Colorado Legislative Council Staff

STATE and LOCAL

FISCAL NOTE

State General Fund and Federal Fund Expenditure Impact

Conditional Local Expenditure Impact

TITLE:            CONCERNING THE THRESHOLD THAT MUST BE REACHED BEFORE BRINGING A TORT ACTION ARISING FROM AN AUTOMOBILE ACCIDENT.

Summary of Legislation

            The provisions of this bill make changes to the “Motor Vehicle-No-Fault Insurance” statutory provisions. The bill would increase the minimum amount that a person must incur in reasonable services as a result of a bodily injury caused by a motor vehicle accident before such person could bring a tort action to recover for such injuries. It would increase current monetary threshold (the minimum amount of reasonable services required) from $2,500 to $25,000 before a person could sue for damages. The bill also would provide an alternative threshold to the monetary threshold that would allow a person to bring a tort action to recover for injuries. It would require a person to incur a “serious injury”, as defined in the bill, before bringing a tort action.

            This bill is intended to decrease the cost of required automobile insurance premiums, by reducing the number of motor vehicle lawsuits and third party awards. The provisions of the bill also would affect the ability of Medicaid to recover the costs it incurs in providing medical coverage for its Medicaid clients, because it will decrease the number of clients who are able to file a tort action when they are involved in an auto accident.

            The provisions of this bill would decrease the potential damages awarded and ultimately decrease the potential number of tort actions. However, in the short run, the number of cases could increase to address the issues of whether the thresholds have been met and the meaning of “serious injury” and the workload of the Judicial Branch.

            The bill will become effective at 12:01 a.m. on the day following the ninety-day period after adjournment sine die of the General Assembly, or on the date of the official declaration of the vote of the people as proclaimed by the Governor, if a referendum petition is filed pursuant to Article V, Section 1 (3) of the State Constitution.

State Expenditures

            Under the provisions of the Colorado Medical Assistance Act, the Department of Health Care Policy and Finance has the authority to recover from a third party the amount of medical assistance that was provided by Medicaid. The provisions of this bill will affect Medicaid’s ability to recover from such third parties, because the provisions of the bill will decrease the number of Medicaid clients who will be able to file tort actions when they are involved in a motor vehicle accident. Third party recoveries are counted as an offset to expenditures. Therefore, this bill will increase the expenditures of the department by an estimated $249,453 ($122,681 GF and $126,772 FF) a year. This estimate is based on the average amount of recoveries for medical assistance in third party cases which were under $25,000 in FY 1995/96 and FY 1996/97.

Local Government Impact

            To the extent that the provisions of this bill were to result in reduced motor vehicle insurance premium costs resulting in fewer lawsuits, the expenditures of local governments would decrease. The fiscal impact would be conditional on eventual savings to local governments.

Spending Authority

            This fiscal note implies that the Department of Health Care Policy and Finance would require additional spending authority of $249,453 ($122,681 GF and $126,772 FF) in FY 1998/99 to implement the provisions of this bill.

Departments Contacted

            Health Care Policy; Human Services; Judicial; Personnel; and Regulatory Agencies