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Clare Fitzgerald
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Phone:
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847-553-3714
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clare.fitzgerald@pciaa.net
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PCI Veto Request on S.D. Subrogation Bill Highlights
Litigation Costs
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PIERRE, S.D.—The Property Casualty Insurers Association of
America (PCI) highlighted the likelihood for Senate Bill 169 to drive increased
litigation costs and thus higher insurance premiums for consumers in a veto
request submitted yesterday to South Dakota Governor Mike Rounds.
The bill, which passed the South Dakota legislature last
week, would prohibit subrogation until the injured party is “made whole,”
meaning that insurers could not recover any
amount unless and until the insured individual receives full compensation for
all damages arising from his or her claim against the person who caused the
injury.
“The ‘make whole’
provision is an enormous loophole in this proposed legislation,” said Kelly Campbell,
PCI vice president. “It means that any time a settlement does not provide the
full amount claimed by the individual the insurer could not recover any amount
paid. Not only is the bill likely to increase litigation costs, it also would
likely result in at-fault parties having less responsibility for the damage
they cause and increase insurance coverage costs for consumers.”
In its letter to
Governor Rounds, PCI pointed out that subrogation is an important cost
containment tool; without the right to subrogate and take action against those
responsible for losses, insurance carriers would be forced to spread the costs
among their own policyholders.
PCI also highlighted
that in the 16 states that do not allow for subrogation of medical payments
coverage, the loss costs are 60 percent higher than in states where subrogation
in allowed.
“Litigation is a cost
driver for all lines of insurance,” said Campbell “This bill would open an
entire new arena of litigation to pursue to determine the definition of ‘made
whole’ and could cost all South Dakotans in terms of higher premiums.”
PCI is composed of
more than 1,000 member companies, representing the broadest cross-section of
insurers of any national trade association. PCI members write over $180
billion in annual premium, 37.4 percent of the nation’s property casualty
insurance. Member companies write 44 percent of the U.S.
automobile insurance market, 30.7 percent of the homeowners market, 35.1
percent of the commercial property and liability market, and 41.7 percent of
the private workers compensation market.
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