THE NEW YORK MOTOR VEHICLE FINANCIAL SECURITY ACT OF 1956 by Ross D. NETHERTON* and FREDERICK N. NABHAN**

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1 THE NEW YORK MOTOR VEHICLE FINANCIAL SECURITY ACT OF 1956 by Ross D. NETHERTON* and FREDERICK N. NABHAN** For as many years as Americans have enjoyed the benefits of widespread and easy use of motor vehicles, they have also felt the inevitable and costly toll of traffic accidents. While the record of the American motorist shows a steadily decreasing rate of traffic deaths in relation to vehicle mileage-the growth in the motorist population, and the lag in modernizing our highways, traffic regulatory agencies, and traffic laws have meant that the annual cost of traffic damage and casualties remains a major problem of our time.' Along the front concerned with accident prevention, this problem has been and is being attacked with varying degrees of success by many devices and programs. The same is true of the front that is more concerned with relieving the hardship of loss and damage due to traffic accidents rather than preventing them. On this latter front, the available weapons of the motorist and pedestrian public range from various forms of personal insurance to comprehensive state compensation plans. In recent times, the principal types of legislation on this subject have been "Safety- Responsibility" laws, compulsory insurance laws, and unsatisfied judgment funds. Since 1951, national attention has been directed to activities in the State of New York, where successive legislative sessions have brought these leading alternatives under careful consideration. Long a leader in breaking ground for new types of social legislation, New York in 1950 found itself in circumstances where pressure for further legislation was no longer deniable. "Closing the Gap" In New York, the public policy against reckless and financially irresponsible drivers was originally implemented in 1929 by the enactment of a Safety-Responsibility Law, which provided for suspension of the driving privileges of motorists who failed to satisfy judgments taken against them for injuries afid damage by their driving. 2 Through the voluntary increase in liability insurance coverage brought about by this law, the probability that a traffic accident victim could collect damages on a judgment rendered in his favor was increased. As successive improvements in Safety-Responsibility legislation occurred, the "security-type" * Legislative Counsel, American Automobile Association; Lecturer, Washington College of Law. American University. ** Senior student, Washington College of Law, American University.. Statistics accumulated by the National Safety Council show that the number of traffic deaths per 100,000,000 vehicle miles per year has decreased from 18 in 1950 to 6.4 in Accident Facts, 1955 edition, p Laws, New York. [37

2 law was enacted providing that upon the report of an accident all motorists involved must show financial responsibility for any damages attributable to them or else be deprived of driving privileges. 3 From 1942, when the security-type act became effective, until 1951, it was estimated that the number of motor vehicle owners who voluntarily provided themselves with the means of showing financial responsibility increased from an estimated 30 percent of registered vehicle owners to an estimated 95 percent. 4 As pressure increased to reduce the burden of financial costs of traffic accidents upon the accident victims, attention was focused upon the relatively small percentage of drivers who allegedly had not and would not voluntarily provide themselves with the means of responding in damages for liability arising out of their negligent driving. In popular terms, this became known as the problem of "closing the gap." Some contended that there would always be a "gap" since the Safety-Responsibility type law became applicable only after an accident had occurred. Others, upon closer examination of the so-called "gap", pointed out that it was overestimated and did not defeat the effectiveness of the security-type Safety-Responsibility law. Just how great is the "gap" in the New York Safety-Responsibility Law? Conclusions have always been controversial because of disagreement over the statistical basis for making estimates. Perhaps the best statistical basis for estimates is found in the accident reports filed with the Bureau of Motor Vehicles. In 1952, an analysis of these reports showed that about 96 percent of all motorists reporting accidents submitted evidence of insurance coverage. In 23,918 reports-less than 4 percent of all reports-no insurance was claimed, yet during the year 23,238 releases were filed evidencing settlement of claims and 2,596 deposited security. Thus, while 23,918 motorists reported they were uninsured, a substantial majority of them demonstrated their financial responsibility, since many of them were included among the 29,5141 who settled claims or deposited security. 9 Some have said this estimate of the size of the "gap" was too small, but, by consensus, the percentage of insured motorists was at least 90 percent. 6 Dollar estimates of the cost of permitting this "gap" to remain unclosed depended upon certain assumptions, namely: that the Laws. New York. State of New York. Insurance Department, The Problem of the Uninsured Motorist, (Albany, 1951). pp 'Report of Safety-Responsibility Committee. 51st Annual TMeeting of the American Automobile Association, Sept. 9-11, 1953, citing results of survey by New York Bureau of Motor Vehicles. G In 1951, Superintendent Alfred J. Boblinger (New York Insurance Department) was quoted as follows: "Strangely enough, basic data upon which the true extent of the problem can be determined is not available. I say strangely enough, because after the years of debate you would think we would know such things as the number of individuals or legitimate claimants who remain uncompensated each year because of the failure of a negligent motorist to have insurance. If we knew the answer to this question. we would he in a better position to argue intelligently about what, if anything, should be done about it." The Problem of the 'Uninsured Motorist, note 4 sispra., p. 10. [38]

