*11 FEDERAL NO-FAULT DEFEATED-FOR NOW

On September 9, ATLA President Mark Mandell testified before the Senate Commerce Committee against the federal no-fault insurance bill, S. 625. The same day, Sen. Mitch McConnell (R-Ky.) reintroduced the bill as S. 2454, in a procedural move to circumvent the Commerce Committee and permit a vote in the Senate in the closing days of the congressional session.

Such a vote would have set the stage for what will be an even more determined effort after the fall elections. But in the end, McConnell's move allowed ATLA an opportunity to energize opponents of this legislation both on and off Capitol Hill.

At the September hearing, witnesses opposing the legislation--in addition to Mandell--included Nebraska Gov. Ben Nelson (R), a former director of the Nebraska Insurance Department and former insurance company president; Arizona State Sen. Gary Richardson, representing the National Conference of Insurance Legislators; Michael Perry, representing the Defense Research Institute; and former Georgia Insurance Commissioner Tim Ryles.

Nelson, Richardson, and Perry argued against the bill primarily on states' rights grounds. The insurance industry and state officials are committed to the policy embodied in the McCarran-Ferguson Act, a 1945 law that entrusts insurance regulation to the states, including determining the type of auto insurance system to impose.

Mandell's testimony was the broadest attack on the bill. While he too opposed the bill on federalism grounds, only he and Ryles attacked the whole premise of no-fault insurance, as well as opposing the details of this particular bill. Mandell's full written testimony is available on ATLA NET, the association's online service (http://www.atlanet.org).

Having failed at a May 1998 House hearing to show that this legislation would address the incidence of fraud (see Washington Focus, July 1998, at 11), the bill's supporters claimed at the September hearing that no-fault insurance helps the poor and residents of inner cities. This argument, if true, could attract the support of many members of Congress representing urban districts. However, Ryles specifically refuted this argument.

Ryles served as Georgia insurance commissioner when Georgia repealed no-fault insurance, which the next year resulted in a 6 percent drop in average insurance rates. He pointed out that the high insurance rates paid by inner- city residents have little to do with the type of liability system in place, but much to do with insurance company policy.

Many urban insurance companies sell "nonstandard" insurance, intended for high-risk drivers. Further, many companies' underwriting guidelines require a credit report from the prospective insured, which has the effect of pushing low-income drivers into higher-risk insurance--even though a credit rating has little or nothing to do with a driver's likelihood of causing an accident. The result: Low-income drivers are forced into nonstandard insurance and pay far higher rates--a problem that would not be alleviated by changing the liability system.

The newest twist revealed at the September hearing was the disappointing recruitment of an unexpected ally to the no-fault cause--the Brain Injury Association (BIA). BIA supportslegislation to ensure full first- party coverage of economic losses for the most severe injuries, but this legislation fails to deliver what the organization wants. Although this legislation only requires no-fault coverage at the same levels required under current law for tort coverage, BIA apparently was misled to believe that far more coverage was required. The bill's minimum coverage levels fall far short of the coverage needed for the most catastrophic injuries.

Even though the hearing failed to make a persuasive case for no-fault insurance, its supporters continued to push their bill. Within hours of the conclusion of the hearing, McConnell introduced his slightly revised version. ATLA learned that he intended to call the bill up for consideration directly on the Senate floor, without allowing the Commerce Committee to act on it.

But the effect of this action was the opposite of what was intended by the bill's supporters. Groups that opposed the bill suddenly realized the push to enact it was serious, and they increased their lobbying efforts. For instance, insurance interests stepped up their opposition on states' rights grounds. The American Bar Association, armed with a resolution opposing the bill, became more active.

Also, state insurance commissioners wrote in to express their concern about a bill that would increase their workload and reduce their authority without increasing their funding. Merwin Stewart, Utah's insurance commissioner, stated in a letter to his state's senators that "this bill will create more problems than it solves," and an attached report states that "perceived (but not verified) solutions to the urban insurance problems of East Coast states should not be imposed on Utah." ATLA communicated with many of the groups opposing this legislation while also stepping up our own lobbying effort.

As of this writing, McConnell has not been given the opportunity to bring his bill to the floor, and it appears to be dead for this year. Supporters of no- fault will not be able to get a vote to serve as a benchmark of support for future Congresses.

The hearing and subsequent lobbying effort have damaged this bill, but it is far from dead. House Majority Leader Dick Armey (R-Tex.) has called this his "top legislative priority," and several senior senators are likely to bring this bill back early in the next Congress.

Defeating this dangerous legislation will be a top priority for ATLA in 1999.

[FNa1]. Philip Buchan is an associate director of ATLA Public Affairs.

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