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Panel Begins Hearings on High-Risk Liability Pooling

July 24, 1986|LARALYN SASAKI | Times Staff Writer

WASHINGTON — A House panel began hearings Wednesday on legislation that would create a new alternative for high-risk groups seeking to obtain liability insurance by allowing them to pool their funds to provide insurance for themselves.

Current law, enacted in 1981 in response to skyrocketing insurance costs to cover product liability, allows only manufacturing and purchasing industries to form such self-insurance funds. The new bill would extend the law to anyone seeking liability insurance, including such high-risk individuals as day-care center operators and truck drivers.

The Senate passed an almost identical bill, 96 to 1, last week.

"The drying up of portions of traditional insurance markets makes it necessary for us to undertake a deliberate but persistent search for alternatives," said Rep. James J. Florio (D-N.J.), chairman of the House Energy and Commerce subcommittee on transportation and tourism, which conducted Wednesday's hearings.

Consumer self-help legislation has been sought in response to a trend by insurance companies to inflate premiums of high-risk groups or to simply stop offering liability coverage. Those seeking such insurance cooperatives--also known as risk-retention groups--contribute to large contingency funds to lessen the impact of liability suits by sharing the responsibility.

"You talk to the day-care centers, the charities and the nonprofit centers . . . of this country, and I think the need is enormous," said Rep. Ron Wyden (D-Ore.), co-sponsor of the House bill.

Insurance industry officials expressed initial support for the legislation but fear such cooperatives may run out of money.

"The danger of a risk-retention group becoming insolvent cannot be minimized," said Edward Muhl, president-elect of the National Assn. of Insurance Commissioners.

However, he added, "insurance consumers will be much better protected under this regulatory scheme" than they have been under the 1981 Risk Retention Act.

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