For the past two years, these two philosophies have collided head-on in state lawmakers' efforts to reform Hawaii's costly auto insurance system, resulting in legislative gridlock.

Now, the state's largest insurance company says it has found a middle road that could significantly lower insurance rates for Hawaii consumers.

State Farm Insurance Co., with about 130,000 local customers, is proposing what it calls a "consumer choice auto insurance" bill that would give motorists the right to select coverage under a tort-based system or coverage under a no-fault system.

Under the plan, those who pick tort coverage can sue for damages and medical benefits if they were hurt in a car accident and the other driver was at fault. Consumers also can select no-fault coverage that offers medical and other benefits but would prohibit them from suing in most cases.

"It's a recognition of the stalemate that has occurred," said Rick Tsujimura, attorney for State Farm, which was the prime mover behind past years' proposals that virtually would have abolished car accident victims' right to sue.

Tsujimura said State Farm is still trying to calculate what kind of savings the choice system would generate.

Efforts to overhaul Hawaii's troubled no-fault system, which is the second most expensive in the nation behind New Jersey's, ended unsuccessfully last year after state House and Senate leaders failed to reach an agreement. The House favored repealing the current no-fault law and replacing it with a tort-based system. The Senate advocated a pure no-fault billir,8p,6pthat would eliminate lawsuits in virtually all instances.

A 1995 compromise bill that would have set up a modified pure no-fault was vetoed by Gov. Ben Cayetano who said it would take away consumers rights to sue without giving back significant savings in return.

Choice systems, which are used in Pennsylvania, Kentucky and New Jersey, are too complicated and may not result in the savings promised, critics say.

Janice Kim, president-elect of the 250-member Consumer Lawyers of Hawaii, said the choice bill is still a no-fault bill that would lead to good drivers paying for bad ones.

Kim said her group plans to introduce a bill that would repeal the no-fault law and replace it with a tort system. The group's plan also would replace the current peer-review process in which insurance companies select a panel of doctors to examine treatments provided by an accident victim's physician, Kim said.

The State Farm and trial attorneys' proposals are two of dozens that lawmakers will face this legislative session, which began yesterday. Bills establishing pure no-fault and pure tort systems likely will be reintroduced this year while both the Cayetano administration and the state insurance industry as a whole plan to introduce their own reform bills.

The Hawaii Insurers Council, a trade group composed of 17 local carriers, is backing a bill that it says would eliminate much of the abuse and fraud that goes on in the state's insurance system. Linda Gilchrist, HIC spokeswoman, said the group wants to keep the current no-fault system in tact, while altering the monetary threshold for lawsuits.

Under Hawaii law, car accident victims can sue drivers who caused the accident only if damages exceed $13,000. Some insurers have argued that the $13,000 threshold encourages some accident victims to pad their claims.

Gilchrist declined to give further specifics on HIC's proposal, saying the group wants to meet with lawmakers first.

State Insurance Commissioner Wayne Metcalf said that the administration won't unveil its no- fault reform bill until next week when Cayetano delivers the annual State-of-the-State speech.

Both the Senate and the House have not yet introduced their reform proposals this year but House Speaker Joe Souki (D, Wailuku) yesterday said the House wants to lower rates and fight false claims and frivolous lawsuits. Sen. David Ige, co-chairman of the Consumer Protection committee, said the Senate is not yet committed to any one proposal.

"I am certain that there will be major reform of some sort this year," said Ige (D, Pearlridge).