A measure aimed at changing South Dakota’s insurance law to give some injured people a better chance of receiving full compensation for their losses has been rejected by a state Senate committee.
However, one of the bill’s main sponsors, Sen. Joni Cutler, R-Sioux Falls, said she might ask the full Senate to override the committee and debate the issue.
The measure is similar to one vetoed a year ago by then-Gov. Mike Rounds.
The bill deals with situations in which people are injured as the result of someone else’s fault. An injured person’s own insurance company typically pays medical bills and covers property damage until compensation is received from the person at fault. South Dakota law now allows the victim’s own insurance company to be first in line to get money from that compensation to recover its expenses.
The bill would require that injured people be fully compensated for all their losses, including lost income, before their own insurance companies could receive any of the money paid by those at fault.
Lobbyists for insurance companies said the measure would increase premiums for health, automobile and property insurance in South Dakota because insurance companies would have to offset the loss of money they now recover in the process known as subrogation.
“Subrogation helps insurers hold the party responsible for damages accountable while ensuring policyholders’ claims are paid,” said Kelly Campbell, vice president of the Property Casualty Insurers Association of America (PCI). “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.”
Subrogation is used by insurers in most states to appropriately balance damage awards and claims, according to the American Insurance Association.
“Subrogation is an accepted, fair and equitable tool used by insurers to keep costs down for policyholders,” said Steve Schneider, AIA’s Midwest Region vice president. “This bill would have needlessly and unwisely placed obstructions on this standard practice.”
Cutler said studies indicate that insurance rates do not increase in states with laws giving victims priority over insurance companies in recovering losses. A majority of states already have such a law in place, she said.
“This bill will help end suffering for the real people of South Dakota. It really, for me, is a moral issue,” Cutler said.
The bill rejected by the Senate panel had already been passed by the House.
The similar measure was approved by the Senate last year only after then-Lt. Gov. Dennis Daugaard, presiding over the chamber, cast a vote to break a tie. The bill later died after the Senate failed to override Rounds’ veto. Daugaard now is governor.
Rep. Brian Gosch, R-Rapid City, the main sponsor in the House, said the measure pits real people against insurance companies. He noted that more than a dozen insurance companies and associations opposed the bill.
Gosch said if people are severely injured in an accident caused by someone else, their own insurance company will cover medical bills, but those victims also will seek additional damages to cover costs such as modifying homes to accommodate wheelchairs. If a settlement is reached with the person at fault, the victim’s own insurance company may get all the money, he said.
“Once that settlement comes in, they don’t get anything, not a penny. They’re devastated,” Gosch said.
Daran Kiefer, vice president of the National Association of Subrogation Professionals, said the current law just allows insurance companies to recover from those at fault what they have already spent to help their own customers. The current law prevents injured people from getting a double recovery of damages, he said.
Cutler countered that the current law allows insurance companies to make a double recovery by first receiving premium payments and then getting preference over their customers in receiving money recovered from those at fault.
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