- A Missouri arbitrator recently awarded a woman $5.2 million in damages after she was infected with HPV in her boyfriend's car.
- Elon Musk believes damage claims drive up the cost of insurance.
Several factors go into the cost of auto insurance.
Elon Musk had a strong reaction to an article published on CNN.com. The article told the story of a Jackson County, Missouri woman who contracted a sexually transmitted disease in her boyfriend's car. Because the harm occurred while in his insured vehicle, she sued GEICO, his insurance carrier.
After reading and reposting the article, Musk wrote: "Crazy damages claims like this are a big part of why car insurance costs so much."
Why the dust up?
To better understand Musk's reaction, it might help to quickly review the incident in question.
According to a woman referred to as "M.O." in court filings, after fooling around with her partner in his car, the woman learned that she had contracted human papillomavirus (HPV) from him. Worse yet, the partner knew he had HPV and failed to inform her, or use protection to prevent the incident.
Untreated, HPV can lead to more serious problems, including a host of different cancers. In Feb. 2021, M.O. submitted a claim directly to GEICO, at which point, the insurer essentially told her to pound sand and rejected the claim.
Knowing that she was on the hook for medical costs, M.O. made a final settlement offer of $1 million. GEICO refused to settle. M.O.'s case was then sent to arbitration for a decision.
The arbitrator's decision
After hearing the case, the arbitrator determined that "there was sexual activity in (insured's) automobile." The arbitrator also wrote that the activity "directly caused, or directly contributed to cause" the woman's HPV infection. Finally, the arbitrator submitted that $5.2 million would compensate M.O. for the damages and injury sustained while in the insured auto of a GEICO customer.
GEICO never bothered to enter a defense. However, once the arbitrator's opinion came down, it appealed to the Jackson County Circuit Court, claiming the company was not given "a meaningful opportunity to defend its interests."
The Missouri Court of Appeals confirmed the award against GEICO, saying the company could have defended its interest by entering a defense, and the insurer had no right to relitigate the case. And so the $5.2 million judgment stands.
To Elon's point
While it's tough to imagine the last time Elon Musk wrote out a check for auto insurance, his reaction may be an oversimplification of a complex issue. It's not just judgments against insurance companies that drive prices. There are far more factors in play. Here are three other reasons insurance rates are not cheap:
- Auto repairs are expensive. You can't give a car a dirty look without running into thousands of dollars in repairs. Other than the driver's deductible, those repair costs come out of the insurance company's pockets.
- Insurance companies must remain solvent. When a credit rating agency like AM Best checks its financial strength, they must have enough money on hand to pay out all claims.
- Insurers are in the business to make money. Premiums are designed to cover losses and make a profit.
The next time someone gets frisky in a car, they might want to consider whether they want their insurance company involved in their hanky-panky. There may not be a more embarrassing way to lose auto insurance coverage.
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