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1. Fifty Ways to Lose Your Recovery
So You Think Your Auto Insurance Will Protect You
To appreciate what is at stake in this fight, on both the cost and compensation sides, it is first necessary to understand in some detail the âfault and liability insuranceâ system that no-fault was designed to replace. Most people believe that they will not be involved in an accident but that if they are, the other driver will be at fault and will pay for their injuries.
Let me use myself as an example. From the time I started driving, I have always thought of myself as a good driver, but I had my first accident when I was seventeen. In the winter of my senior year in high school, I decided to test how well my fatherâs new Lancia Flaminia, an expensive Italian car, would operate in the snow. My friend Lew and I set off in a driving snowstorm to see a movie at a local theater. Unfortunately, the only two ways out of the neighborhood involved steep hills, a Hobsonâs choice. As we started down a long hill, I realized I couldnât control the car, and we started to skid. We wound up going off the main road, with the car stopping across one lane of the intersecting road, up against a curb two feet in front of a stone wall. As the car was not drivable, I got out and walked the short distance home to call for help. When I returned, my friend Lew was sitting on the hood of the car talking with two passersby, an older woman and a man walking a small dog. Soon thereafter, we all turned to see a car barreling down the hill way too fast for the conditions. We could see what was going to happen next. It seemed to occur in slow motion. The driver jammed on his brakes and skidded off the roadâright into the back of the Lancia. Lew flew off the hood but was unhurt. The man walking his dog was not so lucky. When the other car hit the Lancia, it drove the Lancia up on the curb, hitting the man and breaking his ankle. Fortunately, no one else was injured. Not too long afterward, I was served with a complaint alleging that I had been negligent and my negligence was responsible, not only for the broken ankle of the passerby but also for injuries suffered by the driver who hit the Lancia. These were phantom injuries, as he had left the scene of the accident completely healthy, if a bit tipsy. It wasnât until more than three years later that the case went to court. The other driverâs lawyer made a compelling case for something that hadnât happened. By then I was in law school and thought I made a pretty good witness, but I think I might well have been found at fault but for the testimony of the other passerby, the older woman, who spoke nervously but sincerely and would not back down under tough questioning. Meanwhile, during all this time wasted with lawyers trying to determine fault, the injured man received not a dime to compensate him from either my insurer or the other driverâs insurer. I do not know whether he was adequately compensated in the end.
This example demonstrates some of the problems with the fault system that this book will describe, starting with the belief that you will not be involved in an auto accident and that if you are, the other driver will be at fault and pay. The facts are far different:
Auto accidents are a common occurrence that most people are likely to experience one or more times over a lifetime of driving, no matter how good a driver they are. In 2017, for example, there were 6,452,000 motor vehicle crashes in the United States, which resulted in 37,133 fatalities and 2,746,000 injuries.1
You are not alone in your belief that the other driver would be at fault. The RAND Institute for Civil Justice (RAND) has found that 90 percent of all drivers believe the other driver was at fault. With all due respect to your driving skill, itâs impossible for 90 percent of the people to be right on this question.
RAND found that if you are involved in an accident, you have a 30 percent chance of recovering nothing for your medical bills and lost wagesânot a dime, no matter how seriously injured you are. Most of those situations involve single-car crashes where no one is at fault.2
If you are among the âluckyâ 70 percent who recover (such as the Tuzzolinos and the Krakowskis), legal doctrines covering the degree of fault of the parties, the amount of the at-fault motoristâs auto insurance coverage, and your own attorneyâs fee (typically, one-third of your recovery) limit the amount you can recover.
These limitations are usually not an issue if your injuries are minor. However, they are a big problem if you suffer a serious injury. In a 1991 study, RAND found that the average recovery for people with economic losses over $100,000 was 9 percent.3
Even if you do secure some recovery in a serious injury case, it can take months or even years to get paid this grossly inadequate amount.
Moreover, the fault and liability insurance system is overly costly, does not deter bad driving, and contains inadequate incentives to purchase safer cars:
Much of your insurance premium is spent on lawyers4 and the fraud the system encourages in cases of minor injury.5 Historically, there have been three incentives for fraud. First, minor injury claims have had a ânuisance valueâ that led insurers not to challenge them, even if they knew the claims to be fraudulent, because it would cost them more to fight the claim (in adjuster and their own attorney fees) than to just pay the inflated claim.6 Second. the collateral source doctrine prohibits an insurer from introducing into evidence the fact that the victim has received compensation for the same injury from another source; most typically, his or her health insurer. The premise is that the at-fault driver should not benefit from the injured motoristâs foresight. The effect is to create yet another incentive to run up oneâs medical bills to get double recovery for economic loss. Third, there was a convention that pain and suffering awards were typically calculated as a multiple of the amount paid for medical bills and lost wages (often three times the economic loss). Thus, the more medical bills individuals could produce, the higher the payment for pain and suffering. Of course, motorists pay the price for these multiple recoveries through higher premiums.
