Governor Jim Doyle requested that the legislature pass the Truth in Auto Insurance legislation. The proposal, contained within the Governor’s budget, would reverse several pro-insurance-company provisions enacted in sweeping 1995 tort reform legislation and return Wisconsin law to its long-standing status.
Two proposed changes to insurance law could have a significant impact on Wisconsin residents’ ability to get justice for injuries sustained in car accidents. Proposed by the governor, insurers would be prohibited from including in policies two types anti-stacking or reducing clauses.
Stacking
Anti-stacking means that an insured who has more than one policy cannot access the proceeds of the other policy. If the first policy doesn’t cover the damages, the second policy will. If a Wisconsin consumer buys policies for two cars, or insures them on one policy that allocates separate premiums for each car, and is then injured by an uninsured driver, Wisconsin law limits the consumer’s maximum recovery to the amount of uninsured motorist coverage of one of the policies. Prior to 1995, when the insurance lobby convinced the legislature to pass anti-consumer laws such as the anti–stacking provisions, policyholders were able to use the sum of all of their policies to pay any claims. This included up to the amount documented. These provisions were repealed by the 1995 legislative reforms that enacted anti-stacking laws.
The governor’s proposal would restore the pre-1995 law that allowed stacking policies and give Wisconsin consumers the right of access to all of the coverage they have actually paid.
Reduce Clauses
In Wisconsin, underinsured motorist coverage (UIM) has been available since 1995. The insurer has the right to limit any proceeds from negligent party’s insurance. UIM coverage buyers cannot collect the coverage they purchased because the payout from the at-fault driver would reduce their recovery. If a Wisconsin consumer has $100,000 worth of UIM coverage and pays a premium to get it, then the $100,000 amount is reduced by any money the injured person gets from the underinsured motorist or from worker’s comp or disability policies. This means that an injured consumer or insured consumer cannot collect the entire UIM coverage purchased. Governor Doyle proposes eliminating such reducing clauses. Insurers will be able to collect the entire amount of their UIM coverage, regardless of any insurance payments received by the negligent party.
This change would also prevent other reductions to insureds’ policies limits like the amount of workers’ comp or disability insurance payments.
Philosophy of the Governor
Consumer-friendly groups consider the governor’s proposal positive, as insured persons would get the entire coverage they purchased. They would receive all of the coverage they purchased. Individuals, their families, insurance companies, health insurers, and public programs can cover any medical or other expenses that are not covered by insurance. The law changes proposed would reduce the burden on injured persons, public programs like Title IXX, and health insurers. The governor believes that the insured should bear the full burden of the accident, regardless of how much they pay in premiums.
Critics Respond
Insurance industry protests that Wisconsin’s ban on them being able to include anti-stacking and reducing clauses in policies will raise insurance prices. These changes will ultimately hurt policyholders, according to insurance companies. Rates would rise to cover higher insurance payouts and could lead to more people losing coverage.
Proponents of the changes point out, however, that the 1995 pro-insurance-industry changes did not result in any reduction in premiums and that the insurance companies are playing on people’s fears. There is no reason to believe that the 1995 anti-consumer legislation did not lower automobile insurance rates. It would be difficult to reverse the legislation and return to pre-1995 levels of the law.
Furthermore, both anti stacking clauses and reducing clauses work together to reduce the insurance resources available for people who are in an accident. In the event that people don’t have enough insurance to cover their medical expenses, they can turn to Medicaid, BadgerCare, SeniorCare, BadgerCare, or other providers for help. In Wisconsin, the rising cost of healthcare has been exacerbated by insufficient auto insurance.
Waiting for the Outcome
The Wisconsin Joint Committee on Finance consists of eight members from each legislative division. It is responsible for reviewing state spending issues, as well as the enormous task of every two years analyzing the governor’s biennial budget plan. After a series public hearings throughout the state, and input from state agencies the committee is now going through the proposal line for line. The budget bill will then be reviewed by the state assembly, followed by the state senator. Before the final bill can reach the governor, there will need to be some negotiation between the houses.
July 1st is the deadline for the budget’s official adoption. This date is unlikely to be met due to the complex state budget. This year’s budget bill is over 1,500 pages.
Both the insurance industry as well as consumers eagerly await the outcome. Each side has a stake in the outcome. These authors believe that restoring 1995’s tort reform laws is in the best interests of Wisconsin residents. This will allow them to return to the law that allows Wisconsin consumers to get the full benefits of all their insurance coverage.