In testimony before the House Consumer Protection, Judiciary and Finance committees yesterday, Graulty said that a Senate measure aiming to restrict litigation costs in the state's no-fault system could increase legal costs and raise expenses for medical coverage.

Graulty and the Cayetano administration have supported a House plan to repeal the 24-year-old no-fault law.

"I don't think it's clear that the cost savings in the Senate bill will be realized," said Rep. Ron Menor, chairman of the Consumer Protection Committee. "I think (the savings) are highly questionable at this time."

A key ingredient in the Senate bill, which attempts to lower premiums between 25 percent and 35 percent, is what's known as a "verbal threshold." Modeled after Michigan's no-fault law, a verbal threshold allows accident victims to sue only in cases where they suffer serious or permanent injuries. Currently, auto accident victims in Hawaii need to reach a monetary threshold of $13,900 before they can sue.

"We feel very comfortable that the Senate bill will lower premiums," said Sen. David Ige, co-chairman of the Senate Commerce, Consumer Protection and Information Technology Committee.

According to Graulty, the Senate bill is ambiguous about what constitutes a serious or permanent injury. He said that could lead to legal challenges by consumers, thereby increasing litigation costs. He also said the bill increases the medical coverage for auto accident victims to $20,000 from the current $10,000, adding to medical costs.

Local attorneys and consumers also oppose the verbal threshold concept since it would greatly reduce auto accident victims right to sue at-fault drivers. But isle insurance carriers said restrictions on lawsuits would save consumers money.

Menor said he hopes to make a decision on the Senate bill next week.

The Senate recently passed an amended version of the House bill, which also attempts to lower premiums between 25 percent and 35 percent. The House bill eliminated the state's 24-year-old no-fault law and replaces it with a tort-based system in which auto accident victims would sue at-fault drivers.

The Senate gutted the bill and replaced it with its verbal threshold proposal.

The two chambers will likely negotiate their differences later this session in House-Senate conference committee meetings.

In a related matter, the House Consumer Protection Committee yesterday heard testimony on a plan to require auto insurance companies to take all people -- good and bad drivers -- as customers.

The take-all-comers provision was repealed in 1993 and insurance companies said the repeal helped stimulate competition in the local insurance business.

But some consumers complained that insurance companies were not renewing their policies for arbitrary reasons or for accidents when they were not at fault.

Graulty said there have been few official complaints about automobile insurance companies dropping customers for minor reasons.