3 accident frequency and average claim costs of uninsured drivers were approximately the same as those of insured drivers. On these assumptions and accepting the assertion that 95 percent of motorists were insured, it was estimated that the dollar loss attributable to uninsured drivers in 1952 was $7,250,000.7 This total, of course, does not take account of those cases where uninsured drivers eventually arrived at settlements of claims against them by means other than insurance, but it provides a starting point for visualizing the social problem which, it was proposed, should be the subject of legislation. Early Studies and Proposals, Serious concern over the problem of the uncompensated traffic accident victim led to the Columbia University Study of This study recommended abrogation of the rule of "no liability without negligence" and that liability be imposed upon the owners of motor vehicles for personal injuries or deaths caused by other vehicles. Under this proposed plan, owners of motor vehicles would be required to maintain liability insurance coverage. Payment of claims under this insurance coverage would follow procedure similar to Workmen's Compensation, that is compensation received from such funds would bar any further civil action against the vehicle owner. It was pointed out in the Report that the adoption of compulsory insurance was an alternative course which need not be accompanied by abrogation of the principle of no liability without negligence. Thus, although the recommendations of the Columbia University Study were never translated into legislation, they gave impetus to the groups who believed that compulsory insurance provided the means of eventually eliminating the hardships of uncompensated accident costs. A Joint Legislative Committee to Investigate Automobile Insurance created in and continued through conducted a study of compulsory insurance, a merit rating system to reduce the cost of insurance for drivers with good accident records, and accident compensation plans. No specific legislative recommendations resulted from this Committee's studies, but the possibility of compulsory insurance was not eliminated from consideration as a possible solution to the continuing social problems incidental to traffic accidents. Meanwhile, other official studies, by the New York Insurance Department, seriously proposed three alternatives for legislative action: I 1. A form of automobile accident compensation insurance 7 lbid., p. 11. Report by the Committee to Study Compensation for Automobile Accidents to the Columbia University Council for Research in the Social Sciences, February 1, New York Legislative Document (1937) 'No. 84, p. 3. I New York Legislative Document (1938) No. 91, p. 9. II 80th Preliminary Report of the Superintendent of Insurance, March , p. 39. [391

4 comparable to workmen's compensation which would apply to traffic accident injuries regardless of fault. 2. A plan, originating with the insurance industry, to strengthen t h e existing Financial Responsibility Law by increasing the vehicle registration fees paid by uninsured drivers, such funds to be used for payment of medical expenses of accident victims not otherwise provided for. 3. A compulsory automobile liability insurance plan similar to that in effect in Massachusetts. * Although the difficulties of administering the Massachusetts law and its other weaknesses were well known, the New York Insurance Department held to the belief that the known defects of compulsory insurance could be avoided. In particular, it felt that rate-making and underwriting practices under compulsory insurance must and could be kept free from political interference. However, it was the view of the Insurance Department that any plan for shifting the financial burden of accident costs should be based on four premises: First, that the insurance costs must be kept as low as possible with due regard to adequacy of rates to insurance enterprise; second, that highway safety should not be subordinated; third, that insurance companies licensed to do business in the state handle the insurance without being compelled to compete with the State Fund or have their underwriting privileges unduly impaired; and fourth, that the opportunity for political meddling with either the rating or the underwriting powers of the companies be eliminated. 12 In 1940, State Senator William Hampton introduced compulsory insurance legislation along lines recommended by the State Department of Insurance and Finance." 3 No vehicle would be registered except upon the filing of a certificate of insurance coverage in the amounts of $5,000/10,000 for death or bodily injury in any single accident. Property damage and guest coverage were not required, there being a feeling that it was not absolutely essential and its inclusion might provide the temptation for fraudulent or collusive claims. No determined effort was made to press for passage of this legislation in 1940, but its introduction provided a trial balloon for interested parties to consider the matter. During World War II, with an accompanying reduction in motor vehicle use and traffic accidents, compulsory insurance receded from the foreground of legislative interest. But in 1951, Governor Dewey brought this issue to the fore as part of his legislative program. Strength was gained for the compulsory insurance program by publication of a report entitled, "The Problem of the Uninsured Motorist." The Problem of the Unin.ured Motorist, see note 4 supra., p Release No. 30, New York State Department of Insurance and Department of Finance. March (Albany. 'N.Y.), p See note 4 mwra. [40]

5 Under the heading of "voluntary ways", this Report suggested that the existing Safety-Responsibility Law might be strengthened by the addition of an unsatisfied judgment fund or an impounding law. The unsatisfied judgment fund would offer one method of providing some measure of financial relief for legitimate accident claims, although, admittedly, such protection would be provided primarily at the expense of the portion of the motoring public already voluntarily insured. The addition of impoundment as an added form of persuasion to induce voluntary maintenance of financial responsibility would have been largely a speculative move, since its effectiveness could only be gauged by reference to the limited experience of three Canadian provinces. No one was prepared to guess how many of the "hard core" of irresponsible drivers who had thus far not seen fit to voluntarily maintain financial responsibility would respond to such additional pressure.'r With regard to what it called "compulsory ways", the Report,felt that two major approaches existed: (1) Extension of the present automobile liability insurance system to cover all motorists as a prerequisite to the granting of driving privileges; or (2) compulsory insurance coupled with the legal and administrative machinery of a compensation plan. This latter approach was acknowledged to have numerous technical complexities, and that there was no conclusive proof that the doctrine of "no liability without fault" had outlived its usefulness. Thus, although the purpose of the Report was not to formulate any recommendations for specific legislation, it served, by inference, to strengthen the position of compulsory insurance as foremost among the possible alternatives for supplementing the security-type Safety-Responsibility Laws. Legislative Tactics, Proposals for supplementing or replacing the security-type Safety-Responsibility Law found little support from the insurance industry and other segments of the public having an interest in the problem of the financially irresponsible driver. The feeling was openly expressed that "if the present crusade to enact more compulsory automobile insurance laws succeeds, automobile liability insurance may be well written by the states instead of the free enterprise insurance companies. When a substantial number of states have placed statutes upon their books which say to every motorist that they must carry insurance, it won't be long before the people reply: 'All right, but you write it for us at cost.' " 1 Associations representing insurance agents and brokers,- and some SC For a discussion of Canadian impounding laws see "Compensation of Automobile Accident Victims", 2 Amer. Uiiv. it. Lew Rev. pp. 1. ( ). 10 Statement of J. Dewey Dorsett, Annual Meeting of the Association of Casualty and Surety Companies, [411

