Senate panel approves hike in drivers’ liability insurance coverage

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Rebuffing claims it will harm some low-income individuals, a Senate panel agreed yesterday to increase the amount of liability insurance that motorists must purchase to drive on Arizona roads.

The 6-1 vote by members of the Senate Committee on Transportation and Technology came over the objections of Sen. David Farnsworth, R-Mesa, who said the more extensive coverage will increase costs.

“There are a lot of folks that live paycheck to paycheck,” he said. “There are people out there right now that are faced with either a permanent or probably a temporary situation, where they have to choose between paying the electric bill and paying their mandatory insurance.”

The result of S1075, Farnsworth said, would be that more people would simply choose to flout the legal requirement to have liability insurance. And that, he said, would mean more motorists on state roads with no insurance at all to compensate those they kill, injure or whose property they damage.

But Sen. Kate Brophy McGee, R-Phoenix, said it is precisely those at the bottom of the income scale that her measure is designed to help. She said these are the people with the least amount of personal resources to call on when they are injured or their car is totaled by someone else who does not have sufficient insurance to cover the damages they have caused.

Wednesday’s vote in no way assures the measure will become law. Similar legislation was approved by the full Senate last year, only to be held up when Rep. David Livingston, R-Peoria, refused to give it a hearing in the House Banking and Insurance Committee, which he chairs.

Current law requires motorists to carry so-called 15/30/10 liability insurance: $15,000 to cover injuries to any one person in an accident, $30,000 for all injuries from the same mishap, and $10,000 for property damage, normally what happens to the other motorist’s vehicle.

Brophy McGee said those limits were enacted in 1972. She said there was a presumption that they would be adjusted to keep pace with the cost of medical care and even the increasing price of vehicles.

That, however, has not happened, with the insurance industry in opposition amid concerns that the higher premiums will mean fewer people buying coverage.

Brophy McGee’s measure would boost the minimum to $25,000 for injuries to one person, $50,000 for all injuries, and $25,000 for property damage.

David Childers, who lobbies for the Property and Casualty Insurance Association of America, argued there’s no reason to believe the higher limits are necessary. He cited figures showing that the average liability claim for injuries is about $13,700. For property damage, Childers said the figure is in the $3,000 to $4,000 range.

But attorney Geoff Trachtenberg told lawmakers that figure is misleading.

He said it represents the amounts for which a claim was settled. And, by definition, if someone has only $15,000 worth of insurance, the claim will settle within those limits.

Brophy McGee said actual figures gathered by the Arizona Department of Transportation put the actual losses in a motor vehicle accident resulting in death in excess of $1.5 million. For other injuries, she said, the figure approaches $93,000.

And Brophy McGee said the typical property damage done exceeds $11,500 – all more than what motorists need to carry.

Trachtenberg acknowledged the cost of increasing liability coverage to the new limits should be in the range of about $91 a year for motorists who now buy the minimum coverage. But he said lawmakers should consider the trade-offs.

For example, he said, if at-fault motorists have more insurance, that will enable the health insurance companies of those they injure to recoup some of their costs from the at-fault motorist – or at least that person’s insurer. That includes the Arizona Health Care Cost Containment System, which provides health coverage for those earning up to 138 percent of the federal poverty level, which is about $28,700 for a family of three.

And Trachtenberg said if people have more insurance, that should lower the premiums for underinsured motorist coverage. That is optional insurance that motorists can buy to protect themselves if they are in an accident with someone whose coverage does not cover their full medical costs.

The measure now goes to the full Senate.