A Timid Step Toward Reform

Hardly anybody disputes the proposition that today's system of private auto insurance is a frustrating failure. Angered by soaring premiums, abruptly canceled policies and dubious compensation to victims for losses and injuries, millions of Americans have concluded that radical reform of the $12 billion-a-year industry is an urgent necessity. Last week the Nixon Administration endorsed that idea, but in such fainthearted fashion as to provoke accusations that it had capitulated to stand-pat forces in the industry.

Presenting the Administration's reform proposals to the Senate Commerce Committee, Secretary of Transportation John Volpe argued: "The present system needs change badly and needs it now." He backed the principle of no-fault auto insurance, under which accident victims are promptly compensated for actual losses by their own insurance company, regardless of who was to blame. But instead of calling for a national program, Volpe merely asked Congress to encourage states to devise their own no-fault plans. He proposed no timetable or standards for state action.

Disgraceful Sham? Within the Administration's councils, Volpe had fought privately for stronger measures, urging that states be given a deadline to adopt no-fault insurance or face imposition of a federal plan. He was overruled by the White House after Presidential Aide Peter Flanigan listened to objections from insurance industry groups against federal insurance standards. "The department was forced not to retreat but into a near rout," complained Richard J. Barber, a former Deputy Assistant Transportation Secretary. Barber, who resigned late last year, directed the 2 1/2-year, $2,000,000 study that was supposed to form the basis for the Administration's recommendations. Barber called the Administration's proposals "a disgraceful sham."

Most members of the Commerce Committee agreed. Michigan Democrat Philip Hart said that there is no time to talk about giving state action a chance to work "when there's a crisis." Hart is co-author of a federal bill that would provide no-fault payments for medical and rehabilitation expenses, plus up to $30,000 over 30 months for loss of income. Accident victims would be able to sue in court only if they suffered "catastrophic" injuries. Despite the Administration's timid position, some form of the bill stands a reasonably good chance of congressional adoption, if not this year then in 1972.

Pain for Lawyers. While Congress debates, the 5,000,000 auto-accident victims per year will presumably continue to collect, as they did in 1967, only about 60% of their $10.5 billion in medical expenses, loss of income and other damages. The Government's own study shows that under today's liability system, litigation consumes 17% of the time of state courts and produces $1 billion a year in legal fees, but yields only 44 cents out of each premium dollar to repay victims for their losses.

Opponents of no-fault insurance, including the American Bar Association and many insurance executives, point out that it would limit a blameless victim's right to collect for pain and suffering. No-fault legislation has been introduced in 26 states; lawyers and insurance men so far have been able to prevent its passage in 25. In Massachusetts, where a limited form of no-fault coverage went into effect Jan. 1, results seem promising. During the first two months, bodily injury reports to the state motor vehicle bureau dropped by 50%, indicating to supporters of the plan that motorists are making fewer false claims. Trial lawyers, however, have sued to have the whole scheme declared unconstitutional, because it makes damages for pain and suffering so difficult to collect.

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