A Manhattan City Council member wants to lower cab drivers’ crash insurance coverage by nearly 90% – a move that some experts say would shift the costs of traffic violence onto victims, instead of keeping it on drivers. The bill, introduced in Sept. by Council Member Carmen De La Rosa, would reduce the minimum “personal injury protection” (PIP) insurance that yellow cab, black car, livery and app-based drivers are required to carry from $200,000 down to $50,000.
“This crisis isn’t just the result of one insurance company’s financial mismanagement. It’s a symptom of an outdated and overly burdensome insurance system that forces drivers to pay sky-high premiums without justification. The core of the problem lies in New York City’s Personal Injury Protection requirement, which mandates $200,000 in coverage per driver – four times what is required everywhere else in the state,” said De La Rosa in an editorial that ran in City & State New York. “To make matters worse, this inflated threshold has made New York City a target for insurance scammers, who file fraudulent claims to exploit the higher payouts available here. These bad actors take advantage of a generous system, adding further hardship to insurers and drivers who are already struggling to make ends meet.”
Some legal and industry experts argue that the reduction would be borne by those injured in crashes. The concern: If there are any additional costs exceeding $50,000, it would be shifted to the victim’s health insurance, whether it’s private or government covered, like Medicare and Medicaid.
PIP insurance, also known as “no fault” insurance, is designed to quickly cover medical costs and economic losses, regardless of who is at fault. The city raised the minimum coverage level to $200,000 for drivers licensed by the Taxi & Limousine Commission (TLC) in 1998, after a rash of high-profile crashes raised questions about taxi driver safety, according to reports.
Costs stemming from crashes are unusually high in New York, said Sam Schwartz, a former cab driver who went on to become the city’s Traffic Commissioner and Chief Engineer of the Department of Transportation in the 1980s.
“Two-hundred-thousand is next to nothing when you have a crash in New York with an injury, so $50,000 is way too little [coverage] for people who drive for a living,” said Schwartz, adding that the decrease in insurance rates will likely be much less than people realize.
De La Rosa’s legislation came in response to the news that the industry’s largest insurer, American Transit, faces collapse, and a new company could come in and jack up monthly premiums.
“The interest for me in carrying this bill comes from the plight of these drivers who have been telling me how the insurance premiums are so high,” explained De La Rosa. “They’re paying every single month exorbitant fees, and then the coverage is sketchy at best.”
Drivers pay around $4,000-$5,000 per year in premiums, according to the TLC, but those fees vary depending partly on the motorist’s record.
Matt Daus, a former TLC commissioner who was general counsel to the agency at the time of the reforms 24 years ago, agreed that not many claims go up to $200,000, and said that the decades-old law warranted revisiting.
“I think it’s worth a look,” said Daus, a partner at the law firm Windels Marx. “We have to look at that, so it doesn’t catastrophically impact seriously injured people.”
De La Rosa insists her legislation will lower costs for drivers but added that there does need to be a fiscal impact statement.
“A challenging road lies ahead given Albany’s cozy relationship with the personal injury trial lawyer lobby,” Tom Stebbins, executive director at the Lawsuit Reform Alliance of New York, told amNY. “But if legislators find the courage to fix these broken policies, they’ll protect both drivers and consumers from high costs and predatory litigation. These unnecessarily high insurance mandates are a magnet for questionable lawsuits as trial attorneys see each outsized insurance policy as a pot of gold at the end of the lawsuit rainbow.”
Stebbins says both Albany and the New York City Council have a role in reining lawsuit abuse. He says the City’s insurance requirements for for-hire vehicles needs to be re-evaluated and streamlined.
“Next, lawmakers must combat fraud and abuse,” said Stebbins. “Strengthening regulations and imposing stricter penalties for fraudulent insurance claims will help reduce the financial strain on drivers and deter dishonest, and often dangerous, staged accident practices and injuries.”
Maya Assurance Co., among the few insurers still covering for-hire vehicles in the state, told the “Insurance Insider US” that it’s planning to leave NYC’s for-hire market. “The fraudulent aspect within New York City has absolutely killed insurance companies to the point where if I personally stayed in the business I would be gone as well,” President KJ Singh told StreetsBlog NYC.
Singh stressed that “the biggest issue is the targeted no-fault fraud.” Insurers call New York a “no-fault” state because they are required to pay medical expenses and property damage no matter who caused an accident. If a bicyclist gets hit by a taxi after blowing through a red light, the driver’s insurance still must pay.
Plaintiff attorneys are increasingly exploiting New York’s no-fault law by recruiting injured clients and working with unscrupulous doctors to file excessive claims for medical care, the StreetsBlog NYCarticle went on to say. Attorneys and doctors split the payouts. Local media outlets have reported on organized crime rings staging accidents and recovering massive payouts.
If a claim is challenged, plaintiff attorneys sue. Sympathetic juries often award the victims enormous damages, so insurers often settle. NYC’s exceptionally high no-fault PIP limits for for-hire vehicles also make the policies a magnet for fraud. State regulators found that 75% of fraud reports last year were due to no-fault rules.
Sources: The Wall Street Journal, amNY, City & State New York and StreetsBlog NYC.