6 local bar associations also joined the opposition to compulsory insurance. The New York State Automobile Association, following the long standing policy of the American Automobile Association, opposed compulsory insurance in preference to the securitytype Safety-Responsibility Law. 17 Press opinion was divided and reflected mainly on the editorial pages rather than in feature stories designed to dramatize the case of,either the proponents or opponents. For the moment, the Dewey Administration and the opponents of their program stood in a stalemate. By concurrent resolutions at each session from 1950 through 1954, the Joint Legislative Committee to Study the Problem of Unsatisfied Judgment Fund and Compulsory Insurance was continued in existence under the Chairmanship of State Senator William S. Hults, Jr. The Committee's report of 1951 dealt with the unsatisfied judgment fund but with no recommendations other than that the study be continued.' 8 In 1953, however, the Committee's report contained positive recommendations for a two-part legislative program consisting of: (1) a Motor Vehicle Financial Responsibility Act requiring every motor vehicle registered or operated in New York to be covered by "proof of financial responsibility;" (2) an "Assigned Case Plan" setting up a procedure whereby accident cases involving either financially irresponsible motorists or unidentifiable motorists are assigned to insurance companies for dispositoin in the same manner as if such company were the insurer of the vehicle operated by the irresponsible, unknown, "wilful evader" or nonresident motorist.' The system, here described for the first time as the "Assigned Case Plan", would have been administered under the supervision of the Superintendent of Insurance, and would have made necessary the creation of a board to distribute cases among insurance companies licensed to do business in New York. Following defense against any claim, the insurance company would have acquired a cause of action against any person on whose behalf any losses were incurred. Losses and administrative expenses under the plan would have been distributed among the participating insurance companies. The Assigned Case Plan appears to have been inspired by the example of New Jersey, where an unsatisfied judgment fund law had been enacted in the legislative session of 1952,20 but drafted with modifications to avoid the degree of state proprietorship which characterized the New Jersey fund. In its comments on the unsatisfied judgment fund principle, the Joint Legislative Coin- 17 American Automobile Association, Safety.Responsibility Bill, (1953 edition), pp. illix. 18 New York Legislative Document (1951) No. 49, New York Legislative Document (1958) No. 30, pp o New Jersey, Laws, 1952, c [42]

7 mittee pointed out that this approach would provide a remedy for those who were injured by "hit and run" drivers, "wilful evaders", drivers of stolen cars, and uninsured non-resident motorists, but it was no guarantee that the greatest number of motorists would be insured. Innocent victims would be indemnified for their injuries, and irresponsible motorists would be unable to resume their driving privileges until they had repaid the State. But, although the gap left by the uninsured group would thus have been closed, certain disadvantages were admitted: The cost of the plan must be borne either by the motorists or by the insurance industry, or both, and it seemed to the Committee inequitable to burden the insured motorist with this additional cost, either directly or indirectly. The possibility of fraudulent and exaggerated claims, and the red tape necessary to protect such a plan, would always be present. In the beginning, at least, it would be expected that some people would not realize that such a plan did not relieve them of their own liability in the event of an accident, and hence a decrease in the number of insured motorists might result. It was also suggested that if the total cost of the unsatisfied judgment fund were placed upon the uninsured motorists through appropriate rate-making techniques, the cost to them would in effect, approximate the cost of insurance coverage. In its survey of possible solutions to the problem of uncompensated traffic accidents, the Joint Legislative Committee did not overlook the potential coercive influence of impounding laws, which had sometimes been mentioned as supplements to the existing security-type Safety-Responsibility law or Unsatisfied Judgment Fund. However, the Committee was not persuaded that impoundment, either alone or in conjunction with other legislation, could force all motorists to carry liability insurance. Also, the Committee referred to the compensation approach, and stated: "After careful consideration... the Committee has concluded that the present common law system of 'no liability without fault' should not be abandoned with respect to automobile accidents. The problem is to make motorists, in one way or another, financially responsible-not to make all motorists financially responsible for all accidents, regardless of cause or fault." 21 The 1952 report of the Joint Legislative Committee provided a basis for Governor Dewey to renew his efforts for a legislative program in behalf of the uncompensated accident victim when the New York State Legislature convened in January In his Annual Message, he said: 22 "I believe the time has come to challenge the right to drive of that small minority who continue to operate vehicles without insurance or other evidence of the ability to recom- 21 New York Legislative Document (1953) No. 30, p Neo rorl; Times, January 8, 1953, p. 21. [433

8 pense the victims of their accidents. This is not a new departure. Under our Safety-Responsibility Law, drivers who are involved in accidents must maintain proof of insurance or financial responsibility. The present law does not begin,to operate, however, until after the damage is done and victims may be dead or permanently incapacitated... "The objections that have been raised to a mandatory insurance program can easily be overcome through a welldrafted law and sound administration. There is no necessity for the creation of a state fund as part of the mandatory insurance program. The assigned risk plan has served us well and can be adapted to meet changing needs....what is required is the willingness and determination to devise a system which will eliminate the irresponsible motorist from,the highways and maintain the integrity of the insurance companies doing business in this state. I am unwilling to believe that we lack the resourcefulness or integrity to solve the administrative problems." Specific legislative proposals and a special message to the legislature followed on February 16, In the Senate, leadership was assumed by Senator Hults, who had served as Chairman of the Joint Legislative Committee. Bills providing for compulsory insurance and an Assigned Case Plan were sponsored in the Senate by Sen. Hults and in the Assembly by Assemblyman Graci. 2 3 Shortly thereafter, others moved into the spotlight with the introduction of bills providing for a state-operated unsatisfied judgment fund and a vehicle impounding law. 24 As the session wore on, all of these competing proposals were pressed by their sponsors. In argument for passage of compulsory insurance, Senator Hults emphasized what he regarded as the major weakness of the current Safety-Responsibility law: 25 "It does not require a motorist -to carry insurance prior to an accident; it is of little comfort to the injured victim that the guilty driver loses his driving privilege; and the law is frequently evaded by the guilty driver obtaining a release which does not truly reflect the extent of the injury. Further, the (Joint Legislative) Committee holds that the fact that the Bureau of Motor Vehicles was required to issue approximately 10,000 suspensions in 1952 indicated a weakness in the law." The alternative view, held by Senator Mitchell and Assemblyman Wilson, was urged with equal vigor: 20 2 New York, Senate Int. 2054, 2055; Assembly Int. 2892, 2898, (February 16, 17, 1953). 2 New York. Senate Int. 2265; Assembly Int. 2304, (February 16, 17, 1953). 2 Press release by Sen. William Hults. Jr., February 16, Press release by Sen. MacNeill Mitchell and Assemblyman Malcolm Wilson, Febru. ary 16, [44]

