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Montana Viewpoint
CAR INSURANCE : CONTROVERSIAL BUT COMPULSORY

October 31, 2005 

There are two inescapable facts of life in Montana, one dictated by geography, the other by law; you need a car, and you need to have liability insurance or you can’t drive it. The fact that we need motorized transportation is pretty much taken for granted, but the need to carry compulsory automobile liability insurance still enjoys some controversy.

Certainly, victims of car accidents deserve at the very least to have their repair and medical costs covered by the guilty party; however some folks don’t, won’t or can’t buy car insurance, so if one of those folks hit you, you’re out of luck. Being able to afford it, but refusing to carry it is one thing, and not being able to afford it is another.

Shortly after the invention of the horseless buggy it became apparent that it could cause damage, and the earliest automobile insurance coverage was written in 1898. Laws requiring mandatory auto insurance had been enacted in most states by 1979, which is when Montana became added to the list.

Several states originally enacted “no-fault” liability insurance coverage. In no-fault, there is no need to determine who caused the accident, each party’s insurance company picks up its customer’s tab. That goes against the interests of lawyers, because there is no one to sue for damages. It apparently also goes against the best interests of insurance companies, if their activity in opposing no fault insurance coverage laws is any indicator. Today only 12 states still allow no-fault insurance coverage.

The prevalent type of insurance, which Montana has, is “tort” liability, in which one party is determined to be at fault, and that party’s insurer pays the bills of the victim of the accident. Premiums are lower with tort liability, but settlements and payments of bills take longer because of the process of determining fault.

One of the more incomprehensible issues for many Montanans is that each car must carry its own insurance policy, and I’m often asked why we didn’t just insure the driver. Well, the main reason as far as I can figure it, is because the insurance companies don’t like the idea. But even if they did like it they would, as one insurance agent assured me, “get their money anyway.”

Besides insuring the driver, two other interesting ideas of how to charge for insurance are setting the premium to the number of miles driven, or paying a portion of the insurance premium each time you buy gas—sort of like a surcharge on fuel.

There is a very real problem that rural low income people face; a car is a necessity, even just to get to work, but the high cost of insurance is in direct conflict with being able to afford other necessities such as food and shelter. The cost of insurance for low-income individuals is made even higher because, in general, they are assigned poor credit ratings, and credit rating is one of the factors used in determining insurance premiums.

Mandatory automobile insurance became law in Montana in 1975. Thanks to the efforts of the Montana Legislature’s Legislative Services Division, I’ve been able to get copies of the hearing minutes for the original legislation, and it is an eye opener for me.

In 1975 there were at least four bills introduced that required a study or implementation of mandatory insurance. Three of them specified “no-fault” insurance, and they saw the trash can in a right smart manner. The fourth was, essentially, the law we have today. It was strongly supported by the insurance industry, while the Montana Highway Patrol and the Montana Department of Insurance took no position on it.

It breezed through the House, and was on its way to breezing through the Senate after a hearing in the Highways and Transportation Committee when it met a roadblock in the person of Senator Gene Turnage. Turnage asked that the bill be sent to the Senate Judiciary Committee for closer inspection, and upon that inspection, the Judiciary Committee recommended that the bill not become law.

The reasoning against passage was sound, as borne out by history, but the person making the argument defied my conception of political party stereotype. Senator Turnage, who was a Republican and later to become Chief Justice of the Montana Supreme Court, stated that it would be an administrative nightmare. Even more telling he argued, as reported in the minutes, “the insurance companies would love it—under criminal penalties they are going to get premiums and rate up everybody.”

The Judiciary Committee voted six (all Republicans) to four (all Democrats) against passage of the bill, but it eventually passed the Senate anyway. As history has shown, Turnage was right, it is unenforceable and an administrative nightmare, but the bill passed into law, and we now live with it—sort of.

Jim Elliott
Phone: 406-444-1556
Mail: State Senate Helena, MT 59620

jim@jimelliott.org