In January of 2011, less than three weeks after it was first introduced to the legislature, Gov. Scott Walker and the legislature repealed Wisconsin’s strong auto insurance law (“Truth in Auto Insurance”). In its place, they passed a bill that does nothing to protect Wisconsin citizens and everything to reward insurance companies for supporting Gov. Walker’s campaign. The new law was created under the guise of “creating jobs”, but does nothing of the sort. Instead, it will have severe financial consequences for any Wisconsin resident who is unfortunate enough to be injured in an automobile accident.
Supporters of the bill falsely claim it is “tort reform,” and will lower auto insurance rates in these difficult economic times. However, Wisconsin premiums have been the 4th lowest in the country for years! A recent study of all 50 states and their insurance premiums substantiates the fact that Wisconsinites pay less than nearly every other state.
What Was Truth In Auto Insurance?
The recently repealed set of laws, called “Truth in Auto Insurance”, ensured that Wisconsin residents injured in automobile accidents had enough insurance coverage to compensate them for their injuries. This put the responsibility for the accident related injuries and medical treatment where it belonged—on the driver that caused the accident. Too often, if there wasn’t enough insurance coverage, the injured person’s own health insurance carrier had to pick up the tab. That causes everyone’s health insurance rates to rise. Further, if the injured person does not have private health insurance, then Wisconsin taxpayers are forced to shoulder the financial burden, because the injured individual is reliant on some type of public insurance. The passage of “Truth in Auto” made it far less likely that either of these two scenarios would occur.
Some of the unfortunate provisions of the new law include: (1) a decrease in the mandatory auto liability limits from $100,000 to $50,000; (2) allowing illusory reducing clauses in policies; (3) preventing an insured from “stacking” coverages from multiple insurance policies even though they paid a premium for each policy; and (4) allowing an insurance carrier to define an “underinsured motorist” by comparing the limits of the coverage to the liability limits of the at-fault driver.
Reducing Clauses: You’ll Never Get What You Pay For
Reducing Clauses allow insurance carriers to reduce your underinsured motorist limits by any amount you receive from the at fault party. So, if you have $100,000 worth of underinsured motorist coverage, and you are in an accident with a driver who has only $50,000 worth of liability coverage, you can only collect an additional $50,000 from your own insurance company. That’s right, even though you bought $100,000 worth of coverage, you will never be able to recover the $100,000 because of the reducing clause. “Truth in Auto” eliminated this “illusory” coverage and protected Wisconsin consumers. Such illusions, however, have now been approved by the legislature and Gov. Walker through the passage of the new law.
Stacking: You Bought It But Can’t Use It
When you insure your cars, you pay a premium for Uninsured and Underinsured Motorist coverage for each car. “Stacking” allowed Wisconsin consumers to combine, for example, all uninsured motorist coverage on each of their vehicles to obtain full compensation for damages caused by an uninsured driver. After all, the consumer paid premiums for all that coverage. The same is true for underinsured motorist coverage. With the repeal of the law, however, even though you paid a premium for two vehicles, and thought you were getting $100,000 worth of uninsured motorist coverage on each, you are stuck recovering only a single $100,000 limit. Combine that with a reducing clause, and you could be paying for hundreds of thousands of dollars of coverage you can never use!
Definition of an Underinsured Motorist: You Still Won’t Get What You Pay For
“Truth in Auto” defined an “underinsured motorist” as anyone whose liability limits were less than the total amount of damages caused. So, for example, if your damages are $500,000, but the at-fault driver has only $100,000 of liability coverage, the at-fault driver would be considered an “underinsured motorist.” Now, however, the determination of whether a driver is “underinsured” is made by comparing the at-fault driver’s liability limits with your underinsured motorist limits. So if you have $500,000 in damages and $100,000 of underinsured motorist coverage, and the at-fault driver has $100,000 of liability coverage, the at-fault driver is no longer considered “underinsured” because both you and the at-fault driver have the same limits ($100,000). Once again, the injured party is unable to receive the full amount of the coverage they purchased.
Conclusion: Unfair to Consumers, A Gift to Insurance Companies
As you can see, the new laws do nothing to protect Wisconsin consumers, but instead allow insurance companies to hold on to premium dollars without having to pay legitimate claims. These changes make it much more difficult for injured people to obtain the fair and reasonable compensation they deserve. Further, the new law will cause those who are severely injured (through no fault of their own) to submit medical bills to their health insurance carrier or go on government-funded insurance. The burden created by implicating the health insurance carriers will ultimately fall to the Wisconsin taxpayers. Taxpayers will be forced to fund the governmental programs in the form of increased taxes, while at the same time pay their own increased health insurance premiums.
In the end, had the legislature and Gov. Walker simply put the focus where they promised they would while campaigning (jobs), Wisconsin residents involved in auto accidents would have had greater protection and actually be able to use the coverage they purchased when they need it most. Not so now; and that’s truly a shame.