employers roughly $2.1 billion yearly from work-related crashes between 1998-2000.
  • Be sure your employees never drive under the influence of alcohol – During 1998-2000, work-related crashes that resulted from drivers being intoxicated cost employers $3.1 billion annually.
  • Encourage employees to take defensive driving courses – These courses teach drivers how to react during an emergency so as to lessen the severity of the accident or avoid it all together.
  • Provide internal driver’s education courses – Teach employees good driving practices like pre-planning the trip route, realistically estimating how long the trip will take, being sure the vehicle is in good condition before hitting the road, and informing colleagues about travel plans.

 

Your Roommate Wrecks Your Car – Who Pays What?

If your roommate borrows your car and causes an accident, who pays what? If you both have auto insurance, your insurance will pay first and you’ll be responsible for your deductible. Your auto insurance policy insures your vehicle plus you, any relative, and anyone else using your car if the use is reasonably believed to be with your permission. 

On the other hand, if your roommate causes an accident that results in serious bodily injury and property damage to another person, the actual driver’s policy will cover the bodily injury liability and the car owner’s liability covers property damaged caused by his or her car. As owner of the car, your liability insurance also covers the cost of your legal fees in the event you are sued, but if your liability limits are exceeded, the courts can attach your personal assets, such as your home, to recover damages. Liability coverage will not pay for damages beyond the limit for which you are insured. 

If you lend your car to a roommate who does not have insurance, you are opening yourself up for trouble. If the damages your friend causes exceed your insurance policy limits, the injured party can come after you for medical and property damage expenses. 

What if your roommate drives your car without your permission? You’re likely not to be held responsible for the damages because your roommate borrowed you vehicle without your knowledge. In this case, your roommate’s insurance will kick in first. If your roommate isn’t covered, you will need to use your collision insurance to cover the damages to your vehicle, and your liability coverage will cover damage to other’s property. Unfortunately, the insurance company will assume your roommate has permission to use your car unless there are clear indications that you denied permission or there are extenuating circumstances, such as a drunk friend takes your car without your knowledge. 

If your car is stolen and then involved in an accident, you will not be held responsible for damages done to other people and their property, but you will probably have to use your collision insurance to pay for the damage to your car. In the unlikely event the thief has auto insurance, his company will not pay for his criminal act.

Regardless of the scenario, it is wise to understand your insurance policy and exactly what it covers and when. Just as important, exercise common sense when loaning your car to roommates, friends, and relatives.