9 "Impoundment of uninsured vehicles involved in accidents... has been proved to be highly effective toward increasing the number of insured cars. It makes the uninsured driver think twice before continuing to drive without insurance protection. It is also effective in allowing additional financial help, in many cases, to insured drivers and to those injured through accidents in which uninsured cars are involved... "Beside precluding the need for a compulsory system of automobile insurance, the unsatisfied judgment fund, coupled with the auto impoundment procedure, would guarantee the insured motorist and the public payment when injured by uninsured drivers, hit and run drivers, and drivers of stolen cars... It would supplement the laws now in effect by removing from the highways the uninsured driver until he had paid the damages caused by him. It would help increase the already high proportion-now 95 percent-of insured drivers, and it would keep the state from going into the insurance business in direct competition with privately operated insurance companies." Again, as in 1951, these proposals were met by opposition from interested private groups, including the stock insurance companies, the association of insurance agents and brokers, the automobile clubs and local bar associations. Pointing to the impressive record of increase in insurance coverage which had come about voluntarily under ten years of the security-type Safety-Responsibility legislation, the groups asserted that the need for compulsory insurance or other types of legislation was growing steadily less, since the number of unsatisfied judgments and claims must decrease in inverse ratio to the increased number of insured motorists. 2 7 Given a few more years of effective administration, the evolutionary process of Safety-Responsibility would narrow the gap of uncompensated claims to a point where it ceased to be of public concern. Despite exertion of the strong efforts by the Dewey Administration throughout the 1953 legislature no bills were brought out of Committee until the last days of the session, and upon adjournment no bills supplanting or supplementing the New York Safety-Responsibility law has been enacted. 23 Both Governor Dewey and Insurance Department Superintendent Alfred J. Bohlinger made it clear, however, that a new drive for a legislative program in behalf of accident victims would be made in Superintendent Bohlinger also advocated adoption of a rating plan which would lower the cost of automobile liability '7 Press release of New York State Automobile Association, January 22, One analysis of the failure to enact any legislation despite the efforts of the Dewey Administration was expressed by Robert Ingraham, writing in the Newe York- Tims, January 1954, p. "Although Governor Dewey urged compulsory insurance last year, he was defeated by the legislature, partly because the Republican State Committee adopted a hands-off policy." [45]

10 insurance for motorists with accident free driving records. In his annual report, he declared that insurance companies took a step in the right direction in 1952 when they put into effect their own policy of penalizing the careless driver. But, he added that "the need for a plan providing further recognition to safe drivers equally necessary." 29 As the 1954 legislature session convened, no time was lost in introducing bills similar to those which had appeared in Following a strong plea in the Governor's Annual Message for action without delay, compulsory insurance bills were introduced by Senator Hults and Assemblyman Graci. 30 Also of interest was the fact that Senator Walter J. Mohoney of Buffalo, who led the opposition in 1953, was now Senate Majority Leader and pledged to manage the Governor's program in the legislature. And finally, to dramatize the issue, the Joint Legislative Committee announced a schedule of public hearings at which victims crippled and impoverished through traffic accidents would testify in an effort to crystallize public sentiment in support of the Governor's program and bring pressure upon the legislators. At this point, however, the insurance industry announced its own counter-move calculated to seize the initiative in the battle for public support. Early in January 1954, the so-called "Voluntary Plan" was explained to the public. 3 ' In brief, it was proposed by legislation to authorize insurers transacting automobile liability insurance in New York State to offer, at an additional premium coverage against loss suffered by innocent victims of financially irresponsible drivers. A non-profit corporation created by statute would pay to motorists and non-motorists having such insurance all valid claims they would otherwise be unable to collect from uninsured drivers, including uninsured drivers of outof-state cars and illegally operated vehicles. The insured and members of his household would be indemnified up to $10,000 for injury to one person, $20,000 for injuries to more than one person, and $5,000 for property damage. The uninsured driver would lose his driving privileges until he made reimbursement to the corporation for payments made in his behalf. Insurance industry spokesmen estimated that such insurance could be made available at about 2 percent of the current automobile liability insurance rate, or an average statewide additional cost of about $2.00 per driver. As the Joint Legislative Committee proceeded to hold its public hearings, newspaper editorials continued to be divided among those which strongly favored the Dewey Administration's pro- 29 Bethune Jones Reio'rt From The State Capitols, 11/10/53 MV INR, p New York, Senate Int. 146; Assembly Int. 200 (January 11, 12, 1954). 51 Wall Street Jour., January 1954, p.. On January 20, 1954, legislation was introduced by Assemblyman Fitzgerald, (N.Y. Assembly Int. 832) and assigned to the Assembly Ways and Means Committee. [46]

