Fender-Bender Justice

Here is a suggested improvement for the Civil Justice System: take all automobile collision cases with a value of less than $50,000 out of the trial courts and in its place implement either a no-fault insurance system or a program of mandatory arbitration.  

  To explain, under a no-fault insurance system if I was, for example, involved in a automobile collision with you, my insurance company would pay up to my policy limits for my auto repairs, medical expenses, loss of income, and pain and suffering based upon an established schedule, and your insurance company would pay for yours – regardless of who was at fault in the collision. Of course, if one of us chose not to have insurance, that person would not receive a recovery at all. (Sounds fair to me.)

  The negatives of this approach would be that the people who were negligent would “escape” being required to pay for the damages caused by their negligence. An additional negative would be that we would lose our present right to have the issues of liability and damages decided by a judge or a jury of our peers.

  But in my mind the benefits of this approach would far outweigh these negatives. The most obvious benefit would be that people would no longer be forced to pay 33 to 40 percent or more of their recovery to their attorney. As a practical matter some claimants might receive a smaller gross payment for their damages. But considering that they will not be paying the costs of filing fees in court, depositions, expert witnesses and for their attorney time for investigation, negotiation with the other sides and preparing for and actually litigating the trial, and that their insurance rates would be appreciably reduced, most people will come out way ahead. In addition, the payments will also come to the injured parties much more quickly than they do under our present system.

  Under today’s system, injured drivers have many reasons to delay their medical recovery, because the more injured a person remains at the time of trial, the greater likelihood of a larger recovery. No-fault insurance would appreciably reduce this problem. And today in many ways it is hard to justify the use of a courtroom and staff, and to require numbers of jurors to take about three days out of their personal or professional lives, to sit and listen to another “fender bender” that couldn’t be settled because the plaintiff was demanding $5,000 and the defense was only willing to offer $4,250.  

  I will never forget one morning as I was driving to our parking garage, I saw a fairly young man with a neck brace walking on crutches toward the main entrance of the courthouse, and it was obvious from the expression on his face that he was in substantial pain. However, when I left the courthouse at noon for a lunch meeting, I happened to see the same fellow again. But this time his neck brace was off and his crutches were tucked under his arm as he was briskly walking away. Very likely he had received his settlement agreement, so now the game was over.  

  At this time twelve states in our country plus the District of Columbia, Puerto Rico and all of Canada have some form of a no-fault insurance system in place. Some of them incorporate reasonable variations in which the standard system of fault is retained for situations in which there are severe injuries or damages greater than a threshold amount, such as $50,000 in New York. Others retain the fault system when the collision involves egregious conduct like reckless driving or driving under the influence of alcohol or other drugs, and the no-fault system does not apply when pedestrians are involved. In addition and all importantly, states still retain their laws allowing suits against insurance companies for any bad faith conduct, which is necessary to keep insurance companies behaving responsibly.  

  In fairness it should also be pointed out that Colorado had a no-fault system in place for 30 years until it was repealed in July of 2003. But that system required people to have minimum coverage of $130,000, which many people either could not afford or did not want, particularly since the average claim was for about $7,800, and 96 percent of the claims were under $25,000. In addition, Colorado required insurance companies to pay for all “reasonable” treatments of pain, which were often found to include hot tubs, treadmills and even fish tanks for vision therapy. And, if parties could meet the threshold of only $2,500 in medical expenses, they could still bring a lawsuit against the at-fault driver’s insurance company for their pain and suffering. All of this resulted in Colorado having the eighth highest insurance premiums in the country. But most other states and Canada have been able to avoid these difficulties.

  An alternative to the no-fault insurance plan would be for insurance companies and their policyholders to agree in advance to use a system of binding arbitration for cases that had a potential value below a specified amount, such as $50,000. This would be accompanied by an agreement for the plaintiff’s attorneys to cap their contingency fee participation at 25 percent, and a penalty for plaintiffs who went to trial and obtained a judgment for less than that specified amount.  

  In California generally no one is winning in standard automobile collision cases except the attorneys. So why not put our heads together and come up with something that works for the rest of us? No system is free from problems, and it doesn’t matter to me as a judge, because if I don’t try these cases I will try some other ones – we are not hurting for business. But in my view both of these alternative systems would be much more effective than what we are doing today. So I just thought you would like to know.

  If you agree with these suggestions, contact your elected representatives in Sacramento, and suggest they implement one of these changes. Your efforts could put appropriate reimbursement money into the pockets of the people who were injured, substantially reduce your insurance rates, allow courts to be more readily available for other types of disputes, and save lots of potential jurors a great deal of time.


Judge Jim Gray (Ret.)