Maryland state lawmakers are getting ready to pass new insurance regulations pertaining to consumers that will dramatically increase the minimum amount of liability insurance they are required to have on their vehicles. Currently, those minimums are $20,000 for an individual and $40,000 for accidents in which multiple people are injured.
Under the proposed legislation, those minimums would increase to $30,000 and $60,000 respectively, putting it ahead of the current leader, which is Virginia (where minimums are $25,000 and $50,000).
According to an article published last week in the Baltimore Sun, the increases would hit low-income drivers the hardest, raising premiums by up to 15%.
Why?
Medical costs are not going down, recent health reform legislation notwithstanding. Treating severe injuries can eat through an insurance settlement of $20,000 very quickly, and before all is said and done, could reach into the six-figure range. However, according to the Maryland Automobile Insurance Fund (a government agency through which most low-income drivers are insured), only a minuscule number of injury claims (about 1%) ever exceed the current minimums; the average settlement is well under $6,000.
Can You Say “Torts”?
Among the public, there is only one organization that supports the new law: the Maryland Association for Justice. Despite its noble and official-sounding name, this is actually an advocacy group for litigators – the lawyers who represent clients in personal injury cases. If this law passes the state legislature (which seems likely), the amount of money involved in these cases is likely to go up considerably.
Since most litigation firms take personal injury cases on a contingency basis – meaning they get a percentage of any court award (33% is standard), this means higher legal fees – and more money in the pockets of these lawyers.
It should come as no surprise that such litigators are big contributors to state politicians during election season.
What About My State?
It appears that unless you live in Maryland, this is not likely to be an issue. At the moment, none of the states bordering Maryland have any such laws under consideration. Meanwhile, citizens of the Old Line State who are just now learning about it are far from pleased. Even if higher minimums were justified (and apparently, based on the figures mentioned above, they are not), there are better ways to address the issue.
Meanwhile, the Maryland state legislature has decided that instead of having the new regulations take effect in October of this year, as was originally planned, they will instead take effect in January of 2011 – after this November’s elections.
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