11 gram and those who, more cautious of embracing compulsory insurance, urged consideration of the unsatisfied judgment fund approach as soon as New Jersey's experience could be appraised. The Joint Legislative Committee's public hearings provided a forum for complete airing of the controversy over these alternative proposals. Insurance Superintendent Bohlinger, acting as field general for the Dewey Administration's program, struck hard at the insurance industry's "Voluntary Plan," asserting that it would cost the insured drivers of the State $6,000,000 per year, and that it was "just another scheme to saddle the insured motorist with the cost of damages inflicted by the uninsured motorist." Continuing to urge the adoption of the Governor's program, he argued that "in contrast to this... the compulsory automobile insurance bill would not have cost the insured motorist anything but would have put the financial burden where it belonged--on the uninsured motorist." 32 Opposition to the compulsory insurance and Assigned Case Plan was offered by the same groups that had been opposed in The arguments stressed now were essentially familiarpolitical meddling with rates, pressure for state-wide flat rates regardless of local accident experience, increase of "claims consciousness", reduction in the percentage of "excess coverage" policies and medical benefits insurance, and the threat of state competition with private insurance. 33 With respect to the personal histories of accident victims who appeared at the hearings it was also stressed that the testimony had not revealed to what extent criminal prosecution could have been used to more systematically eliminate dangerous drivers from the highways, and it was asserted that compulsory insurance would in effect be "a license to go out on the highways and kill as many people as you can afford to pay for." 34 As to these and other arguments that compulsory insurance would not cut down the number of traffic accidents and would not have prevented the accidents in which the earlier witnesses had been involved, Senator Hults replied that traffic safety was beyond the scope of his committee's jurisdiction and that the real issue was how to cut down the "social cost" of accidents. 35 Upon conclusion of this series of public hearings, the stage was set for an all-out test of strength in the legislature. Partisans 32 Proponents of compulsory insurance also received some support from testimony by MIotor Vehicle Commissioner MacDuff, who stated that from the administrative point of view the Bureau of Motor Vehicles saw no reason why a compulsory insurance law could not be drafted that was administratively sound. New York Times, February 6, 1954 p. 1; February 20, 1954, p. 1. N'ew N Fork Times, February 6, p. 1; February 20, 1954, p. 1. Testimony of M4. D. Griffith. Executive Vice President of the New York Board of Trade, Ibid. 35 Thus he replied to the arguments of Dan Reidy representing the State Bar Association: "You are making a wonderful case, but it is before the wrong committee." New York Times, February 6, p. 1. [471

12 on both sides made no secret of their anxiety over the outcome. 80 As in past years, opinion tended to split along up-state and downstate lines instead of by political parties. Democratic party strength, concentrated in the New York City metropolitan area, was fairly certain to support the bill; but up-state Republicans refused to be bound to the Governor's program, and in caucus decided that each should be free to vote as he wished. When the Hults compulsory insurance bill was brought to a vote the Assembly adopted it by a vote of 91 to 54, the Democrats and downstate Republicans combining to provide the winning margin. 7 Senate consideration of the compulsory insurance bill came on March 19,th, two days prior to adjournment. Here again the Republican majority was about evenly split. However a similar split in the Democratic votes prevented an outcome similar to that in the Assembly. On the first vote, the bill was defeated 29 to Senator Hults immediately moved to reconsider the vote and bring the bill up again the following day after the Republican leadership could reorganize its forces. However, on March 20th, the Republican majority remained fatally divided and only succeeded in switching three of the Republican votes that had been against the bill previously. So, when the 9 Democrats who had supported the bill on the first vote withdrew their support, the cause was lost a second time. 39 It was the first instance in three terms when Governor Dewey had been defeated on a piece of major legislation that had reached the floor of both houses. The Final Phase: Following the election of Governor Harriman in 1954, the Joint Legislative Committee to Study the Problem of Unsatisfied so Vestal Lernman, General Manager of the National Association of Independent Insurers, was quoted as stating: "What happens in New York will set a pattern for the country." In full agreement, John 0. Cole, Chairman of the National Ussociation of Insurance Brokers, stated: "Because of New York's leading position among the states, we know that if New York adopts compulsory insurance, many other states will 'ollow without complete examination of the merits of the ease." Wall Street Jour., February , p. 1. Entirely different reasons were involved in several political conferences in Albany. It was reported that as the hills neared a vote. a conference of Republican Assemblymen behind closed doors urged full party support for the bill as a means of persuading Governor Dewey to become a candidate for a fourth term. New York Times, 2March 17, p In this vote the Democrats withheld their votes until all Republicans had taken a position. At this point the Republican vote showed 48 in favor and 47 against. Thereafter, the Democrats proceeded to deliver 43 votes in favor of the bill and only 7 against. The purpose of this tactic, as explained by Assemblyman William Hapolan, was to "reveal that the Governor with 98 Republican votes could not deliver comnpulsory insurance to the people of the state without the help of the Democrats." New York Times, March 17, p. 1. as The tabulations showed 17 Republicans and 9 Democrats in favor of the bill and 20 Republicans and 9 Democrats against. Democratic Senators made no secret of the fact that they did not intend to repeat the tactics of their colleagues in the Assembly, but that they hoped that by administering a legislative defeat to Governor Dewey they could dissuade him from running for office again. New York Tiases, March 20, 1954, p. 1. a9 The tally of the March 20th vote showed 19 Senators in favor, all Republicans, and 26 against, consisting of 17 Republicans and 9 Democrats. Not voting were 9 Democrats and 1 Republican was absent. Now York Times, March 21, 1954, p. 1. [48]

