Steve Mullen thought the worst was happening when a drunken driver sped the wrong way down an Interstate 680 on-ramp and smashed head-on into his black 2005 Chevy pickup.
But the financial crunch since that January 2010 accident has been almost as bad, partly because the other driver had only the minimum $25,000 insurance required by the State of Nebraska.
That minimum hasn’t changed since Nebraska started requiring drivers to buy liability insurance in 1985, despite medical costs these days that can be 10 times as high. A proposal in the Nebraska Legislature would double that minimum, giving the state the highest required auto liability coverage in the nation.
Insurance companies oppose the change, saying that raising the minimum would result in more uninsured drivers, currently an estimated 8 percent of Nebraska motorists, and that only a small number of claims exceed the minimum required.
Insurance agents and trial attorneys favor the change, saying their clients need more protection from what can be devastating consequences of claims that exceed insured amounts.
Mullen thinks the proposal is “an excellent idea.” Besides facing $92,000 in medical bills, he lost his truck-driving job, has physical damage that blocks him from finding work and is embroiled in a legal battle with his own insurance company.
“It’s just almost destroyed me,” Mullen said. “I’d just as soon died out there than go through this. It’s been a tough time. It’s changed my life.”
The irony, he said, is that he had bought an insurance policy with $250,000 in liability coverage, 10 times the minimum. “If it would have been my fault and the same thing happened to him, he would have been covered.”
As it is, the other driver pleaded no contest to drunken driving, paid a $400 fine and had his license suspended for 60 days. Mullen’s attorney, Matthew Miller, said suing the other driver would be a waste of time. He wants Mullen’s insurance company to pay its $250,000 limit, even though that wouldn’t cover all of his present and future damages.
Mullen, meanwhile, lives with friends and worries that his credit has been damaged by the delay in paying medical bills. Although his pickup has been repaired, he still has some physical problems and gets the feeling that employers think he’s “too fragile” to hire. At age 63, he can’t afford to retire.
Mullen’s story illustrates why the state should raise the minimums, said State Sen. Steve Lathrop of Ralston, who has handled such cases as an attorney. He introduced Legislative Bill 196 after a friend told him of a similar experience. He also talked with the state’s independent insurance agents association, which favors the bill.
“If I get hit by someone with the $25,000 minimum, that very often is not enough money,” Lathrop said. “I’m likely either under-compensated or I’ll have to go against my own policy. That is unfair to people who try to do the financially responsible thing.”
Shorthand for liability insurance minimums in Nebraska is 25-50-25. That is, $25,000 in coverage for bodily injury to one person, $50,000 for bodily injury per accident involving more than one person, and $25,000 for property damage. The coverage kicks in if a driver causes injuries or damage to others or others’ property.
LB 196 would raise Nebraska’s minimums to 50-100-50. Current state law also requires Nebraskans to buy 25-50-25 coverage in case of accidents caused by uninsured and underinsured drivers. Those minimums also would double if the bill passes.
Iowa’s Legislature is not considering a plan to change its 20-40-15 minimums.
In Nebraska, the Banking, Commerce and Insurance Committee is considering Lathrop’s measure. Similar proposals failed in 2007 and 2009. Lathrop said LB 196 might be killed, move ahead or be held until 2012 and ultimately might be subject to a compromise that would raise the minimums to, say, 40-80-40.
Nebraska’s Department of Insurance doesn’t have an official position on the bill, said its director, Bruce Ramge, but encourages motorists to buy more than the current minimum coverage.
There’s no official estimate of how many motorists carry the minimum. The percentage among insurers varies widely, as high as 40 percent for companies that specialize in writing policies for high-risk drivers, or as low as 5 percent for companies that accept few high-risk drivers.
The existing minimum liability insurance would cover most injury costs. Of bodily injury liability claims, 7 percent in Nebraska and 5 percent in Iowa were more than the $25,000 minimum, the Property Casualty Insurers Association of America said. Only 4 percent of the Nebraska claims were more than $50,000, the cost of doubling the minimum is in dispute.
Lathrop estimates it would raise premiums for people who buy the minimum today by 8 percent and not affect people who already purchase higher coverage.
Jim Dobler, who represents insurance companies that oppose the measure, said the increase would be between 10 percent and 20 percent.
Dobler, president of the Nebraska Insurance Information Services and general counsel of Farmers Mutual Insurance of Lincoln, said people who today buy 50-100-50 coverage also would have to pay more because their premium group would be joined by many drivers with drunken-driving convictions or other signs of poor driving.
He said drivers with bad records often qualify for or can afford only minimum coverage.
If the minimums go up, Dobler said, some insurance companies would sell more policies with higher premiums, “but that’s not the whole story.” The cost increase would result in more uninsured drivers and fall heavier on families that have minimum coverage for young drivers and three or four cars — often those who can least afford to pay more.
“Granted, you would hope that everyone would be responsible and buy adequate liability insurance on their own, but some people are not so responsible,” he said. “The way to deal with that is for a person to buy their own underinsured motorist coverage.”
Trial attorneys and independent insurance agents say they want to protect their clients.
“You can’t argue with the fact that if there’s $50,000 in bills and only $25,000 in coverage, you’re going to have a problem,” said Mandy L. Strigenz, an Omaha lawyer who is president of the Nebraska Association of Trial Attorneys.
If there’s inadequate coverage, then the cost of medical care may fall on taxpayers, in the case of Medicare or Medicaid, or on other medical patients and their health insurance, Strigenz said. Unpaid medical bills become expenses that health care providers recover from patients who do have adequate insurance.
She said she doubts that many people would simply not purchase the required coverage. “You can’t legislate for people who won’t follow the law. If you’re going to own a vehicle, you have to be responsible for your vehicle.”
Omaha insurance agent Dan Loring, speaking on behalf of the Independent Insurance Agents of Nebraska, said insurance agents often recommend $500,000 in auto liability coverage and a $1 million “umbrella” liability policy.
Doubling the minimums would be only a partial step toward better protection for consumers, he said.
“The consumers don’t have a clue about the risks,” said Loring, a member of the agents’ legislative committee backing the proposed change. “If the state only requires $25,000, that’s a disservice to the consumer. It’s not going to protect him. And it’s not fair. The victim shouldn’t have to pay.”