The system does not deter âbadâ drivers. The main deterrent, of course, is the risk of injuring oneself. In addition, most accidents are caused by matters out of the driverâs control (such as youthful inexperience, as was the case in my accident, or environmental conditions) or are not deterrable (such as drunk driving). To the extent that the tort system could have had any deterrent effect, it disappeared with the sale of automobile bodily injury liability (BI) insurance. With BI coverage, the at-fault driver does not pay for your losses; his or her insurer does. The at-fault driverâs insurer then imposes a premium surcharge on him or her, but it is far less than the full cost of the injury.
The system does not provide incentives to drive safer cars because who you are and what car you drive are irrelevant to your insurer. The reason is that under the tort system, your insurance does not pay for your losses. Instead, it protects your assets and provides coverage for them only if you are at fault and must pay for some other unknown driverâs injuries and repair of his or her car. Under these circumstances, your insurer cannot reward you for driving a safer car even though it will reduce your chances of injury.
Lastly, the sheer volume of auto accident cases clogs the courts, resulting in long delays not only for recoveries in auto cases but also for handling more important cases:
For example, in 2001, auto cases represented 35 percent of civil trials in the nationâs seventy-five largest counties,7 by far the largest category of cases.
How did the fault system come into being? It was a âgiftâ from the British. Donât worry, we wonât be here long. The colonial states and then the free states of the United States of America inherited the British âcommon lawâ system, based on judicial precedents. The branch of common law that applies to âaccidentsâ is called tort law. When the automobile was introduced into the United States in the late nineteenth century, it was apparent from the beginning that there would be a need for a body of law to govern injuries resulting from crashes. Professor Jeffrey OâConnell, one of the fathers of the no-fault concept, described what happened at the dawn of the automotive age: âIn 1896, when there were four motor vehicles in the United States, two were in St. Louis. They managed to collide with such impact as to injure both drivers, one seriously.â8
State courts and legislatures, without any apparent consideration of alternatives, simply fitted these crashes into the category of accidents and applied the same principles of fault they applied to other accidents. That did not have to be the case. Had Daniel Patrick Moynihan been alive at the time, he would have pointed them toward a more efficient and equitable way to handle these crashes. In âNext: A New Auto Insurance Policy,â an article published in the August 27, 1967, magazine section of the New York Times, Moynihan pointed out that the automobile transportation system inevitably results in crashes. Writing against the tort system and in favor of no-fault insurance, he described motor vehicle crashes as not accidents but âthe perfectly predictable outcomes of a particular transportation system utilizing a specific technology.â In simple terms, a lot of high-powered vehicles going at high speeds will inevitably run into one another and injure people. Moynihanâs answer was to reject the tort system as expensive, wasteful, and a burden on the courts and instead to endorse the no-fault insurance plan developed by Professors Robert Keeton and OâConnell as a more efficient, lower-cost system of redress for injuries. He called Keeton and OâConnellâs 1965 no-fault proposal in the book Basic Protection for the Traffic Victim: A Blueprint for Reforming Automobile Insurance, âthe one incontestably successful reform [proposed in] . . . the 1960s.â
But Moynihan wasnât alive at the turn of the twentieth century, and even if he had been, it was likely that, given their backgrounds, the lawyers and judges who shaped the legal system then and now would have ignored him. The decision to treat motor vehicle crashes as accidents threw injured people into the fault system, which many scholars argue was intentionally restrictive, designed to make recovery very difficult so that the cost of inevitable injuries would not cripple the industrial revolution.9
Every state created its own law, but they were broadly the same. To recover damages for medical and work losses, the injured person had to identify the driver who caused the injury and prove that the other driver was at fault. But that wasnât all. In this harsh regime, pursuant to the doctrine of contributory negligence, the injured person also had to prove that he or she was not partially at fault. In most states, if the court found that the injured person was even 10 percent at fault, then he or she was not entitled to any recovery. There were also a host of other restrictions that made it even more difficult for injured people to recover.10
Even with all these restrictions, there remained cases where an at-fault driver could be held liable. In those circumstancesâwhere there was no contributory negligence and no other restriction appliedâif a person was seriously injured, the at-fault driver could face financial ruin if forced to pay the losses from his or her own pocket. Such an outcome would surely have inhibited the development of the automobile. Thus, it is not surprising that the first automobile insurance policy was sold in the United States in 1897, one year after the accident in St. Louis. Now, in 2021, forty-eight states and the District of Columbia require all motorists to buy auto insurance to exercise the privilege of driving.11
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