13 Judgment Fund and Compulsory Insurance was reorganized under the chairmanship of Senator Henry Neddo and continued in existence for another year. As might be expected under a new administration, steps to revive the campaign for compulsory insurance were cautious. The Joint Committee turned its attention to the study of two problems; the experience of New Jersey under its Unsatisfied Judgment Fund and the compilation of accurate data on the question of how many New York motorists carried liability insurance. Since the New Jersey Unsatisfied Judgment Fund had only become available to claims on April 1, 1955, little could be learned from experience on this aspect. However, something of the administrative problems connected with the establishment of the fund was discovered from a review of the steps taken since passage of the legislation in During 1954, the State of New Jersey had, under this law, collected approximately $400,000 from assessments of insurance companies. In addition, $2,723, had been collected from motorists at the time of registration, making the total amount of the Unsatisfied Judgment Fund in excess of $3 million. 40 From analysis of the fees collected from motorists, it was estimated that approximately 83 percent of New Jersey drivers were insured. Public reaction on the part of the insured driver who, under the New Jersey law was required to contribute to the fund was studied, as well as the numerous problems arising in the process of integrating the operation of the fund into the overall operation of the state administration. In its 1955 report the Joint Committee recognized that any unsatisfied judgment plan has numerous advantages and disadvantages, and announced that it planned to examine the operation of the New Jersey law "for some time" in order to determine the feasibility of recommending similar legislation in New York. In regard to current statistics on the number of insured motorists, the 1954 legislature had directed the Bureau of Motor Vehicles to obtain information directly from each registered vehicle owner regarding his insurance coverage. This was undertaken in connection with the 1955 annual registration. Preliminary estimates by the Bureau set the percentage of insured drivers at more than 90 percent. However, in the absence of final reports on this survey, the Joint Legislative Committee took no position with respect to the advisability of recommending compulsory insurance legislation. Therefore, although compulsory insurance bills were introduced in the 1955 legislative session and hearings were held, no serious effort was made to press for their enactment. Caution gave way to resolution in January 1956, however, when Governor Harriman, in a special message, outlined a new program for dealing with the problem of the uncompensated 40 N1ew York Legislative Document (1955) No. 80, p [49]

14 traffic accident victim. Stating that the results of the Motor Vehicle Bureau's survey during 1955 showed that approximately 14 percent of the state's drivers were uninsured, he called for forthright action to close this gap. The Governor's plan was described in these words: 41 "Every motorist would be required at the time he registers his car to provide proof of adequate financial responsibility. An automobile liability insurance policy with any authorized insurer would be deemed adequate proof of financial responsibility as would the posting of appropriate bonds or other security. Those motorists who fail to furnish proof of financial responsibility would be required to pay an additional assessment over and above the cost of registering their cars. For the first year (1957), the assessment proposed is $30 per vehicle. In subsequent years, the assessment would be based on the amount needed. The money so collected would be placed in a special fund to be used solely to indemnify any person injured by a financially irresponsible motorist. The fund would make possible the satisfaction of claims for damages not only against known uninsured financially irresponsible motorists registered in this state, but would also provide a means of indemnification for losses arising out of accidents with uninsured out-of-state cars, hit-andrun drivers and drivers of stolen vehicles or other unauthorized drivers. The law would further provide that any uninsured motorist involved in an accident would not be relieved of personal liability merely by the payment of the so-called assessment levied against him for the privilege of driving his car. If an uninsured motorist is involved in an accident, he would always remain primarily liable for the damage he causes. Until the judgment rendered against him for such damage is fully paid by him, not only would his driver's license, as well as his car registration, be revoked, but his car would be impounded. The mere fact that the victim has redress to the compulsory indemnification fund and is reimbursed out of that fund would not in any way relieve the uninsured driver from his obligation to pay for the damages resulting from his acts... Finally, the law would provide that the cost of the compulsory indemnification fund, together with the cost of its operation, be borne entirely by the uninsured motorist." Governor Harriman pointed to compulsory insurance as an alternative plan, but emphasized its known shortcomings and disadvantages which, as.he put it, "cannot lightly be dismissed." With the door thus opened for active consideration of the traffic accident problem, more than a score of bills were introduced on the general subject of financial responsibility. In the committee [50]

15 phase, campaigning resembled the events of 1954, with the same groups in opposition to the Administration's program urging the same basic arguments with regard to the various alternative proposals. The only significant shift in the alignment of interested private groups was the open support of compulsory insurance by the American Mutual Alliance, representing the mutual insurance companies. Under a plan which it described as an "equal responsibility plan", the Alliance proposed to require all uninsured drivers to post a bond of $25,000 or obtain certification of self-insurance as prerequisites to vehicle registration. 42 Such bonds, it was estimated, would cost approximately as much as a policy of liability insurance. On March 7, 1956, the Republican g r o up in the Assembly introduced a compulsory insurance bill which, they announced, they would support in preference to the Governor's program. Essentially the Republican plan was the same as the compulsory insurance bill proposed by Governor Dewey in 1954, with slight changes to simplify the bookkeeping and reporting requirements imposed upon the insurance companies. Almost immediately after this bill was introduced, the mutual insurance companoies indicated their willingness to support it, and Governor Harriman stated that he would sign such a bill, if enacted, even though he considered it less effective than his own program. 43 Under these good auspices, the Republican bill was reported favorably by the Assembly Rules Committee on March 13th, and brought to the Assembly for a vote the next day. 44 No serious efforts were made by either the Democrats or up-state Republicans to offer counterproposals, and Assembly approval was given by a vote of 123 in favor to 24 against. 45 Action by the Senate followed on March 22nd. Some Senators felt that they should delay a vote until the Assembly acted upon the Harriman Administration bill, thus making it possible to enact and present both bills to the Governor for his choice. But, by virtue of the efforts of Senator Walter J. Maloney, the majority leader, the Assembly's bill was voted on first, and passed by a vote of 50 in favor to 7 against. 46 On April 17, 1956, Governor Harriman signed this bill. In &I The Governor admitted an inconsistency between these findings and earlier Utaisties based on the Motor Vehicle Bureau's analysis of accident reports. But he asserted that, even though the actual number of insured motorists in New York could not be precisely stated, the problem of the uninsured driver was "obviously a serious one." Ibid. New York Thiacs, January 14, 1956, p. 10. '2 Ibid., March , p. 20. ' Ibid. 4" As reported in the New York Times, "word that the battle of compulsory insurance was to he joined again sent coveys of lobbyists scurrying through the capitol this afternoon, the principal opponents of the bill are the stock insurance companies who contend that it would subject their business to political domination." Ibid., March 14, 1956, p. 28. "r The tally showed in favor of the bill 48 Republicans and 43 Democrats, and against the bill 47 Republicans and 7 Democrats. Ibid., March 15, 1956, p. 26. 'A The tally showed 27 Republicans and 23 Democrats in favor and 7 Republicans against. New York Tirtes, March 23, p. 1. [51]

16 his statement at the time, he pointed out that he regarded the bill as lacking in adequate protection against uninsured drivers, drivers of stolen cars, hit-and-run drivers, and out-of-state motorists-all features which would have been covered by the program he had originally recommended-but, despite this defect "it marks a great step toward securing just -treatment and assuring a greater measure of safety for the citizens of our state." Thus ended one of the bitterest legislative battles of the postwar decade. Peovisions Of the Law The principal features of the new law 47 are as follows: Effective Date: The law, entitled "The Motor Vehicle Financial Security Act," will become effective October 1, 1956, and apply to registrations of motor vehicles for the year Proof. At the time of applying for 1957 registration, motorists must give proof of financial responsibility by insurance coverage, security bond or deposit, or self-insurance, in minimum amounts of $10,000/20,000 liability and $5,000 property damage. When renewing registrations in 1958 and subsequent years, motorists must accompany applications with previous year's registration and a statement that "proof of financial security" is still in effect. Notice of Termination: Motorists must maintain "proof of financial security" throughout registration period. In the event of failure to do so, the motorist must surrender his registration card and plates to the state Motor Vehicle Department. Insurers must notify the Department of all cancellations or terminations of insurance coverage which has been certified to the Department under this law within 30 days following effective date thereof. Revocation of Driving Privilege: Upon receipt of evidence that proof of financial security is no longer in effect, the Commissioner shall revoke the registration, the vehicle not to be registered or re-registered in the name of such person, or in any other name where the Commissioner has reasonable grounds to believe that such registration or re-registration will have the effect of defeating the purposes of the act, and no other motor vehicle shall be registered in the name of such person for a period of 30 days. Upon receipt of evidence that a person, other than the owner, has operated upon the public highways of this state a motor vehicle registered in this state with knowledge that proof of financial security was not in effect, the Commissioner shall revoke the driver's license of such person, or if he is a non-resident, the nonresident driving privileges, such license or privilege not to be restored for a period of one year. This would not apply to any person who had in effect an operator's policy of automobile liability insurance. 47 New York, Laws 1956, c [52]

17 Upon receipt of evidence that the owner of a motor vehicle not registered in this state has operated or permitted such motor vehicle to be operated upon the public highways of this state while proof of financial security was not in effect, the Commissioner shall revoke such person's privilege to operate any motor vehicle in the state and the privilege of operation within the state of any motor vehicle owned by him, such privilege not to be restored for one year. Upon receipt of evidence that a non-resident, other than an owner, has operated on the public highways of this state a motor vehicle not registered in the state, with knowledge that proof was not in effect, the Commissioner shall revoke such non-resident's privilege to operate in the state, the privilege not to be restored for one year. This would not apply to a person who had in effect an operator's policy of automobile liability insurance. Satisfaction of Judgment: Would provide that if a motor vehicle is involved in an accident, and its registration or the driver's license of its operator, or both, have been revoked, neither such vehicle nor any other motor vehicle shall be registered or reregistered in the name of its owner or of any person legally responsible for its use, nor shall any driver's license be issued to such owner, person, or operator, until one year has passed since the date of revocation and the Commissioner has received evidence that no "cause of action" has been commenced within one year, or a release has been given, or that no judgment arising out of such cause of action remains unsatisfied, unless being paid in installments according to law. A similar provision applicable to motor vehicles not registered in the state is included. Penalties: Any owner of a motor vehicle registered in the state who shall operate such motor vehicle or permit its operation in the state without having financial security in full force and effect, and any other person who shall operate any motor vehicle registered in the state with knowledge that the owner does not have proof in effect, except a person who had in effect an operator's policy, shall be guilty of a misdemeanor punishable by a fine of not less than $100 nor more than $1,000 or imprisonment for not more than one year or both. Expenses of Administration: Expenses of administration of the act would be assessed pro rata upon all insurance carriers in proportion to premiums on automobile liability insurance meeting the requirements of the act, calculated on the basis of the limits of coverage required by the act. Significantly, this new law does not supersede the existing security-type Safety-Responsibility law. In relation to existing laws, the law provides for repeal of only the earlier Acts of 1951 which made it mandatory that minors must show proof of financial responsibility as a prerequisite to registration. [53]

18 Massachusetts and New York Compared Running through tihe entire history of the campaign for compulsory insurance in New York, its proponents expressed the belief that it was possible to draft a law that would avoid the major weaknesses that had always subjected the Massachusetts law 48 to criticism. Comparative analysis of the main features of these two systems is therefore of interest. Persons Subject to the Law: NEW YORK-All owners of motor vehicles registered in the state, and all owners and operators of motor vehicles used in the state, resident or non-resident. MASSA- CHUSETTS-All owners of motor vehicles registered in the state, and non-resident owners of motor vehicles who operate in the state for more than 30 days in any year. Insurance Coverage Required: NEW YORK-Automobile liability coverage for bodily injury and property damage in minimum limits of $10,000 for injury to one person, $20,000 for injury to more than one person, and $5,000 for property damage, terms of coverage prescribed by regulation. Territorial applicability: United States and Canada. Insurance need not be coterminous with vehicle registration. MASSACHUSETTS-Automobile liability coverage for bodily injury only in minimum limits of $5,000 for injury to one person and $10,000 for injury to more than one person. Terms of coverage prescribed in statute. Territorial applicability: highways of Massachusetts only. Guest coverage excluded. All policies must be coterminous with vehicle registration. -roof of Insurance: NEW YORK-Proof given by certificate of uisurance for initial registration under the law. Thereafter, upon tenewal of registration, proof given by statement of registrant that acceptable proof is being maintained. MASSACHUSETTS- Proof given by certificate of insurance issued annually by State Insurance Commissioner. Notice of Cancellation or Termination of Insurance: NEW YORK -Insurer must give 10 days advance notice to insured upon cancellation or failure to renew by insurer. Upon termination by cancellation or failure to renew, notice must be filed by insurer with Commissioner of Motor Vehicles within 30 days after effective date. No review of cancellations or terminations. MASSA- CHUSETTS-Insurer must give 20 days notice of cancellation, with reasons, to insured and to Registrar of Motor Vehicles. Notice of intent not to renew must be given by insurer before November 16. Procedure provided for cancellation or refusal to renew by Board of Appeal and courts. Expenses of Administration: NEW YORK--Cost of administration masasachusetts G.L. (1951), c. 90, 1, 1A, 3, 3G, 22A and 34A-34J; c. 20, BA; c. 175, 112, 113A-113G, 182 and 183. [54]

19 assessed against insurers. MASSACHUSETTS-Cost of administration paid out of general funds of -the state appropriated by the legislature. Penalties: NEW YORK-Statute sets forth penalty provisions relating to operation without proof in effect, applicable to motor vehicles registered in New York or elsewhere. Violators are subject to revocation of driving privileges and punishable as misdemeanor by fine of $100 to $1,000 and/or imprisonment for one year. MASSACHUSETTS-Operation without insurance coverage makes violator subject to fine of $100 to $500 or imprisonment for one year. Rate-Making: NEW YORK-Premium rates established by insurance companies through regular rate making procedure. MASSA- CHUSETTS-Premium rates by Insurance Commissioner. Supplementary Laws: NEW YORK-Safety-Responsibility law requiring security following accidents and future proof following unsatisfied judgments and certain convictions remains in force. MASSACHUSETTS-In action against an uninsured non-resident driver, court may order deposit of security. Driving privilege may be suspended for failure to satisfy judgment for damage to property. CONSTITUTIONAL AND ADMINISTRATIVE PROBLEMS I Certain constitutional problems arising in connection with compulsory insurance have already been laid to rest by the courts. There is first the bagic question of whether the state's imposition of such conditions on the right to operate a motor vehicle violates the Equal Protection or Due Process clauses of the Fourteenth Amendment of the Federal Constitution or comparable provisions of state constitutions. From experience with the Massachusetts law, it may be said that if the conditions of the statute are imposed generally and uniformly to all motorists registered in the state, young and old, reckless and careful, no constitutional right is violated. At an early date the Supreme Judicial Court of Massachusetts held that a compulsory insurance requirement was within the power of the state to impose. In 1925 the court said: the power to license imports the further power to withhold such license except upon compliance with prescribed conditions... The requirement that every owner before 0 In re Opinion of the Justices, 251 Mass. 569, 596; 147 N.E. 681, 693. [551

20 being allowed to register his motor vehicle shall provide security for the discharge of his liability for personal injuries or death resulting from the presence of such motor vehicle on the public ways cannot be pronounced unreasonable. It furnishes a degree of assurance of compensation to those rightfully and carefully using the ways and injured by the carelessness of the operators of motor vehicles... The requirement for security for the payment of legal claims arising from personal injuries caused on highways by motor vehicles is an extension of tihe police power into a new field, so far as we are aware, but in our opinion it falls within the limits of the constitutional powers of the General Court." The Justices went on to support their decision by noting the "great uncompensated damage now caused by motor vehicles to innocent travelers" and concluded that "the general principle which sustains this aspect of the proposed bill is that when the general welfare of travelers on the highway in the opinion of the Legislature is threatened by and demands protection against a specific evil, any rational means may be adopted to remedy that evil." Contentions that this reasoning did not recognize a necessary distinction between commercial and non-commercial vehicles were also dismissed by the Massachusetts court." 0 The New York compulsory insurance law may, of course, rely on this background of judicial doctrine to support the application of compulsory insurance to residents of New York, but by extending its application to non-residents who use the highways of the state, it raises an issue not involved in these cases. No doubt it will be contended that the case of the non-resident motorist driving on New York highways falls within the doctrine expressed in Hess V. Pawtoski. 51 There Justice Butler said: "Motor vehicles are dangerous machines, and even when skillfully and carefully operated, their use is attended by serious damage to persons and property. In the public interest the state may make and enforce regulations reasonably calculated to promote care on the part of all, residents and non-residents alike, who use its highways." so In Poresky v. Registrar of Motor Vehieles, 322 'Mass. 742, 77 N.E.(2d) 314 (1947), it was argued that while compulsory insurance might reasonably be required of commercial vehicles, it was not reasonable when applied to persons using the public highways in an "ordinary and usual manner; that is, to drive to and from a place of employment, to shop, and to run errands..." Such a right, it was urged, "has been the very life of man from time immemorial... and never has it been contingent upon one's financial status." The argument failed to move the court and appears to have to put to rest questions of the constitutionality of the Mdassachusetts Law. This was the so-called "Second Poresky Case." In earlier litigation, Poresky had contended unsuccessfully that compulsory insurance was unconstitutional for want of power to impose regulatory conditions upon the registration of motor vehicles. Poresky V. Registrar, etc., 319 Mass. 717, 67 2.E.(2d) 408 (1946). r2 274 U.S. 352 (1